As filed with the Securities and Exchange Commission on May 20, 1999
Registration Statement No. 333-75489
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in Its Charter)
Delaware One New York Plaza 13-3526694
(Jurisdiction) New York, New York 10292 (I.R.S. Employer
(212) 778-1000 Identification No.)
(Address of registrant's principal executive offices)
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Joe Donovan
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
(Name and address of agent for service)
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Copies to:
Christopher J. DiAngelo, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
426(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Per Aggregate Offering Registration
Being Registered Registered Unit(1) Price(1) Fee
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<S> <C> <C> <C> <C>
Mortgage Backed
Securities......... $1,000,000 100% $1,000,000 $278(2)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
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Prudential Securities Secured
Financing Corporation Asset-Backed Securities
Sponsor Issuable in Series
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You should read the section entitled The Securities
"Risk Factors" starting on page 3 of
this prospectus and consider these o will be issued from time to
factors before making a decision to time in series,
invest in the securities.
o will consist of either
Retain this prospectus for future asset-backed certificates
reference. This prospectus may not be used or asset-backed notes,
to consummate sales of securities unless
accompanied by the prospectus supplement o will be issued by a trust
relating to the offering of the securities. or other special purpose
- --------------------------------------------- entity established by the
sponsor,
o will be backed by one or
more pools of mortgage
loans or manufactured
housing contracts held
by the issuer,
o may have one or more forms
of credit enhancement,
such as insurance
policies or reserve funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved of disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
PRUDENTIAL SECURITIES
The date of this prospectus is _______, 1999
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TABLE OF CONTENTS
SUMMARY OF PROSPECTUS..........................................................1
RISK FACTORS...................................................................3
THE SPONSOR....................................................................7
USE OF PROCEEDS................................................................7
THE TRUSTEE....................................................................7
THE TRUST FUNDS................................................................8
The Mortgage Loans.......................................................8
The Contracts...........................................................15
Fixed Retained Yield....................................................17
Insurance Policies......................................................17
Acquisition of the Loans from the Originator............................18
Assignment of the Loans.................................................19
Representations and Warranties..........................................20
Pre-Funding Accounts....................................................23
DESCRIPTION OF THE SECURITIES.................................................24
Distributions...........................................................25
Principal and Interest on the Securities................................26
Form of Securities......................................................26
CREDIT ENHANCEMENT............................................................28
Subordination...........................................................29
Overcollateralization...................................................29
Cross-Collateralization.................................................29
Surety Bonds............................................................29
Letters of Credit.......................................................30
Special Hazard Insurance Policies.......................................30
Reserve Funds...........................................................30
Other Insurance, Guarantees and Similar Instruments or Agreements.......31
Reduction or Substitution of Credit Enhancement.........................31
PREPAYMENT AND YIELD CONSIDERATIONS...........................................31
Interest Rates..........................................................31
Interest Shortfalls Due to Principal Prepayments........................32
Weighted Average Life of Securities.....................................33
SERVICING OF THE LOANS........................................................34
The Servicer............................................................34
Payments on Loans.......................................................35
Advances and Limitations Thereon........................................37
Adjustment to Servicing Compensation in Connection
with Prepaid and Liquidated Loans....................................37
Reports to Securityholders..............................................38
Collection and Other Servicing Procedures...............................38
Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Loans....39
Servicing Compensation and Payment of Expenses..........................40
Evidence as to Compliance...............................................41
Certain Matters Regarding the Servicer..................................41
Events of Default; Rights Upon Event of Default.........................42
Amendment...............................................................44
Termination; Purchase or Other Disposition of Loans.....................45
CERTAIN LEGAL ASPECTS OF THE LOANS............................................46
The Mortgage Loans......................................................46
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The Contracts...........................................................53
Installment Contracts...................................................57
Soldiers' and Sailors' Civil Relief Act.................................59
Type of mortgaged property..............................................60
Certain Matters Relating to Insolvency..................................60
Bankruptcy Laws.........................................................60
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................62
General.................................................................62
Grantor Trust Securities................................................62
REMIC Securities........................................................64
Debt Securities.........................................................71
Partnership Interests...................................................72
FASIT Securities........................................................74
Discount and Premium....................................................76
Backup Withholding......................................................80
Foreign Investors.......................................................80
STATE TAX CONSIDERATIONS......................................................81
ERISA CONSIDERATIONS..........................................................82
General.................................................................82
Certificates............................................................82
Notes...................................................................84
Consultation with Counsel...............................................84
LEGAL INVESTMENT..............................................................85
PLAN OF DISTRIBUTION..........................................................86
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................87
ADDITIONAL INFORMATION........................................................88
LEGAL MATTERS.................................................................89
RATINGS.......................................................................89
GLOSSARY......................................................................90
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SUMMARY OF PROSPECTUS
This summary highlights selected information from this prospectus and does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of your
series of securities, read carefully this entire prospectus and the accompanying
prospectus supplement.
The Sponsor
Prudential Securities Secured Financing Corporation will act as the sponsor
of the issuers, meaning that it will establish the issuers and cause them to
issue the securities.
Securities Offered
Each class of securities will consist of one or more classes of ownership
securities or debt securities. Ownership securities represent beneficial
ownership interests in the assets held by the issuer. Ownership securities will
be issued in the form of certificates. Debt securities represent indebtedness
secured by the assets of the issuer. Debt securities will be issued in the form
of notes.
Each series of securities will be issued in one or more classes, one or
more of which may be classes of:
o fixed-rate securities,
o adjustable-rate securities,
o compound-interest or accrual securities,
o planned-amortization-class securities,
o principal-only securities,
o interest-only securities,
o participating securities,
o senior securities, or
o subordinated securities.
The interest rate, principal balance, notional balance, minimum
denomination and form of each class of securities will be described in the
accompanying prospectus supplement. The securities will be available in either
fully registered or book-entry form, as described in the accompanying prospectus
supplement.
The Loans
Each issuer will hold one or more pools of loans, which may include:
o conventional mortgage loans or manufactured housing contracts secured
by one-to-four family residential properties and/or manufactured
homes,
o mortgage loans secured by security interests in shares issued by
private, non-profit cooperative housing corporations,
o mortgage loans secured by junior liens on the mortgaged properties,
o mortgage loans with loan-to-value ratios in excess of the appraised
value of the mortgaged property,
o home improvement retail installment contracts, and
o revolving home equity lines of credit.
The sponsor will direct the issuer to acquire the loans from affiliated
originators, unaffiliated originators or warehouse trusts created by the sponsor
or an affiliate to finance the origination of loans.
Distributions on the Securities
Owners of securities will be entitled to receive payments in the manner
described in the accompanying prospectus supplement, which will specify:
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o whether distributions will be made monthly, quarterly, semi-annually
or at other intervals and dates,
o the amount allocable to payments of principal and interest on any
distribution date, and
o whether distributions will be made on a pro rata, random lot, or other
basis.
Credit Enhancement
A series of securities, or classes within a series, may have the benefit of
one or more types of credit enhancement, including:
o the use of excess interest to cover losses and to create
over-collateralization,
o the subordination of distributions on the lower classes to the
distributions on more senior classes,
o the allocation of losses on the underlying loans to the lower classes,
and
o the use of cross support, reserve funds, financial guarantee insurance
policies, guarantees and letters of credit.
The protection against losses afforded by any credit enhancement will be
limited in the manner described in the accompanying prospectus supplement.
Redemption or Repurchase of Securities
One or more classes of securities may be redeemed or repurchased in whole
or in part by the issuer, the servicer, the provider of credit enhancement, or
their affiliates at the times described in the accompanying prospectus
supplement and at the price at least equal to the amount necessary to pay all
outstanding principal and accrued interest on the redeemed classes.
Legal Investment
The accompanying prospectus supplement will state whether or not the
securities will constitute "mortgage related securities" under the Secondary
Mortgage Market Enhancement Act of 1984.
ERISA Limitations
Employee benefit plans should carefully review with their own legal
advisors whether the purchase or holding of the securities could give rise to a
transaction prohibited or otherwise impermissible under ERISA or the Internal
Revenue Code.
Certain Federal Income Tax Consequences
Each class of securities offered by this prospectus and the accompanying
prospectus supplement will constitute one of the following for federal income
tax purposes:
o interests in a trust treated as a grantor trust,
o "regular interests" or "residual interests" in a trust treated as one
or more "real estate mortgage investment conduits",
o debt issued by the issuer,
o interests in an issuer which is treated as a partnership, or
o "regular interests", "high-yield interests" or "ownership interests"
in a trust treated as one or more "financial asset securitization
investment conduits".
Ratings
The securities offered by this prospectus and the accompanying prospectus
supplement will be rated at the time of issuance in one of the four highest
rating categories by at least one statistical rating organization.
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RISK FACTORS
You should consider the following risk factors prior to any purchase of
any class of securities. You should also consider the information under the
caption "Risk Factors" in the accompanying prospectus supplement.
Your investment in any security may be an illiquid investment; you should be
prepared to hold your security to maturity.
A secondary market for these securities is unlikely to develop. If it
does develop, it may not provide you with sufficient liquidity of
investment or continue for the life of these securities. The
underwriter(s) may establish a secondary market in the securities,
although no underwriter will be obligated to do so. The securities are
not expected to be listed on any securities exchange or quoted in the
automated quotation system of a registered securities association.
Issuance of the securities in book-entry form may also reduce the
liquidity in the secondary trading market, since some investors may be
unwilling to purchase securities for which they cannot obtain
definitive physical securities.
As a result of prepayment on the loans or early redemption of the securities,
you could be fully paid significantly earlier than would otherwise be the case,
which may adversely affect the yield to maturity on your securities.
The yield to maturity of the securities may be adversely affected by a
higher or lower than anticipated rate of prepayments on the loans. The
yield to maturity on interest-only securities purchased at premiums or
discounts to par will be extremely sensitive to the rate of prepayments
on the loans.
The underlying loans may be prepaid in full or in part at any time,
although prepayment may require the borrower to pay of a prepayment
penalty or premium. These penalties will generally not be property of
the issuer, and will not be available to fund distributions owing to
you. We cannot predict the rate of prepayments of the loans, which is
influenced by a wide variety of economic, social and other factors,
including prevailing mortgage market interest rates, the availability
of alternative financing, local and regional economic conditions and
homeowner mobility. Therefore, we can give no assurance as to the level
of prepayments that a trust fund will experience.
Prepayments may result from mandatory prepayments relating to unused
monies held in pre-funding accounts, voluntary early payments by
borrowers, including payments in connection with refinancings of the
first mortgages, sales of mortgaged properties subject to "due-on-sale"
provisions and liquidations due to default, as well as the receipt of
proceeds from physical damage, credit life and disability insurance
policies. In addition, repurchases or purchases from the issuer of
loans or the payment of substitution adjustments will have the same
effect on the securities as a prepayment of the loans.
One or more classes of securities of any series may be subject to
optional or mandatory redemption or in whole or in part, on or after a
specified date, or on or after the time when the aggregate outstanding
principal amount of the underlying loans or the securities is less than
a specified amount or percentage. You will bear the risk of reinvesting
unscheduled distributions resulting from a redemption.
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Any of the foregoing principal prepayments may adversely affect the
yield to maturity of the prepaid securities. Since prevailing interest
rates are subject to fluctuation, there can be no assurance that you
will be able to reinvest these prepayments at a yield equaling or
exceeding the yield on your securities.
Credit enhancement, even if provided, will in any event be limited in both
amount and scope of coverage, and may not be sufficient to cover all losses or
risks on your investment.
Credit enhancement may be provided in limited amounts to cover some,
but not all, types of losses on the underlying loans and, in most
cases, will reduce over time in accordance with a schedule or formula.
Furthermore, credit enhancement may provide only very limited coverage
as to some types of losses, and may provide no coverage as to other
types of losses. Generally, credit enhancement does not directly or
indirectly guarantee to the investors any specified rate of
prepayments, which is one of the principal risks of your investment.
The amount and types of coverage, the identification of any entity
providing the coverage, the terms of any subordination and any other
information will be described in the accompanying prospectus
supplement.
Property values may decline, leading to higher losses on the loans.
An investment in securities such as these, which are backed by
residential real estate loans, may be affected by a decline in real
estate values and changes in the borrowers' financial condition. If
property values were to decline, the rates of delinquencies and
foreclosures may rise, thereby increasing the likelihood of loss. If
these losses are not covered by any credit enhancement, you will bear
all risk of these losses and will have to look primarily to the value
of the mortgaged properties for recovery of the outstanding principal
and unpaid interest on the defaulted loans.
Loans with balloon and non-traditional payment methods may have greater default
risk.
Some of the loans may be balloon loans that provide for the payment of
a large remaining principal balance in a single payment at maturity.
Because borrowers of balloon loans are required to make substantial
single payments upon maturity, the default risk associated with balloon
loans may be greater than that associated with fully-amortizing loans.
Loans with high loan-to-value ratios may not have adequate security in the event
of a default.
Even though all of the loans will be secured be residential real
estate, in some cases the value of the real estate may be close to, or
even less than, the amount of the loan. As a result, the mortgaged
properties may not provide adequate security for these high
loan-to-value loans. Underwriting analysis with respect to high
loan-to-value loans relies more heavily on the mortgagor's
creditworthiness than on the protection afforded by the security
interest in the underlying mortgaged property.
Additionally, there is also the risk that if the borrower moves, he or
she will be unable to pay the loan in full from the proceeds of the
sale of the property. The costs incurred by the servicer in the
collection and liquidation of high loan-to-value loans may be higher
than with respect to other loans, because the servicer may be required
to pursue collection solely against the borrower. Consequently,
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the losses on defaulted high loan-to-value loans may be more severe as
there is no assurance that any proceeds will be recovered.
Loans secured by junior liens may experience higher rates of delinquencies and
losses.
Some of the loans will be secured by second, or even more junior, liens
which are subordinate to the rights of the more senior mortgagees. As a
result, the proceeds from any liquidation, insurance or condemnation
proceedings will be available to satisfy the principal balance of a
mortgage loan only to the extent that the claims of all senior
mortgagees have been satisfied in full. In addition, a mortgagee
secured by a junior lien may not foreclose on the mortgaged property
unless it forecloses subject to the senior mortgage, in which case it
must either pay off the senior mortgage or undertake to make payments
on the senior mortgage. The issuer will not have any source of funds to
satisfy any senior mortgage or make payments due to any senior
mortgagee.
Foreclosure of mortgaged properties involve delays and expense and could cause
losses on the loans.
Even if the mortgaged properties provide adequate security for the
loans, substantial delays could be encountered in connection with the
foreclosure of defaulted loans, and corresponding delays in the receipt
of the foreclosure proceeds could occur. Foreclosures are regulated by
state statutes, rules and judicial decisions and are subject to many of
the delays and expenses of other lawsuits, sometimes requiring several
years to complete. The servicer will be entitled to reimburse itself
for any expenses it has paid in attempting to recover amounts due on
the liquidated loans, including payments to prior lienholders, accrued
fees of the servicer, legal fees and costs of legal action, real estate
taxes, and maintenance and preservation expenses, which will reduce the
amount of the net recovery by the trust.
Geographic concentration of mortgaged properties may result in higher losses, if
particular regions experience downturns.
Some geographic regions from time to time will experience weaker
regional economic conditions and housing markets than will other
regions, and, consequently, will experience higher rates of loss and
delinquency. The loans underlying a series of securities may be
concentrated in these weaker regions, and these concentrations may
present risks in addition to those generally present for similar
asset-backed securities without these concentrations. Information with
respect to geographic concentration of mortgaged properties will be
specified in the accompanying prospectus supplement.
Environmental conditions on the mortgaged property may give rise to liability
for the issuer.
Real property pledged as security to a lender may be subject to
environmental risks which could cause losses on your securities. Under
the laws of some states, contamination of a mortgaged property may give
rise to a lien on the mortgaged property to assure the costs of
clean-up. In several states, this type of lien has priority over the
lien of an existing mortgage or owner's interest against the property.
In addition, under the laws of some states and under CERCLA, a lender
may be liable, as an "owner" or "operator," for costs of addressing
releases or threatened releases of hazardous substances that require
remedy at a property, if agents or employees of the lender have become
sufficiently involved in the
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operations of the borrower, regardless of whether or not the
environmental damage or threat was caused by a prior owner. A lender
also will increase its risk of environmental liability upon the
foreclosure of the mortgaged property, since the lender may then become
the legal owner of the property.
Security interests in the manufactured homes may not be perfected and the issuer
may not realize upon the full amount due under the loan.
Some of the loans may be secured by manufactured homes and, in some
cases, the real estate on which the manufactured home is located. Some
federal and state laws, which do not apply to other types of mortgage
loans, limit the issuer's ability to foreclose on manufactured homes or
may limit the amount realized to less than the amount due under the
loan. These limitations could cause losses on your securities.
State and federal credit protection laws may limit collection of principal and
interest on the loans.
Residential mortgage lending is highly regulated at both the federal
and state levels and violations of these laws, policies and principles
may limit the ability of the servicer to collect all or part of the
amounts due on the loans, may entitle the borrower to a refund of
amounts previously paid and, in addition, could subject the issuer, as
the owner of the loan, to damages and administrative enforcement. The
occurrence of any of the foregoing could cause losses on your
securities.
The Soldiers' and Sailors' Civil Relief Act may limit the ability to collect on
the loans.
The terms of the Soldiers' and Sailors' Civil Relief Act of 1940, or
similar state legislation, benefit mortgagors who enter military
service after the origination of his or her loan, including a mortgagor
who is a member of the National Guard or is in reserve status at the
time of the origination of the loan and is later called to active duty.
These mortgagors may not be charged interest, including fees and
charges, above an annual rate of 6% during the period of the
mortgagor's active duty status, unless a court orders otherwise upon
application of the lender. The implementation of the Soldiers' and
Sailors' Civil Relief Act could have an adverse effect, for an
indeterminate period of time, on the ability of the servicer to collect
full amounts of interest on these loans.
In addition, the Soldiers' and Sailors' Civil Relief Act imposes
limitations that would impair the ability of the servicer to foreclose
on loans during the mortgagor's period of active duty status. Thus, in
the event that these loans go into default, there may be delays and
losses occasioned by the inability to realize upon the mortgaged
property in a timely fashion.
The ratings assigned to your securities may be lowered or withdrawn.
The ratings assigned to the securities will be based on, among other
things, the adequacy of the value of the trust fund and any credit
enhancement with respect to a series. Any rating which is assigned may
not remain in effect for any given period of time or may be lowered or
withdrawn entirely by the rating agencies if, in their judgment,
circumstances in the future so warrant. Ratings may also be lowered or
withdrawn because of an adverse change in the financial or other
condition of a provider of credit enhancement or a change in the rating
of a credit enhancement provider's long term debt.
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Some of the terms used in this prospectus are capitalized. These
capitalized terms have specified definitions, which are included at the end of
this prospectus under the heading "Glossary."
THE SPONSOR
Prudential Securities Secured Financing Corporation was incorporated in
the State of Delaware on August 26, 1988 as a wholly-owned, limited purpose
finance subsidiary of Prudential Securities Group Inc., a wholly-owned indirect
subsidiary of The Prudential Insurance Company of America. The sponsor's
principal executive offices are located at One New York Plaza, 14th Floor, New
York, New York 10292.
Its telephone number is (212) 778-1000.
Unless otherwise specified in the applicable prospectus supplement, the
sponsor will have no servicing obligations or responsibilities with respect to
any mortgage loan pool, contract pool or trust fund. The sponsor does not have,
nor is it expected in the future to have, any significant assets.
Neither the sponsor nor Prudential Securities Group Inc. nor any of
their affiliates, including The Prudential Insurance Company of America, will
insure or guarantee the securities of any series.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement,
substantially all of the net proceeds from the sale of each series of securities
will be used for the purchase of the loans represented by the securities of a
series or to reimburse amounts previously used to effect the purchase of the
loans, the costs of carrying the loans until the sale of the securities and
other expenses connected with pooling the loans and issuing the securities.
THE TRUSTEE
The prospectus supplement for each series of securities will specify
the entity acting as trustee for a series. The commercial bank or trust company
serving as trustee may have normal banking relationships with the sponsor, the
issuer, the servicer or any of their respective affiliates. The trustee's
liability in connection with the issuance and sale of the securities is limited
solely to the express obligations of the trustee enumerated in the agreements
under which a series was issued.
The trustee may resign at any time, in which event the servicer will be
obligated to appoint a successor trustee. The servicer or the issuer may also
remove the trustee if the trustee ceases to be eligible to act as trustee for a
series under the Issuing Agreement, if the trustee becomes insolvent or in order
to change the situs of the trust fund for state-tax reasons. Upon becoming aware
of these circumstances, the servicer or the issuer, as the case may be, will
become obligated to appoint a successor trustee. The trustee may also be removed
at any time by the holders of securities evidencing not less than a specified
percentage of the voting interest in the trust fund. Any resignation and removal
of the trustee, and the appointment of a successor trustee, will not become
effective until acceptance of the appointment by the successor trustee. The
trustee, and any successor trustee, will have a combined capital and surplus, or
shall be a member of a bank holding system with an aggregate combined capital
and surplus, of at least $50,000,000 and will be subject to supervision or
examination by federal or state authorities.
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THE TRUST FUNDS
The securities offered by this prospectus will consist of either
asset-backed certificates or asset-backed notes, which represent either
beneficial ownership interests in, or debt secured by, the trust fund consisting
of the assets of a trust or another special-purpose entity issuing the
securities. The trust fund for each series of securities will consist primarily
of a segregated pool of loans comprised of mortgage loans and/or manufactured
housing contracts. In addition, a trust fund may also include one or more of the
following:
o amounts held from time to time in the Collection Account
relating to the securities;
o the issuer's interest in any primary mortgage insurance,
hazard insurance, title insurance and/or other insurance
policies relating to a loan;
o any property which initially secured a mortgage loan and which
has been acquired by foreclosure or trustee's sale or deed in
lieu of foreclosure or trustee's sale;
o any manufactured home which initially secured a contract and
which is acquired by repossession;
o any reserve funds;
o one or more guarantees, letters of credit, insurance policies,
surety bonds or any other credit enhancement arrangement; and
o any other assets as may be specified in the accompanying
prospectus supplement.
Some of the loans may be delinquent to the extent and as specified in
the accompanying prospectus supplement. The percentage of those loans which are
delinquent shall not exceed 10% of the aggregate principal balance of the loans
in the pool as of the Cut-Off Date for that series. Unless otherwise specified
in the applicable prospectus supplement, the trust fund will not include,
however, the portion of interest on the loans which constitutes the Fixed
Retained Yield, if any. See "--Fixed Retained Yield" below.
The mortgage loan pool and/or contract pool for a series will be
originated or acquired by an originator of mortgage loans and/or contracts and
transferred to the issuer either directly by the originator or through a
special-purpose affiliate thereof. The mortgage loan pool or contract pool
relating to a series will be serviced by a servicer specified in the
accompanying prospectus supplement, which may be the originator, under a
Servicing Agreement.
The Mortgage Loans
Each mortgage loan pool will consist of mortgage loans evidenced by
promissory notes or other evidences of indebtedness that provide for an original
term to maturity of not more than 40 years, for monthly payments and for
interest on the outstanding principal amounts thereof at a rate that is either
fixed or adjustable, as described in the accompanying prospectus supplement. The
mortgage loans may provide for fixed level payments or be graduated payment
loans, graduated equity loans, balloon loans, buy-down loans or mortgage loans
with other payment characteristics as described in the accompanying prospectus
supplement. In addition, the mortgage loan pools may include participation
interests in mortgage loans, in which event references in this prospectus to
payments on mortgage loans underlying the participations shall mean payments
thereon allocable to the participation interests, and the meaning of other terms
relating to mortgage loans will be similarly adjusted. Similarly, the mortgage
loan pools may
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include mortgage loans with respect to which a Fixed Retained Yield has been
retained by the originator, in which event references in this prospectus to
mortgage loans and payments thereon shall mean the mortgage loans exclusive of
the Fixed Retained Yield. The prospectus supplement for a series will specify
whether there will be any Fixed Retained Yield in any mortgage loan and, if so,
the owner thereof. See "Servicing of the Loans--Fixed Retained Yield" in this
prospectus. The mortgage loans will be secured by mortgages, deeds of trust or
other similar security instruments creating first, second or more junior liens
on conventional one-to four-family residential properties, which may include
mixed-use or vacation properties, all of which will be located in any of the
fifty states, the District of Columbia or the Commonwealth of Puerto Rico. The
mortgage loans may also consist of installment contracts for the sale of real
estate. If so provided in the applicable prospectus supplement, a mortgage loan
pool may also contain cooperative apartment loans evidenced by promissory notes
secured by security interests in shares issued by private, non-profit,
cooperative housing corporations and in the proprietary leases or occupancy
agreements granting exclusive rights to occupy specific dwellings in the
cooperatives' buildings. In the case of a cooperative apartment loan, the
proprietary lease or occupancy agreement securing the cooperative apartment loan
is generally subordinate to any blanket mortgage on the cooperative apartment
building and/or the underlying land. Additionally, the proprietary lease or
occupancy agreement is subject to termination and the cooperative shares are
subject to cancellation by the cooperative if the tenant-stockholder fails to
pay maintenance or other obligations or charges owed by the tenant-stockholder.
Each mortgage loan must have an original term of maturity of not less
than 5 years and not more than 40 years. Mortgage loans having LTVs at the time
of origination exceeding 80% will generally be supported by external credit
enhancement or be covered by primary mortgage insurance providing coverage on at
least the amount of the mortgage loan in excess of 75% of the original fair
market value of the mortgaged property and remaining in force until the
principal balance of the mortgage loan is reduced to 80% of the original fair
market value. The fair market value of the mortgaged property securing any
mortgage loan is, unless otherwise specified in the applicable prospectus
supplement, the lesser of (x) the appraised value of the mortgaged property
determined in an appraisal obtained by the originator of the mortgage loan at
origination, acquisition, or, in the case of a refinancing, an appraisal
obtained at the origination of the refinanced mortgage loan, and (y) the sale
price for the mortgaged property.
No assurance can be given that values of the mortgaged properties have
remained or will remain at the levels which existed on the dates of origination
of the mortgage loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding balances of the
mortgage loans and any secondary financing on the mortgaged properties in a
particular trust fund become equal to or greater than the value of the mortgaged
properties, the actual rates of delinquencies, foreclosures and losses could be
higher than those now generally experienced in the mortgage lending industry. To
the extent that the losses are not covered by the methods of credit enhancement
for the series or the insurance policies described in this prospectus, they will
be borne by holders of the securities of the series relating to the trust fund.
Furthermore, in a declining real estate market a new appraisal could render the
Cut-Off Date LTVs of the mortgage loans as unreliable measures of leverage.
The prospectus supplement for each series will describe selected
characteristics of the mortgage loan pool, which may include the aggregate
principal balance of the mortgage loans as of the Cut-Off Date, the range of
original terms to maturity of the mortgage loans, the weighted average remaining
term to stated maturity at the Cut-Off Date of the mortgage loans, the earliest
and latest origination dates of the mortgage loans, the range of loan interest
rates and Net Loan Rates borne by the mortgage loans, the weighted average loan
interest rate at the Cut-Off Date of the mortgage loans, the range of LTVs at
the time of origination and the highest outstanding
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principal balance at origination of any mortgage loan. A maximum of 5% of the
mortgage loans, by aggregate principal balance as of the Cut-Off Date, that are
included in a trust fund may deviate from the characteristics that are described
in the accompanying prospectus supplement.
All of the mortgage loans in a trust fund will have monthly payments
due on a specified day of each month and will, with respect to mortgage loans
secured by residential mortgaged properties, require at least monthly payments
of interest on any outstanding balance. The mortgage loan pools may include
adjustable-rate mortgage loans that provide for payment adjustments to be made
less frequently than adjustments in the payments. Each adjustment in the loan
interest rate which is not made at the time of a corresponding adjustment in
payments -- and which adjusted amount of interest is not paid currently on a
voluntary basis by the mortgagor -- will result in either a decrease, if the
loan interest rate rises, or an increase, if the loan interest rate declines, in
the rate of amortization of the mortgage loan. Moreover, these payment
adjustments on the mortgage loans may be subject to a number of limitations, as
specified in the accompanying prospectus supplement, which may also affect the
rate of amortization on the mortgage loan. As a result of these provisions, or
in accordance with the payment schedules of some graduated payment loans and
other mortgage loans, the amount of interest accrued in any month may equal or
exceed the scheduled monthly payment on the mortgage loan. In any of these
months, no principal would be payable on the mortgage loan and, if the accrued
interest exceeded the scheduled monthly payment, there would be deferred
interest. Deferred interest is added to the principal balance of the mortgage
loan and will bear interest at the loan interest rate until paid. If these
limitations prevent the payments from being sufficient to amortize fully the
mortgage loan by its stated maturity date, a lump sum payment equal to the
remaining unpaid principal balance of the mortgage loan will be due on its
stated maturity date. See "Prepayment and Yield Considerations" in this
prospectus.
The mortgaged properties will consist of residential properties,
including detached homes, townhouses, units in planned unit developments,
condominium units, mixed-use properties, vacation homes and small scale
multifamily properties, all of which constitute a "dwelling or mixed residential
and commercial structure" within the meaning of Section 3(a)(41)(A)(i) of the
Securities Exchange Act of 1934, except for a de minimis portion of any trust
fund which may be comprised of other types of properties. The mortgage loans
will be secured by liens on fee simple or leasehold interests -- in those states
in which long-term ground leases are used as an alternative to fee interests --
in the mortgaged properties, or liens on shares issued by cooperatives and the
proprietary leases or occupancy agreements occupy specified units in the
cooperatives' buildings. The geographic distribution of mortgaged properties
will be included in the accompanying prospectus supplement. Each prospectus
supplement will also describe the percentage of the aggregate principal balance
as of the Cut-Off Date of the mortgage loans in the mortgage loan pool
representing the refinancing of existing mortgage indebtedness and the types of
mortgaged properties.
Buy-Down Loans. A trust fund may contain mortgage loans subject to
temporary buy-down plans under which the monthly payments made by the mortgagor
during the early years of the mortgage loan will be less than the scheduled
monthly payments on the mortgage loan. The shortfall in payment made by the
mortgagor under the terms of the buy-down plan will be compensated for from an
amount contributed by the originator of the mortgage loan or another source and,
if so specified in the accompanying prospectus supplement, placed in a custodial
account by the servicer. If the mortgagor on a buy-down loan prepays the
mortgage loan in its entirety, or defaults on the mortgage loan and the
mortgaged property is sold in liquidation thereof, during the period when the
mortgagor is not obligated, on account of the buy-down plan, to pay the full
scheduled monthly payment otherwise due on the buy-down loan, the unpaid
principal balance of the buy-down loan will be reduced by the amounts remaining
in the custodial
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account with respect to the buy-down loan, and the amounts shall be deposited in
the Collection Account, net of any amounts paid with respect to the buy-down
loan by any insurer, guarantor or other person under a credit enhancement
arrangement described in the accompanying prospectus supplement.
Balloon Loans. A trust fund may include mortgage loans which are
amortized over 30 years or some other term, or which do not provide for
amortization prior to maturity, but which have a shorter term that causes the
outstanding principal balance of the mortgage loan to be due and payable at
maturity in an amount greater than the regular scheduled payment. If specified
in the accompanying prospectus supplement, the originator will be obligated to
refinance its balloon loan at its maturity at a new interest rate determined
prior to maturity by reference to an index plus a margin specified in the
mortgage note. The mortgagor is not, however, obligated to refinance the balloon
loan through the originator. In the event a mortgagor refinances a balloon loan,
the new loan will not be included in the trust fund. See "Prepayment and Yield
Considerations" in this prospectus.
Home Equity Lines of Credit. The trust fund may include "home equity
revolving lines of credit" or home equity lines. A home equity line establishes
a maximum credit limit with respect to the borrower, and permits the borrower to
draw additional funds, and repay the aggregate outstanding balance in each case
from time to time in such a manner so that the aggregate outstanding balance of
the home equity line does not exceed the maximum credit limit. Home equity lines
are generally evidenced by a loan agreement rather than a note. Home equity
lines generally may be drawn down from time to time by the borrower writing a
check against the account, or acknowledging the advance in a supplement to the
loan agreement. A home equity line will be secured by either a senior or a
junior lien mortgage, and will bear interest at either a fixed or an adjustable
rate.
In a number of states, the borrower must, on the opening of an account,
draw an initial advance of not less than a specified amount. Home equity lines
generally amortize according to an amortization period established at the time
of the initial advance. The amortization period is the length of time in which
the initial advance plus interest will be repaid in full and generally ranges
from 5 years to 15 years depending on the credit limit assigned. Generally, the
amortization period will be longer the higher the credit limit. The minimum
monthly payment on a home equity line will generally be equal to the sum of the
following:
o a basic monthly payment in an amount necessary to completely
repay the then-outstanding balance and the applicable finance
charge in equal installments over the assigned amortization
period;
o any monthly escrow charges;
o any delinquency or other similar charges; and
o any past due amounts, including past due finance charges.
The basic monthly payment amount is typically recomputed each time the
loan interest rate adjusts and whenever additional funds are advanced; the
recomputation in the case of an additional advance of funds may also reset the
amortization schedule. The effect of each additional advance of funds on the
home equity line is to reset the commencement date of the original maturity term
to the date of the additional advance. For example, a home equity line made
originally with a 15-year maturity from date of origination changes at the time
of the next adjustment or additional advance of funds to a home equity line with
a maturity of 15 years from the date of the additional advance of funds. For
some home equity lines, the same type of recomputation exists for adjustments of
the loan interest rate.
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Prior to the expiration of a specified period, the reduction of the
account to a zero balance and the closing of a home equity line account may
result in a prepayment penalty. A prepayment penalty also may be assessed
against the borrower if a home equity line account is closed by the servicer due
to a default by the borrower under the loan agreement.
Each loan agreement will provide that the servicer has the right to
require the borrower to pay the entire balance plus all other accrued but unpaid
charges immediately, and to cancel the borrower's credit privileges under the
loan agreement if, among other things, the borrower fails to make any minimum
payment when due under the loan agreement, if there is a material change in the
borrower's ability to repay the home equity line, or if the borrower sells any
interest in the property securing the loan agreement, thereby causing the
"due-on-sale" clause in the trust deed or mortgage to become effective.
Junior Liens. Mortgage loans which are secured by junior mortgages are
subordinate to the rights of the mortgagees under the senior mortgage or
mortgages. Accordingly, liquidation, insurance and condemnation proceeds
received with respect to the mortgaged property will be available to satisfy the
outstanding balance of the mortgage loan only to the extent that the claims of
the senior mortgages have been satisfied in full, including any liquidation and
foreclosure costs. In addition, a junior mortgagee foreclosing on its mortgage
may be required to purchase the mortgaged property for a price sufficient to
satisfy the claims of the holders of any senior mortgages which are also being
foreclosed. In the alternative, a junior mortgagee which acquires title to a
mortgaged property, through foreclosure, deed-in-lieu of foreclosure or
otherwise may take the property subject to any senior mortgages and continue to
perform with respect to any senior mortgages, in which case the junior mortgagee
must comply with the terms of any senior mortgages or risk foreclosure by the
senior mortgagee.
High LTV Loans. A mortgage loan pool may include mortgage loans with
combined LTVs in excess of 100%, generally up to a maximum of 125%. For these
high LTV loans, more emphasis in the underwriting analysis is placed on the
borrower's payment history and ability to repay debt, rather than on the
collateral value of the mortgaged property. High LTV loans are generally
targeted as debt consolidation loans for repeat or frequent borrowers with
generally strong credit ratings. Lending decisions for high LTV loans are based
on an analysis of the prospective mortgagor's documented cash flow and credit
history supplemented by a collateral evaluation deemed appropriate by the
originator.
Graduated Equity Loans. A mortgage loan pool may include graduated
equity loans. Graduated equity loans are fixed-rate, fully-amortizing mortgage
loans which provide for monthly payments based on a 10- to 30-year amortization
schedule, and which provide for scheduled annual payment increases for a number
of years and level payments thereafter. The full amount of the scheduled payment
increases during the early years is applied to reduce the outstanding principal
balance of the mortgage loans.
Graduated Payment Loans. A mortgage loan pool may include graduated
payment loans. Graduated payment loans provide for payments of monthly
installments which increase annually in each of a specified number of initial
years and level monthly payments thereafter. Payments during the early years are
required in amounts lower than the amounts which would be payable on a level
debt service basis due to the deferral of a portion of the interest accrued on
the mortgage loan. Deferred interest is added to the principal balance of the
mortgage loan and is paid, together with interest thereon, in the later years of
the obligation. Because the monthly payments during the early years of the
mortgage loan are not sufficient to pay the full interest accruing on the
mortgage loan, the interest payments on the mortgage loan may not be sufficient
in its early years to meet its proportionate share of the distributions expected
to be made on the securities. Thus, if the mortgage loans include graduated
payment loans, the servicer will establish a reserve
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fund which, together with reinvestment income thereon, will be sufficient to
cover the amount by which payments of interest on the graduated payment loans
assumed in calculating distributions expected to be made on the securities of a
series exceed scheduled interest payments according to the relevant graduated
payment mortgage plan for the period during which excess occurs.
Convertible Mortgage Loans. A trust fund may contain convertible
mortgage loans which may either (i) switch from a fixed-rate mortgage to an
adjustable-rate mortgage under the terms of the underlying mortgage note or (ii)
switch from an adjustable-rate mortgage to a fixed-rate mortgage under the terms
of the underlying mortgage note. These mortgage loans will be automatically
repurchased by the originator or the servicer upon the occurrence of the
conversion.
Payment Terms.
The payment terms of the mortgage loans to be included in a trust fund
for a series will be described in the accompanying prospectus supplement and may
include any of the following features of combinations thereof or other features
described in the accompanying prospectus supplement:
o Interest may be payable at a loan interest rate that may be a
fixed rate, a rate adjustable from time to time in relation to
an index, a rate that is fixed for a period of time and is
followed by an adjustable rate, a rate that otherwise varies
from time to time, or a rate that is convertible from an
adjustable rate to a fixed rate or a fixed rate to an
adjustable rate. Changes to a loan interest rate may be
subject to periodic limitations, maximum rates, minimum rates
or a combination of these limitations. Accrued interest may be
deferred and added to the principal of a mortgage loan for
these periods and under other circumstances as may be
specified in the accompanying prospectus supplement. Mortgage
loans may provide for the payment of interest at a rate lower
than the specified loan interest rate for a period of time of
for the life of the mortgage loan, and the amount of any
difference may be contributed from funds supplied by the
seller of the mortgaged property or another source.
o Principal may be payable on a level debt service basis to
fully amortize the mortgage loan over its term, may be
calculated on the basis of an assumed amortization schedule
that is significantly longer than the original term to
maturity or on a loan interest rate that is different from the
loan interest rate or may not be amortized during all or a
portion of the original term. Payment of all or a substantial
portion of the principal may be due on maturity. Principal may
include deferred interest that has been added to the principal
balance of the mortgage loan.
o Monthly payments of principal and interest may be fixed for
the life of the mortgage loan, may increase over a specified
period of time or may change from period to period. mortgage
loans may include limits on periodic increases or decreases in
the amount of monthly payments and may include maximum or
minimum amounts of monthly payments.
o Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the mortgage loan or may
decline over time, and may be prohibited for the life of the
mortgage loan or for specified periods. Some mortgage loans
may permit prepayments after expiration of the applicable
lockout period and may require the payment of a prepayment fee
in connection with any subsequent prepayment. Other mortgage
loans may
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permit prepayments without payment of a fee unless the
prepayment occurs during specified time periods. The mortgage
loans may include "due on sale" clauses which permit the
mortgagee to demand payment of the entire mortgage loan in
connection with the sale or particular transfers of the
mortgaged property. Other mortgage loans may be assumable by
persons meeting the then applicable underwriting standards of
the originator.
Amortization of the Mortgage Loans.
The mortgage loans will provide for payments that are allocated to
principal and interest according to either the actuarial method, the simple
interest method or the "Rule of 78s" method, as described in the accompanying
prospectus supplement. The accompanying prospectus supplement will state whether
any of the mortgage loans will provide for deferred interest or negative
amortization.
An actuarial mortgage loan provides for payments in level monthly
installments -- except, in the case of balloon loans, for the final payment --
consisting of interest equal to one-twelfth of the applicable loan interest rate
times the unpaid principal balance, with the remainder of the payment applied to
principal.
A simple interest mortgage loan provides for the amortization of the
amount financed under the mortgage loan over a series of equal monthly payments
- -- except, in the case of a balloon loan, for the final payment. Each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the mortgage loan being multiplied by
the stated loan interest rate and further multiplied by a fraction, the
numerator of which is the number of days in the period elapsed since the
preceding payment of interest was made and the denominator of which is the
number of days in the annual period for which interest accrues on the mortgage
loan. As payments are received under a simple interest mortgage loan, the amount
received is applied first to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if a
borrower pays a fixed monthly installment on a simple interest mortgage loan
before its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be less than it would
have been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly greater.
However, the next succeeding payment will result in an allocation of a greater
amount to interest if the payment is made on its scheduled due date.
Conversely, if a borrower pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the remaining portion, if any,
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. If each scheduled payment under a simple interest mortgage
loan is made on or prior to its scheduled due date, the principal balance of the
mortgage loan will amortize in the manner described in the preceding paragraph.
However, if the borrower consistently makes scheduled payments after the
scheduled due date, the mortgage loan will amortize more slowly than scheduled.
If a simple interest mortgage loan is prepaid, the borrower is required to pay
interest only to the date of prepayment.
Some of the mortgage loans held by an issuer may be loans insured under
the FHA Title I credit insurance program created under Sections 1 and 2(a) of
the National Housing Act of 1934. Under the Title I program, the FHA is
authorized and empowered to insure qualified lending institutions against losses
on eligible loans. The Title I program operates as a coinsurance program in
which the FHA insures up to 90% of specified losses incurred on an individual
insured loan, including the unpaid principal balance of the loan, but only to
the extent of the
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insurance coverage available in the lender's FHA insurance coverage reserve
account. The owner of the loan bears the uninsured loss on each loan. The types
of loans which are eligible for insurance by the FHA under the Title I program
include property improvement loans made to finance actions or items that
substantially protect or improve the basic livability or utility of a property
and includes:
o single family, multifamily and nonresidential property
improvement loans;
o manufactured home improvement loans, where the home is
classified as personality;
o historic preservation loans; and
o fire safety equipment loans for existing health care
facilities.
If specific information respecting the mortgage loans to be included in
a trust fund is not known to the issuer at the time the securities of a series
are initially offered, more general information of the nature described above
will be provided in the prospectus supplement and final specific information
will be disclosed in a Current Report on Form 8-K to be available to investors
on the date of issuance thereof and to be filed with the Securities and Exchange
Commission promptly after the initial issuance of the securities. A copy of the
Issuing Agreement with respect to each series of securities will be attached to
the Form 8-K and will be available for inspection at the corporate trust office
of the trustee specified in the accompanying prospectus supplement. A schedule
of the mortgage loans relating to a series will be attached to the Issuing
Agreement delivered to the trustee upon delivery of the securities.
The Contracts
Each contract pool will consist of conventional manufactured housing
installment sales contracts and installment loan agreements originated by the
originator, or by a manufactured housing dealer in the ordinary course of
business and purchased by the originator. Each contract will be secured by
manufactured homes, each of which will be located in any of the fifty states,
the District of Columbia and the Commonwealth of Puerto Rico. The contracts will
be fully amortizing and will bear interest at a fixed or adjustable annual
percentage rate. The contract pool may include contracts with respect to which a
Fixed Retained Yield has been retained, in which event references in this
prospectus to contracts and payments thereon shall mean the contracts exclusive
of the Fixed Retained Yield. The prospectus supplement for a series will specify
whether there will be any Fixed Retained Yield in any contract, and if so, the
owner thereof. See "Fixed Retained Yield" in this prospectus.
The originator will represent that the manufactured homes securing the
contracts consist of "manufactured homes" within the meaning of 42 United States
Code, Section 5402(6), which defines a "manufactured home" as "a structure,
transportable in one or more sections, which in the traveling mode, is eight
body feet or more in width or forty body feet or more in length, or, when
erected on site, is three hundred twenty or more square feet, and which is built
on a permanent chassis designed to be used as a dwelling with or without a
permanent foundation when connected to the required utilities, and includes the
plumbing, heating, air-conditioning, and electrical systems contained therein;
except that such term shall include any structure which meets all the
requirements of [this] paragraph except the size requirements and with respect
to which the manufacturer voluntarily files a certification required by the
Secretary of Housing and Urban Development and complies with the standards
established under [this] chapter."
Manufactured homes, unlike site-built homes, generally depreciate in
value. Consequently, at any time after origination it is possible, especially in
the case of contracts with
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high LTVs at origination, that the market value of a manufactured home may be
lower than the principal amount outstanding under the contract.
The prospectus supplement for each series will describe a number of
characteristics of the contracts, which may include the aggregate principal
balance of the contracts in the contract pool as of the Cut-Off Date for a
series, the range of original terms to maturity of the contracts in the contract
pool, the weighted average remaining term to stated maturity at the Cut-Off Date
of the contracts, the earliest and latest origination dates of the contracts,
the range of loan interest rates and Net Loan Rates borne by the contracts, the
weighted average Net Loan Rate at the Cut-Off Date of the contracts, the range
of the contracts which had loan-to-value ratios at the time of origination of
the contracts and the highest outstanding principal balance at origination of
any contract. A maximum of 5%, by aggregate principal balance as of the Cut-Off
Date, of the aggregate contracts that are included in a trust fund will deviate
from the characteristics that are described in the accompanying prospectus
supplement.
The fair market value of the manufactured home securing any contract
is, unless otherwise specified in the applicable prospectus supplement, either
(x) the appraised value of the manufactured home determined in an appraisal
obtained by the originator at origination or acquisition and (y) the sale price
for the property, plus, in either case, sales and other taxes and, to the extent
financed, filing and recording fees imposed by law, premiums for insurance and
prepaid finance charges.
The contracts in a trust fund will generally have due dates on the
first of each month and will be fully-amortizing contracts. Contracts may have
due dates which occur on a date other than the first of each month. The contract
pools may include adjustable rate contracts that provide for payment adjustments
to be made less frequently than adjustments in the payments. Each adjustment in
the loan interest rate which is not made at the time of a corresponding
adjustment in payments will result in a decrease, if the loan interest rate
rises, or an increase, if the loan interest rate declines, in the rate of
amortization of the contract. Moreover, the payment adjustments on the contracts
may be subject to specified limitations, as specified in the prospectus
supplement, which may also affect the rate of amortization on the contract. As a
result of these provisions, the amount of interest accrued in any month may
equal or exceed the scheduled monthly payment on the contract. In any of these
months, no principal would be payable on the contract, and if the accrued
interest exceeded the scheduled monthly payment, the excess interest due would
become deferred interest that is added to the principal balance of the contract.
Deferred interest will bear interest at the loan interest rate until paid. If
these limitations prevent the payments from being sufficient to amortize fully
the contract by its stated maturity date, a lump sum payment equal to the
remaining unpaid principal balance will be due on its stated maturity date. See
"Prepayment and Yield Considerations" in this prospectus.
The geographic distribution of manufactured homes will be stated in the
accompanying prospectus supplement. Each prospectus supplement will state the
percentage of the aggregate principal balance of any contracts as of the Cut-Off
Date in the contract pool which are secured by manufactured homes which have
become permanently affixed to real estate. Each prospectus supplement will also
state the percentage of the aggregate principal balance of the contracts as of
the Cut-Off Date in the contract pool representing the refinancing of existing
mortgage indebtedness.
If specific information respecting the contracts to be included in a
trust fund is not known to the issuer at the time the securities of a series are
initially offered, more general information of the nature described above will
be provided in the prospectus supplement and final specific information will be
disclosed in a Current Report on Form 8-K to be available to investors on the
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date of issuance thereof and to be filed with the Securities and Exchange
Commission promptly after the initial issuance of the securities.
Fixed Retained Yield
The prospectus supplement for a series will specify whether a Fixed
Retained Yield has been retained with respect to the loans of a series, and, if
so, the owner thereof. Any Fixed Retained Yield will be established on a
loan-by-loan basis and will be specified in the schedule of loans attached as an
exhibit to the applicable Issuing Agreement. The servicer, with respect to
loans, may deduct the Fixed Retained Yield from payments as received and prior
to deposit of these payments in the Collection Account for a series or may,
unless an election has been made to treat the trust fund, or a portion of the
trust fund, as a REMIC, withdraw the Fixed Retained Yield from the Collection
Account after the entire payment has been deposited in the Collection Account.
Notwithstanding the foregoing, any partial payment or recovery of interest
received by the servicer relating to a loan, whether paid by the mortgagor or
obligor or received as Liquidation Proceeds, Insurance Proceeds or otherwise,
after deduction of all applicable servicing fees, will be allocated between
Fixed Retained Yield, if any, and interest on a pari passu basis.
Insurance Policies
The Issuing Agreement may require the servicer to cause to be
maintained for each loan a standard hazard insurance policy issued by a
generally acceptable insurer insuring the mortgaged property underlying the
mortgage loan or the manufactured home underlying the contract against loss by
fire, with extended coverage. Standard hazard insurance policies will generally
be in an amount at least equal to the lesser of 100% of the insurable value of
the improvements which are a part of the mortgaged property or manufactured home
or the principal balance of the loan; provided, however, that this insurance may
not be less than the minimum amount required to fully compensate for any damage
or loss on a replacement cost basis. The servicer may also maintain on property
acquired upon foreclosure, or deed in lieu of foreclosure, of any mortgage loan,
and on any manufactured home acquired by repossession a standard hazard
insurance policy in an amount that is at least equal to the lesser of 100% of
the insurable value of the improvements which are a part of the property or the
insurable value of the manufactured home or the principal balance of the loan
plus, if required by the applicable Issuing Agreement, accrued interest and
liquidation expenses; provided, however, that this insurance may not be less
than the minimum amount required to fully compensate for any damage or loss on a
replacement cost basis. Any amounts collected under any insurance policies,
other than amounts to be applied to the restoration or repair of the mortgaged
property or manufactured home or released to the borrower in accordance with
normal servicing procedures, will be deposited in the Collection Account.
The standard hazard insurance policies covering the mortgaged
properties generally will cover physical damage to, or destruction of, the
improvements on the mortgaged property caused by fire, lightning, explosion,
smoke, windstorm, hail, riot, strike and civil commotion, subject to the
conditions and exclusions particularized in each policy. Because the standard
hazard insurance policies relating to the mortgage loans will be underwritten by
different insurers and will cover mortgaged properties located in various
states, these policies will not contain identical terms and conditions. The most
significant terms thereof, however, generally will be determined by state law
and generally will be similar. Most of these policies typically will not cover
any physical damage resulting from the following: war, revolution, governmental
actions, floods and other water-related causes, earth movement, including
earthquakes, landslides and mudflows, nuclear reaction, wet or dry rot, vermin,
rodents, insects or domestic animals, hazardous wastes or hazardous substances,
theft and, in some cases, vandalism. The foregoing list is merely indicative of
particular kinds of uninsured risks and is not intended to be all-inclusive.
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The standard hazard insurance policies covering the contracts will
provide, at a minimum, the same coverage as a standard form fire and extended
coverage insurance policy that is customary for manufactured housing in the
state in which the manufactured home is located.
The servicer may maintain a blanket policy insuring against hazard
losses on all of the mortgaged properties or manufactured homes in lieu of
maintaining the required standard hazard insurance policies. The servicer will
be liable for the amount of any deductible under a blanket policy if the amount
would have been covered by a required standard hazard insurance policy, had it
been maintained.
In general, if a mortgaged property or manufactured home is located in
an area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards and the flood insurance has been made
available, the Issuing Agreement will require the servicer to cause to be
maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally acceptable
insurance carrier. Generally, the Issuing Agreement will require that the flood
insurance be in an amount not less than the lesser of (i) the amount required to
compensate for any loss or damage to the mortgaged property on a replacement
cost basis and (ii) the maximum amount of insurance which is available under the
federal flood insurance program.
Any losses incurred with respect to loans due to uninsured risks,
including earthquakes, mudflows, floods, hazardous wastes and hazardous
substances, or insufficient hazard insurance proceeds could affect distributions
to the securityholders.
The servicer shall obtain and maintain at its own expense and keep in
full force and effect a blanket fidelity bond and an error and omissions
insurance policy covering the servicer's officers and employees as well as
office persons acting on behalf of the servicer in connection with the servicing
of the trust fund.
Although the terms and conditions of primary mortgage insurance
policies differ, each primary mortgage insurance policy will generally cover
losses up to an amount equal to the excess of the unpaid principal amount of a
defaulted mortgage loan or contract, plus accrued and unpaid interest thereon
and certain approved expenses, over a specified percentage of the value of the
mortgaged property or manufactured home.
As conditions precedent to the filing or payment of a claim under a
primary mortgage insurance policy, the insured will typically be required, in
the event of default by the mortgagor, among other things, to:
o advance or discharge (x) hazard insurance premiums and (y) as
necessary and approved in advance by the insurer, real estate
taxes, protection and preservation expenses and foreclosure
and similar costs;
o in the event of any physical loss or damage to the mortgaged
property, have the mortgaged property restored to at least its
condition at the effective date of the primary mortgage
insurance policy; and
o if the insurer pays the entire amount of the loss or damage,
tender to the insurer good and merchantable title to, and
possession of, the mortgaged property.
Acquisition of the Loans from the Originator
The loans underlying a series of securities will be acquired by the
issuer from the originator, either directly or through a special-purpose
affiliate of the originator, under a Loan Sale Agreement. Each loan so acquired
will have been originated or acquired by the originator
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thereof in accordance with the underwriting criteria specified in the
accompanying prospectus supplement. In the Loan Sale Agreement, the originator
will make a number of representations and warranties concerning the loans being
acquired from the originator as described in this prospectus under
"--Representations and Warranties".
Assignment of the Loans
At the time of the issuance of the securities of a series, the issuer
will cause the mortgage loans comprising the mortgage loan pool, including any
rights to, or security interests in, leases, rents and personal property, or the
contracts comprising the contract pool included in the trust fund to be assigned
to the trustee, together with all principal and interest received by or on
behalf of the issuer on or with respect to the loans after the Cut-Off Date,
other than principal and interest due on or before the Cut-Off Date and other
than any Fixed Retained Yield, and the originator shall thereupon be liable to
the trustee for defective loan documents or an uncured breach of the
representations or warranties regarding the loans, to the extent described
below. The trustee or its agent will, concurrently with the assignment,
authenticate and deliver the securities evidencing a series to the issuer in
exchange for the loans. Each loan will be identified in a schedule appearing as
an exhibit to the applicable Issuing Agreement. Each schedule will include,
among other things, the unpaid principal balance as of the close of business on
the applicable Cut-Off Date, the scheduled monthly payment of principal, if any,
and interest, the maturity date and the loan interest rate for each loan in the
trust fund.
With respect to each mortgage loan in a trust fund, the mortgage note
or other promissory note, any assumption, modification or conversion to fixed
interest rate agreement, a copy of any recorded UCC-1 financing statements and
continuation statements, together with original executed UCC-2 or UCC-3
financing statements disclosing an assignment of a security interest in any
personal property constituting security for repayment of the mortgage loan to
the trustee, an executed re-assignment of assignment of leases, rents and
profits to the trustee if the assignment of leases, rents and profits is
separate from the mortgage, a mortgage assignment in recordable form and the
recorded mortgage or other documents as are required under applicable law to
create a perfected security interest in the mortgaged property in favor of the
trustee will be delivered to the trustee or to a designated custodian; provided,
that, in instances where recorded documents cannot be delivered due to delays in
connection with recording, copies thereof, certified by the originator to be
true and complete copies of these documents, sent for recording, may be
delivered and the original recorded documents will be delivered promptly upon
receipt. As to each mortgage loan for which there is primary mortgage insurance,
the certificate of primary mortgage insurance will be delivered to the trustee.
The assignment of each mortgage will be recorded promptly after the initial
issuance of securities for the trust fund, except in states where, the recording
is not required to protect the trustee's interest in the mortgage loan against
the claim of any subsequent transferee or any successor to or creditor of the
originator or any affiliate of the originator.
With respect to any mortgage loans which are cooperative apartment
loans, the issuer will cause to be delivered to the trustee or to a designated
custodian the original cooperative note, the security agreement, the proprietary
lease or occupancy agreement, the recognition agreement, an executed financing
agreement and the relevant stock certificate and blank stock powers. The
originator will cause to be filed in the appropriate office an assignment and a
refinancing statement evidencing the trustee's security interest in each
cooperative apartment loan.
With respect to each contract, there will be delivered to the trustee
or to a designated custodian the original contract and copies of documents and
instruments to each contract and the security interest in the property securing
each contract. In order to give notice of the right, title and interest of
securityholders to the contracts, the sponsor will cause a UCC-1 financing
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statement to be executed identifying the trustee as the secured party and
identifying all contracts as collateral. The contracts will not be stamped or
otherwise marked to reflect their assignment to the issuer. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the contracts without notice of the assignment, the
interest of securityholders in the contracts could be defeated. See "Certain
Legal Aspects of the Loans."
The trustee or the designated custodian will hold the documents
relating to mortgage loans generally or contracts in trust for the benefit of
securityholders of the series and will review the documents within 45 days of
the date of the applicable Issuing Agreement. If any document is not delivered
or is found to be defective in any material respect or has not been recorded as
required by the applicable Loan Sale Agreement, the trustee or a designated
custodian shall immediately notify the servicer and the issuer, and the servicer
shall immediately notify the originator. If the originator cannot cure the
omission or defect within 60 days after receipt of notice, the originator will
be obligated, under the Loan Sale Agreement, either to repurchase the loan from
the trustee within 60 days after receipt of notice, at a price equal to the then
unpaid principal balance thereof, plus accrued and unpaid interest at the
applicable loan interest rate, less any Fixed Retained Yield and less the rate,
if any, of servicing fee payable with respect to the loan, through the last day
of the month in which the repurchase takes place or to substitute one or more
new loans for the loan. In the case of a loan so repurchased, the purchase price
will be deposited in the Collection Account. In the case of a substitution, the
substitution will be made in accordance with the standards described in "--
Representations and Warranties" below.
There can be no assurance that the originator will fulfill this
repurchase or substitution obligation. The servicer will be obligated to enforce
the obligation to the same extent as it must enforce the obligation of the
originator for a breach of representation or warranty. However, as in the case
of an uncured breach of a representation or warranty, neither the servicer,
unless the servicer is the originator, nor the issuer will be obligated to
purchase or substitute for the loan if the originator defaults on its repurchase
or substitution obligation, unless the breach also constitutes a breach of the
representations or warranties of the servicer or the issuer, as the case may be.
This repurchase or substitution obligation constitutes the sole remedy available
to the securityholders or the trustee for omission of, or a material defect in,
a constituent document.
The trustee will be authorized to appoint a custodian to maintain
possession of the documents relating to the loans. The custodian will keep the
documents as the trustee's agent under a custodial agreement.
Representations and Warranties
The originator, in the Loan Sale Agreement, will have made a number of
representations and warranties concerning the mortgage loans. The originator
will have represented, among other things, substantially to the effect that:
o immediately prior to the sale and transfer of the mortgage
loans, the originator had good title to, and was the sole
owner of, each mortgage loan and there had been no other
assignment or pledge thereof;
o as of the date of the transfer, the mortgage loans are subject
to no offsets, defenses or counterclaims;
o each mortgage loan at the time it was made complied in all
material respects with applicable state and federal laws,
including, usury, equal credit opportunity and disclosure
laws;
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o a lender's policy of title insurance was issued on the date of
the origination of each mortgage loan and each policy is valid
and remains in full force and effect;
o as of the date of the transfer, each mortgaged property is
free of material damage and is in adequate repair and each
mortgage is a valid lien on the mortgaged property, subject
only to
o the lien of current real property taxes and
assessments,
o covenants, conditions and restrictions, rights of
way, easements and other matters of public record as
of the date of the recording of the mortgage,
exceptions appearing of record and either being
acceptable to mortgage lending institutions generally
or specifically reflected in the lender's policy of
title insurance issued on the date of origination and
either (i) specifically referred to in the appraisal
made in connection with the origination of the
mortgage loan or (ii) which do not adversely affect
the appraised value of the mortgaged property as set
forth in the appraisal,
o other matters to which like properties are commonly
subject which do not materially interfere with the
benefits of the security intended to be provided by
the mortgage, and
o in the case of second or more junior loans any senior
loans of record as of the date of recording of the
mortgage loan;
o as of the date of the transfer, there are no delinquent tax or
assessment liens against the mortgaged property that would
permit taxing authority to initiate foreclosure proceedings;
and
o with respect to each mortgage loan, if the mortgaged property
is located in an area identified by the Federal Emergency
Management Agency as having special flood hazards and subject
in particular circumstances to the availability of flood
insurance under the federal flood insurance program, the
mortgaged property is covered by flood insurance meeting the
requirements of the applicable Issuing Agreement.
The originator, in the Loan Sale Agreement, will have made a number of
representations and warranties concerning the contracts. The originator will
have represented, among other things, substantially to the effect that:
o immediately prior to the sale and transfer of the contracts,
the originator had good title to, and was the sole owner of,
each contract and there had been no other assignment or pledge
thereof,
o as of the date of the transfer, the contracts are subject to
no offsets, defenses or counterclaims,
o each contract at the time it was made complied in all material
respects with applicable state and federal laws, including
usury, equal credit opportunity and disclosure laws,
o as of the date of the transfer, each contract is a valid first
lien on the manufactured home and the manufactured home is
free of material damage and is in adequate repair,
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o as of the date of the transfer, there are no delinquent tax or
assessment liens against the manufactured home, and
o with respect to each contract, the manufactured home securing
the contract is covered by a standard hazard insurance policy
in the amount required by the Issuing Agreement and all
premiums then due on the insurance have been paid in full.
All of the representations and warranties of the originator concerning
a loan will have been made as of the date on which the originator sold the loan
to the issuer. A substantial period of time may have elapsed between the date as
of which the representations and warranties were made and the later date of
initial issuance of the securities. Since the representations and warranties
referred to in the preceding paragraphs are the only representations and
warranties that will be made by the originator, the repurchase obligation
described below will not arise if, during the period commencing on the date of
sale of a loan by the originator, the relevant event occurs that would have
given rise to such an obligation had the event occurred prior to sale of the
affected loan. However, the issuer will not include any loan in the trust fund
for any series of securities if anything has come to the issuer's attention that
would cause it to believe that the representations and warranties of the
originator will not be accurate and complete in all material respects concerning
the loan as of the date of initial issuance of the securities.
The servicer, or the trustee if the servicer is the originator, will
promptly notify the originator of any breach of any representation or warranty
made by it concerning a loan which materially and adversely affects the
interests of the securityholders in the loan. If the originator cannot cure the
breach within 60 days after notice from the servicer or the trustee, as the case
may be, then the originator will be obligated either (1) to repurchase the loan
from the trust fund at the applicable purchase price or (2) subject to the
trustee's approval and to the extent permitted by the Issuing Agreement, to
substitute for the Deleted Loan one or more loans, as the case may be, but only
if (a) with respect to a trust fund or a portion of the trust fund for which a
REMIC election is to be made, the substitution is effected within two years of
the date of initial issuance of the securities or (b) with respect to a trust
fund for which no REMIC election is to be made, the substitution is effected
within 120 days of the date of initial issuance of the securities.
Any substitute loan will, on the date of substitution:
o have a LTV no greater than that of the Deleted Loan,
o have a loan interest rate not less than the loan interest rate
of the Deleted Loan,
o have a Net Loan Rate not less than the Net Loan Rate of the
Deleted Loan,
o have a remaining term to maturity not greater than that of the
Deleted Loan, and
o comply with all of the representations and warranties
contained in the Loan Sale Agreement as of the date of
substitution.
If substitution is to be made for a Deleted Loan with an adjustable
loan interest rate, the substitute loan will also bear interest based on the
same index, margin, frequency and month of adjustment as the Deleted Loan. In
the event that one substitute loan is substituted for more than one Deleted
Loan, or more than one substitute loan is substituted for one or more Deleted
Loans, then the amount described above will be determined on the basis of
aggregate principal balances -- provided, that in all events the tests for a
"qualified mortgage" as described in Section 860G of the Code are met as to each
substituted loan -- the rates will be determined on the basis of weighted
average loan interest rates and Net Loan Rates, as the case may be, and the
terms will be determined on the basis of
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weighted average remaining terms to maturity. In the case of a substitute loan,
the mortgage file relating, thereto will be delivered to the trustee or the
designated custodian and the originator will pay an amount equal to the excess
of (x) the unpaid principal balance of the Deleted Loan, over (y) the unpaid
principal balance of the substitute loan or loans, together with interest on the
excess at the loan interest rate to the next scheduled due date of the Deleted
Loan. Such amount will be deposited in the Collection Account for distribution
to securityholders. Except in those cases in which the servicer is the
originator, the servicer will be required under the applicable Issuing Agreement
to enforce this repurchase or substitution obligation for the benefit of the
trustee and the holders of the securities, following the practices it would
employ in its good faith business judgment were it the owner of the loan. This
repurchase or substitution obligation will constitute the sole remedy available
to holders of securities or the trustee for a breach of representation by the
originator.
None of the sponsor, the issuer or the servicer, unless the servicer is
the originator, will be obligated to purchase or substitute for a loan if the
originator defaults on its obligation to do so, and no assurance can be given
that the originator will carry out their respective repurchase obligations with
respect to loans.
The originator, the servicer or another entity specified in the
accompanying prospectus supplement, will make the representations and warranties
as to the types and geographical concentration of the mortgage loan pool or
contract pool and as to other matters concerning the pools as may be described
the accompanying prospectus supplement. Upon a breach of any representation or
warranty which materially and adversely affects the interests of the
securityholders in a loan, the entity making the representation or warranty will
be obligated either to cure the breach in all material respects, repurchase the
loan at the purchase price or substitute for the loan in the manner, and subject
to the conditions, described above regarding the obligations of the originator
with respect to missing or defective loan documents or the breach of the
originator's representations and warranties. This repurchase or substitution
obligation constitutes the sole remedy available to the securityholders or the
trustee for a breach of a representation or warranty by the originator, the
servicer or the other party, respectively.
Pre-Funding Accounts
A trust fund may include one or more Pre-Funding Accounts. On the
closing date for a series, a portion of the proceeds of the sale of the
securities of a series will be deposited in the Pre-Funding Account and may be
used to acquire additional loans or subsequent loans during the Pre-Funding
Period. If any funds remain on deposit in the Pre-Funding Account at the end of
Pre-Funding Period, that amount will be applied in the manner specified in the
accompanying prospectus supplement to prepay the securities of that series.
If a Pre-Funding Account is established, (a) the Pre-Funding Period
will not extend beyond the last day of the third full month after the closing
date, (b) the additional loans to be acquired during the Pre-Funding Period will
be subject to the same representations and warranties and satisfy the same
eligibility requirements as the loans included in the trust fund on the closing
date, subject to the exceptions that are expressly stated in the accompanying
prospectus supplement and (c) prior to the purchase of additional loans, the
amount on deposit in the Pre-Funding Account will be invested in one or more
eligible investments allowed by the rating agencies or any Credit Enhancer. Any
eligible investment must mature no later than the business day prior to the next
distribution date.
If a Pre-Funding Account is established, one or more capitalized
interest accounts may be established and maintained with the trustee, for the
benefit of the securityholders. On the closing date for a series, a portion of
the proceeds of the sale of the securities of a series will be deposited
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in the capitalized interest account and used to fund the excess, if any, of (a)
the sum of the amount of interest accrued on the securities of a series and
specified fees or expenses during the Pre-Funding Period, over (b) the amount of
interest available therefor from the loans in the trust fund. Any amounts on
deposit in the capitalized interest account at the end of the Pre-Funding Period
that are not necessary for these purposes will be distributed to the person
specified in the accompanying prospectus supplement.
If a trust fund includes a Pre-Funding Account and the principal
balance of additional loans delivered to the issuer during the Pre-Funding
Period is less than the original amount on deposit in the Pre-Funding Account,
the securityholders will receive a prepayment of principal as and to the extent
described in the accompanying prospectus supplement. Any principal prepayment
may adversely affect the yield to maturity of these securities. Since prevailing
interest rates are subject to fluctuation, there can be no assurance that
investors will be able to reinvest these prepayments at yields equaling or
exceeding the yields on the securities. It is possible that the yield on any
reinvestment will be lower, and may be significantly lower, than the yield on
the securities.
DESCRIPTION OF THE SECURITIES
The securities will be issued in series. Each series of securities or,
in some instances, two or more series of securities will be issued under an
Issuing Agreement. The following summaries describe particular provisions of the
Issuing Agreements. The summaries are not complete and are subject to all of the
provisions of the Issuing Agreement for the issuer and the accompanying
prospectus supplement. We will file each Issuing Agreement executed and
delivered with respect to each series with the Securities and Exchange
Commission as an exhibit to a Current Report on Form 8-K promptly after issuance
of the securities of a series. We will provide a copy of the Issuing Agreement,
without exhibits, relating to any series without charge upon written request of
a holder of a security of a series addressed to Prudential Securities Secured
Financing Corporation, One New York Plaza, 14th Floor, New York, New York 10292,
Attention: Managing Director-Asset Backed Finance Group.
Neither the securities nor the underlying loans will be guaranteed or
insured by any governmental agency or instrumentality or the sponsor, the
issuer, the servicer, the trustee, the originator or any of their respective
affiliates.
The securities will consist of two basic types: (i) certificates
representing beneficial ownership interests in the assets held by the issuer and
(ii) notes representing debt secured by the assets held by the issuer. Each
series or class of securities may have a different Interest Rate, which may be
fixed or adjustable. The accompanying prospectus supplement will specify the
Interest Rate for each series or class of securities, or the initial Interest
Rate and the method for determining subsequent changes to the Interest Rate.
A series may include one or more classes of Strip Securities or Accrual
Securities. In addition, a series may include two or more classes that differ as
to timing, sequential order, priority of payment, Interest Rate or amount of
distributions of principal or interest or both. Distributions of principal or
interest or both on any class may be made upon the occurrence of specified
events, in accordance with a schedule or formula, or on the basis of collections
from designated portions of the pool.
A series of securities may include one or more classes of securities
that are senior to one or more classes of securities which are subordinate with
respect to particular distributions of principal and interest and allocations of
losses on the loans. In addition, some classes of senior or
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subordinate securities may be senior to other classes of senior or subordinate
securities with respect to the distributions or losses.
Each issuer may also issue classes of Equity Participation Securities.
These classes of securities may constitute what are commonly referred to as the
"residual interest," "ownership interest", "seller's interest" or the "general
partnership interest," depending upon the treatment of the issuer for federal
income tax purposes and generally will not be styled as having principal and
interest components. Any losses suffered by the trust fund will generally be
absorbed first by the class of Equity Participation Securities.
Distributions.
Securityholders will be entitled to receive payments on their
securities on specified distribution dates. Distribution dates will occur
monthly, quarterly or semi-annually, as specified in the accompanying prospectus
supplement. The distribution date will be the specified day of each month, or,
in the case of quarterly-pay securities, the specified day of every third month;
and, in the case of semi-annually-pay securities, the specified day of every
sixth month, or if this day is not a business day, the next succeeding business
day.
The accompanying prospectus supplement will describe a record date
preceding the distribution date, as of which the trustee or its paying agent
will fix the identity of the securityholders for the purpose of receiving
payments on the next succeeding distribution date. The record date will be
either the close of business as of the last day of the calendar month which
precedes the distribution date or the day immediately prior to the distribution
date.
The accompanying prospectus supplement and the Issuing Agreement will
describe a remittance period which occurs prior to each distribution date. For
example, in the case of monthly-pay securities, the calendar month preceding the
month in which a distribution date occurs. Interest accrued and principal
collected on or with respect to the pool during a remittance period will be
required to be remitted by the servicer to the trustee prior to the distribution
date and will be used to distribute payments to securityholders on the
distribution date. The Issuing Agreement may provide that all or a portion of
the principal collected on or with respect to the pool may be applied by the
trustee to the acquisition of additional loans during a specified period, rather
than used to distribute payments of principal to securityholders during that
period, with the result that the securities possess an interest-only period,
also commonly referred to as a revolving period, which will be followed by an
amortization period. Any interest-only or revolving period may, upon the
occurrence of specified events, terminate prior to the end of the specified
period and result in the earlier than expected amortization of the securities.
Beginning on the distribution date in the month following the month --
or, in the case of quarterly-pay securities, the third month following the month
and each third month thereafter or, in the case of semi-annually-pay securities,
the sixth month following the month and each sixth month thereafter -- in which
the Cut-Off Date occurs for a series of securities, distributions of principal
and accrued interest or, where applicable, of principal-only or interest-only,
on each class of securities entitled thereto will be made either by the trustee
or a paying agent appointed by the trustee, to the persons who are registered as
securityholders at the close of business on the record date. Interest that
accrues and is not payable on a class of securities will generally be added to
the principal balance of each security of a class. Distributions will be made in
immediately available funds, by wire transfer or otherwise, to the account of a
securityholder at a bank or other entity having appropriate facilities therefor,
if the securityholder has so notified the trustee or the paying agent, as the
case may be, and the Issuing Agreement provides for the form of payment, or by
check mailed to the address of the person entitled thereto as it appears on the
security register; provided, however, that the final distribution in retirement
of the securities, other than any book-entry securities, will be made only upon
presentation and surrender of the
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securities at the office or agency of the trustee specified in the notice to
securityholders of the final distribution.
Principal and Interest on the Securities
The method of determining, and the amount of, distributions of
principal and interest, or, where applicable, of principal-only or
interest-only, on a particular series of securities will be described in the
accompanying prospectus supplement. Each class of securities, other than
particular classes of Strip Securities, may bear interest at a different
Interest Rate. The accompanying prospectus supplement will specify the Interest
Rate for each class, or in the case of an adjustable Interest Rate, the initial
Interest Rate and the method for determining the Interest Rate. Interest on the
securities will be calculated either on the basis of a 360-day year consisting
of twelve 30-day months, on the basis of the actual number of days in the
accrual period over 360 or on the basis of the actual number of days in the
accrual period over 365.
On each distribution date for a series of securities, the trustee will
distribute or cause the paying agent to distribute, as the case may be, to each
holder of record on the record date of a class of securities, an amount equal to
the percentage interest represented by the security held by the holder
multiplied by the distribution amount for that class. The distribution amount
for a class of securities for any distribution date will be the portion, if any,
of the principal distribution amount allocable to a class for the distribution
date, plus, if the class is entitled to payments of interest on the distribution
date, the interest accrued at the applicable Interest Rate on the principal
balance or notional amount of a class, less the amount of any deferred interest
added to the principal balance of the mortgage loans and/or the outstanding
balance of one or more classes of securities on the due date and any other
interest shortfalls allocable to securityholders which are not covered by
advances or the applicable credit enhancement.
In the case of a series of securities that includes two or more classes
of securities, the timing, sequential order, priority of payment or amount of
distributions of principal, and any schedule or formula or other provisions
applicable to the determination thereof, including distributions among multiple
classes of senior securities or subordinate securities, of each class shall be
as provided in the accompanying prospectus supplement. Generally, distributions
of principal of any class of securities will be made on a pro rata basis among
all of the securities of a class.
On or prior to the second business day next preceding the distribution
date, or any earlier day as shall be agreed by the Credit Enhancer, if any, and
the trustee, the trustee will determine the amounts of principal and interest
which will be passed through to securityholders on the immediately succeeding
distribution date. If the amount in the Collection Account is insufficient to
cover the amount to be passed through to securityholders, the trustee will be
required to notify the Credit Enhancer, if any, under the Issuing Agreement for
the purpose of funding this deficiency.
Form of Securities
The securities of each series will be issued as physical certificates
in fully registered form only in the denominations specified in the accompanying
prospectus supplement, and will be transferable and exchangeable at the
corporate trust office of the registrar of the securities named in the
accompanying prospectus supplement. No service charge will be made for any
registration of exchange or transfer of securities, but the trustee may require
payment of a sum sufficient to cover any tax or other governmental charge.
If so specified in the accompanying prospectus supplement, specified
classes of a series of securities will be issued in uncertificated book-entry
form, and will be registered in the name of Cede, the nominee of DTC. DTC is a
limited purpose trust company organized under the laws
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of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
under the provisions of Section 17A of the Securities Exchange Act of 1934. DTC
was created to hold securities for its participating organizations and
facilitate the clearance and settlement of securities transactions between these
participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include other organizations. Indirect access to the DTC system also is
available to others such as brokers, dealers, banks and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Under a book-entry format, securityholders that are not participants or
indirect participants but desire to purchase, sell or otherwise transfer
ownership of securities registered in the name of Cede & Co., as nominee of DTC,
may do so only through participants and Indirect participants. In addition,
these securityholders will receive all distributions of principal of and
interest on the securities from the trustee through DTC and its participants.
Under a book-entry format, securityholders will receive payments after the
distribution date because, while payments are required to be forwarded to Cede &
Co., as nominee for DTC, on each distribution date, DTC will forward the
payments to its participants, which thereafter will be required to forward the
payments to indirect participants or securityholders. Unless and until physical
securities are issued, it is anticipated that the only securityholder will be
Cede & Co., as nominee of DTC, and that the beneficial holders of book-entry
securities will not be recognized by the trustee as securityholders under the
Issuing Agreement. The beneficial holders of the securities will only be
permitted to exercise the rights of securityholders under the Issuing Agreement
indirectly through DTC and its participants who in turn will exercise their
rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
participants on whose behalf it acts with respect to the securities and is
required to receive and transmit payments of principal of and interest on the
securities. Participants and indirect participants with which securityholders
have accounts with respect to their book-entry securities similarly are required
to make book-entry transfers and receive and transmit the payments on behalf of
their respective securityholders. Accordingly, although securityholders will not
possess securities, the rules provide a mechanism by which securityholders will
receive distributions and will be able to transfer their interests.
Unless and until physical securities are issued, securityholders who
are not participants may transfer ownership of securities only through
participants by instructing the participants to transfer securities, by
book-entry transfer, through DTC for the account of the purchasers of the
securities, which account is maintained with their respective participants.
Under the rules and in accordance with DTC's normal procedures, transfers of
ownership of securities will be executed through DTC and the accounts of the
respective participants at DTC will be debited and credited. Similarly, the
respective participants will make debits or credits, as the case may be, on
their records on behalf of the selling and purchasing securityholders.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and banks, the ability of a securityholder to
pledge securities to persons or entities that do not participate in the DTC
system, or otherwise take actions concerning the securities may be limited due
to the lack of a physical security.
DTC in general advises that it will take any action permitted to be
taken by a securityholder under an Issuing Agreement only at the direction of
one or more participants to whose account with DTC the securities are credited.
Additionally, DTC in general advises that it
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will take these actions with respect to specified percentages of the
securityholders only at the direction of and on behalf of participants whose
holdings include current principal amounts of outstanding securities that
satisfy the specified percentages. DTC may take conflicting actions with respect
to other current principal amounts of outstanding securities to the extent that
these actions are taken on behalf of participants whose holdings include the
requisite current principal amounts of outstanding securities.
Any securities initially registered in the name of Cede & Co., as
nominee of DTC, will be issued in fully registered, certificated form to
securityholders or their nominees, rather than to DTC or its nominee only under
the events specified in the Issuing Agreement and described in the accompanying
prospectus supplement. Upon the occurrence of any of the events specified in the
Issuing Agreement and the prospectus supplement, DTC will be required to notify
all participants of the availability through DTC of physical securities. Upon
surrender by DTC of the securities representing the securities and instruction
for reregistration, the trustee will issue the securities in the form of
physical certificates, and thereafter the trustee will recognize the holders of
the physical certificates as securityholders. Thereafter, payments of principal
of and interest on the securities will be made by the trustee directly to
securityholders in accordance with the procedures described in this prospectus
and in the Issuing Agreement. The final distribution of any security, whether
physical certificates or securities registered in the name of Cede & Co.,
however, will be made only upon presentation and surrender of the securities on
the final distribution date at the office or agency as is specified in the
notice of final payment to securityholders.
None of the sponsor, the issuer, the originator, the servicer or the
trustee will have any liability for any actions taken by DTC, or its nominee, or
Cedelbank or the Euroclear System, including, without limitation, actions for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the securities held by Cede & Co., as nominee for DTC, or
for maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
CREDIT ENHANCEMENT
Various forms of credit enhancement may be provided with respect to one
or more classes of a series of securities or with respect to the loans in the
trust fund. Credit enhancement may be in the form of:
o the subordination of one or more classes of subordinate
securities to provide credit support to one or more classes of
senior securities,
o overcollateralization,
o cross-collateralization,
o the use of a surety bond, financial guaranty insurance policy,
special hazard insurance policy, letter of credit or other
third party guarantees,
o the use of a reserve fund, or
o any combination of the foregoing.
Any credit enhancement may not provide protection against all risks of
loss and may not guarantee repayment of the entire principal balance of the
securities and interest thereon. If losses occur that exceed the amount covered
by credit enhancement or are not covered by the
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credit enhancement, holders of one or more classes of securities will bear their
allocable share of deficiencies.
The descriptions of any insurance policies or bonds described in this
prospectus or any prospectus supplement and the coverage thereunder are not
complete and are qualified in their entirety by reference to the actual forms of
the policies, copies of which are available upon request.
Subordination
The subordination of one or more classes of subordinate securities
provides credit enhancement to the senior securities. With respect to any
senior/subordinate series of securities, the total amount available for
distribution on each distribution date, as well as the method for allocating
this amount among the various classes of securities included in a series, will
be described in the accompanying prospectus supplement. Generally, the amount
available for contribution will be allocated first to interest on the senior
securities of a series, and then to principal of the senior securities up to the
amounts determined as specified in the accompanying prospectus supplement and
the Issuing Agreement, prior to allocation to the subordinate securities of a
series. In the event of any realized losses on the loans, the rights of the
subordinate securityholders to receive distributions with respect to the loans
will be subordinate to the rights of the senior securityholders.
Overcollateralization
Subordination provisions of a series may be used to accelerate the
amortization of one or more classes of securities relative to the amortization
of the underlying loans. The accelerated amortization is achieved by the
application of excess interest to the payment of principal of one or more
classes of securities. This acceleration feature creates, with respect to the
loans or groups thereof, overcollateralization which results from the excess of
the aggregate principal balance of the loans, or a group thereof, over the
principal balance of the class. This acceleration may continue for the life of
the security, or may be limited. In the case of limited acceleration, once the
required level of overcollateralization is reached, the limited acceleration
feature may cease, unless necessary to maintain the required level of
overcollateralization.
Cross-Collateralization
The beneficial ownership of separate groups of assets included in a
trust fund or the obligations to make payments secured by a pledge of a separate
group of assets included in a trust fund may be evidenced by separate classes of
the series. In this case, credit enhancement may be provided by a
cross-collateralization feature which requires that distributions be made with
respect to one class of securities may be made from excess amounts available
from other asset groups within the same trust fund which support other classes
of securities. The prospectus supplement for a series that includes a
cross-collateralization feature will describe the manner and conditions for
applying the cross-collateralization feature.
The coverage provided by one or more forms of credit enhancement may
apply concurrently to two or more separate trust funds. If applicable, the
prospectus supplement will identify the trust funds to which the
credit-collateralization relates and the manner of determining the amount of the
coverage provided thereby and of the application of the coverage to the
identified trust funds.
Surety Bonds
A surety bond or financial guaranty insurance policy may be obtained
and maintained for each class or series of securities. The bond insurer will be
described in the accompanying
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prospectus supplement. This description will include financial information with
respect to the bond insurer.
A surety bond will unconditionally and irrevocably guarantee to
securityholders that an amount equal to each full and complete insured payment
will be received by the trustee on behalf of securityholders, for distribution
by the trustee to each securityholder. The amount of any insured payment will be
defined in the accompanying prospectus supplement, and will generally equal the
full amount of the distributions of principal and interest to which
securityholders are entitled under the Issuing Agreement plus any other amounts
specified in the Issuing Agreement or in the accompanying prospectus supplement.
The specific terms of any surety bond will be described in the
accompanying prospectus supplement. Surety bonds may apply only to specified
classes, or may apply at the loan level and only to specified loans. Surety
bonds may have limitations including limitations on the bond insurer's
obligation to guarantee the obligations of the originator to repurchase or
substitute for any loans. surety bonds will not guarantee any specified rate of
prepayments. In addition, insured payments will generally not be available to
cover interest shortfalls arising from the application of the Soldiers' and
Sailors' Civil Relief Act.
Subject to the terms of the Issuing Agreement, the bond insurer may be
subrogated to the rights of each securityholder to receive payments under the
securities to the extent of any payment by the bond insurer under the surety
bond.
Letters of Credit
A letter of credit may be obtained from a bank and delivered to the
trustee. The letter of credit may provide direct coverage with respect to the
securities or support the issuer's or any other person's obligation under a
purchase obligation to make payments to the trustee with respect to one or more
components of credit enhancement. The bank issuing the letter of credit, as well
as the amount available under the letter of credit with respect to each
component of credit enhancement, will be specified in the accompanying
prospectus supplement and the Issuing Agreement.
Special Hazard Insurance Policies
Any insurance policy covering special hazard losses which may be
obtained by the issuer for a trust fund will be issued by the insurer named in
the accompanying prospectus supplement. Each special hazard insurance policy
will protect holders of the series of securities from (i) losses due to direct
physical damage to a mortgaged property other than any loss of a type covered by
a hazard insurance policy or a flood insurance policy, if applicable, and (ii)
losses from partial damage caused by reason of the application of the
co-insurance clauses contained in hazard insurance policies. Aggregate claims
under a special hazard insurance policy will be limited to a maximum amount of
coverage, as stated in the accompanying prospectus supplement and the Issuing
Agreement.
Reserve Funds
If so provided in the accompanying prospectus supplement, the issuer
will deposit or cause to be deposited in reserve fund any combination of cash,
one or more irrevocable letters of credit or one or more eligible investments in
specified amounts, amounts otherwise distributable to subordinate
securityholders, or any other instrument satisfactory to the rating agencies
rating the series, which will be applied and maintained in the manner and under
the conditions specified in the accompanying prospectus supplement. In the
alternate or in addition to an initial deposit, a reserve fund may be funded
through application of all or a portion of amounts otherwise payable on any
subordinate securities, on any Equity Participation Security or otherwise.
Amounts in a
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reserve fund may be distributed to securityholders, or applied to reimburse the
servicer for outstanding advances or may be used for other purposes.
Other Insurance, Guarantees and Similar Instruments or Agreements
A trust fund may include in lieu of some or all of the foregoing or in
addition thereto, third party guarantees, and other arrangements for maintaining
timely payments or providing additional protection against losses on all or any
specified portion of the assets included in the trust fund, paying
administrative expenses, or accomplishing the other purpose as may be described
in the prospectus supplement. The trust fund may include a guaranteed investment
contract or reinvestment agreement under which funds held in one or more
accounts will be invested at a specified rate. If any class of securities has a
floating Interest Rate, or if any of the loans has a floating coupon rate, the
trust fund may include an interest rate swap contract, an interest rate cap
agreement or similar contract providing limited protection against interest rate
risks.
Reduction or Substitution of Credit Enhancement
The amount of credit support provided by any of the forms of credit
enhancement, including, without limitation, a surety bond, special hazard
insurance policy, letter of credit, or any alternative form of credit
enhancement, may be reduced under specified circumstances. In most cases, the
amount available under any credit enhancement will be subject to periodic
reduction in accordance with a schedule or formula on a nondiscretionary basis
under the terms of the Issuing Agreement as the aggregate outstanding principal
balance of the loans declines. Additionally, in some cases, the credit
enhancement, and any replacements therefor, may be replaced, reduced or
terminated upon the written assurance from each rating agency rating a series
that the then current rating of the securities will not be adversely affected.
Furthermore, in the event that the credit rating of any obligor under any Credit
Enhancer is downgraded, the credit rating of the securities may be downgraded to
a corresponding level, and neither the sponsor nor the issuer thereafter will be
obligated to obtain replacement credit enhancement in order to restore the
rating of the securities, and also will be permitted to replace the credit
enhancement with other credit enhancement instruments issued by Credit Enhancer
whose credit ratings are equivalent to the downgraded level and in lower amounts
which would satisfy the downgraded level; provided, that the then current,
albeit downgraded, rating of the series of securities is maintained. Where the
credit enhancement is in the form of a reserve fund, a permitted reduction in
the amount of credit enhancement will result in a release of all or a portion of
the assets in the reserve fund to any of the holders of the Equity Participation
Securities, the sponsor, the servicer, the originator or the other person that
is entitled thereto. Any assets so released will not be available to fund
distribution obligations in future periods.
PREPAYMENT AND YIELD CONSIDERATIONS
Interest Rates
Any class of securities of a series may have a fixed Interest Rate, or
an Interest Rate which varies based on changes in an index or based on changes
with respect to the underlying loans or may receive interest payments with
respect to the underlying loans in another manner specified in the accompanying
prospectus supplement.
The prospectus supplement for each series will specify the range and
the weighted average of the loan interest rates and Net Loan Rates for the loans
underlying a series as of the Cut-Off Date. Each monthly interest payment on a
loan will generally be calculated as the product of one-twelfth of the
applicable loan interest rate at the time of the calculation and the
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then unpaid principal balance on the loan. If the trust fund includes
adjustable-rate loans or includes loans with different Net Loan Rates, the
weighted average Net Loan Rate may vary from time to time as described below.
See "The Trust Funds." The prospectus supplement for a series will also specify
the initial Interest Rate for each class of securities of a series having an
Interest Rate and will specify whether each Interest Rate is fixed or is
variable.
The Net Loan Rate for any adjustable rate loan will change with any
changes in the index specified in the accompanying prospectus supplement on
which the loan interest rate adjustments are based, subject to any applicable
periodic or aggregate caps or floors on the loan interest rate or other
limitations described in the accompanying prospectus supplement. The weighted
average Net Loan Rate with respect to any series may vary due to changes in the
Net Loan Rates of adjustable rate loans, to the timing of the loan interest rate
readjustments of the loans and to different rates of payment of principal of
fixed or adjustable rate loans bearing different loan interest rates.
If the trust fund for a series includes adjustable rate loans, any
limitations on the periodic changes in a mortgagor's or obligor's monthly
payment, any limitations on the adjustments to the Net Loan Rates or loan
interest rates, any provision that could result in deferred interest and the
effects, if any, thereof on the yield on securities of the series will be
discussed in the accompanying prospectus supplement.
No distribution of principal and only a partial distribution of
interest will be made to securityholders with respect to a negatively amortizing
loan. Distribution of the portion of scheduled interest at the applicable Net
Loan Rate representing deferred interest with respect to the loan will be passed
through to the securityholders on the distribution date following the due date
on which it is received. Deferred interest will bear interest at the Net Loan
Rate for the loan. For federal income tax purposes, deferred interest may
constitute interest income to the trust fund and to securityholders at the time
that it accrues, rather than at the time that it is paid. See "Certain Federal
Income Tax Consequences."
Interest Shortfalls Due to Principal Prepayments
When a loan is prepaid in full, the mortgagor or obligor pays interest
on the amount prepaid only to the date of prepayment and not thereafter.
Similarly, Liquidation Proceeds and Insurance Proceeds are also likely to
include interest only to the time of payment. When a loan is prepaid in part,
and the prepayment is applied as of a date other than the due date occurring in
the month of receipt or the due date occurring in the month following the month
of receipt, the mortgagor or obligor pays interest on the amount prepaid only to
the date of prepayment and not thereafter. The effect of the foregoing is to
reduce the aggregate amount of interest which would otherwise be passed through
to securityholders if the loan were outstanding, or if the partial prepayment
were applied, on the succeeding due date. To mitigate this reduction in yield,
the Issuing Agreement will provide whether with respect to any principal
prepayment or liquidation of any loan underlying the securities of a series, the
servicer will pay into the Collection Account for a series to the extent funds
are available for this purpose from the aggregate servicing fees, or portion
thereof as specified in the accompanying prospectus supplement, which the
servicer is entitled to receive relating to mortgagor or obligor payments or
other recoveries distributed on the distribution date, the amount, if any, as
may be necessary to assure that the amount paid into the Collection Account with
respect to the loan includes an amount equal to interest at the Net Loan Rate
for the loan for the period from the date of the prepayment or liquidation to
but not including the next due date. See "Servicing of the Loans--Adjustment to
Servicing Compensation in Connection with Prepaid and Liquidated Loans."
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Weighted Average Life of Securities
Weighted average life of a security refers to the average amount of
time that will elapse from the date of issuance of the security until each
dollar in reduction of the principal amount of the security is distributed to
the investor. The weighted average life and the yield to maturity of any class
of the securities of a series will be influenced by, among other things, the
rate at which principal on the loans included in the mortgage loan pool or
contract pool for the security is paid, which is determined by scheduled
amortization and prepayments. For this purpose, the term "prepayments" includes
prepayments and liquidations due to default, casualty, condemnation and the
like.
The loans may generally be prepaid in full or in part at any time, and
fixed rate loans will generally contain due-on-sale clauses permitting the
holder to accelerate the maturity of the loan upon conveyance of the mortgaged
property or manufactured home.
Prepayments on loans are commonly measured relative to a prepayment
standard or model. The prospectus supplement for each series will describe one
or more the prepayment standards or models and will contain tables setting forth
the weighted average life of each class and the percentage of the original
aggregate principal amount of each class that would be outstanding on specified
distribution dates for a series based on the assumptions stated in the
accompanying prospectus supplement, including assumptions that prepayments on
the loans are made at rates corresponding to various percentages of the
prepayment standard or model specified in the accompanying prospectus
supplement.
There is, however, no assurance that prepayment of the loans underlying
a series of securities will conform to any level of the prepayment standard or
model specified in the accompanying prospectus supplement. A number of economic,
geographic, social and other factors may affect prepayment experience. These
factors may include homeowner mobility, economic conditions, changes in
mortgagor's or obligor's housing needs, job transfers, unemployment, mortgagor's
or obligor's net equity in the properties securing the loans, servicing
decisions, enforceability of due-on-sale clauses, market interest rates, the
magnitude of taxes, and the availability of funds for refinancing. In general,
however, if prevailing interest rates fall significantly below the loan interest
rates on the loans underlying a series of securities, the prepayment rates of
the loans are likely to be higher than if prevailing rates remain at or above
the rates borne by the loans. It should be noted that securities of a series may
evidence an interest in a trust fund with different loan interest rates.
Accordingly, the prepayment experience of the securities will to some extent be
a function of the mix of loan interest rates of the loans. In addition, the
terms of the Servicing Agreement will require the servicer to enforce any
due-on-sale clause to the extent specified in the Servicing Agreement. See
"Servicing of the Loans--Enforcement of Due-on-Sale Clauses; Realization Upon
Defaulted Loans" and "Certain Legal Aspects of the Loans--Due-On-Sale Clauses"
for a description of particular provisions of each Servicing Agreement and a
number of legal developments that may affect the prepayment experience on the
loans.
A lower rate of principal prepayments than anticipated would negatively
affect the total return to investors in any securities of a series that are
offered at a discount to their principal amount or, if applicable, their parity
price, and a higher rate of principal prepayments than anticipated would
negatively affect the total return to investors in the securities of a series
that are offered at a premium to their principal amount or, if applicable, their
parity price. Parity price is the price at which a security will yield its
coupon, after giving effect to any payment delay. In addition, the yield to
investors in a class of securities which bears interest at an adjustable
Interest Rate, will also be affected by changes in the index on which any
adjustable Interest Rate is based. Changes in the index may not correlate with
changes in prevailing mortgage interest rates or
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financing rates for manufactured housing, and the effect, if any, thereof on the
yield of the securities will be discussed in the accompanying prospectus
supplement. The yield on some types of securities may be particularly sensitive
to prepayment rates, and further information with respect to yield on the
securities will be included in the applicable prospectus supplement.
At the request of the mortgagor or obligor, the servicer may refinance
the loans in any trust fund by accepting prepayments thereon and making new
loans secured by a mortgage on the same property or a security interest in the
same manufactured home. Upon this refinancing, the new loans will not be
included in the trust fund. A mortgagor or obligor may be legally entitled to
require the servicer to allow such a refinancing. Any refinancing will have the
same effect as a prepayment in full of the loan.
The originator may be obligated, under specified circumstances, to
repurchase some of the loans. In addition, the terms of insurance policies
relating to the loans may permit the applicable insurer to purchase delinquent
loans. The proceeds of any repurchase will be deposited in the Collection
Account and the repurchase will have the same effect as a prepayment in full of
the loan. See "The Trust Funds--Assignment of the Loans." In addition, the
servicer may have the option to purchase all, but not less than all, of the
loans in any trust fund under specified limited conditions. For any series of
securities for which an election has been made to treat the trust fund or a
portion of the trust fund as a REMIC, any purchase may be effected only in a
"qualified liquidation," as defined in Code Section 860F(a)(4)(A). See
"Servicing of the Loans--Termination; Purchase or other Disposition of Loans."
SERVICING OF THE LOANS
The following summaries describe particular provisions of the Servicing
Agreements which relate to trust funds comprised of loans. The summaries do not
purport to be complete and are subject to and are qualified in their entirety by
reference to, all the provisions of the Servicing Agreement for each series
which may further modify the provisions summarized below. The provisions of each
Servicing Agreement will vary depending upon the nature of the securities to be
issued thereunder and the nature of the trust fund. We will file each Servicing
Agreement executed and delivered with respect to each series with the Securities
and Exchange Commission as an exhibit to a Current Report on Form 8-K promptly
after issuance of the securities of a series.
The Servicer
The servicer under each Servicing Agreement will be named in the
accompanying prospectus supplement. The servicer with respect to each series
will service the loans contained in the trust fund for a series. For trust funds
comprised of mortgage loans, the servicer will be a seller/servicer approved by
FNMA or FHLMC. Any servicer may delegate its servicing responsibilities to one
or more sub-servicers, but will not be relieved of its liabilities with respect
thereto.
The servicer will make a number of representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Servicing Agreement. An uncured breach of a
representation or warranty that in any respect materially and adversely affects
the interests of the securityholders will constitute an event of default by the
servicer under the Servicing Agreement. See "Servicing of the Loans--Rights Upon
Event of Default; Events of Default--Loans."
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Payments on Loans
The servicer or the trustee will, as to each series of securities,
establish and maintain, or cause to be established and maintained the Collection
Account. The Collection Account will be maintained with a depository (1) whose
long-term debt obligations at the time of any deposit in the Collection Account
are rated not lower than the rating on the series of securities at the time of
the initial issuance thereof, (2) the deposits in which are insured by the
Federal Deposit Insurance Corporation through either the Bank Insurance Fund or
the Savings Association Insurance Fund, to the limit established by the FDIC,
and the uninsured deposits in which accounts are otherwise secured such that, as
evidenced by an opinion of counsel, the trustee for the benefit of the
securityholders of the series has a claim with respect to funds in the
Collection Account for a series, or a perfected security interest in any
collateral, which shall be limited to eligible investments, securing the funds,
that is superior to the claims of any other sponsor or general creditor of the
depository or (3) which is otherwise acceptable to each rating agency rating a
series.
A Collection Account may be maintained as an interest bearing or a
non-interest bearing account, or the funds held in the Collection Account may be
invested pending each succeeding distribution date in eligible investments
satisfactory to the rating agencies or any Credit Enhancer. Any of these
eligible investments shall mature not later than the business day preceding the
next distribution date and none of these investments shall be sold or disposed
of prior to the maturity date of the eligible investment; however, in the event
that an election has been made to treat the trust fund or a portion of the trust
fund with respect to a series as a REMIC, no eligible investments will be sold
or disposed of at a gain prior to maturity unless the servicer has received an
opinion of counsel or other evidence satisfactory to it that the sale or
disposition will not cause the trust fund or a portion of the trust fund to be
subject to the tax on "prohibited transactions" imposed by Code Section
860F(a)(1), otherwise subject the trust fund or a portion of the trust fund to
tax, or cause the trust fund of a portion of the trust fund to fail to qualify
as a REMIC. Any interest or other income earned on funds in the Collection
Account is generally paid to the servicer or its designee as additional
servicing compensation.
The servicer will deposit in the Collection Account for each series of
securities any amounts representing scheduled payments of principal and interest
on the loans due after the applicable Cut-Off Date but received prior thereto,
and, the following payments and collections received or made by it with respect
to the loans subsequent to the applicable Cut-Off Date, other than payments due
on or before the Cut-Off Date:
o all payments on account of principal, including prepayments,
and interest, net of any portion thereof retained by a
sub-servicer as its servicing compensation and net of any
Fixed Retained Yield;
o Net Liquidation Proceeds;
o Net Insurance Proceeds;
o all amounts required to be deposited in the Collection Account
from any reserve fund, and amounts available under any other
form of credit enhancement applicable to a series;
o all advances made by the servicer;
o all amounts withdrawn from buy-down funds or other funds
described in the accompanying prospectus supplement, if any,
with respect to the loans, in accordance with the terms of the
respective agreements applicable thereto;
o all proceeds from the repurchase of loans by the originator;
and
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o all other amounts required to be deposited in the Collection
Account under the Servicing Agreement
Notwithstanding the foregoing, the servicer will be entitled, at its
election, either (a) to withhold and pay itself the applicable servicing fee
and/or to withhold and pay to the owner thereof any Fixed Retained Yield from
any payment or other recovery on account of interest as received and prior to
deposit in the Collection Account or (b) to withdraw the applicable servicing
fee and/or any Fixed Retained Yield from the Collection Account after the entire
payment or recovery has been deposited in the Collection Account; however, with
respect to each trust fund or a portion of the trust fund as to which a REMIC
election has been made, the servicer will, in each instance, withhold and pay to
the owner thereof the Fixed Retained Yield prior to deposit of the payment or
recovery in the Collection Account.
Advances, amounts withdrawn from any reserve fund, and amounts
available under any other form of credit enhancement will be deposited in the
Collection Account not later than the business day preceding the distribution
date on which the amounts are required to be distributed. All other amounts will
be deposited in the Collection Account not later than the business day next
following the day of receipt and posting by the servicer.
If the servicer deposits in the Collection Account for a series any
amount not required to be deposited in the Collection Account, it may at any
time withdraw this amount from the Collection Account.
The servicer is permitted, from time to time, to make withdrawals from
the Collection Account for the following purposes, to the extent permitted in
the applicable Servicing Agreement:
o to reimburse itself for advances;
o to reimburse itself from Liquidation Proceeds for expenses
incurred by the servicer in connection with the liquidation of
any defaulted loan or property acquired in respect thereof and
for amounts expended in good faith in connection with the
restoration of damaged property, to reimburse itself from
Insurance Proceeds for expenses incurred by the servicer in
connection with the restoration, preservation or repair of the
mortgaged properties or manufactured homes and expenses
incurred in connection with collecting on the insurance
policies and, to the extent that Liquidation Proceeds or
Insurance Proceeds after the reimbursement are in excess of
the unpaid principal balance of the loans together with
accrued and unpaid interest thereon at the applicable Net Loan
Rate through the last day of the month in which the
Liquidation Proceeds or Insurance Proceeds were received, to
pay to itself out of the excess the amount of any unpaid
servicing fees and any assumption fees, late payment charges
or other mortgagor or obligor charges on the loans;
o to pay to itself the applicable servicing fee and/or pay the
owner thereof any Fixed Retained Yield, in the event the
servicer is not required, and has elected not, to withhold the
amounts out of any payment or other recovery with respect to a
particular loan prior to the deposit of the payment or
recovery in the Collection Account;
o to reimburse itself and the issuer for specified expenses,
including taxes paid on behalf of the trust fund, incurred by
and recoverable by or reimbursable to it or the issuer, as the
case may be;
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o to pay to the originator with respect to each loan or property
acquired in respect thereof that has been repurchased by the
originator, as the case may be, all amounts received thereon
and not distributed as of the date as of which the purchase
price of the loan was determined;
o to pay itself any interest earned on or investment income
earned with respect to funds in the Collection Account, all
interest or income to be withdrawn not later than the next
distribution date;
o to make withdrawals from the Collection Account in order to
make distributions to securityholders; and
o to clear and terminate the Collection Account.
Advances and Limitations Thereon
The accompanying prospectus supplement will describe the circumstances,
if any, under which the servicer will make advances with respect to delinquent
payments on loans. The servicer will be obligated to make advances, and the
obligation may be limited in amount, or may not be activated until a portion of
a specified reserve fund is depleted. Advances are intended to provide liquidity
and not to guarantee or insure against losses. Accordingly, any funds advanced
are recoverable by the servicer out of amounts received on particular loans
which represent late recoveries of principal or interest, proceeds of insurance
policies or Liquidation Proceeds respecting which any advance was made. If an
advance is made and subsequently determined to be nonrecoverable from late
collections, proceeds of insurance policies, or Liquidation Proceeds from the
loan, the servicer may be entitled to reimbursement from other funds in the
Collection Account, or from a specified reserve fund as applicable, to the
extent specified in the accompanying prospectus supplement.
Adjustment to Servicing Compensation in Connection with Prepaid and Liquidated
Loans
When a mortgagor or obligor prepays a loan in full, the mortgagor or
obligor pays interest on the amount prepaid only to the date on which the
principal prepayment is made. Similarly, Liquidation Proceeds from a mortgaged
property or manufactured home will not include interest for any period after the
date on which the liquidation took place, and Insurance Proceeds may include
interest only to the date of settlement of the claims. Further, when a loan is
prepaid in part, and the prepayment is applied as of a date other than a due
date, the mortgagor or obligor pays interest on the amount prepaid only to the
date of prepayment and not thereafter. The effect of the foregoing is to reduce
the aggregate amount of interest which would otherwise be passed through to
securityholders if the loan were outstanding, or if the partial prepayment were
applied, on the succeeding due date. In order to mitigate the adverse effect to
securityholders of a series resulting from the prepayment or liquidation of a
loan or settlement of an insurance claim with respect thereto, the amount of the
aggregate servicing fees may be reduced by an amount equal to the accrual of
interest on any prepaid or liquidated loan at the Net Loan Rate from the date of
its prepayment or liquidation or the date of the insurance settlement to the
next due date. These reductions in the aggregate servicing fees will be made by
the servicer with respect to the loans under the applicable Servicing Agreement
but only to the extent that the aggregate amount of this interest does not
exceed the aggregate servicing fees relating to mortgagor or obligor payments or
other recoveries distributed on the distribution date. The amount of the offset
against the aggregate servicing fees will be included in the scheduled
distributions to securityholders on the distribution date on which the principal
prepayments, Liquidation Proceeds or Insurance Proceeds are passed through to
securityholders. See "Prepayment and Yield Considerations."
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Reports to Securityholders
Unless otherwise specified or modified in the Servicing Agreement for
each series, a statement setting forth the following information, if applicable,
will be included with each distribution to securityholders of record of a
series:
(a) the amount of principal distributed to holders of the
securities and the outstanding principal balance of the
securities following the distribution;
(b) the amount of interest distributed to holders of the
securities and the current interest on the securities;
(c) the amounts of (1) any overdue accrued interest included in
the distribution, (2) any remaining overdue accrued interest
with respect to the securities or (3) any current shortfall in
amounts to be distributed as accrued interest to holders of
the securities;
(d) the amounts of (1) any overdue payments of scheduled principal
included in the distribution, (2) any remaining overdue
principal amounts with respect to the securities, (3) any
current shortfall in receipt of scheduled principal payments
on the loans or (4) any realized losses or Liquidation
Proceeds to be allocated as reductions in the outstanding
principal balances of the securities;
(e) the amount received under any credit enhancement, and the
remaining amount available under the credit enhancement;
(f) the amount of any delinquencies with respect to payments on
the loans;
(g) the book value of any REO property acquired by the trust fund;
and
(h) such other information as specified in the Issuing Agreement.
In addition, within a reasonable period of time after the end of each
calendar year, the trustee will furnish to each holder of record at any time
during the calendar year (x) the aggregate of amounts reported under clauses
(a), (b), and (d)(4) above for the calendar year and (y) the information
specified in the Issuing Agreement to enable securityholders to prepare their
tax returns including, without limitation, the amount of original issue discount
accrued on the securities, if applicable. Information in the distribution date
and annual statements provided to the holders will not have been examined and
reported upon by an independent public accountant. However, the servicer will
provide to the trustee a report by independent public accountants with respect
to the servicer's servicing of the loans. See "--Evidence as to Compliance" in
this prospectus.
A series of securities or one or more classes of a series may be issued
in book-entry form. In this event, owners of beneficial interests in the
securities will not be considered holders and will not receive the reports
directly from the trustee. The trustee will forward the reports only to the
entity or its nominee which is the registered holder of the global certificate
which evidences the book-entry securities. Beneficial owners will receive the
reports from the participants and indirect participants of the applicable
book-entry system in accordance with the practices and procedures of these
entities.
Collection and Other Servicing Procedures
The servicer, directly or through sub-servicers, will make reasonable
efforts to collect all payments called for under the loans and will, consistent
with the Servicing Agreement, follow the collection procedures as it follows
with respect to mortgage loans or manufactured housing contracts serviced by it
that are comparable to the loans, as the case may be. Consistent with the above,
the servicer may, in its discretion, (i) waive any prepayment charge, assumption
fee, late
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payment charge or any other charge in connection with the prepayment of a loan
and (ii) arrange with a mortgagor or obligor a schedule for the liquidation of
deficiencies running for not more than six (6) months after the applicable due
date.
In accordance with the Servicing Agreement, the servicer, to the extent
permitted by law, will establish and maintain or will cause to be established
and maintained one or more escrow accounts in which the servicer will be
required to deposit or cause to be deposited payments by mortgagors or obligors,
as applicable, for taxes, assessments, mortgage and hazard insurance premiums
and other comparable items. Withdrawals from the escrow accounts may be made to
effect timely payment of taxes, assessments, mortgage and hazard insurance, to
refund to mortgagors or obligors amounts determined to be overages, to pay
interest to mortgagors or obligors on balances in the escrow accounts, if
required, to repair or otherwise protect the mortgaged properties or
manufactured homes and to clear and terminate this account. The servicer will be
responsible for the administration of each escrow account. The servicer will be
obligated to advance particular amounts which are not timely paid by mortgagors
or obligors, to the extent that the servicer determines that the amounts will be
recoverable out of Insurance Proceeds, Liquidation Proceeds, or otherwise.
Alternatively, if specified in the Servicing Agreement, in lieu of establishing
a escrow account, the servicer may procure a performance bond or other form of
insurance coverage, in an amount acceptable to each rating agency rating the
series of securities, covering loss occasioned by the failure to escrow these
amounts.
Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Loans
Each Servicing Agreement will provide that, when any mortgaged property
or manufactured home is conveyed by the mortgagor or obligor, the servicer will
exercise its rights to accelerate the maturity of the loan under any
"due-on-sale" clause applicable thereto, if any, unless (a) it is not
exercisable under applicable law or (b) this exercise would result in loss of
insurance coverage with respect to the loan. In this case, the servicer is
authorized to take or enter into an assumption and modification agreement from
or with the person to whom the mortgaged property or manufactured home has been
or is about to be conveyed, and the person will become liable under the mortgage
note or contract and, unless prohibited by applicable state law, the mortgagor
or obligor remains liable thereon; provided, that the loan will continue to be
covered by any pool insurance policy and any primary mortgage insurance policy,
and the loan interest rate with respect to the loan and the payment terms shall
remain unchanged. The servicer will also be authorized, with the prior approval
of any pool insurer and any primary mortgage insurer, if any, to enter into a
substitution of liability agreement with this person, and the original mortgagor
or obligor will be released from liability and this person will be substituted
as mortgagor or obligor and becomes liable under the mortgage note or contract.
The servicer is obligated under the Servicing Agreement to realize upon
defaulted loans to the extent provided in the Servicing Agreement. However, in
the case of foreclosure or of damage to a mortgaged property or manufactured
home from an uninsured cause, the servicer is not required to expend its own
funds to foreclose, repossess or restore any damaged property, unless it
reasonably determines (i) that this foreclosure, repossession or restoration
will increase the proceeds to securityholders of a series of liquidation of the
loan after reimbursement of the servicer for its expenses and (ii) that these
expenses will be recoverable to it through Liquidation Proceeds or Insurance
Proceeds. In the event that the servicer has expended its own funds for
foreclosure or to restore damaged property, it will be entitled to charge the
Collection Account for a series an amount equal to all costs and expenses
incurred by it.
The servicer may foreclose against property securing a defaulted loan
either by foreclosure, by sale or by strict foreclosure and in the event a
deficiency judgment is available against the mortgagor or other person may
proceed for the deficiency. See "Certain Legal
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Aspects of the Loans--The Mortgage Loans--Anti-Deficiency Legislation and Other
Limitations on Lenders" for a description of the availability of deficiency
judgments. It is anticipated that in most cases the servicer will not seek
deficiency judgments against any mortgagor or obligor, and the servicer is not
required under the Servicing Agreement to seek deficiency judgments.
With respect to a trust fund, or one or more segregated pools of assets
in the trust fund, as to which a REMIC election has been made, if the trustee
acquires ownership of any mortgaged property or manufactured home as a result of
a default or imminent default of any loan secured by the mortgaged property or
manufactured home, the trustee generally will be required to dispose of the
property with two (2) years following its acquisition by the trust fund. The
servicer also will be required to administer the mortgaged property or
manufactured home in a manner which does not cause the mortgaged property or
manufactured home to fail to qualify as "foreclosure property" within the
meaning of Code Section 860G(a)(8) or result in the receipt by the trust fund of
any "net income from foreclosure property" within the meaning of Code Section
860G(c). In general, this would preclude the holding of the mortgaged property
or manufactured home as a dealer in the property or the receipt of rental income
based on the profits of the lessee.
The servicer may modify, waive or amend the terms of any loan without
the consent of the trustee or any securityholder. These modifications, waivers
or amendments shall only be given if the servicer determines that it is in the
best interests of securityholders and, generally, only if the loan is in default
or the servicer has determined that default is reasonably foreseeable.
Servicing Compensation and Payment of Expenses
For each series of securities, the servicer will be entitled to be paid
a servicing fee on the loans until termination of the Servicing Agreement. The
servicer, at its election, will pay itself the servicing fee for a series with
respect to each loan by (a) withholding the servicing fee from any scheduled
payment of interest prior to deposit of the payment in the Collection Account
for a series or (b) withdrawing the servicing fee from the Collection Account
after the entire interest payment has been deposited in the Collection Account.
The servicer may also pay itself out of the Liquidation Proceeds or Insurance
Proceeds with respect to a loan, or withdraw from the Collection Account, the
servicing fee on the loan or other recoveries with respect thereto to the extent
provided in the Servicing Agreement. The servicing fee with respect to the loans
underlying the securities of a series will be specified in the applicable
prospectus supplement. Any additional servicing compensation in the form of
prepayment charges, assumption fees, late payment charges or otherwise will be
retained by the servicer to the extent not required to be deposited in the
Collection Account.
In addition to amounts payable to any sub-servicer, the servicer will
pay all expenses incurred in connection with the servicing of the loans
underlying a series, including, without limitation, payment of the hazard
insurance policy premiums and fees or other amounts payable in accordance with
any applicable agreement for the provision of credit enhancement for a series,
payment of the fees and disbursements of the trustee and any custodian, fees due
to the independent accountants and expenses incurred in connection with
distributions and reports to securityholders. However, some of these expenses
may be reimbursable to the servicer under the terms of the Issuing Agreement. In
addition, the servicer will be entitled to reimbursement for particular expenses
incurred by it in connection with the liquidation of defaulted loans. In the
event that claims are either not made or are not fully paid from any applicable
form of credit enhancement, the trust fund will suffer a loss to the extent that
Net Liquidation Proceeds and Net Insurance Proceeds are less than the principal
balance of the loan, plus accrued interest thereon at the Net Loan Rate. In
addition, the servicer will be entitled to reimbursement of expenditures
incurred by it in connection with the restoration of any mortgaged property or
manufactured home, the right of reimbursement being prior to the rights of the
securityholders to receive Liquidation Proceeds
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and Insurance Proceeds. The servicer is also entitled to reimbursement from the
Collection Account of advances, of advances made by it to pay taxes or insurance
premiums with respect to any mortgaged property or manufactured home and of
particular losses against which it is indemnified by the trust fund.
Evidence as to Compliance
The applicable Servicing Agreement for each series will provide that
each year, a firm of independent public accountants will furnish a statement to
the trustee to the effect that this firm has examined specified documents and
records relating to the servicing of the loans by the servicer and that, on the
basis of the examination, this firm is of the opinion that the servicing has
been conducted in compliance with the Servicing Agreement, except for (i) any
exceptions as such firm believes to be immaterial and (ii) any other exceptions
as are stated in this statement.
The applicable Servicing Agreement for each series will also provide
for delivery to the trustee for a series of an annual statement signed by an
officer of the servicer to the effect that the servicer has fulfilled its
obligations under the Servicing Agreement throughout the preceding calendar
year.
Certain Matters Regarding the Servicer
The servicer may not resign from its obligations and duties under the
Servicing Agreement for each series, except upon its determination that its
duties thereunder are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities of a
type and nature presently carried on by it. No resignation will become effective
until the trustee for a series or a successor servicer has assumed the
servicer's obligations and duties under the Servicing Agreement. If the servicer
resigns for any of the foregoing reasons and the trustee is unable or unwilling
to assume responsibility for servicing the loans, it may appoint another
institution as servicer, as described under "Servicing of the Loans--Events of
Default; Rights Upon Event of Default " below.
The Servicing Agreement will provide that neither the servicer nor any
director, officer, employee or agent of either of them will be under any
liability to the trust fund or the securityholders, for the taking of any action
or for refraining from the taking of any action in good faith in accordance with
the Servicing Agreement or for errors in judgment; provided, however, that none
of the servicer or any director, officer, employee or agent of the servicer will
be protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of his or its
duties or by reason of reckless disregard of his or its obligations and duties
thereunder. The Servicing Agreement will further provide that the servicer and
any director, officer, employee or agent of the servicer shall be entitled to
indemnification by the trust fund and will be held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
the Servicing Agreement or the securities other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of his or its duties thereunder or by reason of reckless
disregard of his or its obligations and duties thereunder. In addition, the
Servicing Agreement will provide that the servicer will not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties under the Servicing Agreement and that in its opinion
may involve it in any expense or liability. The servicer may, however, in its
discretion, undertake any such action deemed by it necessary or desirable with
respect to the Servicing Agreement and the rights and duties of the parties
thereto and the interests of the securityholders thereunder. In this event, the
legal expenses and costs of the action and any liability resulting therefrom
will be expenses, costs and liabilities of the trust fund, and the servicer will
be entitled to be reimbursed therefor out of the Collection Account, and any
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loss to the trust fund arising from the right of reimbursement will be allocated
pro rata among the various classes of securities unless otherwise specified in
the applicable Servicing Agreement.
Any person into which the servicer may be merged or consolidated, or
any person resulting from any merger, conversion or consolidation to which the
servicer is a party, or any person succeeding to the business through the
transfer of substantially all of its assets, or otherwise, of the servicer will
be the successor of the servicer under the Servicing Agreement; provided, that
the successor or resulting entity is qualified to service mortgage loans for
FNMA or FHLMC and that each rating agency's rating of any securities for a
series in effect immediately prior to this event is not adversely affected
thereby.
The servicer also may have the right to assign its rights and delegate
its duties and obligations under the Servicing Agreement (1) in connection with
a sale or transfer of a substantial portion of its mortgage or manufactured
housing servicing portfolio; provided, that (x) in the case of a transfer by a
servicer of mortgage loans, the purchaser or transferee accepting the assignment
or delegation is qualified to service mortgage loans for FNMA or FHLMC, (xi) the
purchaser or transferee is reasonably satisfactory to the issuer and the trustee
for a series and executes and delivers to the issuer and the trustee an
agreement, in form and substance reasonably satisfactory to the issuer and the
trustee, which contains an assumption by the purchaser or transferee of the due
and punctual performance and observance of each covenant and condition to be
performed or observed by the servicer under the Servicing Agreement from and
after the date of the agreement; and (z) each rating agency's rating of any
securities for a series in effect immediately prior to the assignment, sale or
transfer is not qualified, downgraded or withdrawn as a result of the
assignment, sale or transfer or (2) to any affiliate of the servicer; provided,
that the conditions contained in clauses (x) through (z) above are met. In the
case of any assignment or delegation, the servicer will be released from its
obligations under the Servicing Agreement except for liabilities and obligations
incurred prior to the assignment and delegation.
Events of Default; Rights Upon Event of Default
Servicing Agreement. Events of default under the Servicing Agreement
generally include:
o any failure by the servicer to deposit amounts in the
Collection Account, which failure continues unremedied for the
number of days specified in the accompanying prospectus
supplement after the giving of written notice of any failure
to the servicer by the trustee for a series, or to the
servicer and the trustee by the holders of a series evidencing
not less than a specified percentage of the aggregate voting
rights of the securities for a series,
o any failure by the servicer duly to observe or perform in any
material respect any other of its covenants or agreements in
the applicable Issuing Agreement which continues unremedied
for the number of days specified in the accompanying
prospectus supplement after the giving of written notice of
any failure to the servicer by the trustee, or to the servicer
and the trustee by the holders of a series evidencing not less
than a specified percentage of the aggregate voting rights of
the securities for a series, and
o particular events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings
and particular actions by the servicer indicating its
insolvency, reorganization or inability to pay its
obligations.
The Servicing Agreement will specify the circumstances under which the
trustee of the holders of securities may remove the servicer upon the occurrence
and continuance of an event of
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default thereunder, whereupon the trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under the Servicing
Agreement and will be entitled to reasonable servicing compensation not to
exceed the applicable servicing fee, together with other servicing compensation
in the form of assumption fees, late payment charges or otherwise as provided in
the Servicing Agreement.
In the event that the trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a finance
institution, bank or loan servicing institution with a net worth specified in
the accompanying prospectus supplement to act as successor servicer under the
provisions of the applicable Servicing Agreement. The successor servicer would
be entitled to reasonable servicing compensation in an amount not to exceed the
servicing fee stated in the accompanying prospectus supplement, together with
the other servicing compensation in the form of assumption fees, late payment
charges or otherwise, as provided in the Servicing Agreement.
During the continuance of any event of default of a servicer under a
Servicing Agreement, the trustee will have the right to take action to enforce
its rights and remedies and to protect and enforce the rights and remedies of
the holders of a series, and holders of securities evidencing not less than a
specified percentage of the aggregate voting rights of the securities for a
series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee or exercising any trust or power conferred
upon that trustee. However, the trustee will not be under any obligation to
pursue any remedy or to exercise any of these trusts or powers unless the
securityholders have offered the trustee reasonable security or indemnity
against the cost, expenses and liabilities which may be incurred by the trustee
in pursuing the remedy. The trustee may decline to follow any direction by the
securityholders if the trustee determines that the action or proceeding so
directed may not lawfully be taken or would involve it in personal liability or
be unjustly prejudicial to the nonassenting holders.
Indenture. Events of default under the indenture for each series of
notes generally include:
o a default in the payment of any principal of or interest on
any note of a series, which continues for the period of time
specified in the accompanying prospectus supplement;
o failure to perform any other covenant of the issuer in the
indenture which continues for the period of time specified in
the accompanying prospectus supplement after notice thereof is
given in accordance with the procedures described in the
accompanying prospectus supplement;
o any representation or warranty made by the issuer in the
indenture or in any certificate or other writing delivered
pursuant thereto or in connection therewith with respect to or
affecting a series having been incorrect in a material respect
as of the time made, and the breach is not cured within the
period of time specified in the accompanying prospectus
supplement after notice thereof is given in accordance with
the procedures described in the accompanying prospectus
supplement;
o specified events of bankruptcy, insolvency, receivership or
liquidation of the issuer; or
o any other event of default provided with respect to notes of
that series.
If an event of default with respect to the notes of any series at the
time outstanding occurs and is continuing, either the trustee or the holders of
a majority of the then aggregate outstanding
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amount of the notes of a series may declare the principal amount of all the
notes of a series to be due and payable immediately. This declaration may, under
some circumstances, be rescinded and annulled by the holders of a majority in
aggregate outstanding amount of the notes of a series.
If, following an event of default with respect to any series of notes,
the notes of a series have been declared to be due and payable, the trustee may,
in its discretion, notwithstanding this acceleration, elect to maintain
possession of the collateral securing the notes of a series and to continue to
apply distributions on the collateral as if there had been no declaration of
acceleration if the collateral continues to provide sufficient funds for the
payment of principal of and interest on the notes of a series as they would have
become due if there had not been such a declaration. In addition, the trustee
may not sell or otherwise liquidate the collateral securing the notes of a
series following an event of default other than a default in the payment of any
principal or interest on any note of a series for thirty (30) days or more,
unless (a) the holders of 100% of the then aggregate outstanding amount of the
notes of a series consent to the sale, (b) the proceeds of the sale or
liquidation are sufficient to pay in full the principal of and accrued interest
due and unpaid on the outstanding notes of a series at the date of the sale or
(c) the trustee determines that the collateral would not be sufficient on an
ongoing basis to make all payments on the notes as these payments would have
become due if the notes had not been declared due and payable, and the trustee
obtains the consent of the holders of a specified percentage of the then
aggregate outstanding amount of the notes of a series.
In the event that the trustee liquidates the collateral in connection
with an event of default involving a default for thirty (30) days or more in the
payment of principal of or interest on the notes of a series, the indenture
provides that the trustee will have a prior lien on the proceeds of any
liquidation for unpaid fees and expenses. As a result, upon the occurrence of
such an event of default, the amount available for distribution to the
noteholders may be less than would otherwise be the case. However, the trustee
may not institute a proceeding for the enforcement of its lien except in
connection with a proceeding for the enforcement of the lien of the Indenture
for the benefit of the noteholders after the occurrence of such an event of
default.
In the event the principal of the notes of a series is declared due and
payable, as described above, the holders of any notes issued at a discount from
par may be entitled to receive no more than an amount equal to the unpaid
principal amount thereof less the amount of the discount which is unamortized.
Subject to the provisions of the indenture relating to the duties of
the trustee, in case an event of default shall occur and be continuing with
respect to a series of Notes, the trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or
direction of any of the holders of notes of a series, unless the holders offered
to the trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with the
request or direction. Subject to these provisions for indemnification and
specified limitations contained in the indenture, the holders of a majority of
the then aggregate outstanding amount of the notes of a series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee with respect to the notes of a series, and the holders of a majority
of the then aggregate outstanding amount of the notes of a series may, in some
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default of a covenant or provision of the
indenture that cannot be modified without the waiver or consent of all the
holders of the outstanding notes of a series affected thereby.
Amendment
Each Issuing Agreement may be amended by the parties thereto without
the consent of the securityholders,
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o to cure any ambiguity,
o to correct or supplement any provision of the Issuing
Agreement that may be inconsistent with any over provision of
the Issuing Agreement,
o to comply with the requirements of the Code, or
o to make any other provisions with respect to matters or
questions arising under the Issuing Agreement that are not
inconsistent with the provisions thereof;
provided, that the action will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the securityholders of
the series.
The Issuing Agreement may also be amended by the with the consent of
the holders of securities evidencing interests aggregating not less than a
specified percentage of the voting interests evidenced by the securities
affected thereby, for the purpose of adding any provisions to or changing in any
manner or eliminating, any of the provisions of the Issuing Agreement or of
modifying in any manner the rights of the securityholders; provided, however,
that no amendment may (i) reduce in any manner the amount of, or delay the
timing of, any payments received on or with respect to loans that are required
to be distributed on any securities, without the consent of the holder of the
security, (ii) adversely affect in any material respect the interests of the
holders of a class of securities of a series in a manner other than that
described in clause (i) above without the consent of the holders of securities
aggregating not less than a specified percentage of the Voting Interests
evidenced by the class, or (iii) reduce the aforesaid percentage of the
securities, the holders of which are required to consent to the amendment,
without the consent of the holders of all securities of the class affected then
outstanding.
Termination; Purchase or Other Disposition of Loans
The obligations created by the Issuing Agreement for a series of
securities will terminate upon the earlier of (i) the later of the final payment
or other liquidation of the last loan subject thereto and the disposition of all
property acquired upon foreclosure of any loan and (ii) any purchase or
disposition described in the following paragraph. In no event, however, will the
trust created by the Issuing Agreement continue beyond the expiration of 21
years from the death of the late survivor of persons named in the Issuing
Agreement. For each series of securities, the trustee will give written notice
of termination of the Issuing Agreement to each securityholder, and the final
distribution will be made only upon surrender and cancellation of the securities
at an office or agency appointed by the sponsor and specified in the notice of
termination.
Repurchase of the Remaining Loans. The Issuing Agreement for each
series may permit, but not require, the servicer or other entity specified in
the accompanying prospectus supplement to purchase from the trust fund for a
series all remaining loans at a price equal to 100% of the aggregate principal
balance of the loans plus, with respect to any property acquired in respect of a
loan, if any, the outstanding principal balance of the loan at the time of
foreclosure, less, in either case, unreimbursed advances, in the case of the
loans, only to the extent not already reflected in the computation of the
aggregate principal balance of the loans, and unreimbursed expenses that are
reimbursable under the terms of the Issuing Agreement plus, in either case,
accrued interest thereon at the weighted average rate on the loans through the
last day of the remittance period in which the repurchase occurs; provided,
however, that if an election is made for treatment as a REMIC under the Code,
the repurchase price may equal the greater of (a) 100% of the aggregate
principal balance of the loans, plus accrued interest thereon at the applicable
Net Loan Rates on the loans through the last day of the month of the repurchase
and (b) the aggregate fair market value of the loans plus the fair market value
of any property acquired in respect of a loan and remaining in the trust fund.
The exercise of this right will effect early retirement of the securities
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of a series, but this entity's right to so purchase is subject to the aggregate
principal balance of the loans at the time of repurchase being less than a fixed
percentage, which shall not exceed 20%, to be stated in the Issuing Agreement,
of the aggregate principal balance of the loans as of the Cut-Off Date.
Mandatory Termination; Auction Sale. The trustee, the servicer or the
originator may be required to effect early retirement of a series of securities
by soliciting competitive bids for the purchase of the trust fund.
The mandatory termination may take the form of an auction sale. Within
a particular period following the failure of the holder of the optional
termination right to exercise the right, the required party shall solicit bids
for the purchase of all loans remaining in the trust fund. In the event that
satisfactory bids, which would not be less than an amount necessary to pay all
principal and interest on the securities outstanding, are received as specified
in the Issuing Agreement, the net sale proceeds will be distributed to
securityholders, in the same order of priority as collections received on the
loans. If satisfactory bids are not received, this party shall decline to sell
the loans and shall not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the loans. This sale and consequent
termination of the trust fund must constitute a "qualified liquidation" of each
REMIC established by the issuer under Section 860F of the Code, including,
without limitation, the requirement that the qualified liquidation takes place
over a period not to exceed 90 days.
CERTAIN LEGAL ASPECTS OF THE LOANS
The following discussion contains summaries of particular legal aspects
of mortgage loans and manufactured housing contracts which are general in
nature. Because these legal aspects are governed by applicable state law, which
laws may differ substantially, the summaries do not purport to be complete nor
to reflect the laws of any particular state, nor to encompass the laws of all
states in which the security for the loans is situated. The summaries are
qualified in their entirety by reference to the applicable federal and state
laws governing the loans.
The Mortgage Loans
The mortgage loans will, in general, be secured by either first, second
or more junior mortgages, deeds of trust, or other similar security agreements
depending upon the prevailing practice in the state in which the underlying
property is located. A mortgage creates a lien upon the real property described
in the mortgage. There are two parties to a mortgage: the mortgagor, who is the
borrower; and the mortgagee, who is the lender. In a mortgage state instrument,
the mortgagor delivers to the mortgagee a note or bond evidencing the loan and
the mortgage. Although a deed of trust is similar to a mortgage, a deed of trust
has three parties: a borrower called the trustor, who is similar to a mortgagor,
a lender called the beneficiary, who is similar to a mortgagee, and a
third-party grantee called the trustee. Under a deed of trust, the borrower
grant the property, irrevocably until the debt is paid, in trust, generally with
a power of sale, to the trustee to secure payment of the loan. The trustee's
authority under a deed of trust and the mortgage's authority under a mortgage
are governed by the express provisions of the deed of trust or mortgage,
applicable law, and, in some cases, with respect to the deed of trust, the
directions of the beneficiary.
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in real
property such as a tenant's interest in a lease of land or improvements, or
both, and the leasehold estate created by the lease. A mortgage covering an
interest in real property other than the fee estate requires
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special provisions in the instrument creating the interest or in the mortgage to
protect the mortgagee against termination of the interest before the mortgage is
paid.
Foreclosure
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure occasionally may result from difficulties in locating
necessary parties defendant. When the mortgagee's right of foreclosure is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming. After the completion of a judicial foreclosure proceeding, the
court may issue a judgment of foreclosure and appoint a receiver or other
officer to conduct the sale of the property. In some states, mortgages may also
be foreclosed by advertisement, by a power of sale provided in the mortgage.
Foreclosure of a mortgage by advertisement is essentially similar to foreclosure
of a deed of trust by nonjudicial power of sale.
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the note or deed of trust. In some states, this
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee must provide notice in some states to any other individual
having an interest of record in the real property, including any junior
lienholders. If the deed of trust is not reinstated within any applicable cure
period, a notice of sale must be posted in a public place and, in most states,
published for a specified period of time in one or more newspapers. In addition,
some state be laws require that a copy of the notice of sale be posted on the
property and sent to all parties having an interest of record in the property.
In some states, the borrower-trustor has the right to reinstate the
loan at any time following default until shortly before the trustee's sale. In
general, the borrower, or any other person having, a junior encumbrance on the
real estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Some state laws control the amount of foreclosure expenses and
costs, including attorneys' fees, which may be recovered by a lender.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the receiver or other designated officer, or by the trustee, is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at the foreclosure sale.
Rather, it is common for the lender to purchase the property from the trustee or
receiver for an amount equal to the unpaid principal amount of the note, accrued
and unpaid interest and the expenses of foreclosure. Thereafter, subject to the
right of the borrower in some states to remain in possession during the
redemption period, the lender will assume the burdens of ownership, including
obtaining hazard insurance and making the repairs at its own expense as are
necessary to render the property suitable for sale. The lender commonly will
obtain the services of a real estate broker and pay the broker a commission in
connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Any loss may be reduced by the receipt of mortgage
insurance proceeds.
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Foreclosure on Shares of Cooperatives
The cooperative shares owned by the tenant-stockholder and pledged to
the lender are, in almost all cases, subject to restrictions on transfer
described in the cooperative's certificate of incorporation and by-laws, as well
as the proprietary lease of occupancy agreement, and may be cancelled by the
cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by the tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by the
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the cooperative to terminate the lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. A default by the
tenant-stockholder under the proprietary lease or occupancy agreement will
usually constitute a default under the security agreement between the lender and
the tenant-stockholder.
The recognition agreement generally provides that, in the event that
the tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate the lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under the proprietary
lease or occupancy agreement. The total amount owed to the cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the cooperative loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure
on a cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
Foreclosure on the cooperative shares is accomplished by a sale in
accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a foreclosure sale has
been conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the cooperative corporation to receive sums due under
the proprietary lease or occupancy agreement. If there are proceeds remaining,
the lender must account to the tenant-stockholder for the surplus. Conversely,
if a portion of the indebtedness remains unpaid, the tenant-stockholder is
generally responsible for the deficiency. See "--Anti-Deficiency Legislation and
Other Limitations on Lenders" below.
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Rights of Redemption
In some states, after sale in accordance with a deed of trust and/or
foreclosure of a mortgage, the borrower and particular foreclosed junior lienors
are given a statutory period in which to redeem the property from the
foreclosure sale. In most states where the right of redemption is available,
statutory redemption may occur upon payment of the foreclosure purchase price,
accrued interest and taxes. In some states, the right to redeem is an equitable
right. The effect of a right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The exercise of a right of redemption
would defeat the title of any purchaser at a foreclosure sale, or of any
purchaser from the lender subsequent to judicial foreclosure or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to maintain the property and pay the expenses of ownership
until the redemption period has run.
Junior Mortgages; Rights of Senior Mortgages
The mortgage loans are secured by mortgages or deeds of trust some of
which are junior to other mortgages or deeds of trust held by other lenders or
institutional investors. The rights of the Trust, and therefore the
securityholders, as mortgagee under a junior mortgage or beneficiary under a
junior deed of trust, are subordinate to those of the mortgagee under the senior
mortgage or beneficiary under the senior deed of trust, including the prior
rights of the senior mortgagee to receive hazard insurance and condemnation
proceeds and to cause the property securing the mortgage loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the junior mortgagee or junior
beneficiary asserts its subordinate interest in the property in foreclosure
litigation and, possibly, satisfies the defaulted senior mortgage or deed of
trust. As discussed more fully below, a junior mortgagee or junior beneficiary
may satisfy a defaulted senior loan in full and, in some states, may cure the
default and loan. In most states, no notice of default is required to be given
to a junior mortgagee or junior beneficiary and junior mortgagees or junior
beneficiaries are seldom given notice of defaults or senior mortgages. In order
for a foreclosure action in some states to be effective against a junior
mortgagee or junior beneficiary, the junior mortgagee or junior beneficiary must
be named in any foreclosure action, thus giving notice to junior lienors. It is
standard practice of the originators to protect their interest by attending any
sale of which they have notice or appearing and bidding for, or redeeming, the
property if it is in their best interest to do so.
The standard form of the mortgage or deed of trust used by most
institutional lenders, including the originators, confers on the mortgagee or
beneficiary the right both to receive all proceeds collected under any hazard
insurance policy and all awards made in connection with any condemnation
proceedings, and to apply the proceeds and awards to any indebtedness secured by
the mortgage or deed of trust. Thus, in the event improvements on the property
are damaged or destroyed by fire or other casualty, or in the event the property
is taken by condemnation, the mortgagee or beneficiary under any underlying
senior mortgages will have the prior right to collect and apply any insurance
proceeds payable under a hazard insurance policy to restore or repair the
property if feasible, and to collect any remaining insurance proceeds or any
award of damages in connection with the condemnation and to apply the same to
the indebtedness secured by the senior mortgages or deeds of trust. Proceeds in
excess of the amount of senior mortgage indebtedness, in most cases, may be
applied to the indebtedness of a junior mortgage or trust deed.
The form of mortgage or deed of trust used by most institutional
lenders typically contains a "future advance" clause, which provides, in
essence, that additional amounts advanced to or on behalf of the mortgagor or
trustor by the mortgagee or beneficiary are to be secured by the mortgage or
deed of trust. The priority of any advance made under the clause depends, in
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some states, on whether the advance was an "obligatory" or "optional" advance.
If the mortgagee or beneficiary is obligated to advance the additional amounts,
the advance is entitled to receive the same priority as amounts initially
advanced under the mortgage or deed of trust, notwithstanding the fact that
there may be junior mortgages or deeds of trust and other liens which intervene
between the date of recording of the mortgage or deed of trust and the date of
the future advance, and, in some states, notwithstanding that the mortgagee or
beneficiary had actual knowledge of the intervening junior mortgages or deeds of
trust and other liens at the time of the advance. Where the mortgagee or
beneficiary is not obligated to advance additional amounts or, in some states,
has actual knowledge of the intervening junior mortgages or deeds of trust and
other liens, the advance will be subordinate to the intervening junior mortgages
or deeds of trust and other liens. Priority of advances under a "future advance"
cause rests, in some states, on state statutes giving priority to all advances
made under the loan agreement to a "credit limit" amount stated in the recorded
mortgage.
Another provision sometimes included in the form of the mortgage or
deed of trust used by institutional lenders, and included in some of the forms
used by the originators, obligates the mortgagor or trustor to pay, before
delinquency, all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to perform
any of these obligations, the mortgagee or beneficiary is given the right under
some mortgages or deeds of trust to perform the obligations itself, at its
election, with the mortgagor or trustor agreeing to reimburse the mortgagee or
beneficiary for any sums expended by the mortgagee or beneficiary on behalf of
the mortgagor or trustor. All sums so expended by the mortgagee or beneficiary
become part of the indebtedness secured by the mortgage or deed of trust.
Anti-Deficiency Legislation and Other Limitations on Lenders
Some states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgage under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or sale under a
deed of trust. A deficiency judgment is a personal judgment against the former
borrower equal in most cases to the difference between the amount due to the
lender and the net amount realized upon the foreclosure sale.
Some state statutes may require the beneficiary or mortgagee to exhaust
the security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. In some other states, the lender has the option of bringing a personal
action against the borrower on the debt without first exhausting the security;
however, in some of these states, the lender, following judgment on the personal
action, may be deemed to have elected a remedy and may be precluded from
exercising remedies with respect to the security. Consequently, the practical
effect of the election requirement, when applicable, is that lenders will
usually proceed first against the security rather than bringing a personal
action against the borrower.
Other statutory provisions may limit any deficiency judgment against
the former borrower following a foreclosure sale to the excess of the
outstanding debt over the fair market value of the property at the time of the
sale. The purpose of these statutes is to prevent a beneficiary or a mortgagee
from obtaining a large deficiency judgment against the former borrower as a
result of low or no bids at the foreclosure sale.
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In some states, exceptions to the anti-deficiency statutes are provided
for in particular instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.
Generally, Article 9 of the UCC governs foreclosure on cooperative
shares and the proprietary lease or occupancy agreement and foreclosure on the
beneficial interest in a land trust. Some courts have interpreted Section 9-504
of the UCC to prohibit a deficiency award unless the creditor establishes that
the sale of the collateral, which, in the case of a mortgage loan secured by
shares of a cooperative, would be the shares and the proprietary lease or
occupancy agreement, was conducted in a commercially reasonable manner.
In addition to anti-deficiency and similar legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act and state laws affording
relief to debtors, may interfere with or affect the ability of a secured
mortgage lender to realize upon its security. For example, in a Chapter 13
proceeding under the federal Bankruptcy Code, when a court determines that the
value of a home is less than the principal balance of the loan, the court may
prevent a lender from foreclosing on the home, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the value
of the home as it exists at the time of the proceeding, leaving the lender as a
general unsecured creditor for the difference between that value and the amount
of outstanding indebtedness. A bankruptcy court may grant the debtor a
reasonable time to cure a payment default, and in the case of a mortgage loan
not secured by the debtor's principal residence, also may reduce the monthly
payments due under the mortgage loan, change the rate of interest and alter the
mortgage loan repayment schedule. Some court decisions have applied the relief
to claims secured by the debtor's principal residence.
The Code, provides priority to specified tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to these tax
liens over the lien of the mortgage of deed of trust. Some environmental
protection laws may also impose liability for cleanup expenses on owners by
foreclosure on real property, which liability may exceed the value of the
property involved. Numerous federal and some state consumer protection laws
impose substantive requirements upon mortgage lenders in connection with the
origination, servicing and the enforcement of mortgage loans. These laws include
the federal Truth in Lending Act, Real Estate Settlement Procedures Act, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act, and
similar statutes and regulations. These federal laws and state laws impose
specific statutory liabilities upon lenders who originate or service mortgage
loans and who fail to comply with the provisions of the law. In some cases, this
liability may affect assignees of the mortgage loans.
"Due-on-Sale" Clauses
The forms of note, mortgage and deed of trust relating to conventional
mortgage loans may contain a "due-on-sale" clause permitting acceleration of the
maturity of a loan if the borrower transfers its interest in the property. In
recent years, court decisions and legislative actions placed substantial
restrictions on the right of lenders to enforce the clauses in many states.
However, effective October 15, 1982, Congress enacted the Garn Act which
purports to preempt state laws which prohibit the enforcement of "due-on-sale"
clauses by providing among other matters, that "due-on-sale" clauses in some
loans, which loans may include the mortgage loans, made after the effective date
of the Garn Act are enforceable, within specified limitations as set forth in
the Garn Act and the regulations promulgated thereunder. "Due-on-sale" clauses
contained in mortgage loans originated by federal savings and loan associations
or federal savings banks are fully enforceable under regulations of the Office
of Thrift Supervision, as successor to the Federal Home Loan Bank Board, which
preempt state law restrictions on the enforcement of
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the clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national
banks and federal credit unions are now fully enforceable under preemptive
regulations of the Office of the Comptroller of the Currency and the National
Credit Union Administration, respectively.
The Garn Act created a limited exemption from its general rule of
enforceability for "due-on-sale" clauses in some "window period" mortgage loans
which were originated by non-federal lenders and made or assumed in some "window
period" states during the "window period," prior to October 15, 1982, in which
that state prohibited the enforcement of "due-on-sale" clauses by constitutional
provision, statute or statewide court decision. Though neither the Garn Act nor
the OTS regulations promulgated thereunder actually names the window period
states, FHLMC has taken the position, in prescribing mortgage loan servicing
standards with respect to mortgage loans which it has purchased, that the window
period states were: Arizona, Arkansas, California, Colorado, Georgia, Iowa,
Michigan, Minnesota, New Mexico, Utah and Washington. Under the Garn Act, unless
a window period state took action by October 15, 1985, the end of the window
period, to further regulate enforcement of "due-on-sale" clauses in window
period mortgage loans, "due-on-sale" clauses would become enforceable even in
window period loans. Five of the window period states, Arizona, Minnesota,
Michigan, New Mexico and Utah, have taken actions which restrict the
enforceability of "due-on-sale" clauses in window period loans beyond October
15, 1985. The actions taken vary among these states.
By virtue of the Garn Act, the servicer may generally be permitted to
accelerate any conventional mortgage loan which contains a "due-on-sale" clause
upon transfer of an interest in the property subject to the mortgage or deed of
trust. With respect to any mortgage loan secured by a residence occupied or to
be occupied by the borrower, this ability to accelerate will not apply to
particular types of transfers, including:
o the granting of a leasehold interest which has a term of three
(3) years or less and which does not contain an option to
purchase,
o a transfer to a relative resulting from the death of a
borrower, or a transfer where the spouse or children becomes
an owner of the property in each case where the transferee(s)
will occupy the property,
o a number resulting from a decree of dissolution of marriage,
legal separation agreement or from an incidental property
settlement agreement by which the spouse becomes an owner of
the property,
o the creation of a lien or other encumbrance subordinate to the
lender's security instrument which does not relate to a
transfer of rights of occupancy in the property; provided,
that the lien or encumbrance is not created by a contract for
deed,
o a transfer by devise, descent or operation of law on the death
of a joint tenant or tenant by the entirety, and
o other transfers as set forth in the Garn Act and the
regulations thereunder.
The extent of the effect of the Garn Act on the average lives and
delinquency rates of the mortgage loans cannot be predicted. See "Prepayment and
Yield Considerations."
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, provides that state usury limitations shall not apply to
specified types of residential first mortgage loans originated by specified
lenders after March 31, 1980. The OTS is authorized to issue rules and
regulations and to publish interpretations governing implementation of Title V.
The statute
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authorized any state to reimpose interest rate limits by adopting before April
1, 1983, a law or constitutional provision which expressly rejects application
of the federal law. Fifteen states have adopted laws reimposing or reserving the
right to impose interest rate limits. In addition, even where Title V is not so
rejected, any state is authorized to adopt a provision limiting specified other
loan charges.
Unless otherwise specified in the accompanying prospectus supplement,
the originator will represent and warrant in the Loan Sale Agreement that all of
the mortgage loans were originated in full compliance with applicable state
laws, including usury laws. See "The Trust Funds--Representations and
Warranties."
Adjustable Rate Loans
The laws of some states may provide that mortgage notes relating to
adjustable rate loans are not negotiable instruments under the UCC. In this
event, the trustee will not be deemed to be a "holder in due course" within the
meaning of the UCC and may take this mortgage note subject to a number of
restrictions on its ability to foreclose and to a number of contractual defenses
available to a mortgagor.
Enforceability of Certain Provisions
Standard forms of note, mortgage and deed of trust generally contain
provisions obligating the borrower to pay a late charge if payments are not
timely made and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In some states, there are
or may be specific limitations upon late charges which a lender may collect from
a borrower for delinquent payments. Some states also limit the amounts that a
lender may collect from a borrower as an additional charge if the loan is
prepaid. Under the servicing agreement, late charges and prepayment fees, to the
extent permitted by law and not waived by the servicer, will be retained by the
servicer as additional servicing compensation.
Courts have applied general equitable principles upon foreclosure.
These equitable principles are generally designed to relieve the borrower from
the legal effect of defaults under the loan documents. Examples of judicial
remedies that may be fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have sustained their judgment for the
lender's judgment and have required lenders to reinstate loans or recast payment
schedules to accommodate borrowers who are suffering from temporary financial
disability. In some cases, courts have limited the right of lenders to foreclose
if the default under the mortgage instrument is not monetary, such as the
borrower failing to adequately maintain the property or the borrower executing a
second mortgage or deed of trust affecting the property. In other cases, some
courts have been faced with the issue whether federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under deeds of trust receive notices in addition to the
statutorily-prescribed minimum requirements. For the most part, these cases have
upheld the notice provisions as being reasonable or have found that the sale by
a trustee under a deed of trust or under a mortgage having a power of sale does
not involve sufficient state action to afford constitutional protections to the
borrower.
The Contracts
As a result of the assignment of the contracts to the trustee, the
trust fund will succeed collectively to all of the rights, including the right
to receive payment on the contracts, and will assume the obligations of the
obligee under the contracts. Each contract evidences both (a) the obligation of
the obligor to repay the loan evidenced thereby, and (b) the grant of a security
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interest in the manufactured home to secure repayment of the loan. Particular
aspects of both features of the contracts are described more fully below.
The contracts generally are "chattel paper" as defined in the UCC in
effect in the states in which the manufactured homes initially were registered.
Under the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the servicing
agreement, the servicer will transfer physical possession of the contracts to
the trustee or a designated custodian or may retain possession of the contracts
as custodian for the trustee. In addition, the servicer will make an appropriate
filing of a UCC-1 financing statement in the appropriate states to give notice
of the trustee's ownership of the contracts. Unless otherwise specified in the
accompanying prospectus supplement, the contracts will not be stamped or marked
otherwise to reflect their assignment from the issuer to the trustee. Therefore,
if through negligence, fraud or otherwise, a subsequent purchaser were able to
take physical possession of the contracts without notice of the assignment, the
trustee's interest in contracts could be defeated.
Security Interests in the manufactured homes
Security interests in manufactured homes may be perfected either by
notation of the secured party's lien on the certificate of title or by delivery
of the required documents and payment of a fee to the state motor vehicle
authority, depending on state law. In some non-title states, perfection under
the provisions of the UCC is required. The servicer may effect the notation or
delivery of the required documents and fees, and obtain possession of the
certificate of title, as appropriate under the laws of the state in which any
manufactured home securing a manufactured housing conditional sales contract is
registered. In the event the servicer fails, due to clerical errors, to effect
the notation or delivery, or files the security interest under the wrong law,
the securityholders may not have a first priority security interest in the
manufactured home securing a contract. As manufactured homes have become larger
and often have been attached to their sites without any apparent intention to
move them, courts in many states have held that manufactured homes, under some
circumstances, may become subject to real estate title and recording laws. As a
result, a security interest in a manufactured home could be rendered subordinate
to the interests of other parties claiming an interest in the home under
applicable state real estate law. In order to perfect a security interest in a
manufactured home under real estate laws, the secured party must file either a
"fixture filing" under the provisions of the UCC or a real estate mortgage under
the real estate laws of the state where the home is located. These filings must
be made in the real estate records office of the county where the home is
located. Substantially all of the contracts contain provisions prohibiting the
borrower from permanently attaching the manufactured home to its site. So long
as the borrower does not violate this agreement, a security interest in the
manufactured home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or the
filing of a UCC financing statement will be effective to maintain the priority
of the security interest in the manufactured home. If, however, a manufactured
home is permanently attached to its site, other parties could obtain an interest
in the manufactured home which is prior to the security interest originally
retained by the originator and transferred to the issuer. With respect to a
series of securities and if so described in the accompanying prospectus
supplement, the servicer may be required to perfect a security interest in the
manufactured home under applicable real estate laws. The servicer will represent
that at the date of the initial issuance of the securities it has obtained a
perfected first priority security interest by proper notation or delivery of the
required documents and fees with respect to substantially all of the
manufactured homes securing the contracts.
The sponsor will cause the security interests in the manufactured homes
to be assigned to the trustee on behalf of the securityholders. Unless otherwise
specified in the accompanying prospectus supplement, neither the sponsor nor the
trustee will amend the securities of title to identify the trustee or the trust
fund as the new secured party, and neither the sponsor nor the
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servicer will deliver the securities of title to the trustee or note thereon the
interest of the trustee. Accordingly, the servicer or the originator, which
continue to be named as the secured party on the securities of title relating to
the manufactured homes. In many states, the assignment is an effective
conveyance of the security interest without amendment of any lien noted on the
certificate of title and the new secured party succeeds to the issuer's rights
as the secured party. However, in some states there exists a risk that, in the
absence of an amendment to the certificate of title, the assignment of the
security interest in the manufactured home might not be effective or perfected
or that, in the absence of this notation or delivery to the trustee, the
assignment of the security interest in the manufactured home might not be
effective against creditors of the servicer, or the originator, or a trustee in
bankruptcy of the servicer, or the originator.
In the absence of fraud, forgery or permanent affixation of the
manufactured home to its site by the manufactured home owner, or administrative
error by state recording officials, the notation of the lien of the servicer or
the originator, on the certificate of title or delivery of the required
documents and fees will be sufficient to protect the securityholders against the
rights of subsequent purchasers of a manufactured home or subsequent lenders who
take a security interest in the manufactured home. If there are any manufactured
homes as to which the security interest assigned to the trustee is not
perfected, the security interest would be subordinate to, among others,
subsequent purchasers for value of manufactured homes and holders of perfected
security interests. There also exists a risk in not identifying the trustee as
the new secured party on the certificate of title that, through fraud or
negligence, the security interest of the securityholders could be released.
In the event that the owner of a manufactured home moves it to a state
other than the state in which the manufactured home initially is registered,
under the laws of most states the perfected security interest in the
manufactured home would continue for four (4) months after relocation and
thereafter until the owner re-registers the manufactured home in this state. If
the owner were to relocate a manufactured home to another state and not
re-register the manufactured home in this state, and if steps are not taken to
re-perfect the trustee's security interest in this state, the security interest
in the manufactured home would cease to be perfected. A majority of states
generally require surrender of a certificate of title to re-register a
manufactured home; accordingly, the trustee must surrender possession if it
holds the certificate of title to the manufactured home or, in the case of
manufactured homes registered in states which provide for notation of lien, the
servicer would receive notice of surrender if the security interest in the
manufactured home is noted on the certificate of title. Accordingly, the trustee
would have the opportunity to re-perfect its security interest in the
manufactured home in the state of relocation. In states which do not require a
certificate of title for registration of a manufactured home, re-registration
could defeat perfection. In the ordinary course of servicing the manufactured
housing conditional sales contracts, the servicer takes steps to effect the
re-perfection upon receipt of notice of registration or information from the
obligor as to relocation. Similarly, when an obligor under a manufactured
housing conditional sales contract sells a manufactured home, the trustee or its
designated custodian must surrender possession of the certificate of title or
the servicer will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the manufactured
housing conditional sales contract before release of the lien. Under the
Servicing Agreement, the servicer is obligated to take steps, at the servicer's
expense, as are necessary to maintain perfection of security interests in the
manufactured homes.
Under the laws of most states, liens for repairs performed on a
manufactured home and liens for personal property taxes take priority over a
perfected security interest. The originator will represent in the Loan Sale
Agreement that it has no knowledge of any liens with respect to any manufactured
home securing payment on any contract. However, these liens could arise at
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any time during the term of a contract. No notice will be given to the trustee
or securityholders in the event such a lien arises.
Enforcement of Security Interests in manufactured homes
The servicer on behalf of the trustee, to the extent required by the
Servicing Agreement, may take action to enforce the trustee's security interest
with respect to contracts in default by repossession and resale of the
manufactured homes securing these defaulted contracts. So long as the
manufactured home has not become subject to the real estate law, a creditor can
repossess a manufactured home securing a contract by voluntary surrender, by
"self-help" repossession that is "peaceful" or, in the absence of voluntary
surrender and the ability to repossess without breach of the peace, by judicial
process. The holder of a contract must give the debtor a number of days' notice,
which varies from 10 to 30 days depending on the state, prior to commencement of
any repossession. The UCC and consumer protection laws in most states place
restrictions on repossession sales, including requiring prior notice to the
debtor and commercial reasonableness in effecting such a sale. The law in most
states also requires that the debtor be given notice of any sale prior to resale
of the unit so that the debtor may redeem at or before this resale. In the event
of a repossession and resale of a manufactured home, the trustee would be
entitled to be paid out of the sale proceeds before the proceeds could be
applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the manufactured home securing such a debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments, and in many
cases the defaulting borrower would have no assets with which to pay a judgment.
Some other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the transaction,
and specified lenders and assignees, to transfer the contract free of notice of
claims by the debtor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the debtor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under a contract; however, the obligor also may be able to asset
the rule to set off remaining amounts due as a defense against a claim brought
by the trustee against the obligor. Numerous other federal and state consumer
protection laws impose requirements applicable to the origination and lending
under the contracts, including the Truth in Lending Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the
Uniform Consumer Credit Code. In the case of some of these laws, the failure to
comply with their provisions may affect the enforceability of the contract.
Transfers of manufactured homes; Enforceability of "Due-on-Sale" Clauses
The contracts, in general, prohibit the sale or transfer of the
manufactured homes without the consent of the servicer and permit the
acceleration of the maturity of the contracts by the servicer upon any sale or
transfer that is not consented to.
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In the case of a transfer of a manufactured home after which the
servicer desires to accelerate the maturity of the contract, the servicer's
ability to do so will depend on the enforceability under state law of the
"due-on-sale" clause. The Garn Act preempts, subject to a number of exceptions
and conditions, state laws prohibiting enforcement of "due-on-sale" clauses
applicable to the manufactured homes. Consequently, in some states the servicer
may be prohibited from enforcing a "due-on-sale" clause on some manufactured
homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980 provides that, subject to the following conditions, state
usury limitations shall not apply to any loan which is secured by a first lien
on particular kinds of manufactured housing. The contracts would be covered if
they satisfy a number of conditions, among other things, governing the terms of
any prepayments, late charges and deferral fees and requiring a 30-day notice
period prior to instituting any action leading to repossession of the unit.
Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, and state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
The originator will represent that all of the contracts comply with applicable
usury law.
Formaldehyde Litigation with Respect to Contracts
A number of lawsuits have been brought in the United States alleging
personal injury from exposure to the chemical formaldehyde, which is preset in
many building materials, including the components of manufactured housing as
plywood flooring and wall paneling. Some of these lawsuits were brought against
manufacturers of manufactured housing, suppliers of component parts, and persons
in the distribution process. The sponsor is aware of a limited number of cases
in which plaintiffs have won judgments in these lawsuits.
The holder of any contract secured by a manufactured home with respect
to which a formaldehyde claim has been successfully asserted may be liable to
the obligor for the amount paid by the obligor on the contract and may be unable
to collect amounts still due under the contract. The successful assertion of the
claim constitutes a breach of a representation or warranty of the person
specified in the accompanying prospectus supplement, and the securityholders
would suffer a loss only to the extent that (i) this person breached its
obligation to repurchase the contract in the event an obligor is successful in
asserting such a claim, and (ii) this person, the servicer or the trustee were
unsuccessful in asserting any claim of contribution or subrogation on behalf of
the securityholders against the manufacturer or other persons who were directly
liable to the plaintiff for the damages. Typical products liability insurance
policies held by manufacturers and component suppliers of manufactured homes may
not cover liabilities arising from formaldehyde in manufactured housing, with
the result that recoveries from the manufacturers, suppliers or other persons
may be limited to their corporate assets without the benefit of insurance.
Installment Contracts
The loans may also consist of installment contracts. Under an
installment contract the lender retains legal title to the property and enters
into an agreement with the borrower for the payment of the purchase price, plus
interest, over the term of the contract. Only after full performance by the
borrower of the contract is the lender obligated to convey title to the real
estate to the purchaser. As with mortgage or deed of trust financing, during the
effective period of the Installment contract, the borrower is generally
responsible for maintaining the property in
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good condition and for paying real estate taxes, assessments and hazard
insurance premiums associated with the property.
The method of enforcing the rights of the lender under an installment
contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able under state statute, to enforce the contract
strictly according to the terms. The terms of installment contracts generally
provide that upon a default by the borrower, the borrower loses his or her right
to occupy the property, the entire indebtedness is accelerated, and the buyer's
equitable interest in the property is forfeited. The lender in such a situation
does not have to foreclosure in order to obtain title to the property, although
in some cases a quiet title action is in order if the borrower has filed the
Installment contract in local land records and an ejectment action may be
necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an installment contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in
the property. However, most state legislatures have enacted provisions by
analogy to mortgage law protecting borrowers under installment contracts from
the harsh consequences of forfeiture. Under these statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during which
the contract may be reinstated upon full payment of the default amount and the
borrower may have a post-foreclosure statutory redemption right. In other
states, courts in equity may permit a borrower with significant investment in
the property under an Installment contract for the sale of real estate to share
in the proceeds of sale of the property after the indebtedness is repaid or may
otherwise refuse to enforce the forfeiture clause. Nevertheless, generally
speaking, the lender's procedures for obtaining possession and clear title under
an Installment contract for the sale of real estate in a given state are simpler
and less time-consuming and costly than are the procedures for foreclosing and
obtaining clear title to a mortgaged property.
Environmental Risks
Real property pledged for a loan as security to a lender may be subject
to unforeseen environmental risks. Of particular concern may be those mortgaged
properties which have been the site of manufacturing, industrial or disposal
activity. These environmental risks may give rise to (a) a diminution in value
of property securing any loan or the inability to foreclose against the property
or (b) in some circumstances as more fully described below, liability for
clean-up costs or other remedial actions, which liability could exceed the value
of the property or the principal balance of the loan.
Under the laws of some states, failure to perform the remediation
required or demanded by the state of any environmental condition or circumstance
that (i) may pose an imminent or substantial endangerment to the public health
or welfare or the environment, (ii) may result in a release or threatened
release of any hazardous material, or (iii) may give rise to any environmental
claim or demand, may give rise to a lien on the property to ensure the
reimbursement of remedial costs incurred by the state to remedy the
environmental condition. In several states these liens have priority over the
lien of an existing mortgage against the property. The value of a mortgaged
property as collateral for a loan could therefore be adversely affected by the
existence of any environmental condition.
The state of the law is currently unclear as to whether and under what
circumstances clean-up costs, or the obligation to take remedial actions, could
be imposed on a secured lender such as the trust fund. Under the laws of some
states and under the CERCLA, a lender may be liable as an "owner or operator"
for costs of addressing releases or threatened releases of hazardous substances
on a mortgaged property if the lender or its agents or employees have
participated in the management of the operations of the borrower, even though
CERCLA's
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definition of "owner or operator," however, is a person "who without
participating in the management of the facility, holds indicia of ownership
primarily to protect his security interest". This exemption for holders of a
security interest such as a secured lender applies only when the lender seeks to
protect its security interest in the contaminated facility or property. Thus, if
a lender's activities begin to encroach on the actual management of the facility
or property, the lender faces potential liability as an "owner or operator"
under CERCLA. Similarly, when a lender forecloses and takes title to a
contaminated facility or property, whether it holds the facility or property as
an investment or leases it to a third party, the lender may incur potential
CERCLA liability.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly contained
CERCLA's secured-creditor exemption. The court held that a lender need not have
involved itself in the day-to-day operations of the facility or participated in
decisions relating to hazardous waste to be liable under CERCLA; rather,
liability could attach to a lender if its involvement with the management of the
facility is broad enough to support the inference that the lender had the
capacity to influence the borrower's treatment of hazardous waste. The court
added that a lender's capacity to influence the decisions could be inferred from
the extent of its involvement in the facility's financial management. A
subsequent decision by the United States Court of Appeals for the Ninth Circuit
in In re Bergsoe Metal Corp., disagreeing with the Fleet Factors court, held
that a secured lender had no liability absent "some actual management of the
facility" on the part of the lender. On April 29, 1992, the United States
Environmental Protection Agency issued a final rule interpreting and delineating
CERCLA's secured-creditor exemption. The final rule defines a specific the range
of permissible actions that may be undertaken by a holder of a contaminated
facility without exceeding the bounds of the secured-creditor exemption.
Issuance of this rule by the EPA under CERCLA would not necessarily affect the
potential for liability in actions by either a state or a private party under
CERCLA or in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the second-creditor
exemption.
If a lender is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners or
operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but these persons or entities may be
bankrupt or otherwise judgment proof. Furthermore, this action against the
borrower may be adversely affected by the limitations on recourse in the
documents in the loan document file. Similarly, in some states anti-deficiency
legislation and other statues requiring the lender to exhaust its security
before bringing a personal action against the borrower-trustor may curtail the
lender's ability to recover from its borrower the environmental clean-up and
other costs and liabilities by the lender. See "--Anti-Deficiency Legislation
and Other Limitations on Lenders".
Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, a borrower who enters military service after the origination of the
borrower's loan, including a borrower who is a member of the National Guard or
is in reserve status at the time of the origination of the loan and is later
called to active duty, may not be charged interest above an annual rate of 6%
during the period of the borrower's active duty status, unless a court orders
otherwise upon application of the lender. It is possible that this action could
have an effect, for an indeterminate period of time, on the ability of the
servicer to collect full amounts of interest on some of the loans in a trust
fund. Any shortfall in interest collections resulting from the application of
the Soldiers' and Sailors' Civil Relief Act could result in losses to the
holders of the securities of the series. In addition, the Soldiers' and Sailors'
Civil Relief Act imposes limitations
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which would impair the ability of the servicer to foreclose on an affected loan
during the borrower's period of active duty status. Thus, in the event that such
a loan goes into default, there may be delays and losses occasioned by the
inability to realize upon the mortgaged property or manufactured home in a
timely fashion.
Type of mortgaged property
The lender may be subject to additional risk depending upon the type
and use of the mortgaged property in question. For instance, mortgaged
properties which are hospitals, nursing homes or convalescent homes may present
special risks to lenders in large part due to significant governmental
regulation of the operation, maintenance, control and financing of health care
institutions. Mortgages on mortgaged properties which are owned by the borrower
under a condominium form of ownership are subject to the declaration, by-laws
and other rules and regulations of the condominium association. mortgaged
properties which are hotels or motels may present additional risk to the lender
in that: (i) hotels and motels are typically operated in accordance with
franchise, management and operating agreements which may be terminable by the
operator; and (ii) the transferability of the hotel's operating, liquor and
other licenses to the entity acquiring the hotel either through purchase or
foreclosure is subject to the vagaries of local law requirements. In addition,
mortgaged properties which are multifamily residential properties may be subject
to rent control laws, which could impact the future cash flows of these
properties. Finally, mortgaged properties which are financed in the installment
sales contract method may leave the holder of the note exposed to tort and other
claims as the true owner of the property which could impact the availability of
cash to pass through to investors.
Certain Matters Relating to Insolvency
The originator, the issuer and the sponsor intend that the transfer of
the loans to the issuer constitute a sale rather for a pledge of the loans to
secure indebtedness of the originator. However, if the originator were to become
a debtor under the federal bankruptcy code or be placed in a conservatorship or
receivership under FIRREA, as the case may be, it is possible that a creditor,
receiver, conservator or trustee-in-bankruptcy of the originator may argue that
the sale of the loans by the originator is a pledge of the loans rather than a
sale. This position, if argued or accepted by a court, could result in a delay
in or reduction of distributions to the securityholders.
Under FIRREA, the FDIC as receiver or conservator of a servicer subject
to its jurisdiction may enforce a contract notwithstanding any provision of the
contract providing for termination thereof by reason of the insolvency of, or
appointment of a receiver or conservator for, the servicer. Consequently,
provisions in a Servicing Agreement providing for an Event of Default upon
specified events of insolvency, receivership or conservatorship of the servicer
may not be enforceable against the FDIC as receiver or conservator to the extent
that the exercise of these rights is based solely upon the insolvency of or
appointment of a receiver or conservator for the servicer. In addition, the FDIC
may transfer the assets and liabilities of an institution in receivership or
conservatorship to another institution.
Bankruptcy Laws
Numerous statutory provisions, including the federal bankruptcy laws
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage lender to obtain payment of the loan, to realize
upon collateral and/or enforce a deficiency judgment. For example, under federal
bankruptcy law, virtually all actions, including foreclosure actions and
deficiency judgment proceedings, are automatically stayed upon the filing of the
bankruptcy petition, and, often, no interest or principal payments are made
during the course of the bankruptcy proceeding. The delay and the consequences
thereof caused by or on behalf of a junior lienor may stay the senior lender
from taking action to foreclose out the junior lien. In a
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case under the Bankruptcy Code, the lender is precluded from foreclosing without
authorization from the bankruptcy court. In addition, a court with federal
bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or
Chapter 13 rehabilitative plan to cure a monetary default on a mortgage loan on
the debtor's residence by paying arrearage within a reasonable time period and
reinstating the original mortgage loan payment schedule even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court, provided no sale of the residence had yet occurred, prior to the
filing of the debtor's petition. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified.
These courts have suggested that the modifications may include reducing the
amount of each monthly payment, changing the rate of interest, altering the
repayment schedule, and reducing the lender's security interest to the value of
the residence, thus leaving the lender in the position of a general unsecured
creditor for the difference between the value of the residence and the
outstanding balance of the loan.
Federal bankruptcy law may also interfere with or affect the ability of
the secured mortgage lender to enforce an assignment by a mortgagor of rent and
leases on the mortgaged property if the mortgagor is in a bankruptcy proceeding.
Under Section 362 of the Bankruptcy Code, the mortgagee will be stayed from
enforcing the assignment, and the legal proceedings necessary to resolve the
issue can be time-consuming and may result in significant delays in the receipt
of the rents. Rents may also escape an assignment thereof (i) if the assignment
is not fully perfected under state law prior to commencement of the bankruptcy
proceeding, (ii) to the extent these rents are used by the borrower to maintain
the mortgaged property, or for other court authorized expenses, or (iii) to the
extent other collateral may be substituted for the rents.
To the extent a mortgagor's ability to make payment on a mortgage loan
is dependent on payments under a lease of the property, the ability may be
impaired by the commencement of a bankruptcy proceeding relating to a lessee
under the lease. Under the federal bankruptcy laws, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition.
In addition, federal bankruptcy law generally provides that a trustee
or debtor in possession in a bankruptcy or reorganization case under the
Bankruptcy Code may, subject to approval of the court (a) assume the lease and
retain it or assign it to a third party or (b) reject the lease. If the lease is
assumed, the trustee or debtor in possession, or assignee, if applicable, must
cure any defaults under the lease, compensate the lessor for its losses and
provide the lessor with "adequate assurance" of future performance. These
remedies may be insufficient, however, as the lessor may be forced to continue
under the lease with a lessee that is a poor credit risk or an unfamiliar tenant
if the lease was assigned, and any assurances provided to the lessor may, in
fact, be inadequate. Furthermore, there is likely to be a period of time between
the date upon which a lessee files a bankruptcy petition and the date upon which
the lease is assumed or rejected. Although the lessee is obligated to make all
lease payments currently with respect to the post-petition period, there is a
risk that the payments will not be made due to the lessee's poor financial
condition. If the lease is rejected, the lessor will be treated as an unsecured
creditor with respect to its claim for damages for termination of the lease and
the mortgagor must release the mortgage property before the flow of lease
payments will recommence. In addition, under Section 502(b)(6) of the Bankruptcy
Code, a lessor's damages for lease rejection are limited by a formula.
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In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer to the trust fund of any payments made by
the mortgagor under the mortgage loan. Moreover, some recent court decisions
suggest that even a non-collusive, regularly conducted foreclosure sale may be
challenged in a bankruptcy proceeding as a "fraudulent conveyance," regardless
of the parties' intent, if a bankruptcy court determines that the mortgaged
property has been sold for less than fair consideration while the mortgagor was
insolvent and within one (1) year, or within any longer state statutes of
limitations if the trustee in bankruptcy elects to proceed under state
fraudulent conveyance law, of the filing of bankruptcy.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a discussion of the material federal income tax
consequences to investors of the purchase, ownership and disposition of the
securities offered hereby. The discussion is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change. The
discussion below does not purport to deal with all federal tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. Investors are urged to consult their own tax advisors in
determining the particular federal, state and local consequences to them of the
purchase, ownership and disposition of the securities.
The following discussion addresses securities of five general types:
o Grantor Trust Securities,
o REMIC Securities,
o Debt Securities,
o Partnership Interests, and
o FASIT Securities.
The prospectus supplement for each series of securities will indicate
whether a REMIC or FASIT election(s) will be made for the trust and, if a REMIC
or FASIT election is to be made, will identify all "regular interests" and
"residual interests" in the REMIC or all "regular interests," "high-yield
interests" and the "ownership interest" in the FASIT.
The Taxpayer Relief Act of 1997 adds provisions to the Code that
require the recognition of gain upon the "constructive sale of an appreciated
financial position." A constructive sale of an appreciated financial position
occurs if a taxpayer enters into particular transactions or series of
transactions with respect to a financial instrument that have the effect of
substantially eliminating the taxpayer's risk of loss and opportunity for gain
with respect to the financial instrument. These provisions apply only to classes
of securities that do not have a principal balance.
Grantor Trust Securities
With respect to each series of Grantor Trust Securities, special tax
counsel to the sponsor, will deliver its opinion to the sponsor that the trust
will be classified as a grantor trust and not as an association taxable as a
corporation. This opinion shall be attached on Form 8-K to be filed with the
Securities and Exchange Commission within fifteen (15) days after the initial
issuance of the securities or filed with the Commission as a post-effective
amendment to the prospectus. Accordingly, each beneficial owner of a Grantor
Trust Security will generally be treated as the owner of an interest in the
loans included in the grantor trust.
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Special Tax Attributes
Unless otherwise disclosed in a accompanying prospectus supplement,
special tax counsel to the sponsor, will deliver its opinion to the sponsor that
(a) Grantor Trust Fractional Interest Securities will represent interests in (i)
"loans . . . secured by an interest in real property" within the meaning of
section 7701(a)(19)(C)(v) of the Code; and (ii) "obligations (including any
participation or certificate of beneficial ownership therein) which . . . are
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code; and (b) interest on Grantor Trust Fractional
Interest Securities will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Section 856(c)(3)(B) of the Code. In addition, the Grantor Trust Strip
Securities will be "obligations (including any participation or certificate of
beneficial ownership therein) . . . principally secured by an interest in real
property" within the meaning of Section 860G(a)(3)(A) of the Code. We will file
this opinion with the Securities and Exchange Commission on Form 8-K within
fifteen (15) days after the initial issuance of the securities or as a
post-effective amendment to the prospectus.
Taxation of Beneficial Owners of Grantor Trust Securities
Beneficial owners of Grantor Trust Fractional Interest Securities
generally will be required to report on their federal income tax returns their
respective shares of the income from the loans, including amounts used to pay
reasonable servicing fees and other expenses but excluding amounts payable to
beneficial owners of any corresponding Grantor Trust Strip Securities, and,
subject to the limitations described below, will be entitled to deduct their
shares of any reasonable servicing fees and other expenses. If a beneficial
owner acquires a Grantor Trust Fractional Interest Security for an amount that
differs from its outstanding principal amount, the amount includible in income
on a Grantor Trust Fractional Interest Security may differ from the amount of
interest distributable thereon. See "--Discount and Premium," below. Individuals
holding a Grantor Trust Fractional Interest Security directly or through certain
pass-through entities will be allowed a deduction for reasonable servicing fees
and expenses only to the extent that the aggregate of the beneficial owner's
miscellaneous itemized deductions exceeds 2% of the beneficial owner's adjusted
gross income. Further, beneficial owners, other than corporations, subject to
the alternative minimum tax may not deduct miscellaneous itemized deductions in
determining alternative minimum taxable income.
Beneficial owners of Grantor Trust Strip Securities generally will be
required to treat the securities as "stripped coupons" under Section 1286 of the
Code. Accordingly, such a beneficial owner will be required to treat the excess
of the total amount of payments on such a security over the amount paid for the
security as original issue discount and to include the discount in income as it
accrues over the life of the security. See "--Discount and Premium," below.
Grantor Trust Fractional Interest Securities may also be subject to the
coupon stripping rules if a class of Grantor Trust Strip Securities is issued as
part of the same series of securities. The consequences of the application of
the coupon stripping rules would appear to be that any discount arising upon the
purchase of such a security, and perhaps all stated interest thereon, would be
classified as original issue discount and includible in the beneficial owner's
income as it accrues, regardless of the beneficial owner's method of accounting,
as described below under "--Discount and Premium." The coupon stripping rules
will not apply, however, if (i) the pass-through rate is no more than 100 basis
points lower than the gross rate of interest payable on the underlying loans and
(ii) the difference between the outstanding principal balance on the security
and the amount paid for the security is less than 0.25% of the principal balance
times the weighted average remaining maturity of the security.
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Sales of Grantor Trust Securities
Any gain or loss recognized on the sale of a Grantor Trust Security,
which is equal to the difference between the amount realized on the sale and the
adjusted basis of the Grantor Trust Security, will be capital gain or loss,
except to the extent of accrued and unrecognized market discount, which will be
treated as ordinary income, and in the case of banks and other financial
institutions except as provided under Section 582(c) of the Code. The adjusted
basis of a Grantor Trust Security will generally equal its cost, increased by
any income reported by the originator, including original issue discount and
market discount income, and reduced, but not below zero, by any previously
reported losses, any amortized premium and by any distributions of principal.
Grantor Trust Reporting
The trustee will furnish to each beneficial owner of a Grantor Trust
Fractional Interest Security with each distribution a statement setting forth
the amount of the distribution allocable to principal on the underlying loans
and to interest thereon at the interest rate attributable to the security. In
addition, within a reasonable time after the end of each calendar year, based on
information provided by the servicer, the trustee will furnish to each
beneficial owner during the year such customary factual information as the
servicer deems necessary or desirable to enable beneficial owners of Grantor
Trust Securities to prepare their tax returns and will furnish comparable
information to the Internal Revenue Service as and when required to do so by
law.
REMIC Securities
If provided in a accompanying prospectus supplement, an election will
be made to treat an issuer as a REMIC under the Code. Qualification as a REMIC
requires ongoing compliance with a number of conditions. With respect to each
series of securities for which such an election is made, special tax counsel to
the sponsor, will deliver its opinion to the sponsor that, assuming compliance
with the Issuing Agreement, the issuer will be treated as a REMIC for federal
income tax purposes. We will file this opinion with the Commission on Form 8-K
within fifteen (15) days after the initial issuance of the securities or as a
post-effective amendment to the prospectus.
A REMIC Trust will not be subject to federal income tax except with
respect to income from prohibited transactions and in particular other instances
described below. See "-Taxes on a REMIC Trust." Generally, the total income from
the loans in a REMIC Trust will be taxable to the beneficial owners of the
securities of that series, as described below.
The REMIC Regulations provide some guidance regarding the federal
income tax consequences associated with the purchase, ownership and disposition
of REMIC Securities. While a number of material provisions of the REMIC
Regulations are discussed below, investors should consult their own tax advisors
regarding the possible application of the REMIC Regulations in their specific
circumstances.
Special Tax Attributes
REMIC Regular Securities and REMIC Residual Securities will be "regular
or residual interests in a REMIC" within the meaning of Section
7701(a)(19)(C)(xi) of the Code and "real estate assets" within the meaning of
Section 856(c)(5)(A) of the Code. If at any time during a calendar year less
than 95% of the assets of a REMIC Trust consist of "qualified mortgages", within
the meaning of Section 860G(a)(3) of the Code, then the portion of the REMIC
Regular Securities and REMIC Residual Securities that are qualifying assets
under those Sections during the calendar year may be limited to the portion of
the assets of the REMIC Trust that are qualified mortgages. Similarly, income on
the REMIC Regular Securities and REMIC Residual Securities will be treated as
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Code, subject to the same limitation
described in the
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preceding sentence. For purposes of applying this limitation, a REMIC Trust
should be treated as owning the assets represented by the qualified mortgages.
The assets of the trust fund will include, in addition to the loans, payments on
the loans held pending distribution on the REMIC Regular Securities and REMIC
Residual Securities and any reinvestment income thereon. REMIC Regular
Securities and REMIC Residual Securities held by a financial institution to
which Section 585, 586 or 593 of the Code applies will be treated as evidences
of indebtedness for purposes of Section 582(c)(1) of the Code. REMIC Regular
Securities will also be qualified mortgages with respect to other REMICs and
FASITs.
Taxation of Beneficial Owners of REMIC Regular Securities
Except as indicated below in this federal income tax discussion, the
REMIC Regular Securities will be treated for federal income tax purposes as debt
instruments issued by the REMIC Trust on the Settlement Date and not as
ownership interests in the REMIC Trust or its assets. Beneficial owners of REMIC
Regular Securities that otherwise report income under a cash method of
accounting will be required to report income with respect to the securities
under an accrual method. For additional tax consequences relating to REMIC
Regular Securities purchased at a discount or with premium, see "--Discount and
Premium," below.
Taxation of Beneficial Owners of REMIC Residual Securities
Daily Portions. Except as indicated below, a beneficial owner of a
REMIC Residual Security for a REMIC Trust generally will be required to report
its daily portion of the taxable income or net loss of the REMIC Trust for each
day during a calendar quarter that the beneficial owner owned the REMIC Residual
Security. For this purpose, the daily portion shall be determined by allocating
to each day in the calendar quarter its ratable portion of the taxable income or
net loss of the REMIC Trust for the quarter and by allocating the amount so
allocated among the beneficial owners of REMIC Residual Securities on this day
in accordance with their percentage interests on this day. Any amount included
in the gross income or allowed as a loss of any beneficial owner of this REMIC
Residual Security by virtue of this paragraph will be treated as ordinary income
or loss.
The requirement that each beneficial owner of a REMIC Residual Security
report its daily portion of the taxable income or net loss of the REMIC Trust
will continue until there are no securities of any class outstanding, even
though the beneficial owner of the REMIC Residual Security may have received
full payment of the stated interest and principal on its REMIC Residual
Security.
The trustee will provide to beneficial owners of REMIC Residual
Securities of each series of securities (i) the information as is necessary to
enable them to prepare their federal income tax returns and (ii) any reports
regarding the securities of a series that may be required under the Code.
Taxable Income or Net Loss of a REMIC Trust. The taxable income or net
loss of a REMIC Trust will be the income from the qualified mortgages it holds
and any reinvestment earnings less deductions allowed to the REMIC Trust. This
taxable income or net loss for a given calendar quarter will be determined in
the same manner as for an individual having the calendar year as the taxable
year and using the accrual method of accounting, with specified modifications.
The first modification is that a deduction will be allowed for accruals of
interest, including any original issue discount, but without regard to the
investment interest limitation in Section 163(d) of the Code, on the REMIC
Regular Securities, but not the REMIC Residual Securities, even though REMIC
Regular Securities are for non-tax purposes evidences of beneficial ownership
rather than indebtedness of a REMIC Trust. Second, market discount or premium
equal to the difference between the total stated principal balances of the
qualified mortgages and the basis to
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the REMIC Trust in the qualified mortgages generally will be included in income,
in the case of discount, or deductible, in the case of premium, by the REMIC
Trust as it accrues under a constant yield method, taking into account the
Prepayment Assumption. See "--Discount and Premium--Original Issue Discount,"
below. The basis to a REMIC Trust in the qualified mortgages is the aggregate of
the issue prices of all the REMIC Regular Securities and REMIC Residual
Securities in the REMIC Trust on the Settlement Date. If, however, a substantial
amount of a class of REMIC Regular Securities or REMIC Residual Securities has
not been sold to the public, then the fair market value of all the REMIC Regular
Securities or REMIC Residual Securities in that class as of the date of the
prospectus supplement should be substituted for the issue price.
The third modification is that no item of income, gain, loss or
deduction allocable to a prohibited transaction will be taken into account. See
"--Taxes on a REMIC Trust--Prohibited Transactions" below. Fourth, a REMIC Trust
generally may not deduct any item that would not be allowed in calculating the
taxable income of a partnership by virtue of Section 703(a)(2) of the Code.
Finally, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code will not be applied at the REMIC Trust
level to any servicing and guaranty fees. See, however, "--Pass-Through of
Servicing and Guaranty Fees to Individuals" below. In addition, under the REMIC
Regulations, any expenses that are incurred in connection with the formation of
a REMIC Trust and the issuance of the REMIC Regular Securities and REMIC
Residual Securities are not treated as expenses of the REMIC Trust for which a
deduction is allowed. If the deductions allowed to a REMIC Trust exceed its
gross income for a calendar quarter, the excess will be a net loss for the REMIC
Trust for that calendar quarter. The REMIC Regulations also provide that any
gain or loss to a REMIC Trust from the disposition of any asset, including a
qualified mortgage or "permitted investment", as defined in Section 860G(a)(5)
of the Code, will be treated as ordinary gain or loss.
A beneficial owner of a REMIC Residual Security may be required to
recognize taxable income without being entitled to receive a corresponding
amount of cash. This could occur, for example, if the qualified mortgages are
considered to be purchased by the REMIC Trust at a discount, some or all of the
REMIC Regular Securities are issued at a discount, and the discount included as
a result of a prepayment on a loan that is used to pay principal on the REMIC
Regular Securities exceeds the REMIC Trust's deduction for unaccrued original
issue discount relating to the REMIC Regular Securities. Taxable income may also
be greater in earlier years because interest expense deductions, expressed as a
percentage of the outstanding principal amount of the REMIC Regular Securities,
may increase over time as the earlier classes of REMIC Regular Securities are
paid, whereas interest income with respect to any given loan expressed as a
percentage of the outstanding principal amount of that loan, will remain
constant over time.
Basis Rules and Distributions. A beneficial owner of a REMIC Residual
Security has an initial basis in its security equal to the amount paid for the
REMIC Residual Security. This basis is increased by amounts included in the
income of the beneficial owner and decreased by distributions and by any net
loss taken into account with respect to the REMIC Residual Security. A
distribution on a REMIC Residual Security to a beneficial owner is not included
in gross income to the extent it does not exceed the beneficial owner's basis in
the REMIC Residual Security, adjusted as described above, and, to the extent it
exceeds the adjusted basis of the REMIC Residual Security, shall be treated as
gain from the sale of the REMIC Residual Security.
A beneficial owner of a REMIC Residual Security is not allowed to take
into account any net loss for any calendar quarter to the extent the net loss
exceeds the beneficial owner's adjusted basis in its REMIC Residual Security as
of the close of the calendar quarter, determined without regard to the net loss.
Any loss disallowed by reason of this limitation may be carried forward
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indefinitely to future calendar quarters and, subject to the same limitation,
may be used only to offset income from the REMIC Residual Security.
Excess Inclusions. Any excess inclusions with respect to a REMIC
Residual Security are subject to a number of special tax rules. With respect to
a beneficial owner of a REMIC Residual Security, the excess inclusion for any
calendar quarter is defined as the excess, if any, of the daily portions of
taxable income over the sum of the "daily accruals" for each day during this
quarter that the REMIC Residual Security was held by the beneficial owner. The
daily accruals are determined by allocating to each day during a calendar
quarter its ratable portion of the product of the "adjusted issue price" of the
REMIC Residual Security at the beginning of the calendar quarter and 120% of the
"federal long-term rate" in effect on the Settlement Date, based on quarterly
compounding, and properly adjusted for the length of the quarter. For this
purpose, the adjusted issue price of a REMIC Residual Security as of the
beginning of any calendar quarter is equal to the issue price of the REMIC
Residual Security, increased by the amount of daily accruals for all prior
quarters and decreased by any distributions made with respect to the REMIC
Residual Security before the beginning of the quarter. The issue price of a
REMIC Residual Security is the initial offering price to the public, excluding
bond houses and brokers, at which a substantial number of the REMIC Residual
Securities was sold. The federal long-term rate is a blend of current yields on
Treasury securities having a maturity of more than nine (9) years, computed and
published monthly by the IRS.
In general, beneficial owners of REMIC Residual Securities with excess
inclusion income cannot offset the income by losses from other activities. For
beneficial owners that are subject to tax only on unrelated business taxable
income, as defined in Section 511 of the Code, an excess inclusion of the
beneficial owner is treated as unrelated business taxable income. With respect
to variable contracts, within the meaning of Section 817 of the Code, a life
insurance company cannot adjust its reserve to the extent of any excess
inclusion, except as provided in regulations. The REMIC Regulations indicate
that if a beneficial owner of a REMIC Residual Security is a member of an
affiliated group filing a consolidated income tax return, the taxable income of
the affiliated group cannot be less than the sum of the excess inclusions
attributable to all residual interests in REMICs held by members of the
affiliated group. For a discussion of the effect of excess inclusions on
particular foreign investors that own REMIC Residual Securities, see "--Foreign
Investors" below.
The Treasury Department also has the authority to issue regulations
that would treat all taxable income of a REMIC Trust as excess inclusions if the
REMIC Residual Security does not have "significant value." Although the Treasury
Department did not exercise this authority in the REMIC Regulations, future
regulations may contain such a rule. If such a rule were adopted, it is unclear
how significant value would be determined for these purposes. If no such rule is
applicable, excess inclusions should be calculated as discussed above.
In the case of any REMIC Residual Securities that are held by a real
estate investment trust, the aggregate excess inclusions with respect to the
REMIC Residual Securities reduced, but not below zero, by the real estate
investment trust taxable income, within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain, will be allocated among the shareholders
of the trust in proportion to the dividends received by the shareholders from
the trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Security as if held directly by the
shareholder. Similar rules will apply in the case of regulated investment
companies, common trust funds and some cooperatives that hold a REMIC Residual
Security.
Pass-Through of Servicing and Guaranty Fees to Individuals. A
beneficial owner of a REMIC Residual Security who is an individual will be
required to include in income a share of
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any servicing and guaranty fees. A deduction for the fees will be allowed to the
beneficial owner only to the extent that the fees, along with certain of the
beneficial owner's other miscellaneous itemized deductions exceed 2% of the
beneficial owner's adjusted gross income. In addition, a beneficial owner of a
REMIC Residual Security may not be able to deduct any portion of the fees in
computing the beneficial owner's alternative minimum tax liability. A beneficial
owner's share of the fees will generally be determined by (i) allocating the
amount of the expenses for each calendar quarter on a pro rata basis to each day
in the calendar quarter, and (ii) allocating the daily amount among the
beneficial owners in proportion to their respective holdings on this day.
Taxes on a REMIC Trust
Prohibited Transactions. The Code imposes a tax on a REMIC equal to
100% of the net income derived from "prohibited transactions." In general, a
prohibited transaction means the disposition of a qualified mortgage other than
in accordance with specified exceptions, the receipt of investment income from a
source other than a loan or other permitted investments, the receipt of
compensation for services, or the disposition of an asset purchased with the
payments on the qualified mortgages for temporary investment pending
distribution on the regular and residual interests.
Contributions to a REMIC after the Startup Day. The Code imposes a tax
on a REMIC equal to 100% of the value of any property contributed to the REMIC
after the "startup day", which is generally the same as the Settlement Date.
Exceptions are provided for cash contributions to a REMIC:
o during the three (3) month period beginning on the startup
day,
o made to a qualified reserve fund by a beneficial owner of a
residual interest,
o in the nature of a guarantee,
o made to facilitate a qualified liquidation or clean-up call,
and
o as otherwise permitted by Treasury regulations.
Net Income from Foreclosure Property. The Code imposes a tax on a REMIC
equal to the highest corporate rate on "net income from foreclosure property."
The terms "foreclosure property", which includes property acquired by deed in
lieu of foreclosure, and "net income from foreclosure property" are defined by
reference to the rules applicable to real estate investment trusts. Generally,
foreclosure property would be treated as such for a period of three (3) years,
with a possible extension. Net income from foreclosure property generally means
gain from the sale of foreclosure property that is inventory property and gross
income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust.
Sales of REMIC Securities
General. Except as provided below, if a REMIC Regular Security or REMIC
Residual Security is sold, the seller will recognize gain or loss equal to the
difference between the amount realized in the sale and its adjusted basis in the
security. The adjusted basis of a REMIC Regular Security generally will equal
the cost of the security to the seller, increased by any original issue discount
or market discount included in the seller's gross income with respect to the
security and reduced by distributions on the security previously received by the
seller of amounts included in the stated redemption price at maturity and by any
premium that has reduced the seller's interest income with respect to the
security. See "--Discount and Premium." The adjusted basis of a REMIC Residual
Security is determined as described above under "--Taxation of Beneficial Owners
of REMIC Residual Securities--Basis Rules and Distributions." Except as provided
in
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the following paragraph or under Section 582(c) of the Code, any gain or loss
will be capital gain or loss, provided the security is held as a "capital
asset", which is generally, property held for investment, within the meaning of
Section 1221 of the Code.
Gain from the sale of a REMIC Regular Security that might otherwise be
capital gain will be treated as ordinary income to the extent that the gain does
not exceed the excess, if any, of (i) the amount that would have been includible
in the income of the beneficial owner of a REMIC Regular Security had income
accrued at a rate equal to 110% of the "applicable federal rate", generally, an
average of current yields on Treasury securities, as of the date of purchase
over (ii) the amount actually includible in the beneficial owner's income. In
addition, gain recognized on such a sale by a beneficial owner of a REMIC
Regular Security who purchased such a security at a market discount would also
be taxable as ordinary income in an amount not exceeding the portion of the
discount that accrued during the period the security was held by the beneficial
owner, reduced by any market discount includible in income under the rules
described below under "--Discount and Premium."
If a beneficial owner of a REMIC Residual Security sells its REMIC
Residual Security at a loss, the loss will not be recognized if, within six (6)
months before or after the sale of the REMIC Residual Security, the beneficial
owner purchases another residual interest in any REMIC or any interest in a
taxable mortgage pool, as defined in Section 7701(i) of the Code, comparable to
a residual interest in a REMIC. This disallowed loss would be allowed upon the
sale of the other residual interest, or comparable interest, if the rule
referred to in the preceding sentence does not apply to that sale. While this
rule may be modified by Treasury regulations, no such regulations have yet been
published.
Transfers of REMIC Residual Securities. Section 860E(e) of the Code
imposes a substantial tax, payable by the transferor, or, if a transfer is
through a broker, nominee, or other middleman as the transferee's agent, payable
by that agent, upon any transfer of a REMIC Residual Security to a disqualified
organization and upon a pass-through entity, including regulated investment
companies, real estate investment trusts, common trust funds, partnerships,
trusts, estates, some cooperatives, and nominees, that owns a REMIC Residual
Security if this pass-through entity has a disqualified organization as a
record-holder. For purposes of the preceding sentence, a transfer includes any
transfer of record or beneficial ownership, whether by a purchase, a default
under a secured lending agreement or otherwise.
The term "disqualified organization" includes the United States, any
state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing,
other than specified taxable instrumentalities, any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas, or any organization, other than a farmers' cooperative, that is exempt
from federal income tax, unless the organization is subject to the tax on
unrelated business income. Moreover, an entity will not qualify as a REMIC
unless there are reasonable arrangements designed to ensure that (i) residual
interests in the entity are not held by disqualified organizations and (ii)
information necessary for the application of the tax described in this
prospectus will be made available. Restrictions on the transfer of a REMIC
Residual Security and other provisions that are intended to meet this
requirement are described in the Pooling and Servicing Agreement, and will be
discussed more fully in the accompanying prospectus supplement relating to the
offering of any REMIC Residual Security. In addition, a pass-through entity,
including a nominee, that holds a REMIC Residual Security may be subject to
additional taxes if a disqualified organization is a record-holder in the REMIC
Residual Security. A transferor of a REMIC Residual Security, or an agent of a
transferee of a REMIC Residual Security, as the case may be, will be relieved of
the tax liability if (i) the transferee furnishes to the transferor, or the
transferee's agent, an affidavit that the transferee is not a disqualified
organization, and (ii) the transferor, or the transferee's
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agent, does not have actual knowledge that the affidavit is false at the time of
the transfer. Similarly, no such tax will be imposed on a pass-through entity
for a period with respect to an interest in the REMIC Residual Security owned by
a disqualified organization if (i) the record-holder of this interest furnishes
to the pass-through entity an affidavit that it is not a disqualified
organization, and (ii) during the period, the pass-through entity has no actual
knowledge that the affidavit is false.
The Taxpayer Relief Act of 1997 adds provisions to the Code that will
apply to an "electing large partnership." If an electing large partnership holds
a Residual Certificate, all interests in the electing large partnership are
treated as held by disqualified organizations for purposes of the tax imposed
upon a pass-through entity by Section 860E(e) of the Code. An exception to this
tax, otherwise available to a pass-through entity that is furnished affidavits
by record holders of interests in the entity and that does not know the
affidavits are false, is not available to an electing large partnership.
Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" to a U.S. Person, as defined below in "Foreign Investors--Grantor
Trust Securities and REMIC Regular Securities", will be disregarded for all
federal tax purposes unless no significant purpose of the transfer is to impede
the assessment or collection of tax. A REMIC Residual Security would be treated
as constituting a noneconomic residual interest unless, at the time of the
transfer, (i) the present value of the expected future distributions on the
REMIC Residual Security is no less than the product of the present value of the
"anticipated excess inclusions" with respect to the security and the highest
corporate rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the applicable REMIC Trust in an amount sufficient to satisfy the liability
for income tax on any "excess inclusions" at or after the time when the
liability accrues. Anticipated excess inclusions are the excess inclusions that
are anticipated to be allocated to each calendar quarter, or portion thereof,
following the transfer of a REMIC Residual Security, determined as of the date
the security is transferred and based on events that have occurred as of that
date and on the Prepayment Assumption. See "--Discount and Premium" and
"--Taxation of Beneficial Owners of REMIC Residual Securities--Excess
Inclusions."
The REMIC Regulations provide that a significant purpose to impede the
assessment or collection of tax exists if, at the time of the transfer, a
transferor of a REMIC Residual Security has "improper knowledge" -- i.e., either
knew, or should have known, that the transferee would be unwilling or unable to
pay taxes due on its share of the taxable income of the REMIC Trust. A
transferor is presumed not to have improper knowledge if (i) the transferor
conducts, at the time of a transfer, a reasonable investigation of the financial
condition of the transferee and, as a result of the investigation, the
transferor finds that the transferee has historically paid its debts as they
come due and finds no significant evidence to indicate that the transferee will
not continue to pay its debts as they come due in the future; and (ii) the
transferee makes a number of representations to the transferor in the affidavit
relating to disqualified organizations discussed above. Transferors of a REMIC
Residual Security should consult with their own tax advisors for further
information regarding these transfers.
Reporting and Other Administrative Matters. For purposes of the
administrative provisions of the Code, each REMIC Trust will be treated as a
partnership and the beneficial owners of REMIC Residual Securities will be
treated as partners. The trustee will prepare, sign and file federal income tax
returns for each REMIC Trust, which returns are subject to audit by the IRS.
Moreover, within a reasonable time after the end of each calendar year, the
trustee will furnish to each beneficial owner that received a distribution
during the year a statement setting forth the portions of any distributions that
constitute interest distributions, original issue discount, and any other
information as is required by Treasury regulations and, with respect to
beneficial
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owners of REMIC Residual Securities in a REMIC Trust, information necessary to
compute the daily portions of the taxable income, or net loss, of the REMIC
Trust for each day during this year. The trustee will also act as the tax
matters partner for each REMIC Trust, either in its capacity as a beneficial
owner of a REMIC Residual Security or in a fiduciary capacity. Each beneficial
owner of a REMIC Residual Security, by the acceptance of its REMIC Residual
Security, agrees that the trustee will act as its fiduciary in the performance
of any duties required of it in the event that it is the tax matters partner.
Each beneficial owner of a REMIC Residual Security is required to treat
items on its return consistently with the treatment on the return of the REMIC
Trust, unless the beneficial owner either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC Trust. The IRS may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the REMIC Trust level.
Termination
In general, no special tax consequences will apply to a beneficial
owner of a REMIC Regular Security upon the termination of a REMIC Trust by
virtue of the final payment or liquidation of the last loan remaining in the
trust fund. If a beneficial owner of a REMIC Residual Security's adjusted basis
in its REMIC Residual Security at the time the termination occurs exceeds the
amount of cash distributed to the beneficial owner in liquidation of its
interest, although the matter is not entirely free from doubt, it would appear
that the beneficial owner of the REMIC Residual Security is entitled to a loss
equal to the amount of this excess.
Debt Securities
With respect to each series of Debt Securities, special tax counsel to
the sponsor, will deliver its opinion to the sponsor that the securities will be
classified as debt secured by the loans. We will file this opinion with the
Securities and Exchange Commission on Form 8-K within fifteen (15) days after
the initial issuance of the securities or as a post-effective amendment to the
prospectus. Accordingly, the Debt Securities will not be treated as ownership
interests in the loans or the issuer. Beneficial owners will be required to
report income received with respect to the Debt Securities in accordance with
their normal method of accounting. For additional tax consequences relating to
Debt Securities purchased at a discount or with premium, see "--Discount and
Premium," below.
Special Tax Attributes
As described above, Grantor Trust Securities will possess specified
special tax attributes by virtue of their being ownership interests in the
underlying loans. Similarly, REMIC Securities will possess similar attributes by
virtue of the REMIC provisions of the Code. In general, Debt Securities will not
possess these special tax attributes. Investors to whom these attributes are
important should consult their own tax advisors regarding investment in Debt
Securities.
Sale or Exchange of Debt Securities
If a beneficial owner of a Debt Security sells or exchanges the
security, the beneficial owner will recognize gain or loss equal to the
difference, if any, between the amount received and the beneficial owner's
adjusted basis in the security. The adjusted basis in the security generally
will equal its initial cost, increased by any original issue discount or market
discount previously included in the seller's gross income with respect to the
security and reduced by the payments previously received on the security, other
than payments of qualified stated interest, and by any amortized premium.
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In general, except as described in "--Discount and Premium--Market
Discount," below, except for particular financial institutions subject to
Section 582(c) of the Code, any gain or loss on the sale or exchange of a Debt
Security recognized by an investor who holds the security as a capital asset,
within the meaning of Section 1221 of the Code, will be capital gain or loss and
will be long-term or short-term depending on whether the security has been held
for more than one (1) year.
Debt Securities Reporting
The trustee will furnish to each beneficial owner of a Debt Security
with each distribution a statement setting forth the amount of the distribution
allocable to principal on the underlying loans and to interest thereon at the
interest rate attributable to the security. In addition, within a reasonable
time after the end of each calendar year, based on information provided by the
servicer, the trustee will furnish to each beneficial owner during this year any
customary factual information as the servicer deems necessary or desirable to
enable beneficial owners of Debt Securities to prepare their tax returns and
will furnish comparable information to the IRS as and when required to do so by
law.
Partnership Interests
With respect to each series of Partnership Interests, special tax
counsel to the sponsor, will deliver its opinion to the sponsor that the issuer
will be treated as a partnership and not an association taxable as a corporation
for federal income tax purposes. We will file this opinion with the Securities
and Exchange Commission on Form 8-K within fifteen (15) days after the initial
issuance of the securities or as a post-effective amendment to the prospectus.
Accordingly, each beneficial owner of a Partnership Interest will generally be
treated as the owner of an interest in the loans.
Special Tax Attributes
As described above, REMIC Securities will possess specified special tax
attributes by virtue of the REMIC provisions of the Code. In general,
Partnership Interests will not possess these special tax attributes. Investors
to whom these attributes are important should consult their own tax advisors
regarding investment in Partnership Interests.
Taxation of Beneficial Owners of Partnership Interests
If the issuer is treated as a partnership for federal income tax
purposes, the issuer will not be subject to federal income tax. Instead, each
beneficial owner of a Partnership Interest will be required to separately take
into account its allocable share of income, gains, losses, deductions, credits
and other tax items of the issuer. These partnership allocations are made in
accordance with the Code, Treasury regulations and the partnership agreement or
in this case, the trust agreement or other similar agreement.
The issuer's assets will be the assets of the partnership. The issuer's
income will consist primarily of interest and finance charges earned on the
underlying loans. The issuer's deductions will consist primarily of interest
accruing with respect to any indebtedness issued by the issuer, servicing and
other fees, and losses or deductions upon collection or disposition of the
issuer's assets.
In some instances, the issuer could have an obligation to make payments
of withholding tax on behalf of a beneficial owner of a Partnership Interest.
See "--Backup Withholding" and "--Foreign Investors."
Substantially all of the taxable income allocated to a beneficial owner
of a Partnership Interest that is a pension, profit sharing or employee benefit
plan or other tax-exempt entity,
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including an individual retirement account, will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
Under Section 708 of the Code, the issuer will be deemed to terminate
for federal income tax purposes if 50% or more of the capital and profits
interests in the issuer are sold or exchanged within a 12-month period. Under
Treasury regulations issued on May 9, 1997 if such a termination occurs, the
issuer is deemed to contribute all of its assets and liabilities to a newly
formed partnership in exchange for a partnership interest. Immediately
thereafter, the terminated partnership distributes interests in the new
partnership to the purchasing partner and remaining partners in proportion to
their interests in liquidation of the terminated partnership.
Sale or Exchange of Partnership Interests
Generally, capital gain or loss will be recognized on a sale or
exchange of Partnership Interests in an amount equal to the difference between
the amount realized and the seller's tax basis in the Partnership Interests
sold. A beneficial owner's tax basis in a Partnership Interest will generally
equal the beneficial owner's cost increased by the beneficial owner's share of
issuer income and decreased by any distributions received with respect to the
Partnership Interest. In addition, both the tax basis in the Partnership
Interest and the amount realized on a sale of a Partnership Interest would take
into account the beneficial owner's share of any indebtedness of the issuer. A
beneficial owner acquiring Partnership Interests at different prices may be
required to maintain a single aggregate adjusted tax basis in the Partnership
Interest, and upon sale or other disposition of some of the Partnership
Interests, allocate a portion of the aggregate tax basis to the Partnership
Interests sold, rather than maintaining a separate tax basis in each Partnership
Interest for purposes of computing gain or loss on a sale of that Partnership
Interest.
Any gain on the sale of a Partnership Interest attributable to the
beneficial owner's share of unrecognized accrued market discount on the assets
of the issuer would generally be treated as ordinary income to the holder and
would give rise to special tax reporting requirements. If a beneficial owner of
a Partnership Interest is required to recognize an aggregate amount of income
over the life of the Partnership Interest that exceeds the aggregate cash
distributions with respect thereto, the excess will generally give rise to a
capital loss upon the retirement of the Partnership Interest. If a beneficial
owner sells its Partnership Interest at a profit or loss, the transferee will
have a higher or lower basis in the Partnership Interests than the transferor
had. The tax basis of the issuer's assets will not be adjusted to reflect that
higher or lower basis unless the issuer files an election under Section 754 of
the Code.
Partnership Reporting
The trustee is required to (i) keep complete and accurate books of the
issuer, (ii) file a partnership information return on IRS Form 1065 with the IRS
for each taxable year of the issuer and (iii) report each beneficial owner's
allocable share of items of issuer income and expense to beneficial owners and
the IRS on Schedule K-1. The issuer will provide the Schedule K-1 information to
nominees that fail to provide the issuer with the information statement
described below and the nominees will be required to forward the information to
the beneficial owners of the Partnership Interests. Generally, beneficial owners
of a Partnership Interest must file tax returns that are consistent with the
information return filed by the issuer or be subject to penalties unless the
beneficial owner of a Partnership Interest notifies the IRS of all
inconsistencies.
Under Section 6031 of the Code, any person that holds Partnership
Interests as a nominee at any time during a calendar year is required to furnish
the issuer with a statement containing specified information on the nominee, the
beneficial owners and the Partnership Interests so held. This information
includes (1) the name, address and taxpayer identification number of the nominee
and (2) as to each beneficial owner (x) the name, address and identification
number of
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this person, (y) whether this person is a United States person, a tax-exempt
entity or a foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing, and (z) specified
information on Partnership Interests that were held, bought or sold on behalf of
this person throughout the year. In addition, brokers and financial institutions
that hold Partnership Interests through a nominee are required to furnish
directly to the issuer information as to themselves and their ownership of
Partnership Interests. A clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, is not required to furnish any of this
information statement to the issuer. Nominees, brokers and financial
institutions that fail to provide the issuer with the information described
above may be subject to penalties.
The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three (3) years after
the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the issuer by the appropriate
taxing authorities could result in an adjustment of the returns of the
beneficial owner of a Partnership Interests, and, under particular
circumstances, a beneficial owner of a Partnership Interest may be precluded
from separately litigating a proposed adjustment to the items of the issuer. An
adjustment could also result in an audit of the beneficial owner of a
Partnership Interest's returns and adjustments of items note related to the
income and losses of the issuer.
FASIT Securities
If provided in a accompanying prospectus supplement, an election will
be made to treat the issuer as a FASIT within the meaning of Code Section
860L(a). Qualification as a FASIT requires ongoing compliance with a number of
conditions. With respect to each series of securities for which an election is
made, special tax counsel to the sponsor, will deliver its opinion to the
sponsor that, assuming compliance with the Issuing Agreement, the issuer will be
treated as a FASIT for federal income tax purposes. We will file this opinion
with the securities and Exchange Commission on Form 8-K within fifteen (15) days
after the initial issuance of the securities or as a post-effective amendment to
the prospectus.
Special Tax Attributes
FASIT Securities held by a real estate investment trust will constitute
"real estate assets" within the meaning of Code Sections 856(c)(5)(A) and
856(c)(6) and interest on the FASIT Regular Securities will be considered
"interest on obligations secured by mortgages on real property or on interests
in real property" within the meaning of Code Section 856(c)(3)(B) in the same
proportion that, for both purposes, the assets of the FASIT Trust and the income
thereon would be so treated. FASIT Regular Securities held by a domestic
building and loan association will be treated as "regular interest[s] in a
FASIT" under Code Section 7701(a)(19)(C)(xi), but only in the proportion that
the FASIT Trust holds "loans . . . secured by an interest in real property which
is . . . residential real property" within the meaning of Code Section
7701(a)(19)(C)(v). If at all times 95% or more of the assets of the FASIT Trust
or the income thereon qualify for the foregoing treatments, the FASIT Regular
Securities will qualify for the corresponding status in their entirety. For
purposes of Code Section 856(c)(5)(A), payments of principal and interest on a
loan that are reinvested pending distribution to holders of FASIT Regular
Securities should qualify for this treatment. FASIT Regular Securities held by a
regulated investment company will not constitute "government securities" within
the meaning of Code Section 851(b)(4)(A)(i). FASIT Regular Securities held by
particular financial institutions will constitute an "evidence of indebtedness"
within the meaning of Code Section 582(c)(1).
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Taxation of Beneficial Owners of FASIT Regular Securities
A FASIT Trust will not be subject to federal income tax except with
respect to income from prohibited transactions and in some other instances as
described below. The FASIT Regular Securities generally will be treated for
federal income tax purposes as newly-originated debt instruments. In general,
interest, original issue discount and market discount on a FASIT Regular
Security will be treated as ordinary income to the beneficial owner, and
principal payments, other than principal payments that do not exceed accrued
market discount, on an FASIT Regular Security will be treated as a return of
capital to the extent of the beneficial owner's basis allocable thereto.
Beneficial owners must use the accrual method of accounting with respect to
FASIT Regular Securities, regardless of the method of accounting otherwise used
by the beneficial owners. See "--Discount and Premium" below.
In order for the FASIT Trust to qualify as a FASIT, there must be
ongoing compliance with the requirements set forth in the Code. The FASIT must
fulfill an asset test, which requires that substantially all the assets of the
FASIT, as of the close of the third calendar month beginning after the Startup
Day, and at all times thereafter, must consist of cash or cash equivalents,
particular debt instruments, other than debt instruments issued by the owner of
the FASIT or a related party, and hedges, and contracts to acquire the same,
foreclosure property and regular interests in another FASIT or in a REMIC. Based
on identical statutory language applicable to REMICs, it appears that the
"substantially all" requirement should be met if at all times the aggregate
adjusted basis of the nonqualified assets is less than one percent of the
aggregate adjusted basis of all the FASIT's assets. The FASIT provisions of the
Code, Sections 860H through 860L, also require the FASIT ownership interest and
particular "high-yield regular interests" to be held only by specified fully
taxable domestic corporations.
Permitted debt instruments must bear interest, if any, at a fixed or
qualified variable rate. Permitted hedges include interest rate or foreign
currency notional principal contracts, letters of credit, insurance, guarantees
of payment default and similar instruments to be provided in regulations, and
which are reasonably required to guarantee or hedge against the FASIT's risks
associated with being the obligor on interests issued by the FASIT. Foreclosure
property is real property acquired by the FASIT in connection with the default
or imminent default of a qualified mortgage, provided the issuer had no
knowledge or reason to know as of the date the asset was acquired by the FASIT
that such a default had occurred or would occur.
In addition to the foregoing requirements, the various interests in a
FASIT also must meet a number of requirements. All of the interests in a FASIT
must be either of the following: (a) one or more classes of regular interests or
(b) a single class of ownership interest. A regular interest is an interest in a
FASIT that is issued on or after the Startup Day with fixed terms, is designated
as a regular interest, and (i) unconditionally entitles the holder to receive a
specified principal amount, or other similar amount, (ii) provides that interest
payments, or other similar amounts, if any, at or before maturity either are
payable based on a fixed rate or a qualified variable rate, (iii) has a stated
maturity of not longer than 30 years, (iv) has an issue price not greater than
125% of its stated principal amount, and (v) has a yield to maturity not greater
than five (5%) percentage points higher than the applicable Federal rate, as
defined in Code Section 1274(d). A regular interest that is described in the
preceding sentence except that if fails to meet one or more of requirements (i),
(ii) (iv) or (v) is a "high-yield regular interest." A high-yield regular
interest that fails requirement (ii) must consist of a specified, nonvarying
portion of the interest payments on the permitted assets, by reference to the
REMIC rules. An ownership interest is an interest in a FASIT other than a
regular interest that is issued on the Startup Day, is designated an ownership
interest and is held by a single, fully-taxable, domestic corporation. An
interest in a FASIT may be treated as a regular interest even if payments of
principal with respect to this interest are subordinated to payments on other
regular interests or the ownership interest in the FASIT, and
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are dependent on the absence of defaults or delinquencies on permitted assets
lower than reasonably expected returns on permitted assets, unanticipated
expenses incurred by the FASIT or prepayment interest shortfalls.
If an entity fails to comply with one or more of the ongoing
requirements of the Code for status as a FASIT during any taxable year, the Code
provides that the entity or applicable potion thereof will not be treated as a
FASIT thereafter. In this event, any entity that holds mortgage loans and is the
obligor with respect to debt obligations with two or more maturities, such as
the trust fund, may be treated as a separate association taxable as a
corporation, and the FASIT Regular Securities may be treated as equity interests
the FASIT Regular Securities. The legislative history to the FASIT Provisions
indicates, however, that an entity can continue to be a FASIT if loss of its
status was inadvertent, it takes prompt steps to requalify and other
requirements that may be provided in Treasury regulations are met. Loss of FASIT
status results in retirement of all regular interests and their reissuance. If
the resulting instruments would be treated as equity under general tax
principles, cancellation of debt income may result.
Taxes on a FASIT Trust
Income from particular transactions by a FASIT, called prohibited
transactions, are taxable to the holder of the ownership interest in a FASIT at
a 100% rate. Prohibited transactions generally include (i) the disposition of a
permitted asset other than for (a) foreclosure, default, or imminent default,
(b) bankruptcy or insolvency of the FASIT, (c) a qualified or complete
liquidation, (d) substitution for another permitted debt instrument or
distribution of the debt instrument to the holder of the ownership interest to
reduce overcollateralization, but only if a principal purpose of acquiring the
debt instrument which is disposed of was not the recognition of gain, or the
reduction of a loss, on the withdrawn asset as a result of an increase in the
market value of the asset after its acquisition by the FASIT or (e) the
retirement of a class of FASIT regular interests; (ii) the receipt of income
from nonpermitted assets; (iii) the receipt of compensation for services; or
(iv) the receipt of any income derived from a loan originated by the FASIT. It
is unclear the extent to which tax on these transactions could be collected from
the FASIT Trust directly under the applicable statutes rather than from the
holder of the FASIT Residual Security.
Due to the complexity of these rules, the absence of Treasury
Regulations and the current uncertainty as to the manner to their application to
the trust and to holders of FASIT Securities, it is particularly important that
potential investors consult their own tax advisors regarding the tax treatment
of their acquisition, ownership and disposition of the FASIT Regular Securities.
Discount and Premium
A security purchased for an amount other than its outstanding principal
amount will be subject to the rules governing original issue discount, market
discount or premium. In addition, all Grantor Trust Strip Securities and some
Grantor Trust Fractional Interest Securities will be treated as having original
issue discount by virtue of the coupon stripping rules in Section 1286 of the
Code. In very general terms, (i) original issue discount is treated as a form of
interest and must be included in a beneficial owner's income as it accrues,
regardless of the beneficial owner's regular method of accounting, using a
constant yield method; (ii) market discount is treated as ordinary income and
must be included in a beneficial owner's income as principal payments are made
on the security, or upon a sale of a security; and (iii) if a beneficial owner
so elects, premium may be amortized over the life of the security and offset
against inclusions of interest income. These tax consequences are discussed in
greater detail below.
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Original Issue Discount
In general, a security will be considered to be issued with original
issue discount equal to the excess, if any, of its "stated redemption price at
maturity" over its "issue price." The issue price of a security is the initial
offering price to the public, excluding bond houses and brokers, at which a
substantial number of the securities were sold. The issue price also includes
any accrued interest attributable to the period between the beginning of the
first Accrual Period and the Settlement Date. The stated redemption price at
maturity of a security that has a notional principal amount or receives
principal only or that is or may be an Accrual Security is equal to the sum of
all distributions to be made under the security. The stated redemption price at
maturity of any other security is its stated principal amount, plus an amount
equal to the excess, if any, of the interest payable on the first distribution
date over the interest that accrues for the period from the Settlement Date to
the first distribution date. The trustee will supply, at the time and in the
manner required by the IRS, to beneficial owners, brokers and middlemen
information with respect to the original issue discount accruing on the
securities.
Notwithstanding the general definition, original issue discount will be
treated as zero if the discount is less than 0.25% of the stated redemption
price at maturity of the security multiplied by its weighted average life. The
weighted average life of a security is apparently computed for this purpose as
the sum, for all distributions included in the stated redemption price at
maturity, of the amounts determined by multiplying (i) the number of complete
years, rounding down for partial years, from the Settlement Date until the date
on which each distribution is expected to be made under the Prepayment
Assumption by (ii) a fraction, the numerator of which is the amount of the
distribution and the denominator of which is the security's stated redemption
price at maturity. Even if original issue discount is treated as zero under this
rule, the actual amount of original issue discount must be allocated to the
principal distributions on the security and, when each distribution is received,
gain equal to the discount allocated to the distribution will be recognized.
Section 1272(a)(6) of the Code contains special original issue discount
rules directly applicable to REMIC Securities and Debt Securities. The Taxpayer
Relief Act of 1997 extends application of Section 1272(a)(6) to the Grantor
Trust Securities for tax years beginning after August 5, 1997. Under these
rules, (i) the amount and rate of accrual of original issue discount on each
series of securities will be based on (x) the Prepayment Assumption, and (y) in
the case of a security calling for a variable rate of interest, an assumption
that the value of the index upon which the variable rate is based remains equal
to the value of that rate on the Settlement Date, and (ii) adjustments will be
made in the amount of discount accruing in each taxable year in which the actual
prepayment rate differs from the Prepayment Assumption.
Section 1272(a)(6)(B)(iii) of the Code requires that the prepayment
assumption used to calculate original issue discount be determined in the manner
prescribed in Treasury regulations. To date, no such regulations have been
promulgated. The legislative history of this Code provision indicates that the
assumed prepayment rate must be the rate used by the parties in pricing the
particular transaction. The sponsor anticipates that the Prepayment Assumption
for each series of securities will be consistent with this standard. The sponsor
makes no representation, however, that the loans for a given series will prepay
at the rate reflected in the Prepayment Assumption for that series or at any
other rate. Each investor must make its own decision as to the appropriate
prepayment assumption to be used in deciding whether or not to purchase any of
the securities.
Each beneficial owner must include in gross income the sum of the
"daily portions" of original issue discount on its security for each day during
its taxable year on which it held the security. For this purpose, in the case of
an original beneficial owner, the daily portions of
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original issue discount will be determined as follows. A calculation will first
be made of the portion of the original issue discount that accrued during each
"accrual period." Original issue discount calculations must be based on accrual
periods of no longer than one (1) year either (i) beginning on a distribution
date, or, in the case of the first accrual period, the Settlement Date, and
ending on the day before the next distribution date or (ii) beginning on the
next day following a distribution date and ending on the next distribution date.
Under Section 1272(a)(6) of the Code, the portion of original issue
discount treated as accruing for any accrual period will equal the excess, if
any, of (i) the sum of (A) the present values of all the distributions remaining
to be made on the security, if any, as of the end of the accrual period and (B)
the distribution made on the security during the accrual period of amounts
included in the stated redemption price at maturity, over (ii) the adjusted
issue price of the security at the beginning of the accrual period. The present
value of the remaining distributions referred to in the preceding sentence will
be calculated based on (i) the yield to maturity of the security, calculated as
of the Settlement Date, giving effect to the Prepayment Assumption, (ii) events,
including actual prepayments, that have occurred prior to the end of the accrual
period, (iii) the Prepayment Assumption, and (iv) in the case of a security
calling for a variable rate of interest, an assumption that the value of the
index upon which this variable rate is based remains the same as its value on
the Settlement Date over the entire life of the security. The adjusted issue
price of a security at any time will equal the issue price of the security,
increased by the aggregate amount of previously accrued original issue discount
with respect to the security, and reduced by the amount of any distributions
made on the security as of that time of amounts included in the stated
redemption price at maturity. The original issue discount accruing during any
accrual period will then be allocated ratably to each day during the period to
determine the daily portion of original issue discount.
In the case of Grantor Trust Strip Securities and some REMIC
Securities, the calculation described in the preceding paragraph may produce a
negative amount of original issue discount for one or more accrual periods. No
definitive guidance has been issued regarding the treatment of the negative
amounts. The legislative history to Section 1272(a)(6) indicates that the
negative amounts may be used to offset subsequent positive accruals but may not
offset prior accruals and may not be allowed as a deduction item in a taxable
year in which negative accruals exceed positive accruals. Beneficial owners of
the securities should consult their own tax advisors concerning the treatment of
the negative accruals.
A subsequent purchaser of a security that purchases the security at a
cost less than its remaining stated redemption price at maturity also will be
required to include in gross income for each day on which it holds the security,
the daily portion of original issue discount with respect to the security -- but
reduced, if the cost of the security to the purchaser exceeds its adjusted issue
price, by an amount equal to the product of (i) the daily portion and (ii) a
constant fraction, the numerator of which is the excess and the denominator of
which is the sum of the daily portions of original issue discount on the
security for all days on or after the day of purchase.
Market Discount
A beneficial owner that purchases a security at a market discount, that
is, at a purchase price less than the remaining stated redemption price at
maturity of the security, or, in the case of a security with original issue
discount, its adjusted issue price, will be required to allocate each principal
distribution first to accrued market discount on the security, and recognize
ordinary income to the extent the distribution does not exceed the aggregate
amount of accrued market discount on the security not previously included in
income. With respect to securities that have unaccrued original issue discount,
the market discount must be included in income in addition to any original issue
discount. A beneficial owner that incurs or continues indebtedness to acquire a
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security at a market discount may also be required to defer the deduction of all
or a portion of the interest on this indebtedness until the corresponding amount
of market discount is included in income. In general terms, market discount on a
security may be treated as accruing either (i) under a constant yield method or
(ii) in proportion to remaining accruals of original issue discount, if any, or
if none, in proportion to remaining distributions of interest on the security,
in any case taking into account the Prepayment Assumption. The trustee will make
available, as required by the IRS, to beneficial owners of securities
information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a security will be
considered to be zero if the discount is less than 0.25% of the remaining stated
redemption price at maturity of the security multiplied by its weighted average
remaining life. Weighted average remaining life presumably would be calculated
in a manner similar to weighted average life, taking into account payments,
including prepayments, prior to the date of acquisition of the security by the
subsequent purchaser. If market discount on a security is treated as zero under
this rule, the actual amount of market discount must be allocated to the
remaining principal distributions on the security and, when each distribution is
received, gain equal to the discount allocated to the distribution will be
recognized.
Premium
A purchaser of a Premium Security need not include in income any
remaining original issue discount and may elect, under Section 171(c)(2) of the
Code, to treat the premium as "amortizable bond premium." If a beneficial owner
makes such an election, the amount of any interest payment that must be included
in the beneficial owner's income for each period ending on a distribution date
will be reduced by the portion of the premium allocable to the period based on
the Premium Security's yield to maturity. This premium amortization should be
made using constant yield principles. If the election is made by the beneficial
owner, the election will also apply to all fully taxable bonds, or bonds the
interest on which is not excludible from gross income, held by the beneficial
owner at the beginning of the first taxable year to which the election applies
and to all fully taxable bonds thereafter acquired by it, and is irrevocable
without the consent of the IRS. If this election is not made, (i) the beneficial
owner must include the full amount of each interest payment in income as it
accrues, and (ii) the premium must be allocated to the principal distributions
on the Premium Security and when each distribution is received a loss equal to
the premium allocated to the distribution will be recognized. Any tax benefit
from the premium not previously recognized will be taken into account in
computing gain or loss upon the sale or disposition of the Premium Security.
Some securities may provide for only nominal distributions of principal
in comparison to the distributions of interest thereon. It is possible that the
IRS or the Treasury Department may issue guidance excluding the securities from
the rules generally applicable to debt instruments issued at a premium. In
particular, it is possible that such a security will be treated as having
original issue discount equal to the excess of the total payments to be received
thereon over its issue price. In this event, Section 1272(a)(6) of the Code
would govern the accrual of the original issue discount, but a beneficial owner
would recognize substantially the same income in any given period as would be
recognized if an election were made under Section 171(c)(2) of the Code. Unless
and until the Treasury Department or the IRS publishes specific guidance
relating to the tax treatment of the securities, the trustee intends to furnish
tax information to beneficial owners of the securities in accordance with the
rules described in the preceding paragraph.
Special Election
For any security acquired on or after April 4, 1994, a beneficial owner
may elect to include in gross income all "interest" that accrues on the security
by using a constant yield
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method. For purposes of the election, the term "interest" includes stated
interest, acquisition discount, original issue discount, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest as adjusted by any amortizable bond premium or acquisition premium. A
beneficial owner should consult its own tax advisor regarding the time and
manner of making and the scope of the election and the implementation of the
constant yield method.
Backup Withholding
Distributions of interest and principal, as well as distributions of
proceeds from the sale of securities, may be subject to the "backup withholding
tax" under Section 3406 of the Code at a rate of 31% if recipients of the
distributions fail to furnish to the payor particular information, including
their taxpayer identification numbers, or otherwise fail to establish an
exemption from this tax. Any amounts deducted and withheld from a distribution
to a recipient would be allowed as a credit against the recipient's federal
income tax. Furthermore, penalties may be imposed by the IRS on a recipient of
distributions that is required to supply information but that does not do so in
the proper manner.
The Internal Revenue Service recently issued final "withholding
regulations", which change some of the rules relating to particular presumptions
currently available relating to information reporting and backup withholding.
The withholding regulations would provide alternative methods of satisfying the
beneficial ownership certification requirement. The withholding regulations are
effective December 31, 2000, although valid withholding certificates that are
held on December 31, 2000 remain valid until the earlier of December 31, 2000 or
the due date of expiration of the certificate under the rules as currently in
effect.
Foreign Investors
The withholding regulations would require, in the case of securities
held by a foreign partnership, that (x) the certification described above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide specified information, including a United States taxpayer
identification number. See "--Backup Withholding" above. A look-through rule
would apply in the case of tiered partnerships. Non-U.S. Persons should consult
their own tax advisors regarding the application to them of the withholding
regulations. Grantor Trust Securities and REMIC Regular Securities
Distributions made on a Grantor Trust Security, Debt Security or a
REMIC Regular Security to, or on behalf of, a beneficial owner that is not a
U.S. Person generally will be exempt from U.S. federal income and withholding
taxes. This exemption is applicable provided (a) the beneficial owner is not
subject to U.S. tax as a result of a connection to the United States other than
ownership of the security, (b) the beneficial owner signs a statement under
penalties of perjury that certifies that the beneficial owner is not a U.S.
Person, and provides the name and address of the beneficial owner, and (c) the
last U.S. Person in the chain of payment to the beneficial owner receives the
statement from the beneficial owner or a financial institution holding on its
behalf and does not have actual knowledge that the statement is false.
Beneficial owners should be aware that the IRS might take the position that this
exemption does not apply to a beneficial owner that also owns 10% or more of the
REMIC Residual Securities of any REMIC trust, or to a beneficial owner that is a
"controlled foreign corporation" described in Section 881(c)(3)(C) of the Code.
REMIC Residual Securities
Amounts distributed to a beneficial owner of a REMIC Residual Security
that is a not a U.S. Person generally will be treated as interest for purposes
of applying the 30%, or lower treaty
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rate, withholding tax on income that is not effectively connected with a U.S.
trade or business. Temporary Treasury Regulations clarify that amounts not
constituting excess inclusions that are distributed on a REMIC Residual Security
to a beneficial owner that is not a U.S. Person generally will be exempt from
U.S. federal income and withholding tax, subject to the same conditions
applicable to distributions on Grantor Trust Securities, Debt Securities and
REMIC Regular Securities, as described above, but only to the extent that the
obligations directly underlying the REMIC Trust that issued the REMIC Residual
Security, for example, loans or regular interests in another REMIC or FASIT,
were issued after July 18, 1984. In no case will any portion of REMIC income
that constitutes an excess inclusion be entitled to any exemption from the
withholding tax or a reduced treaty rate for withholding. See "--REMIC
Securities--Taxation of Beneficial Owners of REMIC Residual Securities--Excess
Inclusions" in this prospectus.
Partnership Interests
Depending upon the particular terms of the Issuing Agreement and Loan
Sale Agreement, an issuer may be considered to be engaged in a trade or business
in the United States for purposes of federal withholding taxes with respect to
non-U.S. Persons. If the issuer is considered to be engaged in a trade or
business in the United States for these purposes and the issuer is treated as a
partnership, the income of the issuer distributable to a non-U.S. Person would
be subject to federal withholding tax. Also, in these cases, a non-U.S.
beneficial owner of a Partnership Interest that is a corporation may be subject
to the branch profits tax. If the issuer is notified that a beneficial owner of
a Partnership Interest is a foreign person, the issuer may withhold as if it
were engaged in a trade or business in the United States in order to protect the
issuer from possible adverse consequences of a failure to withhold. A foreign
holder generally would be entitled to file with the IRS a claim for refund with
respect to withheld taxes, taking the position that no taxes were due because
the issuer was not in a U.S. trade or business.
FASIT Regular Securities
Some "high-yield" FASIT Regular Securities may not be sold to or
beneficially owned by non-U.S. Persons. Any purported transfer will be null and
void and, upon the trustee's discovery of any purported transfer in violation of
this requirement and the last preceding owner of the high-yield FASIT Regular
Securities will be restored to ownership thereof as completely as possible. The
last preceding owner will, in any event, be taxable on all income with respect
to the high-yield FASIT Regular Securities for federal income tax purposes. The
Issuing Agreement will provide that, as a condition to transfer of a high-yield
FASIT Regular Security, the proposed transferee must furnish an affidavit as to
its status as a U.S. Person and otherwise as a permitted transferee.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Certain Federal Income Tax Consequences," potential investors should consider
the state and local income tax consequences of the acquisition, ownership, and
disposition of the securities. State and local income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in the
securities.
The federal income tax discussions set forth above are included for
general information only and may not be applicable depending upon an investor's
particular tax situation. prospective purchasers should consult their tax
advisers with respect to the tax consequences to them of the
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purchase, ownership and disposition of the securities, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
ERISA CONSIDERATIONS
ERISA and Section 4975 of the Code impose a number of requirements on
those employee benefit plans to which they apply and on those persons who are
fiduciaries with respect to these plans. The following is a general discussion
of the requirements, and a number of applicable exceptions to and administrative
exemptions from the requirements.
General
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan and certain individual retirement
arrangements from engaging in specified transactions involving "plan assets"
with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to the plan, unless a statutory or
administrative exemption applies to the transaction. ERISA and the Code also
prohibit generally a number of actions involving conflicts of interest by
persons who are fiduciaries of these plans or arrangements. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for these persons. In addition, investments by plans
are subject to ERISA's general fiduciary requirements, including the requirement
of investment prudence and diversification and the requirement that a plan's
investments be made in accordance with the documents governing the plan.
Employee benefit plans that are governmental plans, as defined in Section 3(32)
of ERISA, and some church plans, as defined in Section 3(33) of ERISA, are not
subject to ERISA requirements. Accordingly, assets of these plans may be
invested in securities without regard to the ERISA considerations discussed
below, subject to the provisions of other applicable federal, state and local
law. Any plan which is qualified and exempt from taxation under Sections 401(a)
and 501(a) of the Code, however, is subject to the prohibited transaction rules
set forth in Section 503 of the Code.
Some transactions involving the issuer might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a plan,
including an individual retirement arrangement, that purchased securities, if
the assets of the issuer were deemed to be assets of the Plan. Under a "plan
asset regulation" issued by the United States Department of Labor, the assets of
the issuer would be treated as plan assets of a plan for the purposes of ERISA
and the Code only if the plan acquired an equity interest in the issuer and none
of the exceptions contained in the plan asset regulation were applicable. An
"equity interest" is defined under the plan asset regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. In addition, in John Hancock
Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993),
the United States Supreme Court ruled that assets held in an insurance company's
general account may be deemed to be "plan assets" for ERISA purposes under
particular circumstances. Therefore, in the absence of an exemption, the
purchase, sale or holding of a security by a plan, including some individual
retirement arrangements, subject to Section 406 of ERISA or Section 4975 of the
Code might result in prohibited transactions and the imposition of excise taxes
and civil penalties.
Certificates
The Department of Labor has issued to various underwriters individual
prohibited transaction exemptions, which generally exempt from the application
of the prohibited transaction provisions of Sections 406(a), 406(b)(1),
406(b)(2) and 407(a) of ERISA and the excise taxes imposed under Sections
4975(a) and (b) of the Code, particular transactions with respect to the initial
purchase, the holding and the subsequent resale by plans of certificates in
pass-through
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trusts that consist of secured receivables, secured loans and other secured
obligations that meet the conditions and requirements of these underwriter
exemptions. These underwriter exemptions will only be available for securities
that are certificates.
Among the conditions that must be satisfied in order for the
underwriter exemptions to apply to offered certificates are the following:
(a) the acquisition of the certificates by a plan is on terms,
including the price for the certificates, that are at least as
favorable to the plan as they would be in an arm's-length transaction
with an unrelated party;
(b) the rights and interests evidenced by the certificates
acquired by the plan are not subordinated to the rights and interests
evidenced by other certificates of the trust;
(c) the certificates acquired by the p1lan have received a
rating at the time of the acquisition that is one of the three highest
generic rating categories from Standard & Poor's Rating Services, a
division of The McGraw-Hill Companies, Moody's Investors Service, Inc.,
Duff & Phelps Credit Rating Co., or Fitch IBCA, Inc.;
(d) the trustee is not an affiliate of any other member of the
Restricted Group;
(e) the sum of all payments made to and retained by the
underwriters in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the
originators and the sponsor under the assignment of the loans to the
trust fund represents not more than the fair market value of the loans;
the sum of all payments made to and retained by any servicer represents
not more than reasonable compensation for this person's services under
the pooling and servicing agreement and reimbursement of this person's
reasonable expenses in connection therewith;
(f) the plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the
Securities Act of 1933; and
(g) in the event that all of the obligations used to fund the
trust have not been transferred to the trust on the closing date,
additional obligations of the types specified in the prospectus
supplement and/or pooling and servicing agreement having an aggregate
value equal to no more than 25% of the total principal amount of the
certificates being offered by the trust may be transferred to the
trust, in exchange for amounts credited to the account funding the
additional obligations, within a funding period of no longer than 90
days or 3 months following the closing date.
The trust fund must also meet the following requirements:
o the corpus of the trust fund must consist solely of assets
of the type that have been included in other investment
pools;
o certificates in the other investment pools must have been
rated in one of the three highest rating categories of
Standard & Poor's, Moody's, Fitch IBCA or Duff & Phelps for
at least one (1) year prior to the plan's acquisition of
certificates; and
o certificates evidencing interests in the other investment
pools must have been purchased by investors other than plans
for at least one (1) year prior to the plan's acquisition of
certificates.
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Moreover, the underwriter exemptions provide relief from specified
self-dealing/conflict of interest prohibited transactions that may occur when
the plan fiduciary causes a plan to acquire certificates in a trust in which the
fiduciary, or its affiliate, is an obligor on the receivables held in the trust;
provided, that, among other requirements, (i) in the case of an acquisition in
connection with the initial issuance of certificates, at least fifty percent of
each class of certificates in which plans have invested is acquired by persons
independent of the Restricted Group and at least fifty percent of the aggregate
interest in the trust is acquired by persons independent of the Restricted
Group; (ii) the fiduciary, or its affiliate, is an obligor with respect to five
percent or less of the fair market value of the obligations contained in the
trust; (iii) the plan's investment in certificates of any class does not exceed
twenty-five percent of all of the certificates of that class outstanding at the
time of the acquisition; and (iv) immediately after the acquisition, no more
than twenty-five percent of the assets of the plan with respect to which this
person is a fiduciary are invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
underwriter exemptions do not apply to plans sponsored by the Restricted Group.
In addition to the underwriter exemptions, the Department of Labor has
issued PTCE 83-1 which provides an exemption for particular transactions
involving the sale or exchange of specified residential mortgage pool
pass-through certificates by plans and for transactions in connection with the
servicing and operation of the mortgage loan pool.
Notes
The underwriter exemptions will not be available for securities which
are notes. If the notes are treated as having substantial equity features, the
purchase, holding and resale of the notes could result in a transaction that is
prohibited under ERISA or the Code. However, if the notes are treated as
indebtedness without substantial equity features, the issuer's assets would not
be deemed assets of a plan. The acquisition or holding of the notes by or on
behalf of a plan could nevertheless give rise to a prohibited transaction, if
the acquisition and holding of Notes by or on behalf of a plan were deemed to be
a prohibited loan to a party in interest with respect to this plan. Some
exemptions from the prohibited transaction rules could be applicable to the
purchase and holding of notes by a plan, depending on the type and circumstances
of the plan fiduciary making the decision to acquire the notes. Included among
these exemptions are: PTCE 84-14, regarding specified transactions effected by
"qualified professional asset managers"; PTCE 90-1, regarding specified
transactions entered into by insurance company pooled separate accounts; PTCE
91-38, regarding specified transactions entered into by bank collective
investment funds; PTCE 95-60, regarding specified transactions entered into by
insurance company general accounts; and PTCE 96-23, regarding specified
transactions effected by "in-house asset managers". Each purchaser and each
transferee of a note that is treated as debt for purposes of the plan asset
regulation may be required to represent and warrant that its purchase and
holding of the note will be covered by one of the exemptions listed above or by
another Department of Labor class exemption.
Consultation with Counsel
The prospectus supplement for each series of securities will provide
further information which plans should consider before purchasing the offered
securities. A plan fiduciary considering the purchase of securities should
consult its tax and/or legal advisors regarding whether the assets of the issuer
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other ERISA issues and their potential
consequences. Moreover, each plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification, an
investment in the securities is appropriate for the plan, taking into account
the overall investment policy of the plan and the
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composition of the plan's investment portfolio. The sale of securities to a plan
is in no respect a representation by the sponsor, the issuer or the
underwriter(s) that this investment meets all relevant requirements with respect
to investments by plans generally or any particular plan or that this investment
is appropriate for plans generally or any particular plan.
LEGAL INVESTMENT
If specified in the accompanying prospectus supplement, the securities
of one or more classes offered by this prospectus will constitute "mortgage
related securities" for purposes of SMMEA, so long as they are rated in one of
the two highest rating categories by at least one nationally recognized
statistical rating organization. As "mortgage related securities," the
securities will constitute legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities, including,
but not limited to, state-chartered savings banks, commercial banks, savings and
loan associations and insurance companies, as well as trustees and state
government employee retirement systems, created in accordance with or existing
under the laws of the United States or of any state, including the District of
Columbia and Puerto Rico, whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for the entities. Under
SMMEA, a number of states enacted legislation, on or before the October 3, 1991
cutoff for the enactments, limiting to varying extends the ability of particular
entities, in particular, insurance companies, to invest in "mortgage related
securities," in most cases by requiring the affected investors to rely solely
upon existing state law, and not SMMEA. Accordingly, the investors affected by
the legislation will be authorized to invest in the securities only to the
extent provided in the legislation.
SMMEA also amended the legal investment authority of federally
chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal
with mortgage related securities without limitation as to the percentage of
their assets represented thereby, federal credit unions may invest in mortgage
related securities, and national banks may purchase mortgage related securities
for their own account without regard to the limitations generally applicable to
investment securities set forth in 12 U.S.C. ss. 24 (Seventh), subject in each
case to the regulations as the applicable federal regulatory authority may
prescribe. In this connection, federal credit unions should review National
Credit Union Administration Letter to Credit Unions No. 96, as modified by
Letter No. 108, which includes guidelines to assist federal credit unions in
making investment decisions for mortgage related securities. The National Credit
Union Administration has adopted rules, effective December 2, 1991, which
prohibit federal credit unions from investing in particular mortgage related
securities, including securities such as some series or classes of the
securities, except under limited circumstances.
All depository institutions considering an investment in the securities
should review the "Supervisory Policy Statement on Securities Activities" dated
January 28, 1992 of the Federal Financial Institutions Examination Council. This
Policy Statement, which has been adopted by the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the
Comptroller of the Currency and the Office of Thrift Supervision, effective
February 10, 1992, and by the National Credit Union Administration, with a
number of modifications, effective June 26, 1992, prohibits institutions from
investing in some "high-risk" mortgage securities, including securities such as
some classes of the securities, except under limited circumstances, and sets
forth specified investment practices deemed to be unsuitable for regulated
institutions.
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Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by these authorities before purchasing any securities,
as some series or classes may be deemed unsuitable investments, or may otherwise
be restricted, under the rules, policies or guidelines, in specified instances
irrespective of SMMEA.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
"interest-bearing" or "income-paying" and, with regard to any securities issued
in book-entry form, provisions which may restrict or prohibit investment in
securities which are issued in book-entry form.
Other classes of securities offered by this prospectus will not
constitute "mortgage related securities" under SMMEA because they will not
represent beneficial ownership interests in qualifying mortgage loans under
SMMEA. The appropriate characterization of those securities under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the securities, may be subject to significant
interpretive uncertainties. All investors whose investment authority is subject
to legal restrictions should consult their own legal advisors to determine
whether, and to what extent, the securities will constitute legal investments
for them.
No representation is made as to the proper characterization of the
securities for legal investment or financial institution regulatory purposes, or
as to the ability of particular investors to purchase securities under
applicable legal investment restrictions. The uncertainties described above, and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the securities, may adversely affect
the liquidity of the non-SMMEA securities.
Investors should consult with their own legal advisors in determining
whether and to what extent the securities constitute legal investments for these
investors.
PLAN OF DISTRIBUTION
The issuer may sell the securities offered hereby in series either
directly or through underwriters. The accompanying prospectus supplement or
prospectus supplements for each series will describe the terms of the offering
for that series and will state the public offering or purchase price of each
class of securities of a series, or the method by which the price is to be
determined, and the net proceeds to the issuer from the sale.
If the sale of any securities is made in accordance with an
underwriting agreement under which one or more underwriters agree to act in this
capacity, the securities will be acquired by these underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Firm commitment underwriting and public reoffering by underwriters may
be done through underwriting syndicates or through one or more firms acting
alone. The specific managing underwriter or underwriters, if any, with respect
to the offer and sale of a particular series of securities will be printed on
the cover of the prospectus supplement for a series and the members of the
underwriting syndicate, if any, will be named in the accompanying prospectus
supplement. The prospectus supplement will describe any discounts and
commissions to be allowed or paid by the issuer to the underwriters, any other
items constituting underwriting compensation and any discounts and commissions
to be
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allowed or paid to the dealers. The obligations of the underwriters will be
subject to a number of conditions precedent. Unless otherwise provided in the
accompanying prospectus supplement, the underwriters with respect to a sale of
any class of securities will be obligated to purchase all of the securities if
any are purchased. In accordance with each underwriting agreement, the sponsor
will indemnity the underwriters against specified civil liabilities, including
liabilities under the Securities Act of 1933.
In connection with any offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices f the
securities at levels above those which might otherwise prevail in the open
market. This stabilizing, if commenced by the underwriters, may be discontinued
at any time.
If any securities are offered other than through underwriters acting
under underwriting agreements, the accompanying prospectus supplement or
prospectus supplements will contain information regarding the terms of the
offering and any agreements to be entered into in connection with the offering.
Purchasers of securities, including dealers, may, depending on the
facts and circumstances of the purchases, be deemed to be "underwriters" within
the meaning of the Securities Act, in connection with reoffers and sales by them
of securities. securityholders should consult with their legal advisors in this
regard prior to any reoffer and sale.
If specified in the prospectus supplement relating to a series of
securities, the sponsor, any affiliate thereof or any other person or persons
specified in the prospectus supplement may purchase some or all of one or more
classes of securities of a series from the underwriter or underwriters or any
other person or persons specified in the accompanying prospectus supplement. The
purchaser may thereafter from time to time offer and sell, by this prospectus
and the accompanying prospectus supplement, some or all of the securities so
purchased, directly, through one or more underwriters to be designated at the
time of the offering of the securities, through dealers acting as agent and/or
principal as in any other manner as may be specified in the accompanying
prospectus supplement. The offering may be restricted in the manner specified in
the accompanying prospectus supplement. These transactions may be effected at
market prices prevailing at the time of sale, at negotiated prices or at fixed
prices. Any underwriters and dealers participating in the purchaser's offering
of the securities may receive compensation in the form of underwriting discounts
or commissions from the purchaser and the dealers may receive commissions from
the investors purchasing the securities for whom they may act as agent, which
discounts or commissions will not exceed those customary in those types of
transactions involved. Any dealer that participates in the distribution of the
securities may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, and any commissions and discounts received by the dealer
and any profit on the resale of the securities by the dealer might be deemed to
be underwriting discounts and commissions under the Securities Act of 1933.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated in this prospectus by reference all documents
and reports filed or caused to be filed by the sponsor under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the date of
this prospectus and prior to the termination of any offering of securities
evidencing interests in this prospectus, including the sponsor's latest annual
report on Form 10-K. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for all purposes of this prospectus to the extent that a
statement contained in this prospectus, in the accompanying prospectus
supplement or in any other subsequently filed document which also is
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or is deemed to be incorporated by reference modifies or replaces the statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
The sponsor will provide, or cause to be provided, without charge to
each person to whom this prospectus is delivered in connection with the offering
of one or more classes of a series, a list identifying all filings with respect
to the sponsor under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act, since the latest fiscal year covered by its annual report on Form
10-K, and a copy of any or all documents or reports incorporated in this
prospectus by reference, in each case to the extent the documents or reports
relate to one or more of classes of a series, other than the exhibits to the
documents, unless the exhibits are specifically incorporated by reference in the
documents. Requests to the sponsor should be directed to: Prudential Securities
Secured Financing Corporation, One New York Plaza, 14th Floor, New York, New
York 10292, Attention: Managing Director-Asset-Backed Finance Group, (212)
778-1000.
ADDITIONAL INFORMATION
The sponsor has filed a registration statement under the Securities Act
of 1933 with the Securities and Exchange Commission with respect to the
securities offered by this prospectus. This prospectus contains, and the
prospectus supplement for each series of securities will contain, a summary of
the material terms of the documents referred to in this prospectus and in the
accompanying prospectus, but neither contains nor will contain all of the
information included in the registration statement of which this prospectus is a
part. For further information, you should read the registration statement and
any amendments thereof and exhibits thereto. You may obtain a copy of the
registration statement from the Public Reference Room of the Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment
of the prescribed charges, or you may examine the registration statement free of
charge at the Securities and Exchange Commission's offices, 450 Fifth Street,
N.W., Washington, D.C. 20549 or at the regional offices of the Securities and
Exchange Commission located at Room 1400, 75 Park Place, New York, New York
10007 and Northwestern Atrium Center, 500 West Madison Street, Suite 400,
Chicago, Illinois 60661-2511. Information about the operation of the Public
Reference Room may be obtained by contracting the Securities and Exchange
Commission at 1-800-SEC-0330. In addition, the Securities and Exchange
Commission maintains a site on the World Wide Web containing reports, proxy and
information statements and other items. The address of the site is
http://www.sec.gov.
Each issuer will be required to file particular reports with the
Securities and Exchange Commission in accordance with the requirements of the
Securities Exchange Act of 1934. Each issuer will suspend filing the reports if
and when the reports are no longer required under the Securities Exchange Act of
1934.
In connection with each distribution, and annually, the sponsor will
cause the servicer to furnish securityholders with statements containing
information with respect to the assets of the issuer, as described in this
prospectus and in the prospectus supplement for a series. See "Servicing of the
Loans--Reports to Securityholders." The servicer for each series will furnish
periodic statements setting forth specified information to the trustee for a
series and, in addition, annually will furnish the trustee with a statement from
a firm of independent public accounts with respect to the examination of
specified documents and records relating to the servicing of the mortgage loans
and/or manufactured housing contracts held by the issuer. See "Servicing of the
Loans--Evidence as to Compliance" in this prospectus. Copies of the monthly and
annual statements provided by the servicer to the trustee will be furnished to
securityholders of the series upon request addressed to Prudential Securities
Secured Financing Corporation, One New York
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Plaza, 14th Floor, New York, New York 10292, Attention: Managing
Director-Asset-Backed Finance Group, (212) 778-1000.
Copies of FHLMC's most recent Offering Circular for FHLMC securities,
FHLMCs Information Statement and the most recent Supplement to the Information
Statement and any quarterly report made available by FHLMC can be obtained by
writing or calling the Investor Inquiry Department at FHLMC at 8200 Jones Branch
Drive, McLean Virginia 22102. Outside Washington, D.C. metropolitan area,
telephone 800-336-FMPC; within Washington, D.C. metropolitan area, telephone
703-759-8160. The sponsor has not and will not participate in the preparation of
FHLMC's Offering Circulars, Information Statements or Supplements.
Copies of FNMA's most recent prospectus for FNMA securities and FNMA's
annual report and quarterly financial statements as well as other financial
information are available from the Senior Vice President for Investor Relations
of FNMA, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (202-752-7115). The
sponsor has not and will not participate in the preparation of FNMA's
prospectuses.
You should rely only on the information contained in this prospectus
and in the accompanying prospectus supplement. We have not authorized anyone to
provide any information that is different. This prospectus and any accompanying
prospectus supplement do not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities offered hereby and thereby
nor an offer of the securities to any person in any state or other jurisdiction
in which the offer would be unlawful. The information included in this
prospectus speaks as of the date hereof. You should not assume that it will
remain correct after this date.
LEGAL MATTERS
A number of legal matters and tax matters will be passed upon for the
sponsor by Dewey Ballantine LLP, New York, New York and/or any other counsel as
will be named on the accompanying prospectus supplement.
RATINGS
At the date of issuance of each series of securities, the securities
offered hereby will be rated in one of the four highest categories by at least
one nationally recognized statistical rating agency. These ratings address, in
the opinion of the rating agency, the likelihood that the issuer will be able to
make timely payment of all amounts due on the series of securities in accordance
with their terms. The ratings will neither address any prepayment or yield
considerations applicable to any securities nor constitute a recommendation to
buy, sell or hold any securities and may be subject to revision or withdrawal at
any time by the assigning rating agency. Each securities rating should be
evaluated independently of any other rating.
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GLOSSARY
The following terms have the meanings given below when used in this
prospectus or the accompanying prospectus supplement.
Accrual Securities means one or more classes of securities as to which
a portion of the accrued interest will not be distributed but rather will be
added to the principal balance of the security, or notional principal balance in
the case of Accrual Securities which are also Strip Securities, on each
distribution date.
CERCLA means the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
Code means the Internal Revenue Code of 1986.
Collection Account means a segregated trust account or accounts for a
series, established and maintained with the trustee, for the benefit of the
securityholders, for the deposit of collections on the underlying loans.
Credit Enhancer means the provider of any credit enhancement for a
series, including bond insurers, guarantors and letter of credit banks.
Cut-Off Date means the date the mortgage loans and/or contracts were
pledged to the trustee of the securities.
Debt Securities means securities that are intended to be treated for
federal income tax purposes as indebtedness secured by the underlying loans held
by the issuer.
Deleted Loan means a loan which breaches the representations and
warranties made by the originator in the Loan Sale Agreement and which must be
repurchased or substituted for by the originator.
DTC means The Depository Trust Company, a limited purpose trust company
organized under the laws of the State of New York.
ERISA means the Employee Retirement Income Security Act of 1974.
Equity Participation Securities means any class of securities or
interests in the issuer which represent the right to receive the proceeds of the
trust fund after all required payments have been made to the holders of the
securities and following any required deposits to any reserve fund that may be
established for the benefit of the securities, including FASIT Ownership
Securities and REMIC Residual Securities.
FASIT means a "financial asset securitization investment trust" under
the Code.
FASIT Ownership Securities means securities of the one separate class
of a series which has been designated as the "ownership interest" of the FASIT
Trust in the accompanying prospectus supplement.
FASIT Regular Securities means securities of each class of a series
which has been designated as the "regular interests" or "high-yield regular
interests" of the FASIT Trust in the accompanying prospectus supplement.
FASIT Securities means securities representing interests in a trust, or
a segregated pool or pools of assets therein, which the issuer will covenant to
elect to have treated as a FASIT under Sections 860H through 860L of the Code.
FASIT Trust means an issuer for which a FASIT election is made.
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FIRREA means the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
Fixed Retained Yield means, with respect to any loan, the portion, if
any, of interest, at the loan interest rate, that is retained by the issuer or
other owner thereof and not included in the trust fund.
Garn Act means the Garn-St Germain Depository Institutions Act of 1982.
Grantor Trust Fractional Interest Security means a Grantor Trust
Security representing an undivided equitable ownership interest in the principal
of the loans constituting the grantor trust, together with interest thereon at a
pass-through rate.
Grantor Trust Securities means securities representing interests in a
grantor trust which the issuer will covenant not to elect to have treated as a
REMIC or a FASIT.
Grantor Trust Strip Security means a Grantor Trust Security
representing ownership of all or a portion of the difference between interest
paid on the loans constituting the grantor trust and interest paid to the
beneficial owners of Grantor Trust Fractional Interest Securities issued with
respect to the grantor trust.
Insurance Proceeds means all proceeds received by the servicer under
any title, hazard or other insurance policy covering any loan, other than
proceeds to be applied to the restoration or repair of the mortgaged property or
manufactured home or released to the mortgagor or obligor in accordance with the
Servicing Agreement.
Interest Rate means, with respect to each class of securities, the rate
at which interest accrues on the securities, which may be fixed rate, adjustable
rate, or rate based upon the underlying loans, as specified in the accompanying
prospectus supplement.
Issuing Agreement means, means (a) with respect to each series of
Grantor Trust Securities, REMIC Securities and FASIT Securities, a pooling and
servicing agreement, (b) with respect to each series of Debt Securities, an
indenture, and (c) with respect to each series of Partnership Interests, a trust
agreement or other similar agreement.
Liquidation Proceeds means all amounts received by the servicer in
connection with the liquidation of defaulted loans or property acquired in
respect thereof, whether through foreclosure sale or otherwise, including
payments in connection with defaulted loans received from the mortgagor or
obligor other than amounts required to be paid to the mortgagor or obligor under
the terms of the applicable loan or otherwise in accordance with law.
Loan Sale Agreement means the agreement or agreement under which the
issuer obtained the loans from the originator, either directly or through a
special-purpose affiliate or the originator.
Loan-to-Value Ratio or LTV means the ratio, expressed as a percentage,
of the principal amount of the loan outstanding at the origination of the loan
divided by the fair market value of the mortgaged property or manufactured home,
as applicable.
Net Insurance Proceeds means Insurance proceeds, less expenses incurred
in connection with collecting on insurance policies, less any unreimbursed
advances with respect to the loan, less, in the discretion of the servicer, but
only to the extent of the amount permitted to be withdrawn from the Collection
Account, any unpaid servicing fees on the loan.
Net Liquidation Proceeds means Liquidation Proceeds, less expenses
incurred in connection with the liquidation, less other reimbursed servicing
costs associated with the liquidation, less specified amounts applied to the
restoration, preservation or repair of the mortgaged property or manufactured
home, less any unreimbursed advances with respect to the
91
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loan and, in the discretion of the servicer, but only to the extent of the
amount permitted to be withdrawn from the Collection Account, less any unpaid
servicing fees on the loans or the mortgaged properties or manufactured homes.
Net Loan Rate means, with respect to each loan, the loan interest rate,
less the Fixed Retained Yield, if any, less any servicing fee applicable to the
loan.
Partnership Interests means securities representing interests in a
trust that is intended to be treated as a partnership under the Code.
PCTE means a Prohibited Transaction Class Exemption issued by the
Department of Labor.
Pre-Funding Account means a segregated trust account or accounts
established and maintained with the trustee, for the benefit of the
securityholders, for the deposit of funds to be used by the issuer to purchase
additional loans during the Pre-Funding Period.
Pre-Funding Period means the period stated in the accompanying
prospectus supplement during which additional loans may be purchased by the
issuer with the funds on deposit in the Pre-Funding Account.
Premium Security means a security that is purchased at a cost greater
than its remaining stated redemption price at maturity.
Prepayment Assumption means the assumption used to calculate the rate
at which the loans prepay, as specified in the accompanying prospectus
supplement.
REMIC means a "real estate mortgage investment conduit" under the Code.
REMIC Regular Securities means the securities of each class of a series
which have been designated as "regular interests" of the REMIC Trust in the
accompanying prospectus supplement.
REMIC Regulations means the regulations issued by the Treasury
Department on December 23, 1992 with respect to REMICs.
REMIC Residual Securities means the securities of each class of a
series which have been designated as "residual interests" of the REMIC Trust in
the accompanying prospectus supplement.
REMIC Securities means securities representing interests in a trust, or
a segregated pool or pools of assets therein, which the issuer will covenant to
elect to have treated as a REMIC under Sections 860A through 860G of the Code.
REMIC Trust means an issuer for which a REMIC election is made.
Restricted Group means the sponsor, the issuer, the underwriter(s), the
trustee, the servicer, any obligor with respect to loans included in the trust
fund constituting more than five percent of the aggregate unamortized principal
balance of the assets in the trust fund, or any affiliate of these parties.
Servicing Agreement means, with respect to a series of securities, the
agreement concerning the servicing of the loans, which may be a servicing
agreement, pooling and servicing agreement, sale and servicing agreement, or
other similar agreement.
Settlement Date means, unless otherwise stated in the accompanying
prospectus supplement, the date the securities are first sold to the public.
SMMEA means the Secondary Mortgage Market Enhancement Act of 1984.
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Startup Day means, unless otherwise stated in the accompanying
prospectus supplement, the date of the initial issuance of the FASIT Securities.
Strip Securities means securities entitled to (i) principal
distributions, with disproportionate, nominal or no interest distributions, or
(ii) interest distributions, with disproportionate, nominal or no principal
distributions.
U.S. Person means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income, or
a trust if a court within the United States can exercise primary supervision
over its administration and at least one United States person has the authority
to control all substantial decisions of the trust.
93
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
issuance and distribution of the Securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates,
except the SEC registration fee.
SEC registration fee..................................... $ 278
Legal fees and expenses.................................. 200,000
Accounting fees and expenses............................. 120,000
Blue Sky fees and expenses............................... 60,000
Rating Agency fees....................................... 100,000
Owner Trustee fees and expenses.......................... 60,000
Indenture Trustee fees and expenses...................... 120,000
Credit Enhancer ......................................... 200,000
Printing and engraving................................... 150,000
Miscellaneous............................................ 200,000
------------
Total............................................ $ 1,210,278
------------
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer or
director acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, for criminal proceedings,
had no reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer of
director actually and reasonably incurred.
The agreements which the Registrant will enter into for each series of
Securities will provide that the Registrant and any director, officer, employee
or agent of the Registrant will be entitled to indemnification by the Trust Fund
and will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to such agreements or the Securities,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of his or its duties
thereunder or by reason of reckless disregard of his or its obligations and
duties thereunder.
Section 8 of the form of underwriting agreements filed as a part of
Exhibit 1 to this Registration Statement provides for indemnification of
directors and officers who sign the Registration Statement and controlling
persons of the Registrant by the underwriters, and for indemnification of each
underwriter and its controlling person by the Registrant, against certain
liabilities.
II-1
<PAGE>
Item 16. Exhibits.
Exhibit
1.1** Form of Underwriting Agreement.
4.1** Form of Pooling and Servicing Agreement, including form of
Certificates.
4.2** Form of Indenture, including form of Notes and certain other related
agreements as Exhibits thereto.
4.3** Form of Trust Agreement.
4.4** Form of Securitization Sponsorship Agreement.
5.1** Opinion of Dewey Ballantine LLP regarding legality.
8.1** Opinion of Dewey Ballantine LLP regarding tax matters.
10.1** Form of Loan Sale Agreement.
10.2** Form of Sale and Servicing Agreement.
23.1** Consent of Dewey Ballantine LLP (included as part of Exhibits 5.1 and
8.1).
24.1* Power of Attorney (included as part of the signature page to Form S-3).
25.1** Statement of Eligibility and Qualification of the Indenture Trustee
(Form T-1).
99.1** Form of Prospectus Supplement -- Notes.
99.2** Form of Prospectus Supplement -- Certificates.
- -------------------
* Previously filed.
** Filed herewith.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(at) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which is registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section
II-2
<PAGE>
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) That,
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act in accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Trust Indenture Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No.1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York on the 20th day of May, 1999.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
By /s/ Vincent T. Pica, II
---------------------------------------
Vincent T. Pica, II
President and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Vincent T. Pica, II
- --------------------------------- President (Principal May 20, 1998
Vincent T. Pica, II Executive Officer)
Director
*
- --------------------------------- Director May 20, 1998
P. Carter Rise
*
- --------------------------------- Director May 20, 1998
Martin Pfinsgraff
*
- --------------------------------- Director May 20, 1998
Leland B. Paton
*
- --------------------------------- Chief Financial Officer May 20, 1998
William J. Horan (Principal Financial
Officer and Principal
Accounting Officer)
* By: /s/ Vincent T. Pica, II May 20, 1998
----------------------------------
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description of Document
- ------- -----------------------
1.1** Form of Underwriting Agreement.
4.1** Form of Pooling and Servicing Agreement, including form of
Certificates.
4.2** Form of Indenture, including form of Notes and certain other related
agreements as Exhibits thereto.
4.3** Form of Trust Agreement.
4.4** Form of Securitization Sponsorship Agreement.
5.1** Opinion of Dewey Ballantine LLP regarding legality.
8.1** Opinion of Dewey Ballantine LLP regarding tax matters.
10.1** Form of Loan Sale Agreement.
10.2** Form of Sale and Servicing Agreement.
23.1** Consent of Dewey Ballantine LLP (included as part of Exhibits 5.1 and
8.1).
24.1* Power of Attorney (included as part of the signature page to Form S-3)
25.1** Statement of Eligibility and Qualification of the Indenture Trustee
(Form T-1).
99.1** Form of Prospectus Supplement-- Notes.
99.2** Form of Prospectus Supplement-- Certificates.
- -------------------
* Previously filed.
** Filed herewith.
EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
--------------------------
MORTGAGE LOAN BACKED [NOTES][CERTIFICATES]
SERIES _______
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
[Underwriter]
[Date]
Ladies and Gentlemen:
___________________________________ (the "Depositor") and
Prudential Securities Secured Financing Corporation (the "Sponsor") proposes,
subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated _______________ (the "Standard
Provisions"), between the Depositor, the Sponsor and
_____________________________, to issue and sell to you (the "Underwriter") the
Securities specified in Schedule I hereto (the "Offered Securities"). The
Depositor and the Sponsor agree 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 Underwriting Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Underwriting Agreement. Each reference to the "Representative"
herein and in the provisions of the Standard Provisions so incorporated by
reference shall be deemed to refer to you. Unless otherwise defined herein,
terms defined in the Standard Provisions are used herein as therein defined. The
Prospectus Supplement and the accompanying Prospectus relating to the Offered
Securities (together, the "Prospectus") are incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriter, and the Underwriter agrees to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriter and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
[Remainder of Page Intentionally Left Blank]
<PAGE>
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.
Yours truly,
___________________________, as Depositor
By: _____________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Sponsor
By: _____________________________________
Name:
Title:
Accepted as of the date hereof:
______________________________,
as Underwriter
By: __________________________
Name:
Title:
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Title of Offered Securities: ______________________, Mortgage Backed
[Notes][Certificates], Series _________,
Class A-1 and Class A-2.
Terms of Offered Securities: The Offered Securities shall have the terms
set forth in the Prospectus and shall
conform in all material respects to the
descriptions thereof contained therein, and
shall be issued pursuant to an [Indenture,
to be dated as of ______________, between
___________, as issuer, and _______________,
as indenture trustee][Pooling and Servicing
Agreement].
Purchase Price: The purchase price for the Offered
Securities shall be ______% and _____% of
the aggregate [note] [certificate] principal
balance of the Class A-1 [Notes]
[Certificates] and Class A-2
[Notes][Certificates], respectively, as of
the Closing Date, plus accrued interest at
the rate of _____% per annum and _______%
per annum, on the aggregate [note]
[certificate] principal balance of the Class
A-1 [Notes][Certificates] and Class A-2
[Notes] [Certificates], respectively, from,
and including _______ to, but not including
the Closing Date.
Specified funds for payment of Federal Funds (immediately available funds).
Purchase Price:
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about _______ at 10:00 A.M. eastern
standard time or at such other time as the
Depositor and the Underwriter shall agree.
Closing Location: ______________________
Name and address of Representative: Designated Representative: _______________
Address for Notices, etc.: _____________________
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
From time to time, ______________________, a __________ corporation
(the "Depositor") and Prudential Securities Secured Financing Corporation, a
Delaware corporation (the "Sponsor") 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. These Standard Provisions 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 these Standard Provisions
and each Underwriting Agreement shall be several and not joint. Unless otherwise
defined herein, the terms defined in the Underwriting Agreement are used herein
as defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell pursuant to
the applicable Underwriting Agreement to the several Underwriters named therein
home equity loan backed [notes][certificates] (the "Securities") representing
indebtedness secured primarily by the property of a trust which consists of two
pools of home equity loans (the "Mortgage Loans") and certain related property.
The Securities will be issued pursuant to an Indenture (the "Indenture") by and
between ______________________, as issuer (the "Issuer"), and
___________________, as indenture trustee (the "Indenture Trustee"). The
Mortgage Loans will be purchased by the Depositor pursuant to a Loan Sale
Agreement (the "Loan Sale Agreement") by and among the Depositor,
__________________________ and _____________________ (together, the
"Originators"). The Mortgage Loans will be sold by the Depositor to the Issuer
pursuant to the terms of a Sale and Servicing Agreement (the "Sale and Servicing
Agreement") among the Issuer, the Depositor, the Indenture Trustee,
___________________, as collateral agent (the "Collateral Agent"), and
___________________, as servicer (in such capacity, the "Servicer").
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 Indenture identified in such Underwriting Agreement. The Securities which
are the subject of any particular Underwriting Agreement into which these
Standard Provisions are incorporated are herein referred to as the "Offered
Securities."
<PAGE>
The Sponsor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. __________),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "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. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities together with the Base Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities. Unless
otherwise specified in the Underwriting Agreement, payment for the Offered
Securities shall be made by certified or official bank check or checks payable
to the order of the Depositor in immediately available or next day funds, at the
time and place set forth in the Underwriting Agreement, upon delivery to the
Representative for the respective accounts of the several Underwriters of the
Offered Securities registered in definitive form and in such names and in such
denominations as the Representative shall request in writing not less than five
full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Offered Securities are herein referred
to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Issuer, 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 Sponsor 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
2
<PAGE>
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
or the Sponsor; (v) there are no material actions, suits or
proceedings pending before any court or governmental agency, authority
or body or threatened, affecting the Depositor, the Sponsor or the
transactions contemplated by the Underwriting Agreement; (vi) neither
the Depositor nor the Sponsor is 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 or the Sponsor;
and (vii) the Representative shall have received, on the Closing Date
a certificate, dated the Closing Date and signed by an executive
officer of the Depositor and the Sponsor, 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
State or federal authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable
to offer or sell the Offered Securities; or (iii) if at or prior to
the Closing Date, a general moratorium on commercial banking
activities in the State of New York shall have been declared by either
federal or New York State authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive
officer of the Depositor to the effect that attached thereto is a true
and correct copy of the letter from each nationally recognized
statistical rating organization (as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act) that
rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization
and that each such rating has not been rescinded since the date of the
applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of __________________, special counsel for the
Depositor, dated the Closing Date, in form and substance satisfactory
to the Representative and containing opinions substantially to the
effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, the Depositor and the
Originators, dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters
and containing opinions substantially to the effect set forth in
Exhibit B hereto.
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(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Indenture 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.
(h) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Issuer and _____________________,
as owner trustee (the "Owner 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 D hereto.
(i) The Representative shall have received, on the Closing
Date, an opinion of _____________________, special counsel for the
Sponsor, dated the Closing Date, with respect to the incorporation of
the Sponsor, the validity of the Offered Securities, the Registration
Statement, the Prospectus and other related matters as the
Underwriters may reasonably require, and the Sponsor shall have
furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(j) 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.
(k) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of
an executive officer of the Depositor satisfactory to the
Representative as to the accuracy of the representations and
warranties of the Depositor herein at and as of such Closing Date as
if made as of such date, as to the performance by the Depositor of all
of its obligations hereunder to be performed at or prior to such
Closing Date, and as to such other matters as the Representative may
reasonably request;
(l) 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;
(m) The [Note] [Certificate] Insurance Policy 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.
(n) The Representative shall have received, on the Closing
Date, an opinion of counsel to _______________________ (the "[Note]
[Certificate] Insurer"), dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters
and containing opinions as to such matters as the Representative may
reasonably request.
(o) 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
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downgrading or (ii) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the
[Note] [Certificate] Insurer's claims paying ability by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the 1933 Act.
(p) 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
______________, of the [Note] [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.
(q) The Representative shall have been furnished such
further information, certificates, documents and opinions as the
Representative may reasonably request.
5. Covenants of the Depositor and the Sponsor. In further
consideration of the agreements of the Underwriters contained in the
Underwriting Agreement, the Depositor and the Sponsor, as applicable, covenant
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 Sponsor 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 Sponsor will
use its best efforts to cause any amendment to the Registration
Statement to become effective as promptly as possible. During the time
when a Prospectus is required to be delivered under the 1933 Act, the
Depositor will comply so far as it is able with all requirements
imposed upon it by the 1933 Act and the rules and regulations
thereunder to the extent necessary to permit the continuance of sales
or of dealings in the Offered Securities in accordance with the
provisions hereof and of the Prospectus, and the Depositor will
prepare and file with the Commission, promptly upon request by the
Representative, any amendments to the Registration Statement or
supplements to the Prospectus which may be necessary or advisable in
connection with the distribution of the Offered Securities by the
Underwriters, and will use its best efforts to cause the same to
become effective as promptly as possible. The Sponsor 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 Sponsor will
advise the Representative, promptly after it receives
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<PAGE>
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 Sponsor 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 Sponsor will file, on a
timely and complete basis, all documents that are required to be filed
by the Sponsor 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 Sponsor 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 Sponsor'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 Sponsor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including, at the option of the Depositor, Rule 158).
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<PAGE>
(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 Sponsor 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
Indenture Trustee under the applicable Sale and Servicing Agreement,
(ii) the annual independent public accountants' servicing report
furnished to the Indenture Trustee pursuant to the applicable Sale and
Servicing Agreement, (iii) each report regarding the Offered
Securities mailed to the holders of such Securities, and (iv) from
time to time, such other information concerning such Securities as the
Representative may reasonably request.
6. Representations and Warranties of the Depositor and the Sponsor.
The Depositor and the Sponsor, as applicable, represent and warrant to, and
agree 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 base
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 Sponsor and the Registration Statement.
There are no contracts or documents of the Sponsor 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 base Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules
and regulations thereunder, and did not include any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; on the date of the Underwriting Agreement and as of the
Closing Date, the Registration Statement and the Prospectus conform,
and as amended or supplemented, if applicable, will conform in all
material respects to the requirements of the 1933 Act and the rules
and regulations thereunder, and on the date of the Underwriting
Agreement and as of the Closing Date, neither of such documents
includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading,
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<PAGE>
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 __________.
(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 these Standard
Provisions, the Underwriting Agreement, the Loan Sale Agreement and
the Sale and Servicing 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, 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 Indenture, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally,
and to general principles of equity (regardless of whether the
entitlement to such benefits is considered in a proceeding in equity
or at law), and will conform in substance to the description thereof
contained in the Registration Statement and the Prospectus, and will
in all material respects be in the form contemplated by the Indenture.
(g) The execution and delivery by the Depositor of these
Standard Provisions, the Underwriting Agreement, the Loan Sale
Agreement and the Sale and Servicing Agreement are within the
corporate power of the Depositor and none of the execution and
delivery by the Depositor of these Standard Provisions, the
Underwriting Agreement, the Loan Sale Agreement and the Sale and
Servicing Agreement, the consummation by the Depositor of the
transactions therein contemplated, or the compliance by the Depositor
with the provisions thereof, will conflict with or result in a breach
of, or constitute a default under,
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<PAGE>
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 at the Closing
Date the Loan Sale Agreement and the Sale and Servicing Agreement will
have been, duly authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement,
the Loan Sale Agreement and the Sale 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, the Loan Sale Agreement or the Sale and
Servicing Agreement, except such as have been obtained and except such
as may be required under the 1933 Act, the rules and regulations
thereunder, or state securities or "Blue Sky" laws, in connection with
the purchase and distribution of the Offered Securities by the
Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to lease, own or license, as the
case may be, and to operate, its properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would
materially adversely affect the conduct of the business, results of
operations, net worth or condition (financial or otherwise) of the
Depositor.
(l) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Depositor and, to
the best of the Depositor's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
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(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 Subsequent Transfer Date, as
the case may be, each of the Mortgage Loans which is a subject of the
Loan Sale Agreement and the Sale 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
Transfer Date, as the case may be, the representations and warranties
made by the Depositor both the Loan Sale Agreement and the Sale and
Servicing Agreement will be true and correct as of such date.
(o) At the time of execution and delivery of the Loan Sale
Agreement and the Sale 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 Issuer
pursuant to the Sale 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 (other than the Issuer and the Indenture Trustee) any of
its right, title or interest in such Mortgage Loans or in such Loan
Sale Agreement or such Sale 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 Issuer and
to transfer the Offered Securities to each of the Underwriters, and
upon execution and delivery to the Issuer of the Sale 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 Issuer 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.
(p) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, these Standard Provisions, the Indenture, the
Sale and Servicing Agreement and the Offered Securities have been or
will be paid at or prior to the Closing Date.
7. Indemnification and Contribution.
(a) The Depositor agrees to indemnify and hold harmless each
Underwriter (including ______________________ 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,
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<PAGE>
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 Servicer. This indemnity agreement will be in addition to any liability
which the Depositor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Depositor,
each of the Depositor's directors, each of the Depositor's officers who signed
the Registration Statement and each person, if any, who controls the Depositor,
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities to which the Depositor, or any such director, officer or controlling
person may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or any other
prospectus relating to the Offered Securities, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statements or
alleged untrue statements 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) 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
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<PAGE>
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 underwriting fee 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.
(d) 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 [Note] [Certificate] Insurer, the Servicer, the
Originators, the Issuer, the Depositor and the Underwriter shall not be
construed as limiting the Depositor's right to enforce its rights under Section
7 of these Standard Provisions. The parties further agree that, as between the
parties hereto, to the extent that the provisions of Section 5 of the
Indemnification Agreement conflict with Section 7 hereof, the provisions of
Section 7 hereof shall govern.
8. Survival of Certain Representations and Obligations. The respective
representations, warranties, agreements, covenants, indemnities and other
statements of the Depositor, its officers and the several Underwriters set forth
in, or made pursuant to, the Underwriting Agreement shall remain in full force
and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. Termination.
(a) The Underwriting Agreement may be terminated by the Depositor by
notice to the Representative in the event that a stop order suspending the
effectiveness of the Registration Statement shall have been issued or
proceedings for that purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the Representative
by notice to the Depositor in the event that the Depositor shall have failed,
refused or been unable to perform all obligations and satisfy all conditions to
be performed or satisfied hereunder by the Depositor at or prior to the Closing
Date.
(c) Termination of the Underwriting Agreement pursuant to this Section
9 shall be without liability of any party to any other party other than as
provided in Sections 7 and 11 hereof.
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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 (10%)
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 (10%) of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. Expenses. The Depositor agrees with the several Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement
is terminated, the Depositor will pay all fees and expenses incident
to the performance of its obligations under the Underwriting
Agreement, including, but not limited to, (i) the Commission's
registration fee, (ii) the expenses of printing and distributing the
Underwriting Agreement and any related underwriting documents, the
Registration Statement, any preliminary Prospectus, the Prospectus,
any amendments or supplements to the Registration Statement or the
Prospectus, and any Blue Sky memorandum or legal investment survey and
any supplements thereto, (iii) fees and expenses of rating agencies,
accountants and counsel for the Depositor, (iv) the expenses referred
to in Section 5(e) hereof, and (v) all miscellaneous expenses referred
to in Item 30 of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing 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.
13
<PAGE>
Except as otherwise provided in this Section 11, the Underwriters
agree to pay all of their expenses in connection with investigating, preparing
to market and marketing the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting Agreement, including
the fees and expenses of their counsel and any advertising expenses incurred by
them in making offers and sales of the Offered Securities.
12. Notices. All communications under the Underwriting Agreement shall
be in writing and, if sent to the Underwriters, shall be mailed, delivered or
telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
_____________________, Attention: _________________ and, if sent to the Sponsor,
shall be mailed, delivered or telegraphed and confirmed to Prudential Securities
Secured Financing Corporation, One New York Plaza, New York, New York 10292,
Attention: Managing Director-Asset Backed Finance Group; provided, however, that
any notice to any Underwriter pursuant to the Underwriting Agreement shall be
mailed, delivered or telegraphed and confirmed to such Underwriter at the
address furnished by it.
13. Representative of Underwriters. Any 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.
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. These Standard Provisions and each Underwriting Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. These Standard Provisions and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
14
<PAGE>
[Signature Page Follows]
15
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Sponsor
By: ______________________________________
Name:
Title:
____________________________, as Depositor
By: ______________________________________
Name:
Title:
Accepted as of the date hereof:
_______________________________
as Underwriter
By: ___________________________
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of _____________,
special counsel for the Depositor
---------------------------------
(1) Each of the Loan Sale Agreement, the Sale and Servicing Agreement,
the Underwriting Agreement and the Standard Provisions (collectively, with the
Indenture and the Indemnification Agreement, the "Documents") constitutes the
valid, legal and binding agreement of the Depositor, and is enforceable against
the Depositor in accordance with its terms.
(2) The [Notes][Certificates], assuming the due execution by the
Issuer and due authentication by the Indenture Trustee and payment therefor
pursuant to the Underwriting Agreement, are validly issued and outstanding and
are entitled to the benefits of the Indenture.
(3) No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of New York for the execution, delivery
and performance of the Documents or the offer, issuance, sale or delivery of the
[Notes][Certificates] or the consummation of any other transaction contemplated
thereby by the Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not called
upon to express any opinion), at the time the Registration Statement became
effective, as of the date of execution of the Underwriting Agreement and as of
the date hereof comply as to form in all material respects with the requirements
of the 1933 Act and the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder, and we do not know of any amendment to
the Registration Statement required to be filed, or of any contracts, indentures
or other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration Statement
or the Prospectus, which has not been filed or described as required.
(5) The registration of the Trust Estate created by the Indenture
under the Investment Company Act of 1940 is not required.
(6) The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE [NOTES][CERTIFICATES]," to the extent such
statements purport to summarize certain provisions of the [Notes][Certificates]
or of the Indenture, or of the Sale and Servicing Agreement or of the Loan Sale
Agreement, are fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Servicer
----------------------
(1) The Servicer has been duly organized and is validly existing as a
corporation in good standing under the federal laws of the United States and is
duly qualified to transact business in the State of ____________.
(2) The Servicer has the requisite power and authority to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
conditions of, each of the Documents to which it is a party.
(3) Each of the Documents to which the Servicer is a party have been
duly and validly authorized, executed and delivered by the Servicer, all
requisite corporate action having been taken with respect thereto, and each
constitutes the valid, legal and binding agreement of the Servicer, and are
enforceable against the Servicer in accordance with their respective terms.
(4) Neither the transfer of the Mortgage Loans to the Depositor, nor
the execution, delivery or performance by the Servicer of the each of the
Documents to which it is a party (A) conflicts or will conflict with or results
or will result in a breach of, or constitutes or will constitute a default under
or violates or will violate, (i) any term or provision of the charter or by-laws
of the Servicer; (ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Servicer or any of its subsidiaries is a
party or is bound; or (iii) any order, judgment, writ, injunction or decree of
any court or governmental agency or body or other tribunal having jurisdiction
over the Servicer or any of its properties; or (B) results in, or will result in
the creation or imposition of any lien, charge or encumbrance upon the Trust
Estate or upon the [Notes][Certificates], except as otherwise contemplated by
the Indenture.
(5) The endorsement and delivery of each Mortgage Note, and the
preparation, delivery and recording of an Assignment of Mortgage with respect to
each Mortgage is sufficient fully to transfer to the Depositor and its assignees
all right, title and interest of the Servicer in the Mortgage Note and Mortgage,
as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of, registration or
qualification of or with or notice to, any court, governmental agency or body or
other tribunal is required under the laws of the State of New York or the State
of _________________, for the execution, delivery and performance of each of the
Documents to which it is a party or the consummation of any other transaction
contemplated thereby by the Servicer, except such which have been obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Servicer, would individually or in the
aggregate have a material adverse effect on (i) the consolidated
14
<PAGE>
financial position, business prospects, stockholders' equity or results of
operations of the Servicer; (ii) the Servicer's ability to perform its
obligations under, or the validity or enforceability of, each of the Documents
to which it is a party; (iii) any Mortgage Note or Mortgaged Property, or the
title of any Mortgagor to any Mortgaged Property; or (B) which have not
otherwise been disclosed in the Registration Statement and to the best of such
counsel's knowledge, no such proceedings or investigations are threatened or
contemplated by governmental authorities or threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
the Indenture Trustee
----------------------
(1) The Indenture Trustee is a _________ banking corporation duly
organized, validly existing and in good standing under the laws of the New York
and has the power and authority to enter into and to take all actions required
of it under the Indenture.
(2) Each of the Documents to which the Indenture Trustee is a party
have been duly authorized, executed and delivered by the Indenture Trustee and
each such Document constitutes the legal, valid and binding obligation of the
Indenture Trustee, enforceable against the Indenture Trustee in accordance with
its terms, except as enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally, as such laws would apply in the event of a
bankruptcy, insolvency or reorganization or similar occurrence affecting the
Indenture Trustee, and (B) general principles of equity regardless of whether
such enforcement is sought in a proceeding at law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Indenture Trustee in connection with its execution and delivery of each of the
Documents to which it is a party or the performance of its obligations
thereunder.
(4) The [Notes][Certificates] have been duly authenticated and
delivered by the Indenture Trustee.
(5) The execution and delivery of, and performance by the Indenture
Trustee of its obligations under, each of the Documents to which it is a party
do not conflict with or result in a violation of any statute or regulation
applicable to the Indenture Trustee, or the charter or bylaws of the Indenture
Trustee, or to the best knowledge of such counsel, any governmental authority
having jurisdiction over the Indenture Trustee or the terms of any indenture or
other agreement or instrument to which the Indenture Trustee is a party or by
which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel to
the Issuer
----------------------
(1) The Issuer is a ___________ business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the power and authority to enter into and to take all actions required of it
under the each of the Documents to which it is a party.
(2) Each of the Documents to which the Issuer is a party have been
duly authorized, executed and delivered by the Issuer and each such Document
constitutes the legal, valid and binding obligation of the Issuer, enforceable
against the Issuer in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, as such
laws would apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Issuer, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law or in
equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Issuer in connection with its execution and delivery of the Documents to which
it is a party or the performance of its obligations thereunder.
(4) The [Notes][Certificates] have been duly executed and delivered by
the Issuer.
(5) The execution and delivery of, and performance by the Issuer of
its obligations under each of the Documents to which it is a party do not
conflict with or result in a violation of any statute or regulation applicable
to the Issuer, or the certificate of trust of the Issuer, or to the best
knowledge of such counsel, any governmental authority having jurisdiction over
the Issuer or the terms of any indenture or other agreement or instrument to
which the Issuer is a party or by which it is bound.
EXHIBIT 4.1
FORM OF POOLING AND
SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT
Dated as of ___________
by and among
________________________
as Depositor
and
________________________
as Servicer
and
________________________
as Trustee
________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I DEFINITIONS ........................................................................................... 1
Section 1.01 Certain Defined Terms.......................................................................... 1
Section 1.02 Provisions of General Application..............................................................39
Section 1.03 Business Day Certificate.......................................................................39
ARTICLE II ESTABLISHMENT OF THE TRUST SALE AND CONVEYANCE OF THE TRUST FUND......................................40
Section 2.01 Establishment of the Trust.....................................................................40
Section 2.02 Purchase and Sale of Initial Mortgage Loans....................................................40
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.................................................40
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files.........................................42
Section 2.05 Delivery of Mortgage Loan Documents............................................................43
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by
Trustee.....................................................................................46
Section 2.07 Designations under REMIC Provisions; Designation of Startup Day................................48
Section 2.08 Execution of Certificates......................................................................48
Section 2.09 Application of Principal and Interest..........................................................48
Section 2.10 Grant of Security Interest.....................................................................48
Section 2.11 Further Action Evidencing Assignments..........................................................49
ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................................49
Section 3.01 Representations of the Servicer................................................................49
Section 3.02 Representations, Warranties and Covenants of the Depositor.....................................51
Section 3.03 Purchase and Substitution......................................................................52
ARTICLE IV THE CERTIFICATES......................................................................................53
Section 4.01 The Certificates...............................................................................53
Section 4.02 Registration of Transfer and Exchange of Certificates..........................................54
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates..............................................59
Section 4.04 Persons Deemed Owners..........................................................................59
ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS.....................................................59
Section 5.01 REMIC Matters; The Servicer....................................................................59
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection Account...............................61
Section 5.03 Permitted Withdrawals from the Collection Account..............................................62
Section 5.04 Hazard Insurance Policies; Property Protection Expenses........................................63
Section 5.05 Assumption and Modification Agreements.........................................................64
Section 5.06 Realization Upon Defaulted Mortgage Loans......................................................65
Section 5.07 Trustee to Cooperate...........................................................................66
Section 5.08 Servicing Compensation; Payment of Certain Expenses by Servicer................................66
Section 5.09 Annual Statement as to Compliance..............................................................67
Section 5.10 Annual Independent Public Accountants' Servicing Report........................................67
<PAGE>
Section 5.11 Access to Certain Documentation................................................................67
Section 5.12 Maintenance of Fidelity Bond...................................................................68
Section 5.13 The Subservicers...............................................................................68
Section 5.14 Reports to the Trustee; Collection Account Statements..........................................68
Section 5.15 Optional Purchase of Defaulted Mortgage Loans..................................................68
Section 5.16 Reports to be Provided by the Servicer.........................................................69
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans......................69
Section 5.18 Periodic Advances; Special Advance.............................................................70
Section 5.19 Indemnification; Third Party Claims............................................................70
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the
Servicer....................................................................................71
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to Resign....................................71
Section 5.22 Periodic Filings with the Securities and Exchange Commission; Additional Information...........72
ARTICLE VI DISTRIBUTIONS AND PAYMENTS............................................................................72
Section 6.01 Establishment of Accounts; Withdrawals from Accounts; Deposits to the Certificate
Account.....................................................................................72
Section 6.02 Permitted Withdrawals From the Certificate Account.............................................74
Section 6.03 Collection of Money............................................................................74
Section 6.04 The Certificate Insurance Policy...............................................................74
Section 6.05 Distributions..................................................................................76
Section 6.06 Investment of Accounts.........................................................................77
Section 6.07 Reports by the Trustee.........................................................................78
Section 6.08 Additional Reports by Trustee..................................................................80
Section 6.09 Compensating Interest..........................................................................80
Section 6.10 Effect of Payments by the Certificate Insurer; Subrogation.....................................80
ARTICLE VII DEFAULT .............................................................................................81
Section 7.01 Events of Default..............................................................................81
Section 7.02 Trustee to Act; Appointment of Successor.......................................................83
Section 7.03 Waiver of Defaults.............................................................................85
Section 7.04 Rights of the Certificate Insurer to Exercise Rights of Class A Certificateholders.............85
Section 7.05 Trustee To Act Solely with Consent of the Certificate Insurer..................................86
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Certificate Insurer............86
Section 7.07 Certificate Insurer Default....................................................................87
ARTICLE VIII TERMINATION.........................................................................................87
Section 8.01 Termination....................................................................................87
Section 8.02 Additional Termination Requirements............................................................88
Section 8.03 Accounting Upon Termination of Servicer........................................................89
Section 8.04 Retention and Termination of the Servicer......................................................90
<PAGE>
ARTICLE IX THE TRUSTEE...........................................................................................90
Section 9.01 Duties of Trustee..............................................................................90
Section 9.02 Certain Matters Affecting the Trustee..........................................................95
Section 9.03 Trustee Not Liable for Certificates or Mortgage Loans..........................................96
Section 9.04 Trustee May Own Certificates...................................................................96
Section 9.05 Trustee's Fees and Expenses; Indemnity.........................................................97
Section 9.06 Eligibility Requirements for Trustee...........................................................97
Section 9.07 Resignation and Removal of the Trustee.........................................................97
Section 9.08 Successor Trustee..............................................................................98
Section 9.09 Merger or Consolidation of Trustee.............................................................99
Section 9.10 Appointment of Co-Trustee or Separate Trustee..................................................99
Section 9.11 Tax Returns...................................................................................100
Section 9.12 Retirement of Certificates....................................................................100
ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................100
Section 10.01 Limitation on Liability of the Depositor and the Servicer.....................................100
Section 10.02 Acts of Certificateholders....................................................................100
Section 10.03 Amendment.....................................................................................101
Section 10.04 Recordation of Agreement......................................................................102
Section 10.05 Duration of Agreement.........................................................................102
Section 10.06 Notices.......................................................................................102
Section 10.07 Severability of Provisions....................................................................102
Section 10.08 No Partnership................................................................................103
Section 10.09 Counterparts..................................................................................103
Section 10.10 Successors and Assigns........................................................................103
Section 10.11 Headings......................................................................................103
Section 10.12 The Certificate Insurer Default...............................................................103
Section 10.13 Third Party Beneficiary.......................................................................103
Section 10.14 Intent of the Parties.........................................................................103
Section 10.15 Appointment of Tax Matters Person.............................................................103
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL..................................104
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A Class A Certificate
EXHIBIT B Class R Certificate
EXHIBIT C Contents of the Mortgage File
EXHIBIT D Certificate Re: Prepaid Loans
EXHIBIT E Trustee's Acknowledgement of Receipt
EXHIBIT F Initial Certification of Trustee
EXHIBIT G Final Certification of Trustee
EXHIBIT H Request for Release of Documents
EXHIBIT I Transfer Affidavit and Agreement
EXHIBIT J Transferor's Certificate
EXHIBIT K ERISA Investment Representation Letter
EXHIBIT L Form of Subsequent Transfer Agreement
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of ____________
(this "Agreement"), by and among ________________________, a ____________
corporation, in its capacity as depositor (the "Depositor"),
_______________________, a ____________ corporation, in its capacity as servicer
(the "Servicer"), and ____________________, a ____________ banking corporation,
in its capacity as trustee (the "Trustee").
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 Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, ____________ is willing to serve in the capacity of
Trustee hereunder; and
WHEREAS, ____________ (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 1.01 Certain Defined Terms. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
ACCEPTED SERVICING PRACTICES: The Servicer's normal servicing
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
ACCOUNT: Any of the Collection Account, the Certificate
Account, the Capitalized Interest Account, the Certificate Insurance Payment
Account or the Pre-Funding Account.
ACCRUAL PERIOD: With respect to the Fixed Rate Certificates
and any Distribution Date, the prior calendar month; with respect to the
Adjustable Rate Certificates and any Distribution Date, the period from and
including the prior Distribution Date (or, in the case
<PAGE>
of the first Distribution Date, from and including the Startup Day) to and
including the day immediately preceding such Distribution Date.
ADDITION NOTICE: A written notice from the Depositor to the
Trustee, the Rating Agencies and the Certificate Insurer that the Depositor
desires to make a Subsequent Transfer.
ADJUSTABLE RATE CERTIFICATES: The Class A-1 Certificates.
ADJUSTED PASS-THROUGH RATE: With respect to any Distribution
Date, the percentage equal to (i) the Weighted Average Class A Pass-Through Rate
plus (ii) the Premium Percentage.
ADMINISTRATIVE COSTS: With respect to any Distribution Date,
the sum of the Trustee Fee, the Premium Amount and the Servicing Fee for such
Distribution Date.
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.
APPRAISED VALUE: As to any Mortgaged Property and time
referred to herein, the appraised value of the Mortgaged Property based upon the
appraisal made by or on behalf of the related Originator at the time referred to
herein or, in the case of a Mortgage Loan that is a purchase money mortgage
loan, the sales price of the Mortgaged Property, if such sales price is less
than such appraised value.
ASSIGNMENT OF MORTGAGE: 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.
AUTHORIZED DENOMINATIONS: Each Class of the Class A
Certificates is issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $1,000 or integral multiples of $1,000 in excess
thereof; provided, however, that one Certificate of each Class is issuable in a
denomination equal to any such multiple plus an additional amount such that the
aggregate denomination of all Class A Certificates of such Class shall be equal
to the applicable Original Certificate Principal Balance.
2
<PAGE>
AVAILABLE FUNDS: As defined in Section 6.04(a).
AVAILABLE FUNDS SHORTFALL: With respect to any Distribution
Date, an amount equal to the excess of the Insured Distribution Amount for such
Distribution Date over the Available Funds for such Distribution Date available
for distribution in respect of such Insured Distribution Amount.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or
(b) a day on which banking institutions in the States of Pennsylvania, New York
or New Jersey are authorized or obligated by law or executive order to be
closed.
BUSINESS PURPOSE PROPERTY: Any mixed-use properties,
commercial properties, or four or more unit multifamily properties.
CAPITALIZED INTEREST ACCOUNT: The Capitalized Interest Account
established in accordance with Section 6.01(a) hereof and maintained by the
Trustee.
CAPITALIZED INTEREST REQUIREMENT: With respect to the
Distribution Dates occurring in ____________ and ____________, (A) the product
of (i) one-twelfth of the Adjusted Pass-Through Rate as calculated as of such
Distribution Date and (ii) the Pre-Funded Amount as of the first day of the
related Due Period, minus (B) 30 days' interest, at the related Mortgage
Interest Rate, on the Subsequent Mortgage Loans transferred to the Trust during
the related Due Period which had a Due Date after the related Subsequent Cut-Off
Date during the related Due Period, minus (C) the amount of any Pre-Funding
Earnings earned from the last Distribution Date (or the Closing Date with
respect to the ____________ Distribution Date). In no event will the Capitalized
Interest Requirement be less than zero.
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
CERTIFICATE: Any Class A-1 Certificate, Class A-2 Certificate,
Class A-3 Certificate, Class A-4 Certificate, Class A-5 Certificate, Class A-6
Certificate or Class R Certificate executed by the Trustee on behalf of the
Trust Fund and authenticated by the Trustee.
CERTIFICATE ACCOUNT: The Certificate Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Servicer or any
Subservicer or the Depositor, or any Affiliate of any of them, shall be deemed
not to be outstanding and the undivided Percentage Interest 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
3
<PAGE>
consent, waiver, request or demand of Certificateholders pursuant to this
Agreement, upon the Trustee's request, the Servicer and the Depositor 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 the Certificate Insurance Policy shall be deemed to be
outstanding and held by the Certificate Insurer to the extent of such payment.
CERTIFICATE INSURANCE PAYMENT ACCOUNT: The Certificate
Insurance Payment Account established in accordance with Section 6.04(c) hereof
and maintained by the Trustee.
CERTIFICATE INSURANCE POLICY: The Financial Guaranty Insurance
Policy No. _________, and all endorsements thereto dated the Closing Date,
issued by the Certificate Insurer for the benefit of the Certificateholders.
CERTIFICATE INSURER: _________________, a ____________stock
insurance company organized and created under the laws of the State of
____________, and any successors thereto.
CERTIFICATE INSURER DEFAULT: The existence and continuance of
any of the following:
(a) the Certificate Insurer shall have failed to make a
required payment when due under the Certificate Insurance Policy;
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment for the benefit
of its creditors or (iii) had an order for relief entered against it under the
United States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
trustee, agent, or receiver for the Certificate Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession by
a custodian, trustee, agent, or receiver of the Certificate Insurer or of all or
any material portion of its property.
CERTIFICATE PRINCIPAL BALANCE: As to any particular Class A
Certificate and date of determination, the product of the Percentage Interest
evidenced thereby and the applicable Class A Certificate Principal Balance of
all Certificates of the same Class as of such date. The Class R Certificates do
not have a "Certificate Principal Balance".
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CERTIFICATE REGISTER: As described in Section 4.02.
CIVIL RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
CIVIL RELIEF ACT INTEREST SHORTFALL: With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the Mortgage Interest Rate.
CLASS: Each class of Certificates designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates, the Class A-5 Certificates, the Class A-6 Certificates or the
Class R Certificates.
CLASS A CERTIFICATE: Any one of the Class A-1 Certificates,
any one of the Class A-2 Certificates, any one of the Class A-3 Certificates,
any one of the Class A-4 Certificates, any one of the Class A-5 Certificates and
any one of the Class A-6 Certificates, as the case may be.
CLASS A CERTIFICATE PRINCIPAL BALANCE: The sum of the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance, the Class A-5 Certificate Principal Balance and the Class A-6
Certificate Principal Balance.
CLASS A DISTRIBUTION AMOUNT: The sum of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount, the Class A-3
Distribution Amount, the Class A-4 Distribution Amount, the Class A-5
Distribution Amount and the Class A-6 Distribution Amount.
CLASS A INTEREST DISTRIBUTION AMOUNT: The sum of the Class A-1
Interest Distribution Amount, the Class A-2 Interest Distribution Amount, the
Class A-3 Interest Distribution Amount, the Class A-4 Distribution Amount, the
Class A-5 Distribution Amount and the Class A-6 Distribution Amount.
CLASS A-1 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-1 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-1 Distribution Amount on such immediately preceding
Distribution Date and (b) interest on the amount described in clause (a) for the
actual number of days in the Accrual Period, calculated at an interest rate
equal to the Class A-1 Pass-Through Rate applicable to such Distribution Date.
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CLASS A-1 CERTIFICATE: Any Certificate designated as a "Class
A-1 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-1 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-1 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-1 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-1 Certificate Principal Balance is reduced to zero.
CLASS A-1 CURRENT INTEREST: With respect to the Class A-1
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-1 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-1 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-1 DISTRIBUTION AMOUNT: With respect to the Class A-1
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-1 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-1 Certificates pursuant to Section 6.01(g) hereof,
and (ii) the lesser of (x) the Class A-1 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-1
Certificates for such Distribution Date.
CLASS A-1 FINAL SCHEDULED MATURITY DATE: The ____________
Distribution Date.
CLASS A-1 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the sum of the Class A-1
Interest Distribution Amount and the Class A-1 Principal Distribution Amount.
CLASS A-1 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date an amount equal to (a) the
related Class A-1 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-1 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-1 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-1 Carry-Forward Amount, in each case as of such Distribution Date.
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CLASS A-1 PASS-THROUGH RATE: With respect to any Distribution
Date, the lesser of (i) LIBOR plus ____% per annum or (ii) the Net Weighted
Average Mortgage Interest Rate for the Mortgage Loans for such Distribution
Date.
CLASS A-1 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the lesser of (x) the
Remaining Principal Distribution Amount for such Distribution Date, and (y) the
Class A-1 Certificate Principal Balance as of such Distribution Date.
On the Class A-1 Certificate Termination Date, any excess of
(a) the amount described in clause (x) of the preceding paragraph over (b) the
amount described in clause (y) of the preceding paragraph shall be distributed
as principal with respect to the Class A-2 Certificates, as elsewhere provided
herein.
CLASS A-2 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-2 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-2 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-2 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-2 CERTIFICATE: Any Certificate designated as a "Class
A-2 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-2 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-2 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-2 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-2 Certificate Principal Balance is reduced to zero.
CLASS A-2 CURRENT INTEREST: With respect to the Class A-2
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-2 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-2 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-2 DISTRIBUTION AMOUNT: With respect to the Class A-2
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-2 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding
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Account as a prepayment of principal on the Class A-2 Certificates pursuant to
Section 6.01(g) hereof, and (ii) the lesser of (x) the Class A-2 Formula
Distribution Amount for such Distribution Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution on account
of the Class A-2 Certificates for such Distribution Date.
CLASS A-2 FINAL SCHEDULED MATURITY DATE: The ____________
Distribution Date.
CLASS A-2 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date, the sum of the Class A-2
Interest Distribution Amount and the Class A-2 Principal Distribution Amount.
CLASS A-2 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date an amount equal to (a) the
related Class A-2 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-2 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-2 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-2 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-2 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to _____%.
CLASS A-2 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date prior to the Class A-1
Certificate Termination Date, zero.
On the Class A-1 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-1 Certificate Termination Date over (y) the Class A-1 Certificate
Principal Balance on the Class A-1 Certificate Termination Date before making
distributions on such date and (ii) the Class A-2 Certificate Principal Balance.
With respect to the Class A-2 Certificates for any
Distribution Date following the Class A-1 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount for such Distribution
Date and (y) the Class A-2 Certificate Principal Balance as of such Distribution
Date. On the Class A-2 Certificate Termination Date any remaining portion of the
Remaining Principal Distribution Amount shall be distributed with respect to the
Class A-3 Certificates.
CLASS A-3 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-3 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-3 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described
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in clause (a), calculated at an interest rate equal to the Class A-3
Pass-Through Rate applicable to such Distribution Date.
CLASS A-3 CERTIFICATE: Any Certificate designated as a "Class
A-3 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-3 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-3 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-3
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-3 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-3 Certificate Principal Balance is reduced to zero.
CLASS A-3 CURRENT INTEREST: With respect to the Class A-3
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-3 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-3 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-3 DISTRIBUTION AMOUNT: With respect to the Class A-3
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-3 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-3 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-3 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-3
Certificates for such Distribution Date.
CLASS A-3 FINAL SCHEDULED MATURITY DATE: The ________________
Distribution Date.
CLASS A-3 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date, the sum of the Class A-3
Interest Distribution Amount and the Class A-3 Principal Distribution Amount.
CLASS A-3 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date an amount equal to (a) the
related Class A-3 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-3 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-3 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-3 Carry-Forward Amount, in each case as of such Distribution Date.
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CLASS A-3 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to ______%.
CLASS A-3 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date prior to the Class A-2
Certificate Termination Date, zero.
On the Class A-2 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-2 Certificate Termination Date over (y) the Class A-2 Certificate
Principal Balance on the Class A-2 Certificate Termination Date before making
distributions on such date and (ii) the Class A-3 Certificate Principal Balance.
With respect to the Class A-3 Certificates for any
Distribution Date following the Class A-2 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-3 Certificate Principal Balance as of such
Distribution Date. On the Class A-3 Certificate Termination Date any remaining
portion of the Remaining Principal Distribution Amount shall be distributed with
respect to the Class A-4 Certificates.
CLASS A-4 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-4 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-4 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-4 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-4 CERTIFICATE: Any Certificate designated as a "Class
A-4 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-4 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-4 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-4
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-4 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-4 Certificate Principal Balance is reduced to zero.
CLASS A-4 CURRENT INTEREST: With respect to the Class A-4
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-4 Pass-Through Rate applicable to such
Distribution Date an such Accrual Period on the Class A-4
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Certificate Principal Balance as of such Distribution Date (and prior to making
any distributions on such Distribution Date).
CLASS A-4 DISTRIBUTION AMOUNT: With respect to the Class A-4
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-4 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-4 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-4 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-4
Certificates for such Distribution Date.
CLASS A-4 FINAL SCHEDULED MATURITY DATE: The _______________
Distribution Date.
CLASS A-4 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date, the sum of the Class A-4
Interest Distribution Amount and the Class A-4 Principal Distribution Amount.
CLASS A-4 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date an amount equal to (a) the
related Class A-4 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-4 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-4 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-4 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-4 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to _______%.
CLASS A-4 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date prior to the Class A-3
Certificate Termination Date, zero.
On the Class A-3 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-3 Certificate Termination Date over (y) the Class A-3 Certificate
Principal Balance on the Class A-3 Certificate Termination Date before making
distributions on such date and (ii) the Class A-4 Certificate Principal Balance.
With respect to the Class A-4 Certificates for any
Distribution Date following the Class A-3 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-4 Certificate Principal Balance as of such
Distribution Date. On the Class A-4 Certificate Termination Date any remaining
portion of
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the Remaining Principal Distribution Amount shall be distributed with respect to
the Class A-5 Certificates.
CLASS A-5 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-5 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-5 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-5 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-5 CERTIFICATE: Any Certificate designated as a "Class
A-5 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-5 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-5 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-5
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-5 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-5 Certificate Principal Balance is reduced to zero.
CLASS A-5 CURRENT INTEREST: With respect to the Class A-5
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-5 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-5 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-5 DISTRIBUTION AMOUNT: With respect to the Class A-5
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-5 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-5 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-5 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-3
Certificates for such Distribution Date.
CLASS A-5 FINAL SCHEDULED MATURITY DATE: The
__________________ Distribution Date.
CLASS A-5 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date, the sum of the Class A-5
Interest Distribution Amount and the Class A-5 Principal Distribution Amount.
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CLASS A-5 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date an amount equal to (a) the
related Class A-5 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-5 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-5 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-5 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-5 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to ____% plus, with respect to any Distribution
Date after the Clean-Up Call Date, _____%.
CLASS A-5 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date prior to the Class A-4
Certificate Termination Date, zero.
On the Class A-4 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-4 Certificate Termination Date over (y) the Class A-4 Certificate
Principal Balance on the Class A-4 Certificate Termination Date before making
distributions on such date and (ii) the Class A-5 Certificate Principal Balance.
With respect to the Class A-5 Certificates for any
Distribution Date following the Class A-4 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-5 Certificate Principal Balance as of such
Distribution Date. On the Class A-5 Certificate Termination Date any remaining
portion of the Remaining Principal Distribution Amount shall be distributed with
respect to the Class A-6 Certificates.
CLASS A-6 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-6 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-6 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-6 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-6 CERTIFICATE: Any Certificate designated as a "Class
A-6 Certificate" on the face thereof, in the form of Exhibit A hereto. The Class
A-6 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-6 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-6
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
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CLASS A-6 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-6 Certificate Principal Balance is reduced to zero.
CLASS A-6 CURRENT INTEREST: With respect to the Class A-6
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-6 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-6 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-6 DISTRIBUTION AMOUNT: With respect to the Class A-6
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-6 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-6 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-6 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-6
Certificates for such Distribution Date.
CLASS A-6 FINAL SCHEDULED MATURITY DATE: The ____________
Distribution Date.
CLASS A-6 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date, the sum of the Class A-6
Interest Distribution Amount and the Class A-6 Principal Distribution Amount.
CLASS A-6 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date an amount equal to (a) the
related Class A-6 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-6 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-6 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-6 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-6 LOCKOUT DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the product of (i) the applicable Class A-6 Lockout
Percentage for such Distribution Date and (ii) the Class A-6 Lockout Pro Rata
Distribution Amount for such Distribution Date.
CLASS A-6 LOCKOUT PERCENTAGE: For each Distribution Date shall
be as follows:
Payment Dates Lockout Percentage
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CLASS A-6 LOCKOUT PRO RATA DISTRIBUTION AMOUNT: For any
Distribution Date will be an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-6 Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the Class A
Certificate Principal Balance immediately prior to such Distribution Date and
(y) the Principal Distribution Amount for such Distribution Date.
CLASS A-6 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to ______%.
CLASS A-6 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date prior to the Class A-5
Certificate Termination Date, the Class A-6 Lockout Distribution Amount.
On the Class A-5 Certificate Termination Date, the lesser of
(i) the excess of (x) the Principal Distribution Amount as of the Class A-5
Certificate Termination Date over (y) the Class A-5 Certificate Principal
Balance on the Class A-5 Certificate Termination Date before making
distributions on such date and (ii) the Class A-6 Certificate Principal Balance.
With respect to the Class A-6 Certificates for any
Distribution Date following the Class A-5 Certificate Termination Date, the
lesser of (x) the Principal Distribution Amount for such Distribution Date and
(y) the Class A-6 Certificate Principal Balance as of such Distribution Date. On
the Class A-6 Certificate Termination Date any remaining portion of the
Principal Distribution Amount shall be distributed with respect to the Class R
Certificates.
CLASS R CERTIFICATE: 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
hereto.
CLASS R CERTIFICATEHOLDER: A Holder of a Class R Certificate.
CLEAN-UP CALL DATE: As defined in Section 8.01(b).
CLOSING DATE: _________.
CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b).
COMBINED LOAN-TO-VALUE RATIO or CLTV: As to any Mortgage Loan
at any time, the fraction, expressed as a percentage, the numerator of which is
the sum of (i) the Principal Balance thereof at such time and (ii) if such
Mortgage Loan is subject to a second mortgage, the unpaid principal balance of
any related first mortgage loan or loans, if any, as of
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such time, and the denominator of which is the Appraised Value of any related
Mortgaged Property or Properties as of the date of the appraisal used by or on
behalf of the Depositor to underwrite such Mortgage Loan.
COMMISSION: The Securities and Exchange Commission.
COMPENSATING INTEREST: As defined in Section 6.09 hereof.
CUMULATIVE LOSS PERCENTAGE: As of any date of determination
thereof, the aggregate of all Liquidated Loan Losses since the Startup Date as a
percentage of the sum of (i) the aggregate Principal Balance of the Initial
Mortgage Loans as of the Initial Cut-Off Date and (ii) the aggregate Principal
Balance of any Subsequent Mortgage Loans transferred to the Trust as of the
related Subsequent Cut-Off Date.
CUMULATIVE LOSS TEST: The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
- -------------------------------------------- --------------------------
1st - 24th Distribution Date _____%
25th - 36th Distribution Date _____%
37th - 48th Distribution Date _____%
49th - 60th Distribution Date
and thereafter _____%
CURTAILMENT: 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 not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
CUSTODIAN: As defined in Section 2.04(c).
CUT-OFF DATE: With respect to the Initial Mortgage Loans, the
Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
DEBT SERVICE REDUCTION: 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 United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the
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then outstanding principal balance of the Mortgage Loan, which valuation results
from a proceeding initiated under the United States Bankruptcy Code.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
DELINQUENCY RATIO: With respect to any Distribution Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are 60 or more days
Delinquent, in foreclosure or converted to REO Property as of the last day of
such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "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: _______________________________, a ____________
corporation, and any successor thereto.
DEPOSITORY: The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to
time as a securities depositary.
DISTRIBUTION DATE: The ____ day of any month or if such ____
day is not a Business Day, the first Business Day immediately following,
commencing on ____________.
DUE DATE: With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
DUE PERIOD: With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
ELIGIBLE ACCOUNT: Either (A) an account or accounts maintained
with an institution (which may include the Trustee, provided such institution
otherwise meets these requirements) whose deposits are insured by the FDIC, the
unsecured and uncollateralized debt
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obligations of which institution shall be rated AA or better by S&P and Aa2 or
better by Moody's and in the highest short term rating category 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 and the Rating Agencies or
(B) a trust account or accounts maintained with the trust department of a
federal or state chartered depository institution or trust company (which may
include the Trustee, provided that the Trustee otherwise meets these
requirements), having capital and surplus of not less than $50,000,000, acting
in its fiduciary capacity.
ERISA: As defined in Section 4.02(m) hereof.
EVENT OF DEFAULT: As described in Section 7.01.
EXCESS SUBORDINATED AMOUNT: With respect to the Mortgage Loans
and any Distribution Date, the excess, if any, of (x) the Subordinated Amount
that would apply on such Distribution Date after taking into account the payment
of the related Class A Distribution Amount on such Distribution Date (except for
any distributions of related Subordination Reduction Amounts on such
Distribution Date) over (y) the related Specified Subordinated Amount for such
Distribution Date; provided, however, that the Excess Subordinated Amount for
the period beginning with the Distribution Date as to which clause (b)(i)(y)(A)
of "Specified Subordinated Amount" applies (the "Trigger Date") and ending on
the Distribution Date occurring in the month six months subsequent to the
Trigger Date (inclusive) shall be limited to the amount obtained using the
following formula.
n
6 X E.S.A.
Where "n" is equal to the number of Distribution Dates that
have occurred since the Trigger Date and "E.S.A." is equal to the amount of
Excess Subordinated Amount that would otherwise be obtained for such
Distribution Date without regard to the provisions of this proviso.
FDIC: The Federal Deposit Insurance Corporation, and any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, and any
successor thereto.
FIXED RATE CERTIFICATES: The Class A-2 Certificates, the Class
A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates and the
Class A-6 Certificates.
FNMA: The Federal National Mortgage Association, and any
successor thereto.
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FORECLOSURE PROFITS: As to any Distribution Date, the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the related Due Period 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 5.06 to the first day of the month
following the month in which such Mortgage Loan became a Liquidated Mortgage
Loan).
GAAP: Generally accepted accounting principles, consistently
applied.
I & I PAYMENTS: Payments due and owing under the Insurance and
Indemnity Agreement other than pursuant to Section 3.02(b) of such Agreement.
INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
INITIAL CUT-OFF DATE: The close of business on ____________
(or with respect to any Initial Mortgage Loan originated or otherwise acquired
by an Originator after ____________, the date of origination or acquisition of
such Initial Mortgage Loan).
INITIAL MORTGAGE LOANS: The Mortgage Loans delivered by the
Depositor on the Startup Date.
INITIAL SUBORDINATED AMOUNT: An amount equal to _____% of the
Maximum Collateral Amount.
INSURANCE AND INDEMNITY AGREEMENT: The Insurance and Indemnity
Agreement dated as of ____________ among the Certificate Insurer, the Depositor,
the Servicer, _____________________________________ as such agreement may be
amended or supplemented in accordance with the provisions thereof.
INSURANCE PROCEEDS: 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."
INSURED DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of (a) the Class A Interest Distribution Amount with respect to
such Distribution Date, (b) the Subordination Deficit, if any, as of such
Distribution Date and (c) (i) on the Class A-1 Final Scheduled Maturity Date,
the Class A-1 Certificate Principal Balance, (ii) on the Class A-2 Final
Scheduled Maturity Date, the Class A-2 Certificate Principal Balance, (iii) on
the Class A-
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3 Final Scheduled Maturity Date, the Class A-3 Certificate Principal Balance,
(iv) on the Class A-4 Final Scheduled Maturity Date, the Class A-4 Certificate
Principal Balance, (v) on the Class A-5 Final Scheduled Maturity Date, the Class
A-5 Certificate Principal Balance and (iv) on the Class A-6 Final Scheduled
Maturity Date, the Class A-6 Certificate Principal Balance.
INSURED PAYMENT: With respect to any Distribution Date, the
Available Funds Shortfall.
INTEREST DETERMINATION DATE: With respect to any Accrual
Period for the Adjustable Rate Certificates, the second London Business Day
preceding the first day of such Accrual Period; provided, however, that with
respect to the _______ Distribution Date, the Interest Determination Date shall
be the second London Business Day preceding the Closing Date.
LATE PAYMENT RATE: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.
LIBOR: With respect to any Accrual Period for the Adjustable
Rate 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 Telerate Page 3750, as
of 11:00 a.m. (London time) on such Interest Determination Date. On each
Interest Determination Date, LIBOR for the related Accrual Period will be
established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
LIQUIDATED MORTGAGE LOAN: A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
LIQUIDATED LOAN LOSS: With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution 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
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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: Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (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 5.04 and 5.06 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
LIQUIDATION PROCEEDS: The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
trustee's sale, foreclosure sale, REO Disposition or otherwise or (iii) the
liquidation of any other security for such Mortgage Loan, including, without
limitation, pledged equipment, inventory and working capital and assignments of
rights and interests made by the related mortgagor.
LOAN REPURCHASE PRICE: As defined in Section 2.06(b).
LOAN SALE AGREEMENT: The Loan Sale Agreement, dated as of the
date hereof, among the Originators and the Depositor relating to the sale of the
Mortgage Loans from the Originators to the Depositor.
LONDON BUSINESS DAY: A day on which banks are open for dealing
in foreign currency and exchange in London and New York City.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
MAXIMUM COLLATERAL AMOUNT: The Original Pool Principal Balance
plus the Original Pre-Funded Amount.
MONTHLY PAYMENT: As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (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
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than Deficient Valuations or similar proceeding or any moratorium or similar
waiver or grace period).
MONTHLY SERVICING FEE: As defined in Section 5.08 hereof.
MOODY'S: 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: The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
MORTGAGE FILE: As described in Exhibit C.
MORTGAGE INTEREST RATE: As to any Mortgage Loan, the per annum
fixed rate at which interest accrues on the unpaid principal balance thereof.
MORTGAGE LOANS: The Initial Mortgage Loans and the Subsequent
Mortgage Loans, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Fund, the Initial Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule. When used in respect of any
Distribution Date, the term Mortgage Loans shall mean all Mortgage Loans
(including those in respect of which the Trustee has acquired the related
Mortgaged Property) which have not been repaid in full prior to the related Due
Period, did not become Liquidated Mortgage Loans prior to such related Due
Period or were not repurchased or replaced by the Depositor prior to such
related Due Period.
MORTGAGE LOAN INTEREST SHORTFALL: With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) any Prepayment
Interest Shortfall for which no payment of Compensating Interest is paid and (b)
any Civil Relief Act Interest Shortfall in respect of such Mortgage Loan for
such Distribution Date.
MORTGAGE LOAN SCHEDULE: The initial schedule of Initial
Mortgage Loans as of the Initial Cut-Off Date as attached hereto as Schedule I,
which will be deemed to be modified automatically upon any replacement, sale,
substitution, liquidation, transfer or addition of any Mortgage Loan, including
the addition of a Subsequent Mortgage Loan, pursuant to the terms hereof. The
initial Mortgage Loan Schedule sets forth as to each Initial Mortgage Loan, and
any subsequent Mortgage Loan Schedule provided in connection with the Subsequent
Mortgage Loans will set forth as to each Subsequent Mortgage Loan: (i) its
identifying number and the name of the related Mortgagor; (ii) the billing
address for the related Mortgaged Property including the state and zip code;
(iii) its date of origination; (iv) the original number of months to stated
maturity; (v) the original stated maturity; (vi) the original Principal Balance;
(vii) its Cut-
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Off Date Balance; (viii) the Mortgage Interest Rate; and (ix) the scheduled
monthly payment of principal and interest.
MORTGAGE NOTE: The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
MORTGAGE PORTFOLIO PERFORMANCE TEST: The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i) the
Rolling Six Month Delinquency Rate is less than or equal to _______%, (ii) the
Subordination Loss Test is satisfied and (iii) if the Twelve Month Loss Amount
is not greater than or equal to _______% of the Pool Principal Balance as of the
first day of the twelfth preceding calendar month.
MORTGAGED PROPERTY: The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple estate in one or more
parcels of land.
MORTGAGOR: The obligor on a Mortgage Note.
NET FORECLOSURE PROFITS: As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
NET LIQUIDATION PROCEEDS: 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.
NET MONTHLY EXCESS CASHFLOW: As of any Distribution Date, the
excess of (x) the Available Funds then on deposit in the Certificate Account
over (y) the sum of (i) Class A Distribution Amount, calculated for this purpose
without regard to any Subordination Increase Amount or portion thereof included
therein, (ii) the Reimbursement Amount, if any, for such Distribution Date,
(iii) the Premium Amount, and (iv) the Trustee Fees.
NET REO PROCEEDS: As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
NET WEIGHTED AVERAGE MORTGAGE INTEREST RATE: With respect to
any Due Period, the weighted average Mortgage Interest Rates (weighted by
Principal Balances) of the Mortgage Loans, calculated at the opening of business
on the first day of such Due Period, less the rate at which the Servicing Fee is
then calculated, less the rate at which the Trustee Fee is then calculated and
less the Premium Percentage.
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NONRECOVERABLE ADVANCES: With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.04, 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 ultimately be
recoverable pursuant to Sections 5.04 and Section 6.04.
OFFICER'S CERTIFICATE: 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 Servicer, or the
Depositor, as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Depositor, 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 REMIC Trust as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact independent of the Depositor, the Servicer and the Trustee, (ii) does not
have any direct financial interest or any material indirect financial interest
in the Depositor or the Servicer or the Trustee or in an Affiliate thereof,
(iii) is not connected with the Depositor 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.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: As of the Startup Day
and as to the Class A-1 Certificates, $_______; the Class A-2 Certificates,
$_______; the Class A-3 Certificates, $_______; the Class A-4 Certificates,
$_______; the Class A-5 Certificates, $_______; and the Class A-6 Certificates,
$_______.
The Class R Certificates do not have an Original Certificate Principal Balance.
ORIGINAL POOL PRINCIPAL BALANCE: The Pool Principal Balance as
of the Initial Cut-Off Date, which amount is equal to $_______.
ORIGINAL PRE-FUNDED AMOUNT: $_______.
ORIGINATORS: _______.
OVERFUNDED INTEREST AMOUNT: With respect to each Subsequent
Transfer Date occurring in _______, the excess of (i) the amount on deposit in
the Capitalized Interest Account, over (ii) two-months' interest calculated at
the Adjusted Pass-Through Rate on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings)
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immediately following such Subsequent Transfer Date (disregarding any amount
applied from the Pre-Funding Account to a Subsequent Mortgage Loan that does not
have a Due Date in _______).
With respect to each Subsequent Transfer Date occurring in _______, the excess
of (i) the amount on deposit in the Capitalized Interest Account, over (ii)
one-month's interest calculated at the Adjusted Pass-Through Rate on the amount
on deposit in the Pre-Funding Account (net of any Pre-Funding Earnings)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the Pre-Funding Account to a Subsequent Mortgage Loan that does not
have a Due Date in _______).
OWNERSHIP INTEREST: 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: 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 Depositor has no actual knowledge that such
Residential Dwelling is not so occupied.
PERCENTAGE INTEREST: With respect to a Class A Certificate of
any Class, the portion evidenced by such Certificate, expressed as a percentage
rounded to four decimal places, equal to a fraction the numerator of which is
the denomination represented by such Certificate and the denominator of which is
the Original Certificate Principal Balance of such Class. With respect to a
Class R Certificate, the portion evidenced thereby as stated on the face of such
Certificate.
PERIODIC ADVANCE: The aggregate of the advances required to be
made by the Servicer on any Servicer Distribution Date pursuant to Section 5.18
hereof, the amount of any such advances being equal to the sum of:
(a) with respect to each Mortgage Loan that was Delinquent as
of the close of business on the last day of the Due Period preceding
the related Servicer Distribution Date, the product of (i) the
Principal Balance of such Mortgage Loan and (ii) one-twelfth of the
Mortgage Interest Rate for such Mortgage Loan net of the Servicing Fee,
and
(b) 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 (i) interest on the Principal Balance
of such REO Mortgage Loan at the Mortgage Interest Rate for such REO
Mortgage Loan net of the Servicing Fee, for the most recently ended Due
Period over (ii) the net income from the REO Property transferred to
the Certificate Account for such Distribution Date;
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provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
PERMITTED INVESTMENTS: As used herein, Permitted Investments
shall include the following:
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(ii) reLoan Sale Agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition thereof,
provided that the unsecured obligations of the party agreeing to repurchase such
obligations are at the time rated in one of the two highest rating categories by
the Rating Agencies;
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no event have
an original maturity of more than 365 days) of any U.S. depository institution
or trust company, incorporated under the laws of the United States or any state;
provided, that the debt obligations of such depository institution or trust
company at the date of acquisition thereof have been rated in one of the two
highest rating categories by the Rating Agencies;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been rated in
the highest short-term rating category by the Rating Agencies;
(v) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as any such
fund is rated in the highest rating category by Moody's or S&P;
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: 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
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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 REMIC Trust to fail to qualify as a REMIC at any time that the
Class A Certificates are outstanding or (ii) the Trust Fund or any Person having
an Ownership Interest in any Class of Certificates, other than such Person, to
incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an Ownership Interest in a Class R
Certificate to such Person. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in Section 7701
of the Code or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof for these purposes if all of its activities are subject to tax and, with
the exception of FHLMC, a majority of its board of directors is not selected by
such governmental unit.
PERSON: 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: As defined in Section 4.02(m).
POOL CUMULATIVE LOAN LOSSES: With respect to any period, the
sum of all Liquidated Loan Losses which occurred during such period.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.
PREFERENCE AMOUNT: Any amounts distributed in respect of the
Class A Certificates which are recovered from any Holder of a Class A
Certificate as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code or other similar law in accordance with a final,
nonappealable order of a court having competent jurisdiction and which have not
theretofore been repaid to such Holder.
PREFERENCE CLAIM: As defined in Section 6.04(f).
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
PRE-FUNDING AMOUNT: With respect to any date, the amount on
deposit in the Pre-Funding Account.
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PRE-FUNDING EARNINGS: The actual investment earnings realized
on amounts deposited in the Pre-Funding Account.
PRE-FUNDING PERIOD: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Servicer Default occurs and (iii)
_______.
PREMIUM AMOUNT: The product of the Premium Percentage and the
Class A Certificate Principal Balance for the related Distribution Date.
PREMIUM PERCENTAGE: The rate at which the "Premium" is
determined as described in the letter dated _______ between the Servicer and the
Certificate Insurer.
PREMIUM SUPPLEMENT EVENT: Means any Event of Default hereunder
or an "Event of Default" as defined in the Insurance and Indemnity Agreement.
PREPAYMENT ASSUMPTION: A constant prepayment rate of __% HEP,
used solely for determining the accrual of original issue discount and market
discount on the Certificates for federal income tax purposes.
PREPAYMENT INTEREST SHORTFALL: With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate
as may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus
(ii) 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 less the Servicing Fee for such Mortgage Loan in such month.
PRINCIPAL BALANCE: As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such Due Date. The Principal Balance of a Mortgage Loan which becomes a
Liquidated Mortgage Loan on or prior to such Due Date shall be zero.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to the Class A
Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date,
of (A) the Available Funds and (B) any Insured Payment plus if the Certificate
Insurer shall so elect in its sole discretion, an amount of principal (including
Liquidated Loan Losses) that would have been
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payable pursuant to clauses (b)(i)-(viii) below if sufficient funds were made
available to the Trustee in accordance with the terms of the Certificate
Insurance Policy over (ii) the sum of (w) the Class A Interest Distribution
Amount, (x) the Trustee Fees, (y) the Reimbursement Amount, if any, and (z) the
Premium Amount; and
(b) the sum, without duplication, of:
(i) all principal in respect of the Mortgage Loans
actually collected during the related Due Period,
(ii) the Principal Balance of each Mortgage Loan that
either was repurchased by the Depositor or purchased by the
Servicer on the related Servicer Distribution Date, to the
extent such Principal Balance is actually received by the
Trustee,
(iii) any Substitution Adjustments delivered by the
Depositor on the related Servicer Distribution Date in
connection with a substitution of a Mortgage Loan, to the
extent such Substitution Adjustments are actually received by
the Trustee,
(iv) the Net Liquidation Proceeds actually collected by
the Servicer of all Mortgage Loans during the related Due
Period (to the extent such Net Liquidation Proceeds relate to
principal),
(v) with respect to the _______ or the _______
Distribution Date, moneys released from the Pre-Funding
Account, if any, (to the extent such funds are less than 1% of
the Pool Principal Balance on _______ or __________,
respectively),
(vi) the amount of any Subordination Deficit for such
Distribution Date,
(vii) the proceeds received by the Trustee of any
termination of the Trust Fund (to the extent such proceeds
relates to principal),
(viii) the amount of any Subordination Increase Amount for
such Distribution Date, and
(ix) if the Certificate Insurer shall so elect in its sole
discretion, an amount of principal (including Liquidated Loan
Losses) that would have been payable pursuant to clauses
(i)-(viii) above if sufficient funds were made available to
the Trustee in accordance with the terms of the Certificate
Insurance Policy,
minus
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(x) the amount of any Subordination Reduction Amount for
such Distribution Date.
PRINCIPAL PREPAYMENT: Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date.
PRINCIPAL REMITTANCE AMOUNT: As of any Distribution Date, the
sum, without duplication of the amounts specified in clauses (b)(i) through
(b)(iv) and (b)(vii) of the definition of the Principal Distribution Amount.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated _______
relating to the Class A Certificates 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).
QUALIFIED APPRAISER: An appraiser, duly appointed by the
Depositor, who had no interest, direct or indirect, in the Mortgaged Property or
in any loan made on the security thereof, and whose compensation is not affected
by the approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
QUALIFIED MORTGAGE: "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto).
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section
2.06(c) or 3.03 hereof, which (a) has or have an interest rate at least equal to
those applicable to the Deleted Mortgage Loan, (b) relates or relate to a
detached one-family residence or to the same type of Residential Dwelling or
Business Purpose Property, or any combination thereof, as the Deleted Mortgage
Loan and in each case has or have the same or a better lien priority as the
Deleted Mortgage Loan and has the same occupancy status or is an Owner Occupied
Mortgaged Property, (c) matures or mature no later than (and not more than one
year earlier than) the Deleted Mortgage Loan, (d) 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, (e) 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 Principal Balance of the Deleted
Mortgage Loan as of such date, (f) 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), and (g)
complies or comply as of the date of substitution with each representation and
warranty set forth in Sections 3.01 and 3.02 of the Loan Sale Agreement.
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RATING AGENCY: S&P or Moody's.
RECORD DATE: With respect to the Fixed Rate Certificates, the
last Business Day of the month immediately preceding a month in which a
Distribution Date occurs, and with respect to the Adjustable Rate Certificates,
the Business Day immediately preceding the related Distribution Date.
REFERENCE BANKS: Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Depositor 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 Telerate Page 3750 on the relevant Interest
Determination Date and (iv) which have been designated as such by the Trustee.
REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Sections
6.05(a)(ii) hereof plus (ii) interest accrued on each such Insured Payment and
Preference Amounts not previously repaid calculated at the Late Payment Rate
from the date the Trustee received the related Insured Payment or Preference
Amounts were paid by the Certificate Insurer and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance and Indemnity Agreement
(excluding the Premium Amount due on such Distribution Date), as certified to
the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
rate specified in the Insurance and Indemnity Agreement. The Certificate Insurer
shall notify the Trustee and the Depositor of the amount of any Reimbursement
Amount.
REMAINING PRINCIPAL DISTRIBUTION AMOUNT: As of any
Distribution Date, the Principal Distribution Amount less the Class A-6 Lockout
Distribution Amount.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC PROVISIONS: Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of 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.
REMIC TRUST: The segregated Pool of assets consisting of the
Trust Fund. The Pre-Funding Account and the Capitalized Interest Account shall
not be part of the REMIC Trust.
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REO DISPOSITION: 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: 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: Proceeds received in respect of any REO Mortgage
Loan (including, without limitation, proceeds from the rental of the related
Mortgaged Property).
REO PROPERTY: A Mortgaged Property acquired by the Servicer in
the name of the Trustee on behalf of the Certificateholders through foreclosure
or deed-in-lieu of foreclosure.
REPRESENTATION LETTER: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
REQUEST FOR RELEASE: A request for release in substantially
the form attached as Exhibit H hereto.
RESERVE INTEREST RATE: With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which three 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 three
New York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
RESIDENTIAL DWELLING: 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: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Second 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 Depositor or the Servicer, the President or any Vice
President, Assistant Vice President, or any Secretary or Assistant Secretary.
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ROLLING SIX MONTH DELINQUENCY RATE: For any Distribution Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first six
Distribution Dates, as the case may be) immediately preceding Due Periods.
S&P: Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, 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.
SERVICER: _______, a _______corporation, or any successor
appointed as herein provided.
SERVICER DISTRIBUTION DATE: With respect to any Distribution
Date, the 20th day of the month in which such Distribution Date occurs, or if
such 20th day is not a Business Day, the Business Day preceding such 20th day.
SERVICER EXTENSION NOTICE: Has the meaning set forth in
Section 8.04 hereof.
SERVICER REMITTANCE AMOUNT: With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to this Agreement but excluding the
following:
(a) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously made an
unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
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(f) certain other amounts which are reimbursable to the
Servicer, as provided in this Pooling and Servicing Agreement; and
(g) Net Foreclosure Profits.
SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.22, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Sections 5.03 and 5.22.
SERVICING COMPENSATION: The Servicing Fee and other amounts to
which the Servicer is entitled pursuant to Section 5.08.
SERVICING FEE: As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) _______% per annum, and (b) the Principal Balance thereof. Such fee shall
be calculated and payable monthly only from the amounts 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: 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 Certificateholders by the Servicer, as such list may from
time to time be amended.
SPECIAL ADVANCE: As defined in Section 5.18(b) hereof.
SPECIFIED SUBORDINATED AMOUNT: Means:
(a) With respect to a Distribution Date occurring on or
prior to the Stepdown Date and after the Stepdown Date, if the
Depositor has given five days written notice of its election not to
"step down" as in described in clause (b) below to the Trustee and the
Certificate Insurer, the amount which is equal to _______% of the
Maximum Collateral Amount;
(b) With respect to a Distribution Date after the Stepdown
Date unless the Depositor has given five days written notice of its
election not to "step down" as in described in this clause to the
Trustee and the Certificate Insurer, (i) if the Stepdown Requirement is
satisfied, the lesser of (x) the amount equal to _______% of the
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Maximum Collateral Amount and (y) the greater of (A) the amount equal
to _______% of the then outstanding aggregate Principal Balances of the
Mortgage Loans or (B) _______% of the Maximum Collateral Amount or (ii)
if the Stepdown Requirement is not satisfied, the amount which is equal
to _______% of the Maximum Collateral Amount;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Subordinated Amount will
be unlimited during the period that such Mortgage Portfolio Performance Test is
not satisfied.
STARTUP DAY: The day designated as such pursuant to Section
2.07(b) hereof.
STEP DOWN DATE: The Distribution Date occurring in _______.
STEP DOWN REQUIREMENT: The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination (x)
the Rolling Six Month Delinquency Rate is less than _______%, (y) the Cumulative
Loss Test is satisfied and (z) the Twelve Month Loss Amount is not greater than
or equal to _______% of the Pool Principal Balance as of the first day of the
twelfth preceding calendar month.
SUBORDINATED AMOUNT: As of any Distribution Date, the
difference, if any, between (a) the sum of (i) the aggregate Principal Balances
of the Mortgage Loans as of the close of business on the last day of the related
Due Period and (ii) the amount on deposit in the Pre-Funding Account as of the
close of business on the last day of the immediately preceding Due Period and
(b) the Class A Certificate Principal Balance as of such Distribution Date
(after taking into account the payment of the Principal Distribution Amount on
such Distribution Date except for any portion thereof related to an Insured
Payment); provided, however, that such amount shall not be less than zero.
SUBORDINATION DEFICIENCY AMOUNT: With respect to any
Distribution Date, the difference, if greater than zero, between (a) the
Specified Subordinated Amount applicable to such Distribution Date and (b) the
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Subordination Increase Amounts on such
Distribution Date.
SUBORDINATION DEFICIT: As of any Distribution Date, the
amount, if any, by which (a) the Class A Certificate Principal Balance, after
taking into account the payment of the Principal Distribution Amount (except for
any amount in respect of the Subordination Deficit) on such date exceeds (b) the
sum of (i) the aggregate Principal Balance of the Mortgage Loans determined as
of the end of the immediately preceding Due Period and (ii) the amount, if any,
on deposit in the Pre-Funding Account as of the close of business on the last
day of the immediately preceding Due Period.
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SUBORDINATION INCREASE AMOUNT: With respect to any
Distribution Date, the lesser of:
(a) the Subordination Deficiency Amount as of such
Distribution Date (after taking into account the payment of the Principal
Distribution Amount on such Distribution Date (except for any Subordination
Increase Amount)); and
(b) (i) with respect to the first Distribution Date, zero,
(ii) with respect to each Distribution Date from the second
Distribution Date to the earliest to occur of (x) the Distribution Date
on which the Subordinated Amount first equals or exceeds __% of the
Maximum Collateral Amount, (y) the Step Down Date or (z) the date on
which the Mortgage Portfolio Performance Test first has not been met,
__% of the amount of Net Monthly Excess Cashflow on such Distribution
Date, and
(iii) with respect to any other Distribution Date, __% of
the amount of Net Monthly Excess Cashflow on such Distribution Date.
SUBORDINATION LOSS TEST: The Subordination Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
- -------------------------------------------- --------------------------
1st - 12th Distribution Date _______%
13th - 24th Distribution Date _______%
25th - 36th Distribution Date _______%
37th - 48th Distribution Date _______%
49th - 60th Distribution Date
and thereafter _______%
SUBORDINATION REDUCTION AMOUNT: With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount for such Distribution Date and (b) the Principal Remittance Amount for
the prior Due Period.
SUBSEQUENT CUT-OFF DATE: As to any Subsequent Mortgage Loans,
the date specified in the Addition Notice delivered in connection therewith,
which date shall be the close of business on the last day of the month
immediately preceding the month in which such Subsequent Mortgage Loans will be
conveyed to the Trust.
SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter
transferred and assigned to the Trust pursuant to Section 2.03.
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SUBSEQUENT TRANSFER: The transfer and assignment by the
Depositor to the Trust of the Subsequent Mortgage Loans pursuant to the terms
hereof.
SUBSEQUENT TRANSFER DATE: The Business Day on which a
Subsequent Transfer occurs.
SUBSERVICERS: _______.
SUBSERVICING AGREEMENT: The agreement between the Servicer and
the Subservicers relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13, a copy of which shall be delivered,
along with any modifications thereto, to the Trustee and the Certificate
Insurer.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.06 or 3.03, 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 Principal Balances of the related Deleted Mortgage Loans together with 30
days' interest thereon at the Mortgage Interest Rate.
TAX MATTERS PERSON: 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 REMIC Trust.
TAX RETURN: 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.
TELERATE PAGE 3750: The display designated as Telerate Page
3750 on the Telerate Service (or such other page as may replace the Telerate
page on that service for the purpose of displaying London interbank offered
rates of major banks).
TRANSFER: Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
TRANSFER AFFIDAVIT AND AGREEMENT: As defined in Section
4.02(k)(ii).
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TRANSFEREE: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
TRANSFEROR: Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
TRUST: _______, the trust created hereunder.
TRUSTEE: _______, a _______ banking corporation, or its
successor-in-interest, or any successor trustee appointed as herein provided.
TRUSTEE FEE: As to any Distribution Date, the fee payable to
the Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to one-twelfth of __% on the Principal Balance of each Mortgage Loan as of
the immediately preceding Due Date.
TRUSTEE'S MORTGAGE FILE: The documents delivered to the
Trustee or its designated agent pursuant to Section 2.05.
TRUSTEE'S REMITTANCE REPORT: As defined in Section 6.07.
TRUST FUND: The segregated Pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; any other
security for such Mortgage Loan, including, without limitation, pledged
equipment, inventory and working capital and assignments of rights and interests
made by the related mortgagor; (v) the Certificate Insurance Policy; (vi) the
rights and remedies of the Trustee against any Person making any representation
or warranty to the Trustee hereunder, to the extent provided herein; and (vii)
each Account and such assets that are deposited therein from time to time and
any investments thereof, together with any and all income, proceeds and payments
with respect thereto.
TWELVE MONTH LOSS AMOUNT: With respect to any Distribution
Date, an amount equal to the aggregate of all Liquidated Loan Losses on the
Mortgage Loans which became Liquidated Mortgage Loans during the 12 preceding
Due Periods.
UNDERWRITER: Prudential Securities Incorporated.
UNDERWRITING GUIDELINES: The underwriting guidelines of the
Originators, a copy of which is attached as an exhibit to the Loan Sale
Agreement.
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UNITED STATES PERSON: 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 or a trust if a court within the United States can exercise
primary jurisdiction over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
WEIGHTED AVERAGE CLASS A PASS-THROUGH RATE: The weighted
average (weighted by the related Certificate Principal Balance) of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through
Rate, the Class A-4 Pass-Through Rate, the Class A-5 Pass-Through Rate and the
Class A-6 Pass-Through Rate.
Section 1.02 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) Any 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 (other than with respect to
the Mortgage Loans and to the Class A-1 Certificates) provided for herein shall
be made on the basis of a 360-day year consisting of twelve 30-day months. All
calculations of interest with respect to the Class A-1 Certificates shall be on
an actual/360 basis. All calculations of interest with respect to any Mortgage
Loan provided for herein shall be made in accordance with the terms of the
related Note and Mortgage or, if such documents do not specify the basis upon
which interest accrues thereon, on the basis of a 360-day year consisting of
twelve 30-day months, to the extent permitted by applicable law.
(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 Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar year ____) and thereafter, within 15 days prior to
the end of each calendar year while this Agreement remains in effect (with
respect to the succeeding calendar years), the Servicer
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shall provide to the Trustee and the Depositor a certificate of a Servicing
Officer specifying the days on which banking institutions in the State of
Pennsylvania are authorized or obligated by law, executive order or governmental
decree to be closed.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Establishment of the Trust. 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
"_________" and does hereby appoint __________ as Trustee in accordance with the
provisions of this Agreement.
Section 2.02 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trustee
without recourse but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, including the outstanding principal of and interest due on such Initial
Mortgage Loans, and all other assets included or to be included in the Trust
Fund for the benefit of the Certificateholders and the Certificate Insurer. In
connection with such transfer and assignment, and pursuant to Section 2.07 of
the Loan Sale Agreement, the Depositor does hereby also irrevocably transfer,
assign, set over and otherwise convey to the Trustee all of its rights under the
Loan Sale Agreement, including, without limitation, its right to exercise the
remedies created by Sections 2.05 and 3.05 of the Loan Sale Agreement for
defective documentation and for breaches of representations and warranties,
agreements and covenants of the Originators contained in Sections 3.01, 3.02 and
3.03 of the Loan Sale Agreement.
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in 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 sell, transfer, assign, set over and convey to the
Trustee without recourse but subject to terms and provisions of this Agreement,
all of the right, title and interest of the Depositor in and to the Subsequent
Mortgage Loans, including the outstanding principal of and interest due on such
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Loan Sale Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the Trustee all
of its rights under the Loan Sale Agreement, including, without limitation, its
right to exercise the remedies created by Sections 2.05 and 3.05 of the Loan
Sale Agreement for defective documentation and for breaches of representations
and warranties, agreements and covenants of the Depositor contained in Sections
3.01, 3.02 and 3.03 of the Loan Sale Agreement.
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The amount released from the Pre-Funding Account with respect
to a transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%)
of the aggregate principal balances as of the related Subsequent Cut-Off Date of
the Subsequent Mortgage Loans so transferred.
(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Depositor shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice,
which shall include a Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other information reasonably
requested by any of the foregoing with respect to the Subsequent
Mortgage Loans;
(ii) the Depositor shall have deposited in the Collection
Account all collections of (x) principal in respect of the Subsequent
Mortgage Loans received after the related Subsequent Cut-Off Date and
(y) interest due on the Subsequent Mortgage Loans after the related
Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date, the Depositor was
not insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
(iv) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Depositor shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and that the Subsequent
Mortgage Loans comply with the provisions of this Section 2.03 and each
complies with the terms of the Loan Sale Agreement, including each of
the representations and warranties made with respect thereto;
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Independent 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
(viii) the Originators and the Depositor shall have delivered
to the Trustee an executed copy of a subsequent transfer agreement,
substantially in the form of Exhibit L hereto.
(c) The obligation of the Trust to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements: (i) such Subsequent
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Mortgage Loan may not be 30 or more days contractually delinquent as of the
related Subsequent Cut-Off Date; (ii) the original term to maturity of such
Subsequent Mortgage Loan may not exceed ___ months; (iii) such Subsequent
Mortgage Loan must have a Mortgage Interest Rate of at least __%; (iv) the
purchase of the Subsequent Mortgage Loans is consented to by the Certificate
Insurer and the Rating Agencies; (v) the Principal Balance of any such
Subsequent Mortgage Loan may not exceed $_______; (vi) no more than __% of such
Subsequent Mortgage Loans may be second liens; (vii) no such Subsequent Mortgage
Loan shall have a CLTV of more than, (a) for consumer purpose loans, __%, and
(b) for business purpose loans, __%; (viii) no more than __% of such Subsequent
Mortgage Loans may be Balloon Loans; (ix) no more than __% of such Subsequent
Mortgage Loans may be secured by mixed-use properties, commercial properties, or
four or more unit multifamily properties; (x) no more than __% of such
Subsequent Mortgage Loans may be secured by commercial properties; and (xi)
following the purchase of such Subsequent Mortgage Loans by the Trust, the
Mortgage Loans (including the Subsequent Mortgage Loans) (a) will have a
weighted average Mortgage Interest Rate, (I) for consumer purpose loans, of at
least __% and (II) for business purpose loans, of at least ___%; and (b) will
have a weighted average CLTV of not more than (I) for consumer purpose loans,
__%, and (II) for business purpose loans, ___%.
(d) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.05.
(e) On each Subsequent Transfer Date upon written instruction
from the Depositor, the Trustee shall withdraw from the Capitalized Interest
Account and pay to the Depositor on such Subsequent Transfer Date the Overfunded
Interest Amount for such Subsequent Transfer Date, as calculated by the Trustee
with the cooperation of the Depositor and subject to the approval of the
Certificate Insurer.
(f) For any Subsequent Mortgage Loan that has a first Due Date
that occurs later than the last day of the Due Period following the Due Period
in which the Subsequent Mortgage Loan was sold to the Trust, on each applicable
Servicer Distribution Date, the Servicer will deposit into the Certificate
Account 30 days' interest at the Mortgage Interest Rate, net of the Servicing
Fee, for each month after the month in which the Subsequent Transfer occurs
until, but not including, the month in which first Due Date occurs.
Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. (a) Upon the issuance of the 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 Certificate Insurer.
(b) Pursuant to Section 2.05 of the Loan Sale Agreement, the
Depositor has delivered or caused to be delivered the Trustee's Mortgage File
related to each Mortgage Loan to the Trustee.
The Trustee will be the custodian or 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 all present
and future Certificateholders and the Certificate
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Insurer; 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 the Depositor or the Servicer and shall be
approved by the Certificate Insurer.
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 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
does hereby with respect to the Initial Mortgage Loans, and will on or before
the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, deliver
or cause to be delivered to the Trustee the following documents or instruments
with respect to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) the related Mortgage with evidence of recording indicated
thereon or a copy thereof certified by the applicable recording office;
(iii) the recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at such
Originator's option, be combined with the assignment referred to in
subpart (iv) hereof);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
related Originator to the Trustee;
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) an original title insurance policy (or (A) a copy of the
title insurance policy, or (B) a binder thereof or copy of such binder
together with a certificate from the related Originator that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
Depositor to the Trustee prior to or concurrently with the execution and
delivery of this Agreement (or, with respect to Subsequent Mortgage Loans, prior
to or on the Subsequent Transfer Date), due to a delay in connection with
recording, the Depositor may:
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(x) In lieu of delivering such original recorded Mortgage,
deliver to the Trustee a copy thereof provided that the related Originator
certifies that the original Mortgage has been delivered to a title insurance
company for recordation after receipt of its policy of title insurance or binder
therefor; and
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in recordable form,
otherwise complete except for recording information.
The Trustee shall promptly upon receipt thereof, with respect
to each Mortgage Note described in (i) above and each assignment described in
(iv) above, endorse such Mortgage Note and assignment as follows: "_______, as
Trustee under the Pooling and Servicing Agreement dated as of _______, _______."
As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the related Originator shall cause to be recorded, at the related Originator's
expense, in the appropriate public office for real property records, the
assignments of the Mortgages to the Trustee.
All original documents relating to the Mortgage Loans which
are not delivered to the Trustee, as permitted by Section 2.05(a) of the Loan
Sale Agreement and this Section 2.05(a), are and shall be held by the related
Originator, the Depositor or the Servicer in trust for the benefit of the
Trustee on behalf of the Certificateholders.
(b) Within 30 days following delivery of the Mortgage Files to
the Trustee, the Trustee will review each Mortgage File to ascertain that all
required documents set forth in Section 2.01(a) have been executed and received,
and that such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 30-day period
(or, with respect to any Qualified Replacement Mortgage, within 30 days after
the assignment thereof) the Trustee finds any document constituting a part of a
Mortgage File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule, the Trustee shall (i)
promptly notify the Class A Certificateholders in writing with the details
thereof, and (ii) promptly notify the Servicer, which shall have a period of 60
days after such notice within which to correct or cure any such defect. Each
original recorded assignment of a Mortgage shall be delivered to the Trustee
within 10 days following the date on which it is returned to the Servicer by the
office with which such assignment was filed for recording and within 10 days
following receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, the Trustee shall review such assignment to
confirm the information specified above with respect to the documents
constituting the Mortgage File. Upon receipt by the Trustee of the recorded
assignment or the assignment in recordable form, as the case may be, such
recorded assignment or assignment in recordable form shall become part of the
Mortgage File. The Trustee shall notify the Servicer of any defect in such
assignment based on such review. The Servicer shall have a period of 60 days
following such notice to correct or cure such defect. In the event that the
Servicer fails to record an assignment of a Mortgage as
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herein provided the Trustee shall, at the Servicer's expense, use reasonable
efforts to prepare and, if required hereunder, file such assignments for
recordation in the appropriate real property or other records and the Servicer
hereby appoints the Trustee as its attorney-in-fact with full power and
authority acting in its stead for the purpose of such preparation, execution and
filing.
(c) It is intended that the conveyance of the Mortgage Loans
and other property by the Depositor to the Trustee as provided in this Section
2.05 and Sections 2.02 and 2.03 be, and be construed as, a sale of the Mortgage
Loans and such other property by the Depositor to the Trustee for the benefit of
the Certificateholders. It is, further, not intended that such conveyance be
deemed a pledge of the Mortgage Loans or such other property by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor. However, in
the event that the Mortgage Loans or any of such other property are held to be
property of the Depositor, or if for any reason this Agreement is held or deemed
to create a security interest in the Mortgage Loans or any of such other
property, then it is intended that: (i) this Agreement shall also be deemed to
be a security agreement within the meaning of the Uniform Commercial Code; (ii)
the conveyance provided for in this Section shall be deemed to be a grant by the
Depositor to the Trustee of a security interest in all of the Depositor's right,
title and interest in and to the Mortgage Loans and such other property and all
amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Certificate Account, whether in the form of cash, instruments, securities or
other property; (iii) the possession by the Trustee or its agent of the Mortgage
Notes and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to the
Uniform Commercial Code; and (iv) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. The Depositor and the Trustee shall, to the extent consistent
with this Agreement, take such actions as may be necessary to ensure that, if
this Agreement were deemed to create a security interest in the Mortgage Loans
or any of such other property, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.
(d) Without diminution of the requirements of Sections 2.04(c)
and this Section 2.05, all original documents relating to the Mortgage Loans
that are not delivered to the Trustee are 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 2.05 to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee pursuant to the Loan Sale
Agreement. 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 Depositor's master data
processing records evidencing each
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Mortgage Loan with a legend, acceptable to the Trustee, evidencing that the
Trust has purchased the Mortgage Loans and all right and title thereto and
interest therein pursuant to the Loan Sale Agreement and this Agreement.
Section 2.06 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 and the Servicer on or prior
to the Closing Date an acknowledgment of receipt of the Certificate Insurance
Policy and, on or prior to the Closing Date or any Subsequent Transfer Date,
with respect to each Mortgage Loan transferred on such date, 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, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Trustee's Mortgage File within 30 days after the
Closing Date (with respect to the Initial Mortgage Loans) or any Subsequent
Transfer Date (with respect to the Subsequent Mortgage Loans), as applicable,
and to deliver to 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 2.05 are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Mortgage Loan Schedule as to the information set forth in (i), (ii), (v) and
(vi) of the definition of "Mortgage Loan Schedule" set forth herein accurately
reflects the information set forth in the Trustee's Mortgage File delivered on
such date. 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.
Within 90 days of the Closing Date, with respect to the
Initial Mortgage Loans, and within 90 days of any Subsequent Transfer Date, with
respect to the Subsequent Mortgage Loans transferred on such date, the Trustee
shall deliver (or cause to be delivered) to the Servicer, the Depositor, the
Rating Agencies and the Certificate Insurer a final certification in the form
attached hereto as Exhibit G 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 2.05 are in its possession, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise physically
altered (handwritten additions, changes or corrections shall not constitute
physical alteration if initialed by the Mortgagor), appears regular on its face
and relates to such Mortgage Loan, and (iii) based on its examination and only
as to the foregoing documents, the information set forth in (i), (ii), (v) and
(vi) of the definition of "Mortgage Loan Schedule" set forth herein
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accurately reflects the information set forth in the Trustee's Mortgage File
delivered on such date.
(b) If 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 2.05 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Depositor,
the Certificate Insurer and the Trustee. In performing any such review, the
Trustee may conclusively rely on the Depositor 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 2.05 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule.
Pursuant to the Loan Sale Agreement, the Depositor and the Originators have
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 Depositor 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, the
Depositor and the Originators will be obligated, pursuant to the Loan 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 3.03 or (ii) purchase such Mortgage Loan at a purchase price equal to
the Principal Balance of such Mortgage Loan as of the date of purchase, plus all
accrued and unpaid interest on such Principal Balance computed at the Mortgage
Interest Rate, net of the Servicing Fee if the Depositor or an Originator, as
applicable, is the Servicer, 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 Collection Account on the next succeeding
Servicer Distribution Date, after deducting therefrom any amounts received in
respect of such repurchased Mortgage Loan or Loans and being held in the
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"). For purposes of calculating the Available Funds, any Loan
Repurchase Price or Substitution Adjustment that is paid shall be deemed
deposited in the Certificate Account in the Due Period preceding such Servicer
Distribution Date.
(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 in the Collection Account (which
certification shall be in the form of Exhibit H hereto), the Trustee shall
release to the Servicer for release to the Depositor the related Trustee's
Mortgage File and shall execute, without recourse, and deliver such instruments
of transfer furnished by the Depositor as may be necessary to transfer such
Mortgage Loan to the Depositor. The Trustee shall notify the Certificate Insurer
if the Depositor fails to repurchase or substitute for a Mortgage Loan in
accordance with the foregoing.
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Section 2.07 Designations under REMIC Provisions; Designation
of Startup Day. (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 REMIC Trust for the purposes of the REMIC
Provisions.
(b) The Closing Date will be the "startup day" of the REMIC
Trust within the meaning of Section 860G(a)(9) of the Code.
Section 2.08 Execution of Certificates. The Trustee
acknowledges the assignment to it of the Mortgage Loans and the delivery of the
Trustee's Mortgage Files relating thereto to it 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 duly
authenticated by the Trustee in Authorized Denominations evidencing the entire
ownership of the Trust Fund.
Section 2.09 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the 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 and then to
principal.
Section 2.10 Grant of Security Interest. (a) Except with
respect to the REMIC Provisions, it is the intention of the parties hereto that
the conveyance by the Depositor of the Trust Fund to the Trustee on behalf of
the Trust shall constitute a purchase and sale of such Trust Fund and not a
loan. In the event, however, that a court of competent jurisdiction were to hold
that the transaction evidenced hereby constitutes a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted 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. The conveyance by the Depositor of the
Trust Fund to the Trustee on behalf of the Trust shall not constitute and is not
intended to result in an assumption by the Trustee or any Certificateholder of
any obligation of the Depositor or any other Person in connection with the Trust
Fund.
(b) The Depositor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Fund and each 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.
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Section 2.11 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Depositor, 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 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 Loan Sale Agreement as may be necessary or desirable to
effectuate the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 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 that:
(a) Each of the Depositor, the Servicer and the Subservicers
is a corporation duly organized, validly existing and in good standing under the
laws of their respective states of incorporation and has the corporate power to
own its assets and to transact the business in which it is currently engaged.
Each of the Depositor, the Servicer and the Subservicers is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties owned or
leased by it or the performance of its obligations hereunder requires such
qualification and in which the failure so to qualify could reasonably be
expected to have a material adverse effect on the business, properties, assets,
or condition (financial or other) of the Depositor, the Servicer or the
Subservicers or the performance of their respective obligations hereunder;
(b) The Depositor and the Servicer each has the power and
authority to make, execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Depsitor and the Servicer,
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies;
(c) Neither the Depositor nor the Servicer is required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency which consent already has not been obtained
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in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except such as have been obtained prior to the
Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Depositor and the Servicer will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of the Depositor or the Servicer, respectively, or
constitute a breach of any mortgage, indenture, contract or other Agreement to
which the Depositor or the Servicer, respectively, is a party or by which it may
be bound;
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer, the Depositor or the Subservicers
which, either in any one instance or in the aggregate, is, in the Servicer's and
the Depositor's judgment, likely to result in any material adverse change in the
business, operations, financial condition, properties, or assets of the
Servicer, the Depositor or the Subservicers, or in any material impairment of
the right or ability of any of them to carry on its business substantially as
now conducted, or in any material liability on the part of any of them, or which
would draw into question the validity of this Agreement, the Certificates, or
the Mortgage Loans or of any action taken or to be taken in connection with the
obligations of the Depositor or the Servicer contemplated herein or therein, or
which would be likely to impair materially the ability of the Depositor or the
Servicer to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby, including, without
limitation, the sale or placement of the Certificates, contains any untrue
statement of fact provided by or on behalf of the Depositor or the Servicer or
omits to state a fact necessary to make the statements provided by or on behalf
of the Depositor or the Servicer contained herein or therein not misleading:
(g) Neither the Depositor nor the Servicer believes, nor does
either have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement;
(h) The transfer, assignment, and conveyance of the Mortgage
Loans by the Depositor pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction;
(i) The Depositor is solvent and will not as a result of this
Agreement and the undertakings of the Depositor hereunder be rendered insolvent;
and
(j) None of the Depositor, the Servicer or the Subservicers is
an "investment company" or a company "controlled by an investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 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.
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Section 3.02 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 made on or prior to the
Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(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
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(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 may materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 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.
Section 3.03 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01,
3.02 and 3.03 of the Loan Sale Agreement shall survive delivery of the
Certificates to the Certificateholders. Pursuant to the Loan Sale Agreement,
with respect to any representation or warranty contained in Sections 3.01, 3.02
or 3.03 of the Loan Sale Agreement that is made to the best of the Depositor's
knowledge, if it is discovered by the Servicer, any Subservicer, the Trustee,
the Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Depositor'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 Depositor, 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 the Certificate Insurer, 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 Depositor's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
Subject to the last paragraph of this Section 3.03, 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 Loan Sale Agreement, the Servicer
shall, or shall cause the Depositor or an Originator to (a) promptly cure such
breach in all material respects, or (b) purchase such Mortgage Loan on the next
succeeding Servicer Distribution Date, in the manner and at the price specified
in Section 2.06(b), or (c) remove such Mortgage Loan from the Trust Fund (in
which case it 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 Day or at
such later date, if the Trustee and the Certificate Insurer receive an Opinion
of Counsel to the effect set forth below in this Section. In addition, pursuant
to the Loan Sale Agreement, the Depositor and the related Originator shall be
obligated to indemnify the Trustee, the Certificateholders and the Certificate
Insurer for any third party claims arising out of a breach by the Depositor of
representations or warranties regarding the Mortgage Loans. Pursuant to the Loan
Sale Agreement any such substitution shall be accompanied by payment by the
Depositor of the Substitution Adjustment, if any, to be deposited in the
Collection Account.
(b) As to any Deleted Mortgage Loan for which the Depositor
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Depositor or an Originator, as applicable, to effect such substitution
by delivering to the Trustee a certification in
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the form attached hereto as Exhibit H, executed by a Servicing Officer and the
documents described in Sections 2.05(a)(i)-(vi) for such Qualified Substitute
Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Depositor. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Depositor 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
Depositor and the related Originator set forth in Sections 2.05 and 3.05 of the
Loan Sale Agreement to, and the Servicer's obligation to cause the Depositor and
the Originator to, cure, purchase or substitute for a defective Mortgage Loan,
or to indemnify as described in clause (a) above, constitute the sole remedies
of the Trustee, the Certificate Insurer and the Certificateholders respecting a
breach of the representations and warranties of the Depositor set forth in
Sections 3.01 and 3.02 of the Loan Sale Agreement. The Trustee shall give prompt
written notice to the Certificate Insurer and the Rating Agencies of any
repurchase or substitution made pursuant to this Section 3.03 or Section
2.06(b).
(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 party discovering such fact shall promptly
(and in any event within 5 days of the discovery) give written notice thereof to
the other parties. In connection therewith, pursuant to the Loan Sale Agreement,
the Depositor 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 Depositor's receipt of notice, in the same manner as it would a Mortgage
Loan for a breach of representation or warranty contained in Sections 3.01, 3.02
or 3.03 of the Loan Sale Agreement. The Trustee shall reconvey to the Depositor
the Mortgage Loan to be released pursuant hereto in the same manner, and on the
same terms and conditions, as it would a Mortgage Loan repurchased for breach of
a representation or warranty contained in Sections 3.01, 3.02 or 3.03 of the
Loan Sale Agreement.
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates. The Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6 and Class R Certificates shall be
substantially in the forms annexed hereto as Exhibits A and B, as applicable.
All Certificates shall be executed by manual or facsimile
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signature on behalf of the Trustee by an authorized officer and authenticated by
the manual or facsimile signature of an authorized officer. Certificates bearing
the signatures of individuals who were at the time of the execution of the
Certificates 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 did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.
Section 4.02 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 registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and copy the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
(b) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(c) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(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 Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Certificate for each Class with a denomination equal to the Original Certificate
Principal Balance for such Class. 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 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 Servicer, the Trustee and the Certificate
Insurer shall have no responsibility or obligation with respect to (i) the
accuracy of the records of
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the Depository, Cede & Co., or any Direct or Indirect Participant with respect
to any Ownership Interest, (ii) the delivery to any Direct or Indirect
Participant or any other Person, other than a Certificateholder, of any notice
with respect to the Class A Certificates or (iii) the payment to any Direct or
Indirect Participant or any other Person, other than a Certificateholder, of any
amount with respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a Certificateholder shall receive a
certificate evidencing such 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 name "Cede & Co." in this Agreement
shall refer to such new nominee of the Depository.
(f) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Servicer or the Depository is unable
to locate a qualified successor or (ii) the Trustee at its sole option elects to
terminate the book-entry system through the Depository, the Class A Certificates
shall no longer be restricted to being registered in the Certificate Register in
the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At
that time, the Servicer may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Servicer.
(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) No transfer, sale, pledge or other disposition of any
Class R Certificate shall be made unless such disposition is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
and effective registration or qualification under applicable state securities
laws or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Depositor or the
Trustee is obligated under this Agreement to register 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 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
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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 different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to appoint counsel to defend such action
and approval by the indemnified party of such counsel, the indemnifying party
will not be liable to such indemnified party under this paragraph for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso of the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel for any indemnified party),
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. Under no circumstances shall the indemnified party enter
into a settlement agreement with respect to any lawsuit, claim or other
proceeding without the prior written consent of the indemnifying party.
(i) 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 Percentage Interest 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 Percentage 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 cancelled and destroyed by the
Trustee in accordance with the Trustee's standard procedures.
(j) No transfer of a Class A Certificate shall be made to the
Depositor or, to the actual knowledge of a Responsible Officer of the Trustee,
to any of the Depositor's Affiliates, successors or assigns.
(k) 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
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its designee as its attorney-in-fact to negotiate the terms of any mandatory
sale under clause (8) 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 of, 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, in form and substance satisfactory to the
Trustee, 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 as 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 4.02(k) and agrees to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if the
Trustee has actual knowledge that the proposed Transferee is not a
Permitted Transferee, no Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest
in a Class R Certificate shall agree (x) to require a Transfer
Affidavit and Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a Class R Certificate
and (y) not to transfer its Ownership Interest unless it provides a
certificate (attached hereto as Exhibit J) to the Trustee stating that,
among other things, it has no actual knowledge that such other Person
is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest in
a Class R Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class R Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on behalf of, a
"pass-through interest holder".
(vi) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. In
addition, no Transfer of a Class R Certificate shall be made unless the
Trustee shall have received a representation letter from the Transferee
of such Certificate
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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 4.02 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 4.02, 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 4.02.
Knowledge shall not be imputed to the Trustee with respect to an
impermissible transfer in the absence of such a written notice or
discovery by a Responsible Officer. The Trustee shall be under no
liability to any Person for any registration of transfer of a Class R
Certificate that is in fact not permitted by this Section 4.02 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
4.02, 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 4.02 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 clause (8) 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.
(l) The provisions of Section 4.02(k) 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 REMIC Trust to cease to qualify as a REMIC and will not cause (x) the REMIC
Trust 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
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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
Person that is not a Permitted Transferee.
(m) 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 it 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.
Section 4.03 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 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 Percentage Interest, but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section 4.03, 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 4.03 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 4.04 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Servicer, the Depositor, 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 6.05 and for all other purposes whatsoever, and the
Servicer, the Depositor, the Certificate Insurer and the Trustee shall not be
affected by notice to the contrary.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 REMIC Matters; The Servicer. (a) The parties
intend that the Trust Fund formed hereunder shall, except for the Capitalized
Interest Account and the Pre-Funding Account, constitute, and that the affairs
of the Trust Fund shall be conducted and this Agreement shall be construed so as
to qualify the Trust Fund as, a "real estate mortgage investment conduit" as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Trustee covenants and agrees that it shall, to the extent
permitted by applicable law, act as agent (and the Trustee is hereby appointed
to act as agent) on behalf of the
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Trust Fund and that in such capacity it shall: (a) prepare and file, or cause to
be prepared and filed, all required federal, state and local tax returns for the
REMIC using a calendar year as the taxable year for the Trust Fund when and as
required by the REMIC Provisions and other applicable federal, state and local
income tax laws; (b) maintain or cause the maintenance of the books of the Trust
Fund on the accrual method of accounting; (c) make an election, on behalf of the
Trust Fund, to be treated as a REMIC on the federal tax return of the Trust Fund
for its first taxable year, in accordance with the REMIC Provisions; provided,
however, that such election shall not be made with respect to the Capitalized
Interest Account and the Pre-Funding Account and shall specifically exclude the
Capitalized Interest Account and the Pre-Funding Account from the assets for
which a REMIC election is made; (d) prepare and forward, or cause to be prepared
and forwarded, to the Certificateholders all information reports as and when
required to be provided to them in accordance with the REMIC Provisions; (e)
conduct the affairs of the Trust Fund at all times that any Certificates are
outstanding so as to maintain the status thereof as a REMIC under the REMIC
Provisions; and (f) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of the
Trust Fund.
The Capitalized Interest Account is an "outside reserve fund"
within the meaning of Treasury Regulations Section 1.860G-2(h) and is not an
asset of the REMIC. The Depositor is the owner of the Capitalized Interest
Account for purposes of Treasury Regulations Section 1.860G-2(h). For all
federal income tax purposes, amounts transferred by the REMIC to the Capitalized
Interest Account, if any, will be treated as amounts distributed by the REMIC to
the Depositor.
In the event that any income tax (including any tax with
regard to "prohibited transactions" of the Trust Fund as defined in Section 860F
of the Code) is imposed on the Trust Fund, such tax shall be charged against
amounts otherwise distributable to the Holders of the Class R Certificates on a
pro rata basis to the extent hereinafter provided. In the event that any such
tax shall be due and owing at a time when amounts otherwise distributable to the
Holders of the Class R Certificates are not available, the Trustee shall pay
such tax from its own funds. In such event, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the Class R
Certificates on any Distribution 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) (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any such tax
in appropriate proceedings and shall prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings).
(b) The Servicer shall service and administer the Mortgage
Loans in accordance with the Accepted Servicing Practices and shall have full
power and authority to do any and all things not inconsistent therewith in
connection with such servicing and administration which it may deem necessary or
desirable subject to the limitations set forth in this Agreement. The Trustee
shall furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Without limiting the generality of the
foregoing, the Servicer shall continue, 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
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cancellation, or of partial or full release or discharge and all other
comparable instruments, and to effect such modifications, waivers, indulgences
and other like matters as are in its judgment necessary or desirable, with
respect to the Mortgage Loans and the Mortgaged Properties and the servicing and
administration thereof. The Servicer shall notify the Trustee of any such
waiver, release, discharge, modification, indulgence or other such matter by
delivering to the Trustee an Officer's Certificate certifying that such
agreement is in compliance with this Section 5.01(b) together with the original
copy of any written agreement or other document executed in connection
therewith, all of which written agreements or documents shall, for all purposes,
be considered a part of the related Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Notwithstanding
anything in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, reduce or increase the principal balance, change the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Certificate
Insurer consents to such modifications in writing; provided, however, that the
Servicer shall be permitted to extend the final maturity date on a Mortgage Loan
by 180 days or less without the consent of the Certificate Insurer.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make its reasonable 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, follow the Accepted Servicing Practices. Consistent with the
foregoing, the Servicer may in its discretion waive any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loans.
(b) The Servicer shall establish and maintain in the name of
the Trustee the Collection Account, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on a daily basis (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal collected and interest due on the
Mortgage Loans on or before the Cut-Off Date):
(i) Payments of interest on the Mortgage Loans;
(ii) Payments of principal of the Mortgage Loans;
(iii) The Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06 or 5.05;
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(iv) The Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Replacement Mortgages are received
pursuant to Sections 2.06 and 3.03;
(v) All Liquidation Proceeds; and
(vi) All Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to the last
sentence of Section 5.04).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Trustee shall invest any funds in the Collection
Account in Permitted Investments as directed by the Servicer, which shall mature
not later than the Business Day next preceding the Distribution Date next
following the date of such investment (except that any investment held by the
Trustee may mature on such Distribution Date) and shall not be sold or disposed
of prior to its maturity. All net income and gain realized from any such
investment shall be for the benefit of the Servicer and shall be subject to its
withdrawal or order on a Distribution Date. The Servicer shall deposit from its
own funds the amount of any loss, to the extent not offset by investment income
or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Trustee shall make withdrawals from the Collection Account, on any
Distribution Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not to exceed
the amount of the sum of the related Insurance Proceeds and Liquidation Proceeds
deposited in the Collection Account pursuant to Section 5.02(c)(v)-(vi);
(b) to reimburse the Servicer for amounts expended by it
pursuant to Section 5.04 in good faith in connection with the restoration of
damaged property, in an amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant to clause (i)
above) and amounts representing proceeds of other insurance policies covering
the property subject to the related Mortgage deposited in the Collection Account
pursuant to Section 5.02(c)(v)-(vi);
(c) to pay to the Depositor amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Depositor to the
extent that the distribution of any such amounts on the Distribution Date upon
which the proceeds of such purchase are distributed would make the total amount
distributed in respect of any such Mortgage Loan on such Distribution Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;
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(d) to reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for which it has
made a Servicing Advance, from subsequent collections with respect to interest
on such Mortgage Loans and from Liquidation Proceeds, Insurance Proceeds and/or
the Loan Repurchase Price or Substitution Adjustment of or relating to such
Mortgage Loans;
(e) to reimburse the Servicer 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;
(f) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(g) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein; and
(h) to pay the Servicer Servicing Compensation pursuant to
Section 5.08 hereof to the extent not retained or paid.
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 5.04 Hazard Insurance Policies; Property Protection
Expenses. (a) The Servicer shall cause to be maintained for each Mortgage Loan a
hazard insurance policy with extended coverage which contains a standard
mortgagee's clause with an appropriate endorsement in an amount equal to the
lesser of (a) the maximum insurable value of the related Mortgaged Property or
(b) the sum of the Principal Balance of such Mortgage Loan plus the outstanding
balance of any mortgage loan senior to such Mortgage Loan, but in no event shall
such amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the combined Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan,
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other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Certificate
Insurer insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), 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 Property a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the Principal Balance of the related Mortgage Loan and the balance of the
related first lien, if any, (ii) the maximum insurable value of the related
Mortgaged Property, and (iii) the maximum amount of such insurance available for
the related Mortgaged Property under the national flood insurance program
(assuming that the area in which such Mortgaged Property is located is
participating in such program).
Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Certificate Insurer, to take or enter into an
assumption and modification agreement from or with the Person to whom such
property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Mortgage Note and the Mortgagor remains liable thereon
or, if the Servicer in its reasonable judgment finds it appropriate, is released
from liability thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee and the Certificate Insurer an Officer's Certificate certifying that
such agreement is in compliance with this Section 5.05 together with the
original copy of such assumption and modification agreement. Any such assumption
and modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the then
current Mortgage Interest Rate thereon shall not be increased or decreased. Any
fee collected by the Servicer for entering into any such agreement will be
retained by the Servicer as additional servicing compensation. At its sole
election, the Servicer may purchase from the Trust Fund any Mortgage Loan that
has been assumed in accordance with this Section 5.05 within one month after the
date of such assumption at a price equal to the greater of (i) the fair market
value of such Mortgage Loan (as determined by the Servicer in its
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good faith judgment) and (ii) the Loan Repurchase Price. Such amount, if any,
shall be deposited into the Collection Account in the Due Period in which such
repurchase is made.
Notwithstanding the foregoing paragraph of this Section 5.05
or any other provision of this Agreement, the Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure. In connection with such foreclosure or other conversion, the
Servicer shall follow such practices (including, in the case of any default on a
related senior mortgage loan, the advancing of funds to correct such default)
and procedures which are consistent with the Accepted Servicing Practices as it
shall deem necessary or advisable and as shall be normal and usual in its
general first and second mortgage loan servicing activities. 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 towards the correction of any
default on a related senior mortgage loan or restoration of any property unless,
in the reasonable judgment of the Servicer, such expenses will be recoverable
from Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee on behalf
of Certificateholders. In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust Fund within two years after its acquisition by the Trust
Fund unless the Servicer shall have furnished the Trustee with an Opinion of
Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined in
Section 860F of the Code or cause the Trust Fund to fail to qualify as a REMIC
at any time that any Certificates are outstanding.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Class R Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 8.01(b)) will
be applied in the following order of priority, in each case to the extent of
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available funds: first, to pay the Servicer any accrued and unpaid Servicing
Fees relating to such Mortgage Loan; second, to reimburse the Servicer or any
Subservicer for any related unreimbursed Servicing Advances, and any related
unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Loan Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 5.07 Trustee to Cooperate. Upon the payment in full of
the Principal Balance of any Mortgage Loan, the Servicer will notify the Trustee
by a certification (which certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 5.02 have been so
deposited) of a Servicing Officer. Upon any such payment in full, the Servicer
is authorized to execute, pursuant to the authorization contained in Section
5.01, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction shall be reimbursed from the Collection Account. From
time to time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a trust receipt signed by a Servicing Officer, release the related
Mortgage File to the Servicer and shall execute such documents as shall be
necessary for the prosecution of any such proceedings. Such trust receipt 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 that hereinabove specified, the trust receipt shall be released by
the Trustee to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive and the Trustee shall pay, out of collections on the Mortgage Loans
for the Due Period, as servicing compensation for such Due Period, an amount
(the "Monthly Servicing Fee") equal to the product of one-twelfth of the
Servicing Fee Rate and the Pool Balance as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late
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payment charges or extension and other administrative charges shall be retained
by the Servicer. The Servicer shall be required to pay all expenses incurred by
it in connection with its activities hereunder (including payment of all fees
and expenses of the Subservicer and payment of the Trustee Fee to the extent
that monies in the Collection Account are insufficient therefor, as provided in
Section 9.05 hereof, and all other fees and expenses not expressly stated
hereunder to be payable by or from another source) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Trustee, the Rating Agencies, the Certificate Insurer and
each Certificateholder, on or before April 30 of each year, beginning _______,
an Officer's Certificate of the Servicer stating that (a) 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 (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material 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.
Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning _______, the Servicer at
its expense shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants (who may also
render other services to the Servicer) to furnish a report to the Trustee, the
Rating Agencies and each Certificateholder to the effect that such firm has
examined certain documents and records relating to the servicing of mortgage
loans under Pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement, and that such examination, which has
been conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers (to the extent that the procedures in such audit
guide are applicable to the servicing obligations set forth in such agreements),
has disclosed no items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. Each of the
Servicer and the Depositor shall permit the designated agents or representatives
of each Certificateholder, the Certificate Insurer and the Trustee (i) to
examine and make copies of and abstracts from all books, records and documents
(including computer tapes and disks) in the possession or under the control of
the Servicer or the Depositor relating to the Mortgage Loans and (ii) to visit
the offices and properties of the Servicer and of the Depositor for the purpose
of examining such materials and to discuss matters relating to the Mortgage
Loans and the Servicer's and the Depositor's performance under this Agreement
with any of the officers or employees of the Servicer and the Depositor having
knowledge thereof and with the independent public accountants of the Servicer
(and by this provision the Servicer and the Depositor each authorize their
respective accountants to discuss their respective finances and affairs), all at
such reasonable times, as often as may be reasonably requested and without
charge to such Certificateholder, the Certificate Insurer or the Trustee.
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Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicers. The parties acknowledge that
the Servicer intends to appoint the Subservicers as the Servicer's agent for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
originated in the State of New Jersey. The Servicer agrees to cause the
Subservicers to service such Mortgage Loans in a manner consistent with the
Accepted Servicing Practices set forth in this Agreement, and agrees that
receipt by the Subservicers of any and all amounts which by the terms hereof are
required to be deposited in the Collection Account shall constitute receipt
thereof by the Servicer for all purposes hereof as of the date so received by
the Subservicers. Notwithstanding such designation of the Subservicers, the
Servicer agrees that it is, and it shall remain, fully obligated under the terms
hereof as Servicer with respect to all such Mortgage Loans, and nothing herein
shall relieve or release the Servicer from its obligations to the other parties
hereto to service such Mortgage Loans in the manner provided in this Agreement.
Section 5.14 Reports to the Trustee; Collection Account
Statements. Not later than 15 days after each Distribution 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 as of
the close of business on the related Distribution 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 for each category of deposit specified in Section
5.02 and each category of withdrawal specified in Section 5.03 and the aggregate
of deposits into the Collection Account as specified in Section 6.01(c). 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 Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) The Depositor or any Affiliate of the Depositor, in its sole discretion,
shall have the right to elect (by written notice sent to the Servicer, the
Trustee and the Certificate Insurer), but shall not be obligated, to purchase
for its own account from the Trust Fund any Mortgage Loan which is 90 days or
more Delinquent in the manner and at the price specified in Section 2.06(b)
except that the amount described in clause (ii) of Section 2.06(b) shall in no
case be net of the Servicing Fee. The purchase price for any Mortgage Loan
purchased hereunder shall be deposited in the Collection Account and the
Trustee, upon receipt of such deposit, shall release or cause to be released to
the purchaser of such Mortgage Loan the related Trustee's Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared by
the purchaser of such Mortgage Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan
released pursuant hereto and the purchaser of such
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Mortgage Loan shall succeed to all the Trustee's right, title and interest in
and to such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The purchaser
of such Mortgage Loan shall thereupon own such Mortgage Loan, and all security
and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
(b) After the Depositor or an Affiliate of the Depositor has
repurchased defaulted Mortgage Loans in a principal amount equal to 1% of the
Maximum Collateral Amount, then notwithstanding the foregoing, unless the
Certificate Insurer consents, any such Depositor or Affiliate of the Depositor
may only exercise its option pursuant to this Section 5.15 with respect to the
Mortgage Loan or Mortgage Loans that have been Delinquent for the longest period
at the time of such repurchase. Any request by such the Depositor or Affiliate
to the Certificate Insurer for consent to repurchase Mortgage Loans that are not
the most Delinquent shall be accompanied by a description of the Mortgage Loans
that have been Delinquent longer than the Mortgage Loan or Mortgage Loans the
Depositor or such Affiliate proposes to repurchase. If the Certificate Insurer
fails to respond to such request within 10 Business Days after receipt thereof,
the Depositor or such Affiliate may repurchase the Mortgage Loan or Mortgage
Loans proposed to be repurchased without the consent of, or any further action
by, the Certificate Insurer. Notice to the Certificate Insurer shall be
delivered in accordance with the terms of the Insurance and Indemnity Agreement.
Section 5.16 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 audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited 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 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to all of the Mortgage Loans and each
Distribution Date shall be offset on such Distribution 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 month preceding
the month of such Distribution Date. The amount of any offset against the
Monthly Servicing Fee with respect to any Distribution Date under this Section
5.17 shall be limited to the Monthly Servicing Fee otherwise payable to the
Servicer (without adjustment on account of Prepayment
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Interest Shortfalls) with respect to such Distribution Date, and the rights of
the Certificateholders to the offset of the aggregate Prepayment Interest
Shortfalls shall not be cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the close of business on the Business Day
preceding such Servicer Distribution Date, the Servicer shall determine the
amount of any Periodic Advance required to be made with respect to the related
Distribution Date. The Servicer shall, one Business Day after such Servicer
Distribution Date, deliver a magnetic tape or diskette to the Trustee indicating
the payment status of each Mortgage Loan as of such Servicer Distribution Date.
The Servicer shall include in the amount to be deposited in the Collection
Account on such Servicer Distribution Date an amount equal to the Periodic
Advance, if any, 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 Distribution 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 in the Collection Account on or
before the Business Day preceding any such future Servicer Distribution Date to
the extent that funds in the Collection Account on such Servicer Distribution
Date shall be less than payments to Certificateholders required to be made on
such 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 determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03.
(b) In addition to the Periodic Advances the Servicer shall
make a special advance (the "Special Advance") on the Servicer Distribution Date
occurring in _______, of $_______, with respect to interest on Mortgage Loans
not having their first payment due until after _______. The Special Advance
shall be made without regard to recoverability, and shall not be reimbursable.
In no event shall the Trustee, as successor Servicer, be liable for the payment
of the Special Advance.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Depositor, the Trustee, the
Certificate Insurer and each Certificateholder harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Depositor, the
Trustee, the Certificate Insurer and any Certificateholder may sustain in any
way related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement. 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 assume the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Depositor, the Servicer, the Trustee, the Certificate Insurer and/or a
Certificateholder in respect of such claim. The Trustee shall reimburse the
Servicer in accordance with Section 5.08 hereof for all amounts advanced by it
pursuant to the preceding sentence except when the claim relates directly to the
failure of the
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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 may, if necessary, reimburse the Servicer from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by it pursuant to Section 4.04(a)(ii) of the Loan Sale Agreement,
except when the claim relates directly to the failure of the Servicer, if it is,
or is an Affiliate of, the Depositor, to perform its obligations to service and
administer the Mortgages in compliance with the terms of the Loan Sale
Agreement, or the failure of the Depositor to perform its duties in compliance
with the terms of this Agreement.
(c) The Trustee shall reimburse the Depositor from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
the Depositor pursuant to the second sentence of Section 4.04(a)(ii) of the Loan
Sale Agreement except when the relevant claim relates directly to the failure of
the Depositor to perform its duties in compliance with the terms of the Loan
Sale Agreement.
Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 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 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 5.21 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 consent of the
Servicer, the Depositor, 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 incurring, in the reasonable judgment of the Certificate Insurer,
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 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
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the Servicer's responsibilities and obligations hereunder in accordance with
Section 7.02. The Servicer shall provide the Trustee, the Rating Agencies and
the Certificate Insurer with 30 days prior written notice of its intention to
resign pursuant to this Section 5.21.
Section 5.22 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, 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 reasonable 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 9.05 and shall not be paid by
the Trust.
The Servicer and the Depositor each agree to promptly furnish
to the Trustee, from time to time upon request, such further information,
reports and financial statements as the Trustee deems appropriate to prepare and
file all necessary reports with the Securities and Exchange Commission.
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.1 Establishment of Accounts; Withdrawals from
Accounts; Deposits to the Certificate Account. (a) The Trustee shall establish
and maintain the Certificate Account which shall be titled "Certificate Account,
_______, as trustee for the registered holders of _______, Mortgage Pass-Through
Certificates, Series _____", the Pre-Funding Account which shall be titled
"Pre-Funding Account, _______, as trustee for the registered holders of _______,
Mortgage Pass-Through Certificates, Series _______", the Capitalized Interest
Account which shall be titled "Capitalized Interest Account, _______, as trustee
for the registered holders of _______, Mortgage Pass-Through Certificates,
Series _______", each of which such Account shall be an Eligible Account. Upon
receipt of the proceeds of the sale of the Certificates, on the Closing Date,
the Trustee shall, upon the Depositor's direction, from the proceeds of the sale
of the Certificates, deposit, on behalf of the Certificateholders (i) in the
Pre-Funding Account, the Original Pre-Funded Amount, and (ii) in the Capitalized
Interest Account, an amount equal to $_______.
(b) The Servicer may direct the Trustee in writing to invest
the funds in the Certificate Account only in Permitted Investments. 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
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860F(a)(1), otherwise subject the Trust Fund to tax or cause the Trust Fund to
fail to qualify as a REMIC and the Certificate Insurer consents to such
disposition. 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 Certificate Account by the Servicer out of
its own funds immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall
cause to be deposited in the Certificate Account, from funds on deposit in the
Collection Account, (a) an amount equal to the Servicer Remittance Amount and
(b) Net Foreclosure Profits, if any with respect to the related Distribution
Date, minus any portion thereof payable to the Servicer pursuant to Section
5.03. On each Servicer Distribution Date, the Servicer shall also deposit into
the Certificate Account any Periodic Advances with respect to the related
Distribution Date calculated in accordance with Section 5.18 and any amounts
required to be deposited in connection with a Subsequent Mortgage Loan pursuant
to Section 2.03(f); on the Servicer Distribution Dates occurring on _________,
the Servicer also will deposit the Special Advance;
(d) On the _______ and _______ Distribution Dates, the Trustee
shall transfer from the Capitalized Interest Account to the Certificate Account
the Capitalized Interest Requirement, if any, for such Distribution Date.
(e) On the Distribution Date following either the final
Subsequent Transfer Date or _______ whichever date is earlier, any amounts
remaining in the Capitalized Interest Account, after taking into account the
transfers on such Distribution Date described in clause (d) above, shall be paid
to the Depositor, and the Capitalized Interest Account.
(f) On any Subsequent Transfer Date, the Depositor shall
instruct in writing the Trustee to withdraw from the Pre-Funding Account an
amount equal to 100% of the aggregate Principal Balances as of the related
Subsequent Cut-Off Date of the Subsequent Mortgage Loans sold to the Trust on
such Subsequent Transfer Date and pay such amount to or upon the order of the
Depositor upon satisfaction of the conditions set forth in Section 2.03(b) and
(c) hereof with respect to such transfer. The Trustee may conclusively rely on
such written instructions from the Depositor.
(g) If the Pre-Funding Amount (exclusive of Pre-Funding
Earnings) has been reduced to $100,000 or less by ___________, then, on the
_________ Distribution Date after giving effect to any reductions in the
Pre-Funding Amount on such date, the Trustee shall withdraw from the Pre-Funding
Account on such date and deposit in the Certificate Account the amount on
deposit in the Pre-Funding Account other than any Pre-Funding Earnings; if the
Pre-Funding Amount has not been reduced to zero by _______, and the remaining
Pre-Funding Amount (exclusive of Pre-Funding Earnings) is (i) less than or equal
to 1% of the Pool Principal Balance on such date, the Trustee shall withdraw
from the Pre-Funding Account the amount on deposit therein, other than the
Pre-Funding Earnings, and deposit such amount into the Collection Account or
(ii) greater than 1% of the Pool Principal Balance on such date, the Trustee
shall withdraw from the Pre-Funding Account the amount on deposit therein, other
than the Pre-Funding Earnings, and distribute such amount to the Holders of the
Class A Certificates, pro rata, as a separate payment of principal, on the
_______ Distribution Date.
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(h) On the _______ and the _______, Distribution Dates the
Trustee shall transfer from the Pre-Funding Account to the Certificate Account
the Pre-Funding Earnings, if any, applicable to each such date.
Section 6.02 Permitted Withdrawals From the Certificate
Account. The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Depositor with respect to each Mortgage Loan
or property acquired in respect thereof that has been repurchased or replaced
pursuant to Section 2.04 or 2.05 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 and not required to be distributed as of the date
on which the related repurchase or purchase price or Principal Balance was
determined;
(c) to pay the Servicer any interest earned on or investment
income earned with respect to funds in the Certificate Account;
(d) to return to the Collection Account any amount deposited
in the Certificate Account that was not required to be deposited therein; and
(e) to clear and terminate the Certificate Account upon
termination of the Trust Fund 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)
through (e) listed above.
Section 6.03 Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, as part of the Trust Fund and shall apply it as provided in this
Agreement.
Section 6.04 The Certificate Insurance Policy. (a) Within two
(2) days of each Servicer Distribution Date, the Trustee shall determine with
respect to the immediately following Distribution Date, the amount to be on
deposit in the Certificate Account on such Distribution Date as a result of the
(i) Servicer's remittance of the Servicer Remittance Amount on the related
Servicer Distribution Date, and (ii) any transfers to the Certificate Account
made from the Capitalized Interest Account and/or the Pre-Funding Account
relating to such Distribution Date pursuant to Section 6.01 hereof, excluding
the amount of any Insured Payment and prior to the application of the amounts
described in clauses (a)(i) through (a)(iii) of Section 6.05 for the
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related Distribution Date. The amounts described above in the preceding sentence
with respect to the Distribution Date are the "Available Funds".
(b) If on any Distribution Date there is an Available Funds
Shortfall, the Trustee shall complete a Notice in the form of Exhibit A to the
Certificate Insurance Policy and submit such notice to the Certificate Insurer
no later than 12:00 noon New York City time on the second Business Day preceding
such Distribution Date as a claim for an Insured Payment in an amount equal to
such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payment Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit upon receipt any amount paid under the Certificate Insurance
Policy in the Certificate Insurance Payment Account and distribute such amount
only for purposes of payment to the Certificateholders of the Insured
Distribution Amount for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy,
to the extent needed to pay the Insured Distribution Amount shall be transferred
to the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the Certificateholders in accordance with Section 6.05. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Insured Distribution Amount
with other funds available to make such payment. However, the amount of any
payment of principal or of interest on the Certificates to be paid from funds
transferred from the Certificate Insurance Payment Account shall be noted as
provided in paragraph (d) below in the Certificate Register and in the statement
to be furnished to Holders of the Certificates pursuant to Section 6.07. Funds
held in the Certificate Insurance Payment Account shall not be invested. Any
funds remaining in the Certificate Insurance Payment Account on the first
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Business Day.
(d) 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 the 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.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any 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 Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to the
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the 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
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evidencing the payments which have been made by the Trustee and subsequently
recovered from the Certificateholders, and dates on which such payments were
made.
(f) 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 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, supersedas 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.
(g) The Trustee shall, upon retirement of the Certificates,
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, surrender the Certificate Insurance Policy to the Certificate
Insurer for cancellation.
Section 6.05 Distributions. (a) No later than 12:00 noon
Pennsylvania time on the fourth Business Day preceding each Distribution Date,
the Servicer shall deliver to the Trustee a report in computer-readable form
containing such information as to each Mortgage Loan as of such Distribution
Date and such other information as the Trustee shall reasonably require. With
respect to the Certificate Account, on each Distribution Date, the Trustee shall
make the following allocations, disbursements and transfers in the following
order of priority, and each such allocation, transfer and disbursement shall be
treated as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) to the Trustee, an amount equal to the
Trustee's Fees then due to it;
(ii) from amounts then on deposit in the
Certificate Account (excluding any Insured Payments) to the
Certificate Insurer the lesser of (x) the excess of (i) the
amount then on deposit in the Certificate Account over (ii)
the Insured Distribution Amount for such Distribution Date and
(y) the sum of (i) the amount of all Reimbursement Amounts
which have not been previously repaid as of such Distribution
Date and any other amounts then due to the Certificate Insurer
pursuant to the Insurance and Indemnity Agreement and (ii) the
Premium Amount;
(iii) from amounts then on deposit in the
Certificate Account, pro rata, (A) to the Owners of the Class
A-1 Certificates, the Class A-1 Distribution Amount for
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such Distribution Date; (B) to the Owners of the Class A-2
Certificates, the Class A-2 Distribution Amount for such
Distribution Date; (C) to the Owners of the Class A-3
Certificates, the Class A-3 Distribution Amount for such
Distribution Date; (D) to the Owners of the Class A-4
Certificates, the Class A-4 Distribution Amount for such
Distribution Date; (E) to the Owners of the Class A-5
Certificates, the Class A-5 Distribution Amount for such
Distribution Date; and (F) to the Owners of the Class A-6
Certificates, the Class A-6 Distribution Amount for such
Distribution Date;
(iv) following the making by the Trustee of
all allocations, transfers and disbursements described above,
from amounts then on deposit in the Certificate Account, the
Trustee shall distribute to the Holders of the Class R
Certificates, the amount remaining in the Certificate Account
on such Distribution Date, if any; provided, however, that if,
on any Distribution Date, (x) the Certificate Insurer is then
in default under the Certificate Insurance Policy relating to
the Mortgage Loans and (y) a Subordination Deficit exists,
then any distribution of the Principal Distribution Amount on
such Distribution Date shall be made pro rata to the Owners of
each of the Class A Certificates.
Notwithstanding the foregoing, the aggregate amounts
distributed on all Distribution Dates to the Holders of each Class of Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 6.06 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
Certificate Insurance Payment 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. 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 (iv) of the definition of Permitted
Investments. No such investment in any Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that if
such Permitted Investment is an obligation of the Trustee, then such Permitted
Investment shall mature not later than such Distribution Date).
(b) Subject to Section 6.01(b), if any amounts are needed for
disbursement from any Account held by the Trustee and sufficient uninvested
funds are not available to make such disbursement, the Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee shall not be, and the Servicer shall be, liable for
any investment loss or other charge resulting therefrom unless the Trustee's
failure to perform in accordance with this Section 6.06 is the cause of such
loss or charge.
(c) Subject to Section 9.01 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 to the extent that the Trustee is the obligor and has defaulted
thereon or as provided in subsection (b) of this Section 6.06).
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(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 Certificate Insurance
Payment 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 6.07 Reports by the Trustee. (a) On each Distribution
Date the Trustee shall provide to each Holder, to the Servicer, to the
Certificate Insurer, to the Underwriter, to the Depositor and to the Rating
Agencies a written report (the "Trustee Remittance Report"), setting forth
information including, without limitation, the following information:
(i) the amount of the distribution with
respect to the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class R Certificates;
(ii) the amount of such distributions
allocable to principal, separately identifying the aggregate
amount of any Prepayments or other unscheduled recoveries of
principal included therein and separately identifying any
Subordination Increase Amounts;
(iii) the amount of such distributions
allocable to interest and the calculation thereof;
(iv) the Certificate Principal Balance of
the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and
Class A-6 Certificates as of such Distribution Date, together
with the principal amount of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6 Certificates (based on
a Certificate in an original principal amount of $1,000) then
outstanding, in each case after giving effect to any payment
of principal on such Distribution Date;
(v) the amount of any Insured Payment
included in the amounts distributed to the Class A
Certificateholders on such Distribution Date;
(vi) the total of any Substitution
Adjustments and any Loan Repurchase Price amounts included in
such distribution;
(vii) the amounts, if any, of any Liquidated
Loan Losses for consumer purpose loans and for business
purpose loans for the related Due Period and cumulative
Liquidated Loan Losses since the Startup Date for consumer
purpose loans and for business purpose loans; and
(viii) LIBOR for such Payment Date.
Items (i), (ii) and (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates
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are outstanding, the Trustee shall furnish a report to each Holder of record
if so requested in writing at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect
to the Certificates for such calendar year.
(b) All distributions made to each Class of Class A
Certificateholders and the Class R Certificateholders as a Class on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of each Class on the next preceding Record Date based on the Percentage Interest
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 Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriter, to
the Servicer, to the Depositor and to the Rating Agencies, together with the
information described in subsection (a) preceding, the following information
with respect to all Mortgage Loans and as to consumer purpose and business
purpose 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 Distribution Date:
(i) the total number of Mortgage Loans and
the aggregate Principal Balances thereof, together with the
number, aggregate principal balances of such Mortgage Loans
and the percentage (based on the aggregate Principal Balances
of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all
Mortgage Loans (A) 31-60 days Delinquent, (B) 61-90 days
Delinquent and (C) 91 or more days Delinquent;
(ii) the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of any
such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
(iii) the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans relating to
Mortgagors in bankruptcy proceedings and the number, aggregate
Principal Balances of all Mortgage Loans and percentage (based
on the aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
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(iv) the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans relating to
REO Properties and the number, aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage
Loans also included in any of the statistics described in the
foregoing clause (i);
(v) the weighted average Mortgage Interest
Rate as of the Due Date occurring in the Due Period related to
such Distribution Date;
(vi) the weighted average remaining term to
stated maturity of all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Pool Cumulative Loan Losses and
the aggregate Pool Cumulative Loan Losses since the Closing
Date; and
(ix) the total number of Mortgage Loans and
the Pool Principal Balance.
Section 6.08 Additional Reports by Trustee. (a) The Trustee
shall report to the Depositor, the Servicer and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Depositor, the Servicer or the Certificate
Insurer may from time to time request in writing.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Loan Sale Agreement or in Section 3.01 or 3.02 hereof. The Trustee shall
also provide the Certificate Insurer such other information as may be reasonably
requested by it.
Section 6.09 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution 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 Distribution
Date resulting from Principal Prepayments during the related Due Period and (b)
its aggregate Monthly Servicing Fees received in the related Due Period and
shall not have the right to reimbursement therefor (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 Policy shall
not be considered payment of the Certificates from the Trust
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Fund. 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 (a) 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 (b) the Certificate Insurer shall be
paid such amounts from the sources and in the manner provided herein for the
payment of such amounts and as provided in the Insurance and Indemnity
Agreement. 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.
ARTICLE VII
DEFAULT
Section 7.01 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 which continues unremedied
for one (1) Business Day after the date upon which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer and the Certificate
Insurer by the Trustee or to the Servicer and the Trustee by
the Certificate Insurer or Certificateholders of Class A
Certificates evidencing Percentage Interests of at least 25%;
(ii) the failure by the Servicer to make any
required Servicing Advance which failure continues unremedied
for a period of 30 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Trustee or to the Servicer
and the Trustee by any Certificateholder or the Certificate
Insurer;
(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 failure of any
representation and warranty made pursuant to Section 3.01 to
be true and correct which continues unremedied for a period of
30 days after the date on which written notice of such
failure, 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;
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(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 30 days;
(v) the Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the
Servicer's property;
(vi) the Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations;
(vii) the Certificate Insurer shall notify
the Trustee of any event of default under the Insurance and
Indemnity Agreement;
(viii) if on any Distribution Date the
Rolling Six Month Delinquency Rate exceeds __%;
(ix) if on any Distribution Date, commencing
in _______, the Twelve Month Loss Amount exceeds ___% of the
Pool Principal Balance as of the close of business on the
first day of the twelfth preceding calendar month;
(x) if (a) on any Distribution Date
occurring before _______, the aggregate Pool Cumulative Loan
Losses since the Cut-Off Date exceed ___% of the Original Pool
Principal Balance, (b) on any Distribution Date on or after
_______ and before _______, the aggregate Pool Cumulative Loan
Losses since the Cut-Off Date exceed ___% of the Original Pool
Principal Balance, (c) on any Distribution Date on or after
_______ and before _______, the aggregate Pool Cumulative Loan
Losses since the Cut-Off Date exceed ___% of the Original Pool
Principal Balance, (d) on any Distribution Date on or after
_______ and before _______, the aggregate Pool Cumulative Loan
Losses since the Cut-Off Date exceed ___% of the Original Pool
Principal Balance, or (e) on any Distribution Date on or after
_______, the aggregate Pool Cumulative Loan Losses since the
Cut-Off Date exceed ___% of the Original Pool Principal
Balance.
(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied: (x) with respect solely to clause (i)
above, if such payment is in respect of Periodic Advances or Compensating
Interest owing by the Servicer and such payment is not made by 12:00 Noon New
York time on the second Business Day prior to the applicable Distribution Date,
the Trustee, upon receipt of written notice or discovery by a Responsible
Officer of such failure, shall give immediate telephonic notice of such failure
to a Servicing Officer of the Servicer and to the Certificate Insurer and the
Trustee shall, with the consent of the
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Certificate Insurer, terminate all of the rights and obligations of the Servicer
under this Agreement and the Trustee, or a successor servicer appointed in
accordance with Section 7.02, shall immediately make such Periodic Advance or
payment of Compensating Interest and assume, pursuant to Section 7.02 hereof,
the duties of a successor Servicer; (y) with respect to that portion of clause
(i) above not referred to in the preceding clause (x) and clauses (ii), (iii),
(iv), (v), (vi) and (vii) above, the Trustee shall, but only at the direction of
the Certificate Insurer or the Majority Certificateholders, by notice in writing
to the Servicer and a Responsible Officer of the Trustee and subject to the
prior written consent of the Certificate Insurer, 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, 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 clause
(viii)-(x) 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 7.02, pass to and be
vested in the Trustee or its designee approved by the Certificate Insurer and
the Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, at the expense of the
Servicer, any and all documents and other instruments and do or cause to be done
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Mortgage Loans and related documents. The
Servicer agrees to cooperate (and pay any related costs and expenses) with the
Trustee in effecting the termination of the Servicer's responsibilities and
rights hereunder, including, without limitation, the transfer to the Trustee or
its designee for administration by it of all amounts which shall at the time be
credited by the Servicer to the Collection Account or thereafter received with
respect to the Mortgage Loans. The Trustee shall promptly notify the Certificate
Insurer and the Rating Agencies of the occurrence of an Event of Default.
Section 7.02 Trustee to Act; Appointment of Successor. (a) On
and after the time the Servicer receives a notice of termination pursuant to
Section 7.01 or fails to receive a Servicer Extension Notice pursuant to Section
8.04, or the Trustee receives the resignation of the Servicer evidenced by an
Opinion of Counsel pursuant to Section 5.21, or the Servicer is removed as
Servicer pursuant to Article VII, in which event the Trustee shall promptly
notify the Rating Agencies, except as otherwise provided in Section 7.01, 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 2.06 and 3.03. The Trustee, as successor
servicer, shall be obligated to pay Compensating Interest pursuant to Section
6.09 in any event and to make advances pursuant to Section 5.18 unless, and only
to the extent the Trustee determines reasonably and in good faith that such
advances would not be recoverable
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pursuant to Section 5.04, such determination to be evidenced by a certification
of a Responsible Officer of the Trustee 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
such direction of the Majority Certificateholders and Certificate Insurer or the
Certificate Insurer, or if no such direction is provided to the Trustee,
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 same Servicing Compensation (including the Servicing
Fee as adjusted pursuant to the definition thereof) and other funds pursuant to
Section 5.08 hereof as the Servicer if the Servicer had continued to act as
servicer hereunder. In the event the Trustee is unable or unwilling to act as
successor servicer, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified 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.
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Notwithstanding anything to the contrary herein, no appointment of a successor
to the Servicer under this Agreement shall be effective until the Trustee and
the Certificate Insurer shall have consented thereto, and written notice of such
proposed appointment shall have been provided by the Trustee to the Certificate
Insurer and to each Certificateholder. The Trustee shall not resign as servicer
until a successor servicer reasonably acceptable to the Certificate Insurer has
been appointed. The Certificate Insurer shall have the right to remove the
Trustee as successor Servicer under this Section 7.02 without cause, and the
Trustee shall appoint such other successor Servicer as directed by the
Certificate Insurer.
(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 5.08, 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 7.03 Waiver of Defaults. 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 the Rating Agencies and the Certificate Insurer.
Section 7.04 Rights of the Certificate Insurer to Exercise
Rights of Class A Certificateholders. By accepting its Certificate, each Class A
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to the receipt of payment on the Certificates)
and shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement and under the Class A Certificates
without any further consent of the Class A Certificateholders, including,
without limitation:
(a) the right to require the Depositor to repurchase Mortgage
Loans pursuant to Section 2.06 or 3.03 hereof to the extent set forth in such
Sections;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as servicer pursuant to Section 7.01
hereof and to consent to or direct waivers of Servicer defaults pursuant to
Section 7.03 hereof;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 7.01 and 7.02 hereof;
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(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
(e) the right to direct the Trustee to investigate certain
matters pursuant to Section 9.02(a)(v) hereof;
(f) the right to remove the Trustee pursuant to Section 9.07
hereof;
(g) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section 5.06 of this
Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that, subject to
Section 10.02, unless a Certificate Insurer Default exists, the rights
specifically enumerated above may only be exercised by the Certificateholders
with the prior written consent of the Certificate Insurer.
Section 7.05 Trustee To Act Solely with Consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Trustee
shall not, without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof;
or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under Sections 7.04, 7.05 or 7.06
or any requirement for the Certificate Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate
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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.
Section 7.07 Certificate Insurer Default. Notwithstanding
anything elsewhere in this Agreement or in the Certificates to the contrary, if
a Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of all of its rights under this
Agreement, the provisions of this Article VII and all other provisions of this
Agreement which (a) permit the Certificate Insurer to exercise rights of the
Certificateholders, (b) restrict the ability of the Certificateholders, the
Servicer or the Trustee to act without the consent or approval of the
Certificate Insurer, (c) provide that a particular act or thing must be
acceptable to the Certificate Insurer, (d) permit the Certificate Insurer to
direct (or otherwise to require) the actions of the Trustee, the Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Trustee shall administer the Trust
Fund and perform its obligations hereunder solely for the benefit of the Holders
of the Certificates. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Certificate Insurer from any obligation or liability it may have to any
party or to the Certificateholders hereunder, under any other agreement,
instrument or document (including, without limitation, the Certificate Insurance
Policy) or under applicable law.
ARTICLE VIII
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, 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 surviving lineal descendant of Joseph P. Kennedy, late
Ambassador of the United States to the Court of St. James, alive as of the date
hereof.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, terminate this Agreement on the
First Distribution Date after any Distribution Date on which the Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (the "Clean-Up Call
Date") by purchasing, on such succeeding Distribution Date, all of the
outstanding Mortgage Loans and REO Properties at a price equal to the sum of (i)
100% of the aggregate Principal Balance of each outstanding Mortgage Loan and
each REO Property and (ii) the greater of (1) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Due Period and (2)
30 days' accrued interest thereon computed at a rate equal to the related
Mortgage Interest Rate, in each case net of the Servicing
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Fee, and (iii) any unreimbursed amounts due to the Certificate Insurer under
this Agreement and any I&I Payments (the "Termination Price"). Any such purchase
shall be accomplished by deposit into the Certificate Account of the Termination
Price. No such termination is permitted without the prior written consent of the
Certificate Insurer if it would result in a draw on the Certificate Insurance
Policy.
(c) If on any Distribution 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 Distribution
Date upon which the Trust Fund will terminate and the 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 Certificateholders mailed during the month of such final distribution before
the Servicer Distribution Date in such month, specifying (i) the Distribution
Date upon which final payment of the 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 Distribution 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 or when the Class A 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 Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine months after the second notice all the
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 and not to the
Certificate Insurer. Such funds shall remain uninvested.
Section 8.02 Additional Termination Requirements. (a) In the
event that the Servicer exercises its purchase option as provided in Section
8.01, the Trust Fund 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 REMIC Trust to comply with the
requirements of this Section 8.02 will not (i) result in the imposition of taxes
on
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"prohibited transactions" of the REMIC Trust as defined in Section 860F of
the Code or (ii) cause the REMIC Trust 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
Distribution Date the Servicer shall adopt and the Trustee
shall sign, a plan of complete liquidation of the REMIC Trust
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 and at or prior to the
final Distribution Date, the Trustee shall sell all of the
assets 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 Class A Principal Balance, plus
one month's interest thereon at the Class A Pass-Through Rate,
(B) to the Certificate Insurer any amounts due the Certificate
Insurer under this Agreement and unpaid, including
unreimbursed Insured Payments and I&I Payments and (C) to the
Class R Certificateholders, all cash on hand after such
payment to the Class A Certificateholders (other than cash
retained to meet claims) and the Trust Fund 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 8.03 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
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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.
Section 8.04 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on _______ (the
"Initial Term"). Thereafter, the Initial Term shall be extendible in the sole
discretion of the Certificate Insurer by written notice (each, a "Servicer
Extension Notice") of the Certificate Insurer (or the Trustee if revocable
written standing instructions of the Certificate Insurer have been previously
delivered to the Trustee), for any specified number of three month terms to the
Servicer. Each such Servicer Extension Notice (if any) shall be delivered by the
Certificate Insurer (or the Trustee, as applicable,) to the other parties to
this Agreement. The Servicer hereby agrees that, as of the date hereof and upon
its receipt of any Servicer Extension Notice the Servicer shall be bound for the
duration of the Initial Term and the term covered by any such Servicer Extension
Notice to act as the Servicer, subject to and in accordance with the other
provisions of this Agreement. The Servicer agrees that if, as of the fifteenth
day prior to the last day of any such servicing term, the Servicer shall not
have received a Servicer Extension Notice from the Certificate Insurer (or
Trustee, as applicable), the Servicer shall, within five days thereafter, give
written notice of such non-receipt to the Certificate Insurer and the Trustee.
The failure of the Certificate Insurer or the Trustee, as applicable, to deliver
a Servicer Extension Notice by the end of any such three-month term shall result
in the automatic termination of the Servicer.
ARTICLE IX
THE TRUSTEE
Section 9.01 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 powers 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 Depositor
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.
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(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of
Default, and after the curing of all such Events of Default
which may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants
or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or 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, the Class A Certificateholders
holding Class A Certificates evidencing Percentage Interests
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
7.01(a)), unless a Responsible Officer of the Trustee shall
have received written notice thereof. In the absence of
receipt of such notice, the Trustee may conclusively assume
that there is no default or Event of Default (except a failure
to make a Periodic Advance);
(v) the Trustee shall not be required to
expend or risk its own funds or otherwise incur financial
liability for the performance of any of its duties hereunder
or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability is
not reasonably assured to it and none of the provisions
contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under
this Agreement except during such time, if any, as the Trustee
shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance
with the terms of this Agreement; and
(vi) subject to the other provisions of this
Agreement (and except in its capacity as successor Servicer)
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
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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 REMIC Trust formed hereunder shall
constitute, and that the affairs of the REMIC Trust 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 Depositor, as Class R
Certificateholder, covenants and agrees that it shall act as agent (and the
Depositor, as Class R Certificateholder, is hereby appointed to act as agent)
and as Class R Certificateholder Tax Matters Person on behalf of the REMIC
Trust, 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 REMIC Trust,
using a calendar year as the taxable year for the REMIC Trust;
(ii) make, or cause to be made, an election,
on behalf of the REMIC Trust, to be treated as a REMIC on the
federal tax return of the REMIC Trust 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
REMIC Trust are within its control, conduct such affairs of
the REMIC Trust at all times that any Certificates are
outstanding so as to maintain the status of the REMIC Trust 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 REMIC Trust;
(vi) pay the amount of any and all federal,
state, and local taxes, including, without limitation, any
minimum tax imposed by Section 23151(a) and 23153(a) of the
Pennsylvania Revenue and Taxation Code upon the Trustee or the
Certificateholders in
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connection with the Trust, the Trust Fund or the Mortgage
Loans, 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 4.02, 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 9.01(c) and 9.05 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 5.12 hereof,
make available information necessary for the computation of
any tax imposed (1) on transferors of residual interests to
transferees that are not Permitted Transferees or (2) on
pass-through entities, any interest in which is held by an
entity which is not a Permitted Transferee. The Trustee
covenants and agrees that it will cooperate with the Servicer
in the foregoing matters and that it will sign, as Trustee,
any and all Tax Returns required to be filed by the Trust
Fund. Notwithstanding the foregoing, at such time as the
Trustee becomes the successor Servicer, the holder of the
largest percentage of the Class R Certificates shall serve as
Tax Matters Person until such time as an entity is appointed
to succeed the Trustee as Servicer;
(x) make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions
all information necessary to compute any tax imposed (A) as a
result of the Transfer of an Ownership Interest in a Class R
Certificate to any Person who is not a Permitted Transferee,
including the information described in Treasury regulations
sections 1.860D-1(b)(5) and 1.860E-2(a)(5)with respect to the
"excess inclusions" of such Class R Certificate and (B) as a
result of any regulated investment company, real estate
investment trust, common trust fund, 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, 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
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Internal Revenue Service or state tax authorities), other than
the expense of obtaining any Opinion of Counsel required
pursuant to Sections 3.03, 5.10 and 8.02 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:
(A) 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;
(B) the projected remaining principal and
interest cash flows as of the end of any calendar
quarter with respect to the regular and residual
interests created hereunder and the Mortgage Loans,
based on the Prepayment Assumption;
(C) the Prepayment Assumption and any
interest rate assumptions used in determining the
projected principal and interest cash flows described
above;
(D) 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;
(E) the treatment of losses realized with
respect to the Mortgage Loans or the regular interests
created hereunder, including the timing and amount of
any cancellation of indebtedness income of the REMIC
with respect to such regular interests or bad debt
deductions claimed with respect to the Mortgage Loans;
(F) the amount and timing of any
non-interest expenses of the REMIC; and
(G) any taxes (including penalties and
interest) imposed on the REMIC, including, without
limitation, taxes on "prohibited transactions,"
"contributions" or "net income from foreclosure
property" or state or local income or franchise taxes;
and
(xiii) make any other required reports in respect of interest
payments in respect of the Mortgage Loans and acquisitions and abandonments of
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
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property" of the REMIC as defined in Section 860G(c) of the Code, on any
contribution to the REMIC after the Startup Day pursuant to Section 860G(d) of
the Code, or any other tax (other than any minimum tax imposed by Sections
23151(a) or 23153(a) of the Pennsylvania Revenue and Taxation Code) is imposed,
such tax shall be paid by (i) the Trustee, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Agreement,
(ii) the Servicer, if such tax arises out of or results from a breach by the
Servicer of any of its obligations under this Agreement, or otherwise (iii) the
holders of the Class R Certificates in proportion to their Percentage Interests.
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 Distribution 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 9.02 Certain Matters Affecting the Trustee. (a) Except
as otherwise provided in Section 9.01:
(i) the Trustee may rely and shall be
protected in acting or refraining from acting upon any
resolution, Officer's 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,
order 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 by the Trustee
or thereby; nothing contained herein shall, however, relieve
the Trustee of the obligation, upon the occurrence of an Event
of Default (which has not been cured), to exercise such of the
rights and powers vested in it by this Agreement, and to use
the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally
liable for any action taken, suffered or omitted by it in good
faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Agreement;
(v) prior to the occurrence of an Event of
Default hereunder and after the curing of all Events of
Default which may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters
stated in any resolution, certificate,
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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 Class A Certificates evidencing
Percentage Interests aggregating not less than 25%; 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 Day, 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
REMIC Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding or subject the REMIC Trust to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local law or ordinances. The
Trustee agrees to indemnify the Trust Fund and the Servicer for any taxes and
costs, including any attorney's fees, imposed or incurred by the Trust Fund or
the Servicer as a result of the breach of the Trustee's covenants set forth
within this subsection (b).
Section 9.03 Trustee 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
Depositor 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 9.04 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.
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Section 9.05 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's Fee in accordance with the
provision of Section 6.04(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 and the
Certificate Insurer 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 through the Servicer's acts or
omissions in violation of this Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder. The
obligations of the Servicer under this Section 9.05 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 9.06 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a banking entity (a) 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 entity publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of
determining an entity's combined capital and surplus for clause (c) of this
Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. 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 9.07.
Section 9.07 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
all Certificateholders. Upon receiving such notice of resignation, the Servicer
at the direction of the Certificate Insurer 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
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the Depositor, the Certificateholders, the Certificate Insurer and the Depositor
by the Servicer. Unless a successor trustee shall have been so appointed and
shall 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 9.06 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer (with the consent of the Certificate Insurer) or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, at the direction of the Certificate Insurer, 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 and the
Certificate Insurer 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 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
not become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
Section 9.08 Successor Trustee. Any successor trustee
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Depositor, the Certificate Insurer, the Servicer and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements held by it hereunder, and
the Servicer and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.06.
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 the Rating Agencies. 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.
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Section 9.09 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 9.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
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 and the consent of the Certificate Insurer, 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 Section 9.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.08 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.
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(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. The Servicer and the Depositor, as
applicable, upon request, will promptly furnish the Trustee with all such
information as may be reasonably required in connection with the Trustee's
preparation of all Tax Returns of the Trust Fund or for the purpose of the
Trustee responding to reasonable requests for information made by
Certificateholders in connection with tax matters and, upon request within five
(5) 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 be 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.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability of the Depositor and the
Servicer. None of the Depositor or 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 gross 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 10.02 Acts of Certificateholders. (a) Except as
otherwise specifically provided herein, whenever Certificateholder action,
consent or approval is required under this
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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 heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except
as expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Servicer, the Depositor and the Trustee by written
agreement, upon the prior written consent 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, 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 the Rating Agencies of any amendment made pursuant
to this Section 10.03 or pursuant to Section 6.09 of the Loan Sale Agreement.
(b) This Agreement may be amended from time to time by the
Servicer, the Depositor and the Trustee with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in 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
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the REMIC Trust
as a REMIC or cause a tax to be imposed on the 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.
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(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 10.04 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 10.05 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, _______, Attention: _______, (ii)
in the case of the Depositor, _______, Attention: _______, (iii) in the case of
the Trustee, _______ Attention: _______, (iv) in the case of the
Certificateholders, as set forth in the Certificate Register, (v) in the case of
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007
Attention: Home Equity Monitoring Group, (vi) in the case of Standard & Poor's
Rating Services, 26 Broadway, New York, New York 10004 Attention: Residential
Mortgage Surveillance Group, (viii) in the case of the Certificate Insurer,
________________________ Attention: Surveillance Department (in each case in
which notice or other communication to the Certificate Insurer refers to an
Event of Default, a claim on the Certificate Insurance Policy or with respect to
which failure on the part of the Certificate Insurer to respond shall be deemed
to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head -Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED") and (viii) in the case of the Underwriter,
Prudential Securities Secured Financing Corporation or Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Len Blum.
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 10.07 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.
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Section 10.08 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 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Servicer, the Depositor, the
Trustee and the Certificateholders and their respective successors and permitted
assigns.
Section 10.11 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12 The Certificate Insurer Default. Any right
conferred to the Certificate Insurer shall be suspended during any period in
which a Certificate Insurer Default exists. At such time as the Certificates are
no longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
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 Depositor to act, as their agent,
as the Tax Matters Person for the REMIC Trust 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.
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Section 10.16 Section 10.16 GOVERNING LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK.
(b) THE SERVICER AND THE TRUSTEE HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH IN SECTION 10.06 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.
[Remainder of Page Intentionally Left Blank]
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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.
_________________________________________
___, as Depositor
By:
Name:
Title:
______________________________, as Servicer
By:_________________________________________
Name:
Title:
________________________________, as Trustee
By:_________________________________________
Name:
Title:
[Signature Page to Pooling and Servicing Agreement]
<PAGE>
EXHIBIT A
FORM OF CLASS A-[ ] CERTIFICATE
Series ______ Pass-Through Rate: _____%
No. A-[ ]-__
Original Certificate Principal Maximum Collateral Amount:
Balance: $______ $________
CUSIP: ______ Percentage Interest of this Certificate: 100%
Cut-Off Date: Date of Pooling and Servicing Agreement: As of
Close of business ______ ________
Closing Date: ______
First Distribution Date: ______ Latest Maturity Date: ________
Servicer: ________ Trustee: ________
-----------------------------------
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-[ ] Certificate percentage interest (the "Percentage Interest") in
certain first and second lien mortgage loans (the "Mortgage Loans") serviced by
________ (hereinafter called the "Servicer"), in its capacity as servicer under
that certain Pooling and Servicing Agreement (the "Agreement") dated as of
________ among ________, as servicer, ________, as depositor (the "Depositor")
and ________, as trustee (the "Trustee"). The Mortgage Loans were originated or
acquired by_________ and ________ (together, the "Originators") and sold to the
Depositor pursuant to that certain Loan Sale Agreement, dated as of ________,
among the Depositor and the Originators. 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.
A-1-1
<PAGE>
On each Distribution Date, commencing on ________, the Trustee
shall distribute to the Person in whose name this Certificate is registered on
the last day of the month next preceding the month of such distribution (the
"Record Date"), an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of the Class A-[ ] Certificates on such Distribution Date pursuant to
Section 6.05 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
________, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans 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
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
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 Mortgage Loans under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Originators, 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 and, with respect to the Class A
Certificates, 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.
A-1-2
<PAGE>
________ (the "Certificate Insurer") has issued a surety bond
with respect to the Class A Certificates, which guarantees certain payments on
the Class A Certificates, as described in 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
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Trustee in New York,
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a 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 Originators 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
A-1-3
<PAGE>
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 the Pool Principal Balance of the Mortgage Loans and REO
Properties at the time of purchase being less than ten percent (10%) of the
Maximum Collateral Amount. Unless this Certificate has been authenticated by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
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.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
_______________________________, not in its
individual capacity, but solely as Trustee
By:____________________________
CERTIFICATE OF AUTHENTICATION
This is a Class A-[ ] Certificate referred to in the
within-mentioned Agreement, which Certificate is issued to Cede & Co. in the
initial denomination of $________.
_______________________________, not in its
individual capacity, but solely as Trustee
By:____________________________
Dated: ________
A-1-5
<PAGE>
EXHIBIT B
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT"), 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 IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.02 OF THE 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 (THE "CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN OPINION OF COUNSEL TO THE
TRUSTEE AND (2) 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 CODE, NOR TO AN ENTITY WHOSE UNDERLYING ASSETS ARE
DEEMED TO BE ASSETS OF SUCH A PLAN, ACCOUNT OR ARRANGEMENT BY REASON OF SUCH
PLAN'S, ACCOUNT'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.
B-1
<PAGE>
Series ________ Percentage Interest of this Certificate:
No. R-1 100%
Cut-Off Date: Date of Pooling and Servicing
Close of business ________ Agreement: As of _______
Closing Date: ________ Latest Maturity Date: ________
First Distribution Date: ________ Trustee: ________
Servicer: ________
________________________________
This certifies that ________ is the registered owner of a
Class R percentage interest (the "Percentage Interest") in certain first or
second lien mortgage loans (the "Mortgage Loans") serviced by ________
(hereinafter called the "Servicer"), in its capacity as servicer under that
certain Pooling and Servicing Agreement (the "Agreement") dated as of ________
among ________, as servicer, ________, as depositor (the "Depositor") and
________, as trustee (the "Trustee"). The Mortgage Loans were originated or
acquired by ________ and ________ (the "Originators") and sold to the Depositor
pursuant to that certain Loan Sale Agreement, dated as of ________, among the
Depositor and the Originators. 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.
On each Distribution Date, commencing on ________, the Trustee
shall distribute to the Person in whose name this Certificate is registered on
the last day of the month next preceding the month of such distribution (the
"Record Date"), an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of the Class R Certificates on such Distribution Date pursuant to
Section 6.05 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 at least a 10% Percentage
Interest 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
B-2
<PAGE>
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,
________, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and
Class R (herein called the "Certificates") and representing undivided ownership
of (i) such Mortgage Loans 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
Mortgage Loan up to the Cut-Off Date), (ii) such assets as from time to time are
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 Mortgage Loans under all insurance policies required to be
maintained pursuant to the Agreement and any Insurance Proceeds, (iv) the
Certificate Insurance Policy, (v) Liquidation Proceeds and (vi) Released
Mortgaged Property Proceeds.
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Originators, ___________________
(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 and,
with respect to the Class A Certificates, 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.
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
hereof 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, 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 4.02(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,
B-3
<PAGE>
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"), nor to
an entity whose underlying assets are deemed to be assets of such a plan,
account or arrangement by reason of such plan's, account'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.
The Certificates are issuable only in fully-registered form.
As provided in the Agreement and subject to certain limitations therein set
forth, a 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 Originators 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 the Pool Principal Balance of the Mortgage
Loans and REO Properties at the time of purchase being less than ten percent
(10%) of the Maximum Collateral Amount. 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 4.02(i) of the Agreement and to adopt a plan of
liquidation of the Trust Fund in accordance with Section 8.02 of the Agreement.
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<PAGE>
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.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed by its authorized officer.
________________________________, not in its
individual capacity, but solely as Trustee
By: ________________________________
CERTIFICATE OF AUTHENTICATION
This is a Class R Certificate referred to in the
within-mentioned Agreement.
___________________________,
not in its individual capacity, but
solely as Trustee
By: ________________________________
Dated: ________
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<PAGE>
EXHIBIT C
CONTENTS OF THE MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall
include each of the following items (copies to the extent the originals have
been delivered to the Trustee pursuant to Section 2.03 of the Agreement), all of
which shall be available for inspection by the Certificateholders, to the extent
required by applicable laws:
1. The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the
originator of the Mortgage Loan to the Person so endorsing the
Mortgage Loan to the Trustee, endorsed by such Person "Pay to
the order of ________________ without recourse" and signed, by
facsimile or manual signature, in the name of the Depositor by
a Responsible Officer.
2. Either: (i) the original Mortgage, and related power of
attorney, if any, with evidence of recording thereon, or (ii)
a copy of the Mortgage and related power of attorney, if any,
certified as a true copy of the original Mortgage or power of
attorney by a Responsible Officer of the Depositor on the face
of such copy substantially as follows: "certified true and
correct copy of original which has been transmitted for
recordation."
3. Either: (i) The original Assignment of Mortgage in recordable
form in blank or (ii) a copy of the Assignment certified as a
true copy of the original Assignment by a Responsible Officer
of the Depositor on the face of such copy substantially as
follows: "certified true and correct copy of original which
has been transmitted for recordation." Any such Assignments of
Mortgage may be made by blanket assignments for Mortgage Loans
secured by the Mortgaged Properties located in the same
county, if permitted by applicable law.
4. The original lender's policy of title insurance or a true copy
thereof, or if such original lender's title insurance policy
has been lost, a copy thereof certified by the appropriate
title insurer to be true and complete, or if such lender's
title insurance policy has not been issued as of the Closing
Date, a marked up commitment (binder) to issue such policy.
5. All original intervening assignments, if any, showing a
complete chain of assignments from the originator to the
related Originator, including any recorded warehousing
assignments, with evidence of recording thereon, certified by
a Responsible Officer of the related Originator by facsimile
or manual signature as a true copy of the original of such
intervening assignments.
6. Originals of all assumption, written assurance, substitution
and modification agreements, if any.
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<PAGE>
EXHIBIT D
CERTIFICATE RE: PREPAID LOANS
I, ______________, ____________ of ________, as Depositor,
hereby certify that between the "Cut-Off Date" (as defined in the Pooling and
Servicing Agreement dated as of ________ among ________, ________ and ________,
as trustee) and the "Startup Day" the following schedule of "Mortgage Loans"
(each as defined in the Pooling and Servicing Agreement) have been prepaid in
full.
Dated: ________
By:______________________________________
Name:
Title:
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<PAGE>
EXHIBIT E
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
________
[Depositor]
[Servicer]
[Certificate Insurer]
Re: Pooling and Servicing Agreement, dated as of ________ (the
"Pooling and Servicing Agreement"), among ________, as
Depositor, ________, as Servicer, and ________, as Trustee,
________, Mortgage Pass-Through Certificates, Series
________, Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6 and Class R
____________________________________________________________
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, subject to the
provisions of Sections 2.05 and 2.06 of the Pooling and Servicing Agreement (as
such provisions relate to the Initial Mortgage Loans), of (x) the documents
relating to the Initial Mortgage Loans referred to in Section 2.05(a) of the
Pooling and Servicing Agreement, except with respect to the list of exceptions
attached hereto, and based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule accurately reflects
information set forth in the Mortgage File as well as the assignment to it of
all other assets included in clauses (i) and (iii) of the definition of "Trust
Fund", (y) the Certificate Account, the Pre-Funding Account and the Capitalized
Interest Account and (z) the Certificate Insurance Policy and declares that it
holds and will hold the Certificate Insurance Policy and such documents and the
other documents delivered to it constituting the Mortgage Files, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Fund" that are delivered to it, in trust for the exclusive
use and benefit of all present and future Certificateholders.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any such
documents or any of the Mortgage Loans identified on the Mortgage Loan Schedule,
or (ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
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<PAGE>
The Schedule of Mortgage Loans is attached to this Receipt.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
__________________________________,
as Trustee
By:________________________________
Name:
Title:
E-2
<PAGE>
EXHIBIT F
INITIAL CERTIFICATION OF TRUSTEE
[Depositor]
[Servicer]
[Certificate Insurer]
Re: Pooling and Servicing Agreement, dated as of ________ (the
"Pooling and Servicing Agreement") among ________, as
Depositor, ________, as Servicer, and ________, as Trustee,
________, Mortgage Pass-Through _______, Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6 and Class R
______________________________________________________________
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Pooling and Servicing Agreement, the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan listed
on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.03 of the Pooling and Servicing Agreement and has
determined that (i) all documents required to be delivered to it pursuant to the
above-referenced Pooling and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered and
relate to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing documents, the information set forth in the Mortgage Loan Schedule
respecting such Mortgage Loan accurately reflects the information set forth in
the Trustee's Mortgage File and (iv) each Mortgage Note has been endorsed as
provided in Section 2.03 of the Pooling and Servicing Agreement. The Trustee has
made no independent examination of such documents beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, enforceability or
genuineness of any such documents contained in each or any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
__________________________, as Trustee
By:_____________________________________
Name:
Title:
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<PAGE>
EXHIBIT G
FINAL CERTIFICATION OF TRUSTEE
[Depositor]
[Servicer]
[Certificate Insurer]
Re: Pooling and Servicing Agreement, dated as of ________ (the
"Pooling and Servicing Agreement") among ________, as
Depositor, ________, as Servicer, and ________, as Trustee,
________, Mortgage Pass-Through Certificates, Series ________,
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6and Class R
_______________________________________________________________
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that,
except as noted on the attachment hereto, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.03 of the Pooling and Servicing Agreement and has determined that (i)
all documents required to be delivered to it pursuant to the above-referenced
Pooling and Servicing Agreement are in its possession, (ii) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, and (iii) based on its examination, and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule respecting
such Mortgage Loan accurately reflects the information set forth in the
Trustee's Mortgage File. The Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
___________________________________,
as Trustee
By:_________________________________
Name:
Title:
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<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
________________, ______
To: [Trustee]
Re: _______, Mortgage Pass-Through Certificates, Series _______,
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6 and Class R
______________________________________________________________
In connection with the administration of the pool of Mortgage
Loans held by you as Trustee for the Certificateholders, we request the release,
and acknowledge receipt, of the (Trustee's Mortgage File/[specify document]) for
the Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts received
in connection therewith have been credited to the
Collection Account.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Collection
Account.)
____ 3. Mortgage Loan in Foreclosure
____ 4. Mortgage Loan Repurchased Pursuant to Section 5.18 of the
Pooling and Servicing Agreement.
____ 5. Mortgage Loan Repurchased or Substituted pursuant to Article
II or III of the Pooling and Servicing Agreement (Servicer
hereby certifies that the repurchase price or Substitution
Adjustment has been credited to the Certificate Account
and that the substituted mortgage loan is a Qualified Substitute
Mortgage Loan.)
H-1
<PAGE>
____ 6. Other (explain)_______________________________________________
If box 1 or 2 above is checked, and if all or part of the
Trustee's Mortgage File was previously released to us, please release to us our
previous receipt on file with you, as well as any additional documents in your
possession relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to you as Trustee, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
By: __________________________________
Name:
Title:
Documents returned to Trustee:
__________________________, as
Trustee
By:_____________________________
Date:___________________________
H-2
<PAGE>
EXHIBIT I
TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Owner] (record or
beneficial owner of ________, Mortgage Pass-Through Certificates, Series
________, Class R (the "Owner")), a [savings institution] [corporation] duly
organized and existing under the laws of [the State of ______] [the United
States], on behalf of which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986 (the "Code"), (ii) will endeavor to remain
other than a disqualified organization for so long as it retains its ownership
interest in the Class R Certificates, and (iii) is acquiring the Class R
Certificates for its own account or for the account of another Owner from which
it has received an affidavit and agreement in substantially the same form as
this affidavit and agreement. A "Permitted Transferee" is any person other than
a "disqualified organization" or a possession of the United States. (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any rural electric
or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that generally is exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be
imposed on transfers of Class R Certificates to disqualified organizations under
the Code, that applies to all transfers of Class R Certificates after ________;
(ii) that such tax would be on the transferor, or, if such transfer is through
an agent (which person includes a broker, nominee or middleman) for a
disqualified organization, on the agent; (iii) that the person otherwise liable
for the tax shall be relieved of liability for the tax if the transferee
furnishes to such person an affidavit that the transferee is not a disqualified
organization and, at the time of transfer, such person does not have actual
knowledge that the affidavit is false; and (iv) that the Class R Certificates
may be "noneconomic residual interests" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code
I-1
<PAGE>
and that the transferor of a noneconomic residual interest will remain liable
for any taxes due with respect to the income on such residual interest, unless
no significant purpose of the transfer was to impede the assessment or
collection of tax.
4. That the Owner is aware of the tax imposed on a
"pass-through entity" holding Class R Certificates if at any time during the
taxable year of the pass-through entity a disqualified organization is the
record holder of an interest in such entity. (For this purpose, a "pass through
entity" includes a regulated investment company, a real estate investment trust
or common trust fund, a partnership, trust or estate, and certain cooperatives.)
5. That the Owner is aware that the Trustee will not register
the transfer of any Class R Certificates unless the transferee, or the
transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. The
Owner expressly agrees that it will not consummate any such transfer if it knows
or believes that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set forth on
the face of the Class R Certificates and the provisions of Section 4.02(i) of
the Pooling and Servicing Agreement under which the Class R Certificates were
issued (in particular, clauses (g) and (h) of Section 4.02(i) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such
Certificates in violation of Section 4.02(i)). The Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
7. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is not a disqualified
organization.
8. That the Owner's Taxpayer Identification Number is
____________.
9. This affidavit and agreement relates only to the Class R
Certificates held by the Owner and not to any other holder of the Class R
Certificates. The Owner understands that the liabilities described herein relate
only to the Class R Certificates.
10. That no purpose of the Owner relating to the transfer of
any of the Class R Certificates by the Owner is or will be to impede the
assessment or collection of any tax.
11. That the Owner has no present knowledge or expectation
that it will be unable to pay any United States taxes owed by it so long as any
of the Certificates remain outstanding.
I-2
<PAGE>
12. That the Owner has no present knowledge or expectation
that it will become insolvent or subject to a bankruptcy proceeding for so long
as any of the Class R Certificates remain outstanding.
13. That the Owner is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includable in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.
14. That the Owner will, in connection with any transfer that
it makes of the Class R Certificates, deliver to the Trustee an affidavit in
form and substance satisfactory to the Trustee, representing and warranting that
it is not transferring the Class R Certificates to impede the assessment or
collection of any tax and that it has no actual knowledge that the proposed
transferee: (i) has insufficient assets to pay any taxes owned by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding, for so long as the Class R Certificates
remains outstanding and; (iii) is not a Permitted Transferee.
15. That the Owner agrees to require a Transfer Affidavit and
Agreement from any person to whom the Owner attempts to transfer a percentage
interest in the Class R Certificates, and in connection with any transfer by a
person for whom the Owner is acting as nominee, trustee or agent, and the Owner
will not transfer its percentage interest or cause any percentage interest to be
transferred to any person that the Owner knows is not a Permitted Transferee. In
connection with any such transfer by the Owner, the Owner agrees to deliver to
the Trustee a transfer certificate in the form attached to the Pooling and
Servicing Agreement as Exhibit J to the effect that the Owner has no actual
knowledge that the person to which the transfer is to be made is not a Permitted
Transferee.
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<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this _ day of .
[NAME OF OWNER]
By: ____________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
______________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to me to be the same person who executed the foregoing
instrument and to be the [Title of Officer] of the Owner, and acknowledged to me
that he executed the same as his free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of
________________ ____.
NOTARY PUBLIC________________________
COUNTY OF____________________________
STATE OF_____________________________
My Commission expires the____
day of ____________, ____.
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<PAGE>
EXHIBIT J
TRANSFEROR'S CERTIFICATE
________________, 19__
[Trustee]
Attention: Corporate Trust Administration
Re: ________, Mortgage Pass-Through Certificates, Series ________,
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 ________, Mortgage Pass-Through
Certificates, Series ________, Class R (the "Certificates"), pursuant to Section
4.02 of the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of ________ among ________, as servicer (the "Company"),
________, as depositor, and ________, 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:
J-1
<PAGE>
EXHIBIT K
ERISA INVESTMENT REPRESENTATION LETTER
[Depositor]
[Servicer]
[Trustee]
Re: ________, Mortgage Pass-ThroughCertificates,
Series ________, 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 ________ (the "Agreement"), among ________, as
Depositor (the "Depositor"), ________, as Servicer (the "Servicer") and
________, 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.
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:
K-1
<PAGE>
EXHIBIT L
FORM OF SUBSEQUENT TRANSFER AGREEMENT
________
________ and ________, as originators (the "Originators"),
________, as depositor (the "Depositor"), and ________, as purchaser (the
"Purchaser"), pursuant to the Pooling and Servicing Agreement, dated as of
________ (the "Pooling and Servicing Agreement"), among the Depositor, ________,
as servicer (in such capacity, the "Servicer") and ________, as trustee (the
"Trustee"), hereby confirm, as of this ____ day of _______, ________, their
understanding with respect to the sale by the Originators to the Depositor, and
the sale by the Depositor to the Purchaser of those Mortgage Loans listed on the
attached Schedule of Mortgage Loans (the "Subsequent Mortgage Loans").
Conveyance of Subsequent Mortgage Loans. The Originators do
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 Originators with respect to the Subsequent
Mortgage Loans but including specifically, without limitation, the Mortgages,
the Files and all other documents, materials and properties appurtenant thereto
and the Notes, including all interest and principal collected by the Originators
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 Originators shall
deliver the original Note, 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 delivery
requirements of the Depositor set forth in Section 2.05 of the Loan Sale
Agreement, dated as of ________ (the "Loan Sale Agreement"), among the
Originators and the Depositor.
The Depositor does hereby irrevocably sell, transfer, assign,
set over and otherwise convey to the Purchaser, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Depositor or any other Person with respect to the Subsequent Mortgage Loans but
including specifically, without limitation, the Mortgages, the Files and all
other documents, materials and properties appurtenant thereto and the 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
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<PAGE>
Pooling and Servicing Agreement) and other required documentation in accordance
with the terms set forth in Section 2.05 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 Depositor.
The Originators and the Depositor hereby affirm the
representations and warranties set forth in the Loan Sale Agreement,
respectively, that relate to the Subsequent Mortgage Loans on the date hereof.
The Originators and the Depositor each hereby deliver notice and confirm that
each of the conditions set forth in Section 2.03(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 Loan 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 2.03(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 Subsequent
Transfer 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.
Capitalized terms used herein but not defined herein shall
have the meanings ascribed thereto in the Pooling and Servicing Agreement.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to the principles of conflicts of laws.
This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
All terms and conditions of the Pooling and Servicing
Agreement are hereby ratified, confirmed and incorporated herein; provided, that
in the event of any
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<PAGE>
conflict the provisions of this Subsequent Transfer Agreement shall control
over the conflicting provisions of the Pooling and Servicing Agreement.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereby executed
this Agreement as of the date first above written.
__________________________
as Originator
By:_______________________
Name:
Title:
__________________________
, as Originator
By:_______________________
Name:
Title:
_________________________,
as Depositor
By:_______________________
Name:
Title:
_________________________,
as Trustee
By:_______________________
Name:
Title:
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EXHIBIT 4.2
FORM OF INDENTURE
INDENTURE
dated as of _____________
by and between
____________________________________,
as Issuer
and
____________________________,
as Indenture Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .........................................................2
Section 1.01. General Definitions......................................2
ARTICLE II THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS......................2
Section 2.01. Forms Generally..........................................2
Section 2.02. Form of Certificate of Authentication....................2
Section 2.03. General Provisions With Respect to Principal and
Interest Payment.......................................3
Section 2.04. Denominations............................................3
Section 2.05. Execution, Authentication, Delivery and Dating...........3
Section 2.06. Registration, Registration of Transfer and Exchange......4
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes...............5
Section 2.08. Payments of Principal and Interest.......................5
Section 2.09. Persons Deemed Owner.....................................7
Section 2.10. Cancellation.............................................8
Section 2.11. Authentication and Delivery of Notes.....................8
Section 2.12. Book-Entry Note..........................................9
Section 2.13. Termination of Book Entry System........................10
Section 2.14. Pledge of Subsequent Mortgage Loans.....................11
ARTICLE III COVENANTS ........................................................13
Section 3.01. Payment of Notes........................................13
Section 3.02. Maintenance of Office or Agency.........................13
Section 3.03. Money for Note Payments to Be Held In Trust.............13
Section 3.04. Existence of Trust......................................15
Section 3.05. Protection of Trust Estate..............................15
Section 3.06. Opinions as to the Trust Estate.........................16
Section 3.07. Performance of Obligations..............................16
Section 3.08. Investment Company Act..................................17
Section 3.09. Negative Covenants......................................17
Section 3.10. Annual Statement as to Compliance.......................18
Section 3.11. Restricted Payments.....................................18
Section 3.12. Treatment of Notes as Debt for Tax Purposes.............18
Section 3.13. Notice of Events of Default.............................19
Section 3.14. Further Instruments and Acts............................19
ARTICLE IV SATISFACTION AND DISCHARGE.........................................19
Section 4.01. Satisfaction and Discharge of Indenture.................19
Section 4.02. Application of Trust Money..............................20
<PAGE>
ARTICLE V DEFAULTS AND REMEDIES...............................................20
Section 5.01. Event of Default........................................20
Section 5.02. Acceleration of Maturity; Rescission and Annulment......22
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee......................22
Section 5.04. Remedies................................................23
Section 5.05. Indenture Trustee May File Proofs of Claim..............23
Section 5.06. Indenture Trustee May Enforce Claims Without
Possession of Notes...................................24
Section 5.07. Application of Money Collected..........................24
Section 5.08. Limitation on Suits.....................................25
Section 5.09. Unconditional Rights of Noteholders to Receive
Principal and Interest................................26
Section 5.10. Restoration of Rights and Remedies......................26
Section 5.11. Rights and Remedies Cumulative..........................26
Section 5.12. Delay or Omission Not Waiver............................27
Section 5.13. Control by Noteholders..................................27
Section 5.14. Waiver of Past Defaults.................................27
Section 5.15. Undertaking for Costs...................................28
Section 5.16. Waiver of Stay or Extension Laws........................28
Section 5.17. Sale of Trust Estate....................................28
Section 5.18. Action on Notes.........................................30
Section 5.19. No Recourse to Other Trust Estates or Other
Assets of the Trust...................................30
Section 5.20. Application of the Trust Indenture Act..................30
Section 5.21. Note Insurer Default....................................30
ARTICLE VI THE INDENTURE TRUSTEE..............................................30
Section 6.01. Duties of Indenture Trustee.............................30
Section 6.02. Notice of Default.......................................32
Section 6.03. Rights of Indenture Trustee.............................32
Section 6.04. Not Responsible for Recitals or Issuance of Notes.......33
Section 6.05. May Hold Notes..........................................34
Section 6.06. Money Held in Trust.....................................34
Section 6.07. Eligibility, Disqualification...........................34
Section 6.08. Indenture Trustee's Capital and Surplus.................34
Section 6.09. Resignation and Removal; Appointment of Successor.......34
Section 6.10. Acceptance of Appointment by Successor
Indenture Trustee.....................................36
Section 6.11. Merger, Conversion, Consolidation or Succession
to Business of Indenture Trustee......................36
Section 6.12. Preferential Collection of Claims Against Trust.........36
Section 6.13. Co-Indenture Trustees and Separate
Indenture Trustees....................................36
Section 6.14. Authenticating Agents...................................38
Section 6.15. Review of Mortgage Files................................39
Section 6.16. Indenture Trustee Fees and Expenses.....................40
<PAGE>
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS....................................40
Section 7.01. Note Registrar to Furnish Indenture Trustee
Names and Addresses of Noteholders....................40
Section 7.02. Preservation of Information; Communications
to Noteholders........................................40
Section 7.03. Reports by Indenture Trustee............................41
Section 7.04. Reports by Trust........................................41
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES.......41
Section 8.01. Accounts; Investment; Collection of Moneys..............41
Section 8.02. Distributions; Statements...............................45
Section 8.03. Claims against the Note Insurance Policy................45
Section 8.04. General Provisions Regarding the Distribution
Accounts and Mortgage Loans...........................48
Section 8.05. Releases of Deleted Mortgage Loans......................48
Section 8.06. Reports by Indenture Trustee to Noteholders;
Access to Certain Information.........................49
Section 8.07. Release of Trust Estate.................................49
Section 8.08. Amendment to Sale and Servicing Agreement...............49
Section 8.09. Delivery of the Mortgage Files Pursuant to Sale
and Servicing Agreement...............................49
Section 8.10. Servicer as Agent.......................................50
Section 8.11. Termination of Servicer.................................50
Section 8.12. Opinion of Counsel......................................50
Section 8.13. Appointment of Collateral Agents........................50
Section 8.14. Rights of the Note Insurer to Exercise Rights
of Noteholders........................................50
Section 8.15. Trust Estate and Accounts Held for Benefit
of the Note Insurer...................................51
ARTICLE IX SUPPLEMENTAL INDENTURES............................................51
Section 9.01. Supplemental Indentures Without
Consent of Noteholders................................51
Section 9.02. Supplemental Indentures With Consent
of Noteholders........................................52
Section 9.03. Execution of Supplemental Indentures....................53
Section 9.04. Effect of Supplemental Indentures.......................54
Section 9.05. Conformity With Trust Indenture Act.....................54
Section 9.06. Reference in Notes to Supplemental Indentures...........54
Section 9.07. Amendments to Governing Documents.......................54
ARTICLE X REDEMPTION OF NOTES.................................................55
Section 10.01. Redemption..............................................55
Section 10.02. Form of Redemption Notice...............................56
Section 10.03. Notes Payable on Optional Redemption....................56
ARTICLE XI MISCELLANEOUS......................................................56
Section 11.01. Compliance Certificates and Opinions....................56
Section 11.02. Form of Documents Delivered to Indenture Trustee........57
<PAGE>
Section 11.03. Acts of Noteholders.....................................58
Section 11.04. Notices, etc., to Indenture Trustee,
the Note Insurer and Trust............................58
Section 11.05. Notices and Reports to Noteholders;
Waiver of Notices.....................................60
Section 11.06. Rules by Indenture Trustee..............................60
Section 11.07. Conflict With Trust Indenture Act.......................60
Section 11.08. Effect of Headings and Table of Contents................60
Section 11.09. Successors and Assigns..................................60
Section 11.10. Separability............................................60
Section 11.11. Benefits of Indenture...................................60
Section 11.12. Legal Holidays..........................................61
Section 11.13. Governing Law...........................................61
Section 11.14. Counterparts............................................61
Section 11.15. Recording of Indenture..................................61
Section 11.16. Trust Obligation........................................61
Section 11.17. No Petition.............................................62
Section 11.18. Inspection..............................................62
Section 11.19. Usury...................................................62
Section 11.20. Note Insurer Default....................................62
Section 11.21. Third-Party Beneficiary.................................63
APPENDICES, SCHEDULES AND EXHIBITS
Appendix I Defined Terms
Schedule l Mortgage Loan Schedule
Exhibit A Form of Note
Exhibit B Form of Subsequent Pledge Agreement
Exhibit C Form of Note Insurer Consent for Subsequent Mortgage Loans
<PAGE>
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of
the provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.1
Trust Indenture Act of 1939 Indenture Section
- --------------------------- -------------------
Section 310
(a) (1)......................................... 6.07
(a) (2)......................................... 6.07, 6.08
(a) (3)......................................... 6.13
(a) (4)......................................... Not Applicable
(a) (5)......................................... 6.07
(b)............................................. 6.07, 6.09
(c)............................................. Not Applicable
Section 311
(a)............................................. 6.12
(b)............................................. 6.12
(c)............................................. Not Applicable
Section 312
(a)............................................. 7.01(a), 7.02(a)
(b)............................................. 7.02(b)
(c)............................................. 7.02(c)
Section 313
(a)............................................. 7.03(a)
(b)............................................. 7.03(a)
(c)............................................. 11.05
(d)............................................. 7.03(b)
Section 314
(a)(1).......................................... 7.04
(a)(2).......................................... 7.04
(a)(3).......................................... 7.04
(a)(4).......................................... 7.04
(b)(1).......................................... 2.11(c), 11.01
(b)(2).......................................... 3.06
(c)(1).......................................... 2.11(d), 4.01,
8.02(d), 11.01
(c)(2).......................................... 2.11(c), 4.01,
8.02(d), 11.01
(c)(3).......................................... 8.02(d)
(d)(1).......................................... 11.01(a)
(d)(2).......................................... 11.01(a)
(d)(3).......................................... 11.01(a)
(e)............................................. 11.0 1(b)
- ----------
* This Cross-Reference Table is not part of the Indenture.
<PAGE>
Section 315
(a).............................................6.01(b), 6.01(c)(1)
(b)............................................. 6.02, 11.05
(c)............................................. 6.01(a)
(d)(1).......................................... 6.01(b), 6.01(c)
(d)(2).......................................... 6.01(c)(2)
(d)(3).......................................... 6.01(c)(3)
(e)............................................. 5.15
Section 316
(a)............................................. 5.20
(b)............................................. 5.09
(c)............................................. 5.20
Section 317
(a)(1).......................................... 5.03
(a)(2).......................................... 5.05
(b)............................................. 3.01
Section 318
(a)............................................. 11.07
<PAGE>
This INDENTURE, dated as of _________, _____ (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between _________________________, a ____________business trust (together with
its permitted successors and assigns, the "Trust"), and ______________________,
a __________banking corporation, as indenture trustee (together with its
permitted successors in the trusts hereunder, the "Indenture Trustee").
Preliminary Statement
The Trust has duly authorized the execution and delivery of
this Indenture to provide for its Mortgage Backed Notes, Series ___________ (the
"Notes"), issuable as provided in this Indenture. All covenants and agreements
made by the Trust herein are for the benefit and security of the Holders of the
Notes and the Note Insurer. The Trust is entering into this Indenture, and the
Indenture Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement
of the Trust in accordance with its terms have been done.
Granting Clause
The Trust hereby Grants to the Indenture Trustee, for the
exclusive benefit of the Holders of the Notes and the Note Insurer, all of the
Trust's right, title and interest in and to (a) the Mortgage Loans in both Pool
I and Pool II listed in the Mortgage Loan Schedule attached as Schedule I to
this Indenture (including property that secures a Mortgage Loan that becomes an
REO Property), including the related Mortgage Files delivered or to be delivered
to the Collateral Agent, on behalf of the Indenture Trustee, pursuant to the
Sale and Servicing Agreement, including all payments of principal received,
collected or otherwise recovered after the Cut-Off Date for each Mortgage Loan,
all payments of interest due on each Mortgage Loan after the Cut-Off Date
therefor whenever received and all other proceeds received in respect of such
Mortgage Loans, any Subsequent Mortgage Loans and any Qualified Substitute
Mortgage Loan, (b) the Loan Sale Agreement and the Sale and Servicing Agreement,
(c) the Insurance Policies, (d) all cash, instruments or other property held or
required to be deposited in the Collection Account, the Distribution Accounts,
the Note Insurance Payment Account, the Pre-Funding Accounts, the Capitalized
Interest Accounts and the Cross-collateralization Reserve Accounts, including
all investments made with funds in such Accounts (but not including any income
on funds deposited in, or investments made with funds deposited in, such
Accounts other than the Pre-Funding Accounts, which income shall belong to and
be for the account of the Servicer), and (e) all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquid
assets, including, without limitation, all insurance proceeds and condemnation
awards. Such Grants are made, however, in trust, to secure the Notes equally and
ratably without prejudice, priority or distinction between any Note and any
other Note by reason of difference in time of issuance or otherwise, and for the
benefit of the Note Insurer to secure (x) the payment of all amounts due on the
Notes in accordance with their terms, (y) the payment of all other sums payable
under this Indenture and (z) compliance with the provisions of this Indenture,
all as provided in this Indenture. All terms used in the foregoing granting
clauses that are defined in Appendix I are used with the meanings given in said
Appendix I.
<PAGE>
The Indenture Trustee acknowledges such Grant, accepts the
trusts hereunder in accordance with the provisions of this Indenture and agrees
to perform the duties herein required to the end that the interests of the
Holders of the Notes may be adequately and effectively protected. The Indenture
Trustee agrees that it will hold the Note Insurance Policy in trust and that it
will hold any proceeds of any claim upon the Note Insurance Policy, solely for
the use and benefit of the Noteholders in accordance with the terms hereof and
the Note Insurance Policy. In addition, the Indenture Trustee agrees that it
will acknowledge the Grant on each Subsequent Transfer Date of the related
Subsequent Mortgage Loans pursuant to the terms of the related Subsequent Pledge
Agreement, provided that the conditions precedent to the pledge of such
Subsequent Mortgage Loans contained in this Indenture and in the Sale and
Servicing Agreement are satisfied on or prior to such Subsequent Transfer Date.
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. Except as otherwise
specified or as the context may otherwise require, the following terms have the
respective meanings set forth in Appendix I for all purposes of this Indenture,
and the definitions of such terms are applicable to the singular as well as to
the plural forms of such terms and to the masculine as well as to the feminine
genders of such terms. Whenever reference is made herein to an Event of Default
or a Default known to the Indenture Trustee or of which the Indenture Trustee
has notice or knowledge, such reference shall be construed to refer only to an
Event of Default or Default of which the Indenture Trustee is deemed to have
notice or knowledge pursuant to Section 6.01(d). All other terms used herein
that are defined in the Trust Indenture Act (as hereinafter defined), either
directly or by reference therein, have the meanings assigned to them therein.
ARTICLE II
THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS
Section 2.01. Forms Generally. The Notes shall be
substantially in the form set forth as Exhibit A attached hereto. Each Note may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange on which the Notes may be listed, or as may, consistently
herewith, be determined by the Trust, as evidenced by its execution thereof. Any
portion of the text of any Note may be set forth on the reverse thereof with an
appropriate reference on the face of the Note.
The Definitive Notes may be produced in any manner determined
by the Trust, as evidenced by its execution thereof.
Section 2.02. Form of Certificate of Authentication. The form
of the Authenticating Agent's certificate of authentication is as set forth on
the signature page of the form of the Note attached hereto as Exhibit A.
2
<PAGE>
Section 2.03. General Provisions With Respect to Principal and
Interest Payment. The Notes shall be designated generally as the
"_____________________, Mortgage Backed Notes, Series _________".
The Notes shall be issued in the form specified in Section
2.01 hereof. The Notes shall be issued in two Classes, the Class A-1 Notes and
the Class A-2 Notes. The aggregate Original Note Principal Balance of Notes that
may be authenticated and delivered under the Indenture is limited to
$____________ of Class A-1 Notes and $_____________ of Class A-2 Notes, except
for the Notes authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or
9.06 of this Indenture.
Subject to the provisions of Sections 3.01, 5.07, 5.09 and
8.02(a) of this Indenture, the principal of each Class of Notes shall be payable
in installments ending no later than the related Final Stated Maturity Date,
unless the unpaid principal of such Notes become due and payable at an earlier
date by declaration of acceleration or call for redemption or otherwise.
All payments made with respect to any Note shall be applied
first to the interest then due and payable on such Note and then to the
principal thereof. All computations of interest accrued on any Note shall be
made on the basis of a year of 360 days and twelve 30-day months.
Notwithstanding any of the foregoing provisions with respect
to payments of principal of and interest on the Notes, if the Notes have become
or been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled, then payments of principal of and interest on the Notes shall be made
in accordance with Section 5.07 hereof.
Section 2.04. Denominations. The Notes shall be issuable only
as registered Notes in the denominations equal to the Authorized Denominations.
Section 2.05. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Trust by an Authorized Officer of
the Owner Trustee. The signature of such Authorized Officer of the Owner Trustee
on the Notes may be manual or by facsimile.
Notes bearing the manual or facsimile signature of an
individual who was at any time an Authorized Officer of the Owner Trustee shall
bind the Trust, notwithstanding that such individual has ceased to be an
Authorized Officer of the Owner Trustee prior to the authentication and delivery
of such Notes or was not an Authorized Officer of the Owner Trustee at the date
of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Trust may deliver Notes executed on behalf of
the Trust to the Authenticating Agent for authentication, and the Authenticating
Agent shall authenticate and deliver such Notes as provided in this Indenture
and not otherwise.
Each Note authenticated on the Closing Date shall be dated the
Closing Date. All other Notes that are authenticated after the Closing Date for
any other purpose hereunder shall be dated the date of their authentication.
3
<PAGE>
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for in Section
2.02 hereof, executed by the Authenticating Agent by the manual signature of one
of its Authorized Officers or employees, and such certificate of authentication
upon any Note shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder.
Section 2.06. Registration, Registration of Transfer and
Exchange. The Trust shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Trust
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby initially appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Indenture Trustee shall remain the Note Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Servicer, on behalf of the
Trust, shall promptly appoint a successor, with the approval of the Note
Insurer, or, in the absence of such appointment, the Servicer, on behalf of the
Trust, shall assume the duties of Note Registrar.
Upon surrender for registration of transfer of any Note at the
office or agency of the Trust to be maintained as provided in Section 3.02
hereof, the Owner Trustee on behalf of the Trust, shall execute, and the
Authenticating Agent shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate initial Note Principal Balance.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations, and of a like aggregate Note Principal
Balance, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Owner Trustee shall
execute, and the Authenticating Agent shall authenticate and deliver, the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Trust, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in the form included in Exhibit A attached hereto, duly
executed by the Holder thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Note Registrar, on behalf of the Trust,
may require payment of a sum sufficient to cover any tax or other governmental
charge as may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.07 hereof not
involving any transfer or any exchange made by the Note Insurer.
No transfer of a Note shall be made to the or, to the actual
knowledge of a Responsible Officer of the Indenture Trustee, to any of the 's
Affiliates, successors or assigns.
4
<PAGE>
The Note Registrar shall not register the transfer of a Note
unless the Note Registrar has received a representation letter from the
transferee to the effect that either (i) the transferee is not, and is not
acquiring the Note on behalf of or with the assets of, an employee benefit plan
or other retirement plan or arrangement that is subject to Title I of the
Employee Retirement Income Security Act or 1974, as amended, or Section 4975 of
the Code or (ii) the acquisition and holding of the Note by the transferee
qualifies for exemptive relief under a Department of Labor Prohibited
Transaction Class Exemption. Each Beneficial Owner of a Note which is a
Book-Entry Note shall be deemed to make one of the foregoing representations.
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes. If
(1) any mutilated Note is surrendered to the Note Registrar or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Trust, the Note Insurer and the Note Registrar harmless, then, in the
absence of notice to the Note Registrar that such Note has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
upon its request the Note Registrar shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note
or Notes of the same tenor and aggregate initial principal amount bearing a
number not contemporaneously outstanding. If, after the delivery of such new
Note, a bona fide purchaser of the original Note in lieu of which such new Note
was issued presents for payment such original Note, the Note Registrar, shall be
entitled to recover such new Note from the person to whom it was delivered or
any person taking therefrom, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expenses incurred by the Trust or the Note Registrar in
connection therewith. If any such mutilated, destroyed, lost or stolen Note
shall have become or shall be about to become due and payable, or shall have
become subject to redemption in full, instead of issuing a new Note, the Trust
may pay such Note without surrender thereof, except that any mutilated Note
shall be surrendered.
Upon the issuance of any new Note under this Section 2.07, the
Note Registrar, may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trust, the Indenture
Trustee or the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section 2.07 in lieu of
any destroyed, lost or stolen Note shall constitute an original contractual
obligation of the Trust, whether or not the destroyed, lost or stolen Note shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 2.07 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.08. Payments of Principal and Interest. (a) Payments
on Notes issued as Book-Entry Notes will be made by or on behalf of the
Indenture Trustee to the Clearing Agency or its nominee. Any installment of
interest or principal payable on any Definitive Notes
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that is punctually paid or duly provided for by the Trust on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered at the close of business on the Record
Date for such Class of Notes and such Distribution Date by either (i) check
mailed to such Person's address as it appears in the Note Register on such
Record Date, or (ii) by wire transfer of immediately available funds to the
account of a Noteholder, if such Noteholder (A) is the registered holder of
Definitive Notes having an initial principal amount of at least $1,000,000 and
(B) has provided the Indenture Trustee with wiring instructions in writing by
five (5) Business Days prior to the related Record Date or has provided the
Indenture Trustee with such instructions for any previous Distribution Date,
except for the final installment of principal payable with respect to such Note
(or the Redemption Price for any Note called for redemption, if such redemption
will result in payment of the then entire unpaid Note Principal Balance of such
Note), which shall be payable as provided in subsection (b) of this Section
2.08. A fee may be charged by the Indenture Trustee to a Holder of Definitive
Notes for any payment made by wire transfer. Any installment of interest or
principal not punctually paid or duly provided for shall be payable as soon as
funds are available to the Indenture Trustee for payment thereof, or if Section
5.07 applies, pursuant to Section 5.07.
(b) All reductions in the Note Principal Balance of a Note (or
one or more Predecessor Notes) effected by payments of installments of principal
made on any Distribution Date shall be binding upon all Holders of such Note and
of any Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such Note.
The final installment of principal of each Note (including the Redemption Price
of any Note called for optional redemption, if such optional redemption will
result in payment of the entire unpaid Note Principal Balance of such Note)
shall be payable only upon presentation and surrender thereof on or after the
Distribution Date therefor at the Corporate Trust Office of the Indenture
Trustee located within the United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire unpaid
Note Principal Balance of any Note will become due and payable on the next
Distribution Date, other than pursuant to a redemption pursuant to Article X, it
shall, no later than two (2) Business Days prior to such Distribution Date,
telecopy or hand deliver to each Person in whose name a Note to be so retired is
registered at the close of business on such otherwise applicable Record Date a
notice to the effect that:
(i) the Indenture Trustee expects that funds sufficient to pay
such final installment will be available in the related Distribution
Account on such Distribution Date; and
(ii) if such funds are available, (A) such final installment
will be payable on such Distribution Date, but only upon presentation
and surrender of such Note at the office or agency of the Note
Registrar maintained for such purpose pursuant to Section 3.02 (the
address of which shall be set forth in such notice) and (B) no interest
shall accrue on such Note after such Distribution Date.
A copy of such form of notice shall be sent to the Note
Insurer by the Indenture Trustee.
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Notices in connection with redemptions of Notes shall be
mailed to Noteholders in accordance with Section 10.02 hereof.
(c) Subject to the foregoing provisions of this Section 2.08,
each Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to unpaid
principal and interest that were carried by such other Note. Any checks mailed
pursuant to subsection (a) of this Section 2.08 and returned undelivered shall
be held in accordance with Section 3.03 hereof.
(d) Each (i) Indenture Trustee's Remittance Report, prepared
by the Indenture Trustee, based solely on the Servicer Remittance Report
delivered to the Indenture Trustee pursuant to the Sale and Servicing Agreement,
and (ii) each report regarding the Mortgage Loans delivered to the Indenture
Trustee by the Servicer pursuant to Section 5.16(b) of the Sale and Servicing
Agreement, shall be delivered by the Indenture Trustee to the Note Insurer, the
Rating Agencies, the Servicer, the Owner Trustee, the Depositor and each
Noteholder as the statements required pursuant to Section 8.06 hereof. Neither
the Indenture Trustee nor the Collateral Agent shall have any responsibility to
recalculate, verify or recompute information contained in any such tape,
electronic data file or disk or any such Servicer Remittance Report except to
the extent necessary to satisfy all obligations under this Section 2.08(d).
Within ninety (90) days after the end of each calendar year,
the Indenture Trustee will be required to furnish to each Person who at any time
during the calendar year was a Noteholder, if requested in writing by such
person, a statement containing the information set forth in subclauses (a), (b)
and (c) in the definition of "Indenture Trustee's Remittance Report," aggregated
for such calendar year or the applicable portion thereof during which such
person was a Noteholder. Such obligation will be deemed to have been satisfied
to the extent that substantially comparable information is provided pursuant to
any requirements of the Code as are from time to time in force.
From time to time (but no more than once per calendar month),
upon the written request of the Depositor, the Servicer or the Note Insurer, the
Indenture Trustee shall report to the Depositor, the Servicer and the Note
Insurer the amount then held in each Account (including investment earnings
accrued) held by the Indenture Trustee and the identity of the investments
included therein. From time to time, at the request of the Note Insurer, the
Indenture Trustee shall report to the Note Insurer with respect to the actual
knowledge of a Responsible Officer, without independent investigation, of any
breach of any of the representations or warranties relating to individual
Mortgage Loans set forth in Section 3.03 of the Loan Sale Agreement. The
Indenture Trustee shall also provide the Note Insurer such other information
within its control as may be reasonably requested by it.
Section 2.09. Persons Deemed Owner. Prior to due presentment
for registration of transfer of any Note, any agent on behalf of the Trust
including but not limited to the Indenture Trustee, or the Note Insurer, may
treat the Person in whose name any Note is registered as the owner of such Note
(a) on the applicable Record Date for the purpose of receiving payments of the
principal of and interest on such Note and (b) on any other date for all other
purposes whatsoever, and none of the Trust, the Indenture Trustee or any other
agent of the Trust, or the Note Insurer shall be affected by notice to the
contrary.
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Section 2.10. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Note Registrar, be delivered to the Note Registrar and
shall be promptly canceled by it. The Owner Trustee, on behalf of the Trust, may
at any time deliver to the Note Registrar for cancellation any Note previously
authenticated and delivered hereunder which the Owner Trustee, on behalf of the
Trust may have acquired in any manner whatsoever, and all Notes so delivered
shall be promptly canceled by the Note Registrar. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section 2.10, except as expressly permitted by this Indenture. All
cancelled Notes held by the Note Registrar shall be held by the Note Registrar
in accordance with its standard retention policy, unless the Owner Trustee, on
behalf of the Trust shall direct by a Trust Order that they be destroyed or
returned to it.
Section 2.11. Authentication and Delivery of Notes. The Notes
shall be executed by an Authorized Officer of the Owner Trustee, on behalf of
the Trust, and delivered to the Authenticating Agent for authentication, and
thereupon the same shall be authenticated and delivered by the Authenticating
Agent, upon a Trust Request and upon receipt by the Authenticating Agent of all
of the following:
(a) A Trust Order authorizing the execution, authentication
and delivery of the Notes and specifying the Note Principal Balance and
the Percentage Interest of such Notes to be authenticated and
delivered.
(b) A Trust Order authorizing the execution and delivery of
this Indenture and the Sale and Servicing Agreement.
(c) One or more Opinions of Counsel (which opinion shall not
be at the expense of the Indenture Trustee or the Trust) addressed to
the Authenticating Agent and the Note Insurer or upon which the
Authenticating Agent and the Note Insurer are expressly permitted to
rely, complying with the requirements of Section 11.01, reasonably
satisfactory in form and substance to the Authenticating Agent and the
Note Insurer.
In rendering the opinions set forth above, such counsel may
rely upon Officer's Certificates of the Trust, the Owner Trustee, the ,
the Originators, the Depositor, the Servicer and the Indenture Trustee,
without independent confirmation or verification with respect to
factual matters relevant to such opinions. In rendering the opinions
set forth above, such counsel need express no opinion as to (A) the
existence of, or the priority of the security interest created by the
Indenture against, any liens or other interests that arise by operation
of law and that do not require any filing or similar action in order to
take priority over a perfected security interest or (B) the priority of
the security interest created by this Indenture with respect to any
claim or lien in favor of the United States or any agency or
instrumentality thereof (including federal tax liens and liens arising
under Title IV of ERISA).
The acceptability to the Note Insurer of the Opinion of
Counsel delivered to the Authenticating Agent and the Note Insurer at
the Closing Date shall be conclusively evidenced by the delivery on the
Closing Date of the Note Insurance Policy.
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(d) An Officer's Certificate of the Trust complying with the
requirements of Section 11.01 and stating that:
(i) the Trust is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of
the terms, conditions or provisions of, or constitute a
default under, the Trust's Certificate of Trust or any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Trust is a party or by which it is
bound, or any order of any court or administrative agency
entered in any proceeding to which the Trust is a party or by
which it may be bound or to which it may be subject, and that
all conditions precedent provided in this Indenture relating
to the authentication and delivery of the Notes have been
complied with;
(ii) the Trust is the owner of each Mortgage Loan, free and
clear of any lien, security interest or charge, has not
assigned any interest or participation in any such Mortgage
Loan (or, if any such interest or participation has been
assigned, it has been released) and has the right to Grant
each such Mortgage Loan to the Indenture Trustee;
(iii) the information set forth in the Mortgage Loan Schedule
attached as Schedule I to this Indenture is correct;
(iv) the Trust has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage Loan; and
(v) as of the Closing Date, no lien in favor of the United
States described in Section 6321 of the Code, or lien in favor
of the Pension Benefit Guaranty Corporation described in
Section 4068(a) of the ERISA, has been filed as described in
subsections 6323(f) and 6323(g) of the Code upon any property
belonging to the Trust.
(e) An executed counterpart of the Sale and Servicing
Agreement.
(f) An executed counterpart of the Loan Sale Agreement.
(g) An executed counterpart of the Trust Agreement.
(h) An executed copy of the Insurance Agreement.
(i) An original executed copy of the Note Insurance Policy.
(j) A copy of a letter from Moody's that is has assigned a
rating of "Aaa" to the Notes and a copy of a letter from S&P
that it has assigned a rating of "AAA" to the Notes.
Section 2.12. Book-Entry Note. The Notes will be issued
initially as one or more certificates in the name of Cede & Co., as nominee for
the Clearing Agency maintaining book-entry records with respect to ownership and
transfer of such Notes, and registration of the
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Notes may not be transferred by the Note Registrar except upon Book-Entry
Termination. In such case, the Note Registrar shall deal with the Clearing
Agency as representative of the Beneficial Owners of such Notes for purposes of
exercising the rights of Noteholders hereunder. Each payment of principal of and
interest on a Book-Entry Note shall be paid to the Clearing Agency, which shall
credit the amount of such payments to the accounts of its Clearing Agency
Participants in accordance with its normal procedures. Each Clearing Agency
Participant shall be responsible for disbursing such payments to the Beneficial
Owners of the Book-Entry Notes that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Beneficial Owners of the Book-Entry Notes that it
represents. All such credits and disbursements are to be made by the Clearing
Agency and the Clearing Agency Participants in accordance with the provisions of
the Notes. None of the Indenture Trustee, the Note Registrar, if any, the Trust
or the Note Insurer shall have any responsibility therefor except as otherwise
provided by applicable law. Requests and directions from, and votes of, such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Beneficial Owners.
Section 2.13. Termination of Book Entry System. (a) The
book-entry system through the Clearing Agency with respect to the Book-Entry
Notes may be terminated upon the happening of any of the following:
(i) The Clearing Agency advises the Indenture Trustee that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities as nominee and depositary with respect to the Notes
and the Indenture Trustee is unable to locate a qualified successor
Clearing Agency satisfactory to the Servicer, on behalf of the Trust;
(ii) The Majority Certificateholders, on behalf of the Trust,
in their sole discretion, elects to terminate the book-entry system by
notice to the Clearing Agency and the Indenture Trustee; or
(iii) After the occurrence of an Event of Default (at which
time the Indenture Trustee shall use all reasonable efforts to promptly
notify each Beneficial Owner through the Clearing Agency of such Event
of Default), the Beneficial Owners of no less than 51% of the Note
Principal Balance of the Book-Entry Notes advise the Indenture Trustee
in writing, through the related Clearing Agency Participants and the
Clearing Agency, that the continuation of a book-entry system through
the Clearing Agency to the exclusion of any Definitive Notes being
issued to any person other than the Clearing Agency or its nominee is
no longer in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection
(a) of this Section 2.13, the Indenture Trustee shall use all reasonable efforts
to notify all Beneficial Owners, through the Clearing Agency, of the occurrence
of such event and of the availability of Definitive Notes to Beneficial Owners
requesting the same, in an aggregate outstanding Note Principal Balance
representing the interest of each, making such adjustments and allowances as it
may find necessary or appropriate as to accrued interest and previous calls for
redemption. Definitive Notes shall be issued only upon surrender to the
Indenture Trustee of the global Note
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by the Clearing Agency, accompanied by registration instructions for the
Definitive Notes. Neither the Trust nor the Indenture Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon issuance of the
Definitive Notes, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall cease to be applicable and the provisions
relating to Definitive Notes shall be applicable.
Section 2.14. Pledge of Subsequent Mortgage Loans. (a) Subject
to the satisfaction of the conditions set forth in paragraph (b) of this Section
2.14, in consideration of the Indenture Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Servicer, on behalf of the
Trust, of all or a portion of the balance of funds in either Pre-Funding
Account, the Trust shall on any Subsequent Transfer Date pledge, without
recourse, to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, all right, title and interest of the Trust in and to the related
Subsequent Mortgage Loans, including the outstanding principal of, and interest
due on, such Subsequent Mortgage Loans, and all other assets in the Trust Estate
relating to the Subsequent Mortgage Loans. In connection with such pledge, and
pursuant to Section 2.07 of the Loan Sale Agreement and Section 2.09 of the Sale
and Servicing Agreement, the Trust does hereby also irrevocably pledge to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer, all
of its rights under the Sale and Servicing Agreement, the Loan Sale Agreement,
the related Subsequent Contribution Agreement and the related Subsequent
Transfer Agreement, including, without limitation, its right to exercise the
remedies created by Sections 2.06 and 3.05 of the Loan Sale Agreement for
defective documentation and for breaches of representations and warranties,
agreement and covenants contained in Section 3.01 and 3.03 of the Loan Sale
Agreement.
The amount released from either Pre-Funding Account with
respect to a transfer of Subsequent Mortgage Loans shall be one-hundred percent
(100%) of the Aggregate Principal Balances of the Subsequent Mortgage Loans so
pledged, as of the related Subsequent Cut-Off Date.
(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) of this Section 2.14 shall be
pledged by the Trust to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the shall have provided the Trust, the Depositor, the
Indenture Trustee, the Collateral Agent, the Rating Agencies and the
Note Insurer with an Addition Notice at least two (2) Business Days
prior to the Subsequent Transfer Date, which shall include a Mortgage
Loan Schedule listing the Subsequent Mortgage Loans, and shall have
provided any other information reasonably requested by any of the
foregoing parties with respect to the Subsequent Mortgage Loans;
(ii) the shall have caused the Servicer to deposit in the
Collection Account all collections of (x) principal in respect of the
Subsequent Mortgage Loans received after the related Subsequent Cut-Off
Date and (y) interest due on the Subsequent Mortgage Loans after the
related Subsequent Cut-Off Date;
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(iii) as of each Subsequent Transfer Date, the Depositor shall
not be insolvent, neither shall be made insolvent by such transfer and
neither shall be aware of any pending insolvency;
(iv) such Subsequent Transfer shall not result in a material
adverse tax consequence to the Trust or the Holders of the Notes;
(v) the related Pre-Funding Period shall not have terminated;
(vi) the Depositor shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and each complies
with the terms of the Loan Sale Agreement, including each of the
representations and warranties made with respect thereto in Section
3.03 of the Loan Sale Agreement; provided, that each representation in
Section 3.03(tt) (other than clause (v)) may be waived or modified with
the prior written consent of the Note Insurer;
(vii) there shall have been delivered to the Note Insurer, the
Trust, the Collateral Agent, the Rating Agencies and the Indenture
Trustee, Independent 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 Depositor, the Note Insurer, the
Trust, the Collateral Agent, the Rating Agencies and the Indenture
Trustee on the Closing Date (i.e. bankruptcy, corporate and tax
opinions);
(viii) the Indenture Trustee shall have received a written
consent from the Note Insurer in the form of Exhibit C hereto;
(ix) the Originators and the Depositor shall have delivered to
the Indenture Trustee an executed copy of a Subsequent Transfer
Agreement, substantially in the form of Exhibit A to the Loan Sale
Agreement;
(x) the Depositor and the Trust shall have delivered to the
Indenture Trustee an executed copy of a Subsequent Contribution
Agreement, substantially in the form of Exhibit G to the Sale and
Servicing Agreement, and
(xi) the Trust and the Indenture Trustee shall have executed a
Subsequent Pledge Agreement, substantially in the form of Exhibit B
hereto.
(c) In connection with the transfer, assignment and pledge of
the Subsequent Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.05 of the Sale and Servicing Agreement.
(d) On each Subsequent Transfer Date upon written instruction
from the Depositor, the Indenture Trustee shall withdraw from the related
Capitalized Interest Account and pay to the Depositor on such Subsequent
Transfer Date the Overfunded Interest Amount for such Subsequent Transfer Date,
as calculated by the Indenture Trustee and subject to the approval of the Note
Insurer.
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ARTICLE III
COVENANTS
Section 3.01. Payment of Notes. The Trust will pay or cause to
be duly and punctually paid the principal of, and interest on, the Notes in
accordance with the terms of the Notes and this Indenture. The Notes shall be
non-recourse obligations of the Trust and shall be limited in right of payment
to amounts available from the Trust Estate as provided in this Indenture and the
Trust shall not otherwise be liable for payments on the Notes. No person shall
be personally liable for any amounts payable under the Notes. If any other
provision of this Indenture conflicts or is deemed to conflict with the
provisions of this Section 3.01, the provisions of this Section 3.01 shall
control.
Section 3.01. Maintenance of Office or Agency. The Indenture
Trustee will always maintain its corporate trust office at a location in the
United States of America where Notes may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Trust in
respect of the Notes and this Indenture may be served. Such location shall be
the Corporate Trust Office of the Indenture Trustee.
The Owner Trustee, at the direction of the Majority
Certificateholder, on behalf of the Trust may also from time to time, at the
expense of the Majority Certificateholders, designate one or more other offices
or agencies within the United States of America where the Notes may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, any designation of an office or agency for
payment of Notes shall be subject to Section 3.03 hereof. The Owner Trustee, at
the direction of the Majority Certificateholder, on behalf of the Trust will
give prompt written notice to the Indenture Trustee and the Note Insurer of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 3.03. Money for Note Payments to Be Held In Trust. All
payments of amounts due and payable with respect to any Notes that are to be
made from amounts withdrawn from the related Distribution Account pursuant to
Sections 8.02(a) or 5.07 hereof shall be made on behalf of the Trust by the
Indenture Trustee, and no amounts so withdrawn from the related Distribution
Account for payments on the Notes shall be paid over to the Trust under any
circumstances except as provided in this Section 3.03 or in Sections 5.07 or
8.02 hereof.
With respect to Definitive Notes, if the Trust shall have a
Note Registrar that is not also the Indenture Trustee, such Note Registrar shall
furnish, no later than the fifth (5th) calendar day after each Record Date, a
list, in such form as such Indenture Trustee may reasonably require, of the
names and addresses of the Holders of Notes and of the number of Individual
Notes held by each such Holder.
Whenever the Trust shall have a Paying Agent other than the
Indenture Trustee, the Servicer, on behalf of the Trust, will, on or before the
Business Day next preceding each Distribution Date, direct the Indenture Trustee
to deposit with such Paying Agent an aggregate sum sufficient to pay the amounts
then becoming due (to the extent funds are then available for such purpose in
the related Distribution Account), such sum to be held in trust for the benefit
of
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the Persons entitled thereto. Any moneys deposited with a Paying Agent in excess
of an amount sufficient to pay the amounts then becoming due on the Notes with
respect to which such deposit was made shall, upon Trust Order, be paid over by
such Paying Agent to the Indenture Trustee for application in accordance with
Article VIII hereof.
Subject to the prior written consent of the Note Insurer, any
Paying Agent other than the Indenture Trustee may be appointed by Trust Order
and at the expense of the Trust. The Trust shall not appoint any Paying Agent
(other than the Indenture Trustee) that is not, at the time of such appointment,
a depository institution or trust company whose obligations would be Permitted
Investments pursuant to clause (b) of the definition of the term "Permitted
Investments". The Servicer, on behalf of the Trust, will cause each Paying Agent
other than the Indenture Trustee to execute and deliver to the Indenture Trustee
and the Owner Trustee, on behalf of the Trust, an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:
(a) allocate all sums received for payment to the Holders of
Notes on each Distribution Date among such Holders in the proportion
specified in the applicable Indenture Trustee's Remittance Report, in
each case to the extent permitted by applicable law;
(b) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(c) if such Paying Agent is not the Indenture Trustee,
immediately resign as a Paying Agent and forthwith pay to the Indenture
Trustee all sums held by it in trust for the payment of the Notes if at
any time the Paying Agent ceases to meet the standards set forth above
required to be met by a Paying Agent at the time of its appointment;
(d) if such Paying Agent is not the Indenture Trustee, give
the Indenture Trustee notice of any Default by the Trust (or any other
obligor upon the Notes) in the making of any payment required to be
made with respect to any Notes for which it is acting as Paying Agent;
(e) if such Paying Agent is not the Indenture Trustee, at any
time during the continuance of any such Default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent; and
(f) comply with all requirements of the Code, and all
regulations thereunder, with respect to withholding from any payments
made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith; provided, however, that with respect to
withholding and reporting requirements applicable to original issue
discount (if any) on any of the Notes, the Servicer, on behalf of the
Trust, has provided the calculations pertaining thereto to the
Indenture Trustee and the Paying Agent.
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The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Trust
Order direct any Paying Agent, if other than the Indenture Trustee, to pay to
the Indenture Trustee all sums held in trust by such Paying Agent, such sums to
be held by the Indenture Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and upon such payment by any Paying Agent
to the Indenture Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for two and one-half years after such amount has become due and
payable to the Holder of such Note (or if earlier, three months before the date
on which such amount would escheat to a governmental entity under applicable
law) shall be discharged from such trust and paid to the Trust; and the Holder
of such Note shall thereafter, as an unsecured general creditor, look only to
the Trust for payment thereof (but only to the extent of the amounts so paid to
the Trust), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease. The Indenture Trustee may
adopt and employ, at the expense of the Trust, any reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence of Trust. (a) Subject to clauses (b)
and (c) of this Section 3.04, the Trust will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware or under the laws of any other state of the United States of America,
and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes and the other Basic
Documents.
(b) Subject to Section 3.09(g) hereof, and with the prior
written consent of the Note Insurer, any entity into which the Trust may be
merged or with which it may be consolidated, or any entity resulting from any
merger or consolidation to which the Trust shall be a party, shall be the
successor issuer under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything in any agreement relating to such merger or consolidation, by which any
such Trust may seek to retain certain powers, rights and privileges therefore
obtaining for any period of time following such merger or consolidation to the
contrary notwithstanding (other than Section 3.09(g)).
(c) Upon any consolidation or merger of or other succession to
the Trust in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Trust) may exercise
every right and power of, and shall have all of the obligations of, the Trust
under this Indenture with the same effect as if such Person had been named as
the issuer herein.
Section 3.05. Protection of Trust Estate. (a) The Trust will,
from time to time, execute and deliver all such supplements and amendments
hereto and all such financing
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statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively all or any portion of the Trust
Estate as made by this Indenture;
(ii) maintain or preserve the lien of this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Sale and Servicing
Agreement, or the Loan Sale Agreement; or
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee, the Noteholders and the Note Insurer
in the Mortgage Loans and the other property held as part of the Trust
Estate against the claims of all Persons and parties.
(b) The Indenture Trustee shall not, and shall not permit the
Collateral Agent to, remove any portion of the Trust Estate that consists of
money or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the Closing Date or cause or permit
ownership or the pledge of any portion of the Trust Estate that consists of
book-entry securities to be recorded on the books of a Person located in a
different jurisdiction from the jurisdiction in which such ownership or pledge
was recorded at such time unless the Indenture Trustee shall have first received
an Opinion of Counsel to the effect that the lien and security interest created
by this Indenture with respect to such property will continue to be maintained
after giving effect to such action or actions.
Section 3.06. Opinions as to the Trust Estate. On or before
April 30th in each calendar year, beginning in ____, the Servicer, on behalf of
the Trust, shall furnish to the Indenture Trustee and the Note Insurer an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee and the Note Insurer either stating that, in the opinion of
such counsel, such action has been taken as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe all such action, if any, that will, in the opinion of such
counsel, be required to be taken to maintain the lien and security interest of
this Indenture with respect to the Trust Estate until May 1st in the following
calendar year.
Section 3.07. Performance of Obligations. (a) The Trust shall
punctually perform and observe all of its obligations under this Indenture and
the other Basic Documents.
(b) The Trust shall not take any action and will use its Best
Efforts not to permit any action to be taken by others that would release any
Person from any of such Person's covenants or obligations under any of the
Mortgage Files or under any instrument included in the Trust Estate, or that
would result in the amendment, hypothecation, subordination, termination or
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discharge of, or impair the validity or effectiveness of, any of the documents
or instruments contained in the Mortgage Files, except as expressly permitted in
this Indenture, the other Basic Documents or such document included in the
Mortgage File or other instrument or unless such action will not adversely
affect the interests of the Noteholders and the Note Insurer.
(c) If the Servicer or the Owner Trustee, on behalf of the
Trust, shall have knowledge of the occurrence of a default under the Sale and
Servicing Agreement or the Loan Sale Agreement, the Servicer or the Owner
Trustee, as applicable, shall promptly notify the Indenture Trustee, the Note
Insurer and the Rating Agencies thereof, and, in the case of the Servicer, shall
specify in such notice the action, if any, the Servicer is taking with respect
to such default.
(d) Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Indenture Trustee shall
promptly notify the Note Insurer and the Rating Agencies. As soon as any
successor Servicer is appointed, the Indenture Trustee shall notify the Note
Insurer and the Rating Agencies, specifying in such notice the name and address
of such successor Servicer.
Section 3.08. Investment Company Act. The Trust shall at all
times conduct its operations so as not to be subject to, or shall comply with,
the requirements of the Investment Company Act of 1940, as amended (or any
successor statute), and the rules and regulations thereunder.
Section 3.09. Negative Covenants. The Trust shall not:
(a) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate, except as expressly permitted by this
Indenture and the other Basic Documents;
(b) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Notes by reason of the payment
of any taxes levied or assessed upon any portion of the Trust Estate;
(c) engage in any business or activity other than as permitted
by the Trust Agreement or other than in connection with, or relating
to, the issuance of the Notes pursuant to this Indenture, or amend the
Trust Agreement, as in effect on the Closing Date, other than in
accordance with Section 11.01 of the Trust Agreement;
(d) incur, issue, assume or otherwise become liable for an
indebtedness other than the Notes;
(e) incur, assume, guaranty or agree to indemnify any Person
with respect to any indebtedness of any Person, except for such
indebtedness as may be incurred by the Trust in connection with the
issuance of the Notes pursuant to this Indenture;
(f) subject to Article IX of the Trust Agreement, dissolve or
liquidate in whole or in part (until the Notes are paid in full);
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(g) (i) permit the validity or effectiveness of this Indenture
or any Grant to be impaired, or permit the lien of this Indenture to be
impaired, amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (ii) permit any lien, charge, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Estate or
any part thereof or any interest therein or the proceeds thereof, or
(iii) permit the lien of this Indenture not to constitute a valid
perfected first priority security interest in the Trust Estate; or
(h) take any other action that should reasonably be expected
to, or fail to take any action if such failure should reasonably be
expected to, cause the Trust to be taxable as (x) an association
pursuant to Section 7701 of the Code or (y) a taxable mortgage pool
pursuant to Section 7701(i) of the Code.
Section 3.10. Annual Statement as to Compliance. On or before
April 30, 2000, and each April 30 thereafter, the Servicer, on behalf of the
Trust, shall deliver to the Indenture Trustee, the Note Insurer and the
Depositor a written statement, signed by an Authorized Officer of the Servicer,
on behalf of the Trust, stating that:
(a) a review of the fulfillment by the Trust during such year
of its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(b) to the best of such Authorized Officer's knowledge, based
on such review, the Trust has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a Default in the fulfillment of any such covenant or condition,
specifying each such Default known to such Authorized Officer and the
nature and status thereof.
Section 3.11. Restricted Payments. The Trust shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Trust or otherwise with respect to any ownership or equity interest or
security in or of the Trust or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Trust may make, or cause to be made, distributions
to the Servicer, the Indenture Trustee, the Owner Trustee, the Note Insurer and
the Certificateholders as contemplated by, and to the extent funds are available
for such purpose under this Indenture and the other Basic Documents and the
Trust will not, directly or indirectly, make or cause to be made payments to or
distributions from any Distribution Account except in accordance with this
Indenture.
Section 3.12. Treatment of Notes as Debt for Tax Purposes. For
purposes of federal, state and local income, franchise and any other income
taxes, the Trust will treat the Notes as indebtedness, and hereby instructs the
Indenture Trustee, Payee Agent and the Servicer, on behalf of the Trust to treat
the Notes as indebtedness for all applicable tax reporting purposes.
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Section 3.13. Notice of Events of Default. The Servicer, on
behalf of the Trust, shall give the Indenture Trustee, the Note Insurer, the
Rating Agencies and the Depositor prompt written notice of each Event of Default
hereunder, each default on the part of the Servicer of its obligations under the
Sale and Servicing Agreement and each default on the part of the Depositor of
its obligations under the Loan Sale Agreement.
Section 3.14. Further Instruments and Acts. Upon written
request of the Indenture Trustee or the Note Insurer, the Owner Trustee, on
behalf of the Trust, will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied:
(a) either
(i) all Notes theretofore authenticated and delivered (other
than (x) Notes that have been destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.07
hereof, and (y) Notes for whose payment money has theretofore
been deposited in trust and thereafter repaid to the Trust, as
provided in Section 3.03 hereof) have been delivered to the
Note Registrar for cancellation; or
(ii) all Notes not theretofore delivered to the Note Registrar
for cancellation,
(A) have become due and payable, or
(B) will become due and payable at the Final Stated
Maturity Date within one (1) year, or
(C) are to be called for redemption pursuant to
Section 10.01 hereof within one (1) year under
irrevocable arrangements satisfactory to the
Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name,
and at the expense, of the Servicer,
and the Servicer, in the case of clauses (ii)(A), (ii)(B) or
(ii)(C) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such
purpose, an amount sufficient to pay and discharge the entire
unpaid Note Principal Balance such Notes not theretofore
delivered to the Indenture Trustee for cancellation, for
principal and interest to the Final Stated Maturity Date or to
the applicable Redemption Date, as the case may be, and in the
case of Notes that were not paid at the Final Stated Maturity
Date of their entire unpaid
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Note Principal Balance, for all overdue principal and all
interest payable on such Notes to the next succeeding
Distribution Date therefor;
(b) the Servicer, on behalf of the Trust, has paid or caused
to be paid all other sums payable hereunder by the Trust (including,
without limitation, amounts due the Note Insurer); and
(c) the Servicer, on behalf of the Trust, has delivered to the
Indenture Trustee and the Note Insurer an Officers' Certificate and an
Opinion of Counsel satisfactory in form and substance to the Indenture
Trustee and the Note Insurer each stating that all conditions precedent
herein providing for the satisfaction and discharge of this Indenture
have been complied with;
then, upon a Trust Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Trust (or of the Servicer in the
case of a redemption by the Servicer pursuant to Section 10.01 hereof), execute
and deliver all such instruments as may be necessary to acknowledge the
satisfaction and discharge of this Indenture and shall pay, or assign or
transfer and deliver, to the Trust or upon Trust Order all cash, securities and
other property held by it as part of the Trust Estate remaining after
satisfaction of the conditions set forth in clauses (a) and (b) above.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Indenture Trustee and any Paying Agent to the
Trust and the Holders of Notes under Section 3.03 hereof, the obligations of the
Indenture Trustee to the Holders of Notes under Section 4.02 hereof and the
provisions of Section 2.07 hereof with respect to lost, stolen, destroyed or
mutilated Notes, registration of transfers of Notes and rights to receive
payments of principal of and interest on the Notes shall survive.
Section 4.02. Application of Trust Money. All money deposited
with the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent,
as the Indenture Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money has been deposited with the
Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event of Default. "Event of Default", wherever
used herein, means, with respect to Notes issued hereunder, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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(a)if the Trust shall fail to distribute or cause to be distributed to
the Indenture Trustee, for the benefit of the holders of the Notes, on any
Distribution Date, any Interest Distribution Amount and any Net Mortgage Loan
Interest Shortfalls due on the Notes on such Distribution Date;
(b) if the Trust shall fail to distribute or cause to be distributed to
the Indenture Trustee, for the benefit of the holders of the Notes, (x) on any
Distribution Date, an amount equal to the Principal Distribution Amount due on
the Notes on such Distribution Date, to the extent that sufficient funds are on
deposit in the Collection Account or (y) on the Final Stated Maturity Date for
any Class of Notes, the aggregate outstanding Note Principal Balance of such
Class of Notes;
(c) if the Trust shall breach or default in the due observance of any
one or more of the covenants set forth in clauses (a) through (h) of Section
3.09 hereof;
(d) if the Trust shall consent to the appointment of a custodian,
receiver, trustee or liquidator (or other similar official) of itself, or of a
substantial part of its property, or shall admit in writing its inability to pay
its debts generally as they come due, or a court of competent jurisdiction shall
determine that the Trust is generally not paying its debts as they come due, or
the Trust shall make a general assignment for the benefit of creditors;
(e) if the Trust shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization in a proceeding under any
bankruptcy laws (as now or hereafter in effect) or an answer admitting the
material allegation of a petition filed against the Trust in any such
proceeding, or the Trust shall, by voluntary petition, answer or consent, seek
relief under the provisions of any now existing or future bankruptcy or other
similar law providing for the reorganization or winding-up of debtors, or
providing for an agreement, composition, extension or adjustment with its
creditors;
(f) if an order, judgment or decree shall be entered in any proceeding
by any court of competent jurisdiction appointing, without the consent (express
or legally implied) of the Trust, a custodian, receiver, trustee or liquidator
(or other similar official) of the Trust or any substantial part of its
property, or sequestering any substantial part of its respective property, and
any such order, judgment or decree or appointment or sequestration shall remain
in force undismissed, unstayed or unvacated for a period of ninety (90) days
after the date of entry thereof; or
(g) if a petition against the Trust in a proceeding under applicable
bankruptcy laws or other insolvency laws, as now or hereafter in effect, shall
be filed and shall not be stayed, withdrawn or dismissed within ninety (90) days
thereafter, or if, under the provisions of any law providing for reorganization
or winding-up of debtors which may apply to the Trust, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Trust or any
substantial part of its property, and such jurisdiction, custody or control
shall remain in force unrelinquished, unstayed or unterminated for a period of
ninety (90) days.
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Section 5.02. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default occurs and is continuing, then and in every
such case, but with the consent of the Note Insurer in the absence of a Note
Insurer Default, the Indenture Trustee may, and on request of the Note Insurer,
in the absence of a Note Insurer Default, or, with the prior written consent of
the Note Insurer, the Holders of Notes representing not less than 50% of the
Note Principal Balance of the Outstanding Notes of both Classes, shall, declare
all the Notes to be immediately due and payable by a notice in writing to the
Trust (and to the Indenture Trustee if given by Noteholders), and upon any such
declaration such Notes, in an amount equal to the entire unpaid Note Principal
Balance of such Notes, together with accrued and unpaid interest thereon to the
date of such acceleration, shall become immediately due and payable, all subject
to the prior written consent of the Note Insurer in the absence of a Note
Insurer Default.
At any time after such a declaration of acceleration of
maturity of the Notes has been made and before a judgment or decree for payment
of the money due has been obtained by the Indenture Trustee as hereinafter
provided in this Article V, the Note Insurer, in the absence of a Note Insurer
Default, or the Holders of Notes representing more than 50% of the Note
Principal Balance of the Outstanding Notes of both Classes, with the prior
written consent of the Note Insurer, by written notice to the Trust and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(a) the Trust has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(i) all payments of principal of, and interest on, all Outstanding
Notes and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(ii) all sums paid or advanced by the Indenture Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee, its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the principal
of Notes that have become due solely by such acceleration, have been cured
or waived as provided in Section 5.14 hereof.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. Subject to the provisions of Section 3.01
hereof and the following sentence, if an Event of Default occurs and is
continuing, the Indenture Trustee may, with the prior written consent of the
Note Insurer, proceed to protect and enforce its rights and the rights of the
Noteholders and the Note Insurer by any Proceedings the Indenture Trustee deems
appropriate to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or enforce any other proper remedy. Any
Proceedings brought by the Indenture Trustee, on behalf of the Noteholders and
the Note Insurer, or any Noteholder against the Trust shall be limited to the
preservation,
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enforcement and foreclosure of the liens, assignments, rights and security
interests under the Indenture and no attachment, execution or other unit or
process shall be sought, issued or levied upon any assets, properties or funds
of the Trust, other than the Trust Estate relative to the Notes in respect of
which such Event of Default has occurred. If there is a foreclosure of any such
liens, assignments, rights and security interests under this Indenture, by
private power of sale or otherwise, no judgment for any deficiency upon the
indebtedness represented by the Notes may be sought or obtained by the Indenture
Trustee or any Noteholder against the Trust. The Indenture Trustee shall be
entitled to recover the costs and expenses expended by it pursuant to this
Article V including reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel.
Section 5.04. Remedies. If an Event of Default shall have
occurred and be continuing and the Notes been declared due and payable and such
declaration and its consequences have not been rescinded and annulled, the
Indenture Trustee, at the direction of the Note Insurer (subject to Section 5.17
hereof, to the extent applicable) may, for the benefit of the Noteholders and
the Note Insurer, do one or more of the following:
(a) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Trust
moneys adjudged due, subject in all cases to the provisions of Sections
3.01 and 5.03 hereof;
(b) in accordance with Section 5.17 hereof, sell the Trust Estate or
any portion thereof or rights or interest therein, at one or more public
or private Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee or the Holders of
the Notes and the Note Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all funds on
deposit in each of the Accounts pursuant to Section 5.07 hereof.
Section 5.05. Indenture Trustee May File Proofs of Claim. In
case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, composition or other judicial Proceeding relative
to the Trust or any other obligor upon any of the Notes or the property of the
Trust or of such other obligor or their creditors, the Indenture Trustee
(irrespective of whether the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand on the Trust for the payment of any
overdue principal or interest) shall, with the prior written consent of the Note
Insurer, be entitled and empowered, by intervention in such Proceeding or
otherwise to:
(a) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and file such other
papers or documents as may be
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necessary or advisable in order to have the claims of the Indenture
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and
counsel), the Noteholders and the Note Insurer allowed in such Proceeding,
and
(b) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other similar
official) in any such Proceeding is hereby authorized by each Noteholder
and the Note Insurer to make such payments to the Indenture Trustee and,
in the event that the Indenture Trustee shall consent to the making of
such payments directly to the Noteholders and the Note Insurer, to pay to
the Indenture Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any Holder
thereof, or the Note Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder or the Note Insurer in any such
Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Indenture or any
of the Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee,
at the direction of the Note Insurer, shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Notes and the Note Insurer in respect of
which such judgment has been recovered after payment of amounts required to be
paid pursuant to clause (a) of Section 5.07 hereof.
Section 5.07. Application of Money Collected. If the Notes
have been declared due and payable following an Event of Default and such
declaration and its consequences have not been rescinded and annulled, any money
collected by the Indenture Trustee with respect to each Class of Notes pursuant
to this Article V or otherwise and any other monies that may then be held or
thereafter received by the Indenture Trustee as security for such Class of Notes
shall be applied in the following order, at the date or dates fixed by the
Indenture Trustee and, in case of the payment of the entire amount due on
account of principal of, and interest on, such Class of Notes, upon presentation
and surrender thereof:
(a) first, to the Indenture Trustee, any unpaid Indenture Trustee Fees
with respect to such Class then due and any other amounts payable and due
to the Indenture Trustee with respect to such Class under this Indenture,
including any costs or expenses incurred by it in connection with the
enforcement of the remedies provided for in this Article V;
(b) second, to the Servicer, any amounts required to pay the Servicer
for any unpaid Servicing Fees with respect to such Class then due and to
reimburse the Servicer for Periodic Advances with respect to such Class
previously made by, and not previously reimbursed to or retained by, the
Servicer and, upon the final liquidation of the related
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Mortgage Loan or the final liquidation of the Trust Estate, Servicing
Advances with respect to such Class previously made by, and not previously
reimbursed to or retained by, the Servicer;
(c) third, to the payment of Interest Distribution Amounts then due and
unpaid upon the Outstanding Notes of such Class through the day preceding
the date on which such payment is made;
(d) fourth, to the payment of the Note Principal Balance of each of the
Outstanding Notes of such Class, up to the amount of their respective
unpaid Note Principal Balance, ratably, without preference or priority of
any kind;
(e) fifth, to the Note Insurer, as subrogee to the rights of the
Noteholders, (x) the aggregate amount -------------- necessary to
reimburse the Note Insurer for any unreimbursed Reimbursement Amounts for
such Class paid by the Note Insurer on prior Distribution Dates, together
with interest thereon at the "Late Payment Rate" specified in the
Insurance Agreement from the date such Reimbursement Amounts were due to
the Note Insurer to such Distribution Date, (y) the amount of any unpaid
Premium Amount for such Class then due, together with interest thereon at
the "Late Payment Rate" specified in the Insurance Agreement from the date
such amounts were due to such Distribution Date and (z) any other amounts
due and owing to the Note Insurer for such Class under the Insurance
Agreement;
(f) sixth, to the payment of any Net Mortgage Loan Interest Shortfalls
of such Class through the day preceding the date on which such payment is
made;
(g) seventh, for payment in respect of the other Class of Notes, in the
priority set forth in this Section 5.07, to the extent of any shortfall in
the payment of the amounts described in clauses (a) through (f) with
respect to such other Class;
(h) eighth, the remainder to the Holder of Trust Certificate relating
to such Class.
Section 5.08. Limitation on Suits. No Holder of a Note shall
have any right to institute any Proceedings, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee and the Note Insurer of a continuing Event of Default;
(b) the Holders of Notes representing not less than 25% of the Note
Principal Balance of the Outstanding Notes of both Classes shall have made
written request to the Indenture Trustee to institute Proceedings in
respect of such Event of Default in its own name as Indenture Trustee
hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
indemnity in full against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(d) the Indenture Trustee, for sixty (60) days after its receipt of
such notice, request and offer of indemnity, has failed to institute any
such Proceeding;
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such sixty (60) day period by the Holders
of Notes representing more than 50% of the Note Principal Balance of the
Outstanding Notes of both Classes; and
(f) the consent of the Note Insurer shall have been obtained; it being
understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and
ratable benefit of all the Holders of Notes.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than 50% of the Note Principal Balances of the
Outstanding Notes of both Classes, the Indenture Trustee shall take the action
prescribed by the group representing a greater percentage of the Note Principal
Balances of the Outstanding Notes of both Classes.
Section 5.09. Unconditional Rights of Noteholders to Receive
Principal and Interest. Subject to the provisions in this Indenture (including
Sections 3.01 and 5.03 hereof) limiting the right to recover amounts due on a
Note to recovery from amounts in the portion of the Trust Estate relating to
such Note, the Holder of any Note shall have the right, to the extent permitted
by applicable law, which right is absolute and unconditional, to receive payment
of each installment of interest on such Note on the respective Distribution Date
for such installments of interest, to receive payment of each installment of
principal of such Note when due (or, in the case of any Note called for
redemption, on the date fixed for such redemption) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
Section 5.10. Restoration of Rights and Remedies. If the
Indenture Trustee, the Note Insurer or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason, or has been
determined to be adverse to the Indenture Trustee, the Note Insurer or to such
Noteholder, then and in every such case the Indenture Trustee, the Note Insurer
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee, the Note Insurer
and the Noteholders shall continue as though no such Proceeding had been
instituted.
Section 5.11. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee, the Note
Insurer or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given
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hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 5.12. Delay or Omission Not Waiver. No delay or
omission of the Indenture Trustee, the Note Insurer or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article V or by
law to the Indenture Trustee, the Note Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Note Insurer or by the Noteholders with the prior consent
of the Note Insurer, as the case may be.
Section 5.13. Control by Noteholders. The Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes on the applicable Record Date shall, with the consent of
the Note Insurer, have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) any direction to the Indenture Trustee to undertake a Sale of the
Trust Estate shall be by the Holders of Notes representing the percentage
of the Note Principal Balance of the Outstanding Notes specified in
Section 5.17(b)(i) hereof, unless Section 5.17(b)(ii) hereof is
applicable; and
(c) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01 hereof, the Indenture
Trustee need not take any action that it determines might involve it in
liability or be unjustly prejudicial to the Noteholders not consenting.
Section 5.14. Waiver of Past Defaults. The Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes on the applicable Record Date may on behalf of the Holders
of all the Notes, and with the consent of the Note Insurer, waive any past
Default hereunder and its consequences, except a Default:
(a) in the payment of principal or any installment of interest on any
Note; or
(b) in respect of a covenant or provision hereof that under Section
9.02 hereof cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
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Section 5.15. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.15 shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate Notes representing more than 10% of the
Note Principal Balance of the Outstanding Notes of both Classes, or to any suit
instituted by any Noteholder for the enforcement of the payment of any Interest
Distribution Amount or Principal Distribution Amount on any Note on or after the
related Distribution Date or for the enforcement of the payment of principal of
any Note on or after the Final Stated Maturity Date (or, in the case of any Note
called for redemption, on or after the applicable Redemption Date).
Section 5.16. Waiver of Stay or Extension Laws. The Trust
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension of law wherever enacted, now or
at any time hereafter in force, that may affect the covenants in, or the
performance of, this Indenture; and the Trust (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.17. Sale of Trust Estate (a) The power to effect any
sale (a "Sale") of any portion of the Trust Estate pursuant to Section 5.04
hereof shall not be exhausted by any one or more Sales as to any portion of the
Trust Estate remaining unsold, but shall continue unimpaired until the entire
Trust Estate shall have been sold or all amounts payable on the Notes and under
this Indenture with respect thereto shall have been paid. The Indenture Trustee
may from time to time postpone any public Sale by public announcement made at
the time and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee
shall not in any private Sale sell or otherwise dispose of the Trust Estate, or
any portion thereof, unless:
(i) the Holders of Notes representing not less than 50% of
the Note Principal Balance of the Notes of both Classes then
Outstanding consent to or direct the Indenture Trustee to make such
Sale; or
(ii) the proceeds of such Sale would be not less than the
entire amount that would be payable to the Holders of the Notes, in
full payment thereof in accordance with Section 5.07 hereof, on the
Distribution Date next succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of
the Trust Estate at a private Sale shall not be deemed a Sale or disposition
thereof for purposes of this Section
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5.17(b). In the absence of a Note Insurer Default, no Sale hereunder shall be
effective without the consent of the Note Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than the
amount described in paragraph (ii) of subsection (b) of this Section 5.17 has
not been established by the Indenture Trustee and no Person bids an amount equal
to or greater than such amount, the Indenture Trustee, acting in its capacity as
Indenture Trustee (i) on behalf of the Noteholders and the Note Insurer, shall
prevent such Sale and bid an amount (which shall include the Indenture Trustee's
right, in its capacity as Indenture Trustee, to credit bid) at least $1.00 more
than the highest other bid in order to preserve the Trust Estate on behalf of
the Noteholders and the Note Insurer.
(d) In connection with a Sale of all or any portion of the
Trust Estate:
(i) any Holder or Holders of Notes may bid for and purchase
the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor,
deliver any Outstanding Notes or claims for interest thereon in lieu of
cash up to the amount that shall, upon distribution of the net proceeds
of such Sale, be payable thereon, and such Notes, in case the amounts
so payable thereon shall be less than the amount due thereon, shall be
returned to the Holders thereof after being appropriately stamped to
show such partial payment;
(ii) the Indenture Trustee may bid for and acquire the
property offered for Sale in connection with any public Sale thereof,
and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A)
the amount that would be payable to the Holders of the Notes as a
result of such Sale in accordance with Section 5.07 hereof on the
Distribution Date next succeeding the date of such Sale and (B) the
expenses of the Sale and of any Proceedings in connection therewith
which are reimbursable to it, without being required to produce the
Notes in order to complete any such Sale or in order for the net Sale
price to be credited against such Notes, and any property so acquired
by the Indenture Trustee shall be held and dealt with by it in
accordance with the provisions of this Indenture;
(iii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Estate in connection with a Sale thereof,
(iv) the Indenture Trustee is hereby irrevocably appointed
the agent and attorney-in-fact of the Trust to transfer and convey its
interest in any portion of the Trust Estate in connection with a Sale
thereof, and to take all action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
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Section 5.18. Action on Notes. The Indenture Trustee's right
to seek and recover judgment under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Indenture Trustee, the Note Insurer or the Holders of Notes shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Trust or by the levy of any execution under such judgment upon any portion of
the Trust Estate.
Section 5.19. No Recourse to Other Trust Estates or Other
Assets of the Trust. The Trust Estate Granted to the Indenture Trustee as
security for the Notes serves as security only for the Notes. Holders of the
Notes shall have no recourse against the trust estate granted as security for
any other series of Notes issued by the Trust, and no judgment against the Trust
for any amount due with respect to the Notes may be enforced against either the
trust estate securing any other series or any other assets of the Trust, nor may
any prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Trust. The Noteholders shall have no recourse
against the Owner Trustee, the Indenture Trustee, Note Registrar, Authenticating
Agent, Collateral Agent, the Depositor, the Servicer or any of their respective
Affiliates, or to the assets of any of the foregoing entities.
Section 5.20. Application of the Trust Indenture Act. Pursuant
to Section 316(a) of the TIA, all provisions automatically provided for in
Section 316(a) are hereby expressly excluded.
Section 5.21. Note Insurer Default. Notwithstanding anything
elsewhere in this Indenture or in the Notes to the contrary, if a Note Insurer
Default exists, the provisions of this Article V and all other provisions of
this Indenture which (a) permit the Note Insurer to exercise rights of the
Noteholders, (b) restrict the ability of the Noteholders or the Indenture
Trustee to act without the consent or approval of the Note Insurer, (c) provide
that a particular act or thing must be acceptable to the Note Insurer, (d)
permit the Note Insurer to direct (or otherwise to require) the actions of the
Indenture Trustee or the Noteholders, (e) provide that any action or omission
taken with the consent, approval or authorization of the Note Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Indenture Trustee shall administer the
Trust Estate and perform its obligations hereunder solely for the benefit of the
Holders of the Notes. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Note Insurer from any obligation or liability it may have to any party or to
the Noteholders hereunder, under any other agreement, instrument or document
(including, without limitation, the Note Insurance Policy) or under applicable
law.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, the Indenture Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a
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prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may
request and conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture. The Indenture Trustee shall, however,
examine such certificates and opinions to determine whether they conform
on their face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of subsection
(b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Sections 5.13 or 5.17
hereof or exercising any trust or power or remedy conferred upon the
Indenture Trustee under this Indenture.
(d) Except with respect to duties of the Indenture Trustee
prescribed by the TIA, as to which this Section 6.01(d) shall not apply, for all
purposes under this Indenture, the Indenture Trustee shall not be deemed to have
notice or knowledge of any Event of Default described in Sections 5.01(e) or
5.01(f) hereof or any Default described in Sections 5.01(c) or 5.01(d) hereof or
of any event described in Section 3.05 hereof unless a Responsible Officer
assigned to and working in the Indenture Trustee's corporate trust department
and having direct responsibility for this Indenture has actual knowledge thereof
or unless written notice of any event that is in fact such an Event of Default
or Default is received by the Indenture Trustee at the Corporate Trust Office,
and such notice references the Notes generally, the Trust, the Trust Estate or
this Indenture.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it under this Indenture or the other
Basic Documents.
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(f) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to the provisions of this Section 6.01.
(g) Notwithstanding any extinguishment of all right, title and
interest of the Trust in and to the Trust Estate following an Event of Default
and a consequent declaration of acceleration of the maturity of the Notes,
whether such extinguishment occurs through a Sale of the Trust Estate to another
Person, the acquisition of the Trust Estate by the Indenture Trustee or
otherwise, the rights, powers and duties of the Indenture Trustee with respect
to the Trust Estate (or the proceeds thereof), the Noteholders and the Note
Insurer and the rights of Noteholders and the Note Insurer shall continue to be
governed by the terms of this Indenture.
(h) The Indenture Trustee, the Collateral Agent or any
successor Collateral Agent appointed pursuant to Section 9.08 of the Sale and
Servicing Agreement shall at all times retain possession of the Indenture
Trustee's Mortgage Files in the State of Delaware or the State of New York (or,
with respect to, as initial Collateral Agent, in the State of _____), except for
those Indenture Trustee's Mortgage Files or portions thereof released to the
Servicer or the Note Insurer pursuant to this Indenture, the Loan Sale Agreement
or the Sale and Servicing Agreement.
(i) Subject to the other provisions of this Indenture and
without limiting the generality of this Section 6.01, the Indenture Trustee
shall have no duty (A) to see to any recording, filing, or depositing of this
Indenture 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, filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see
to the payment or discharge of any tax, assessment, or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Trust Estate from funds available in the Distribution
Accounts or (D) to confirm or verify the contents of any reports or certificates
of the Servicer delivered to the Indenture Trustee pursuant to this Indenture
believed by the Indenture Trustee to be genuine and to have been signed or
presented by the proper party or parties.
Section 6.02. Notice of Default. Immediately after the
occurrence of any Default known to the Indenture Trustee, the Indenture Trustee
shall transmit by mail to the Note Insurer and the Depositor notice of each such
Default and, within ninety (90) days after the occurrence of any Default known
to the Indenture Trustee, the Indenture Trustee shall transmit by mail to all
Holders of Notes notice of each such Default, unless such Default shall have
been cured or waived; provided, however, that in no event shall the Indenture
Trustee provide notice, or fail to provide notice of a Default known to the
Indenture Trustee in a manner contrary to the requirements of the Trust
Indenture Act. Concurrently with the mailing of any such notice to the Holders
of the Notes, the Indenture Trustee shall transmit by mail a copy of such notice
to the Rating Agencies.
Section 6.03. Rights of Indenture Trustee. (a) Except as
otherwise provided in Section 6.01 hereof, the Indenture Trustee may rely on,
and be protected in acting or refraining to act upon any document believed by it
to be genuine and to have been signed or presented by
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the proper Person. The Indenture Trustee need not investigate any fact or matter
stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall
not be unreasonably withheld, the Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith that it believes to be authorized or
within its rights or powers.
(e) The Indenture Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Indenture or to
institute, conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Noteholders or the Note Insurer,
pursuant to the provisions of this Indenture, unless such Noteholders or the
Note Insurer shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(f) The Indenture 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 Noteholders or the Note Insurer; provided, however, that if the payment
within a reasonable time to the Indenture 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 Indenture Trustee, not reasonably assured to the Indenture
Trustee by the security afforded to it by the terms of this Indenture, the
Indenture Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action.
(g) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed as a duty,
and the Indenture Trustee shall not be answerable for anything other than its
negligence or willful misconduct in the performance of such act.
Section 6.04. Not Responsible for Recitals or Issuance of
Notes. The recitals contained herein and in the Notes, except, with respect to
the Indenture Trustee, the certificates of authentication on the Notes, shall be
taken as the statements of the Trust, and the Owner Trustee, the Indenture
Trustee and the Authenticating Agent assume no responsibility for their
correctness. The Owner Trustee and Indenture Trustee make no representations
with respect to the Trust Estate or as to the validity or sufficiency of this
Indenture or of the Notes. Neither the Indenture Trustee nor the Owner Trustee
shall be accountable for the use or application by the Trust of the Notes or the
proceeds thereof or any money paid to the Trust or upon a Trust Order pursuant
to the provisions hereof.
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Section 6.05. May Hold Notes. The Indenture Trustee, any
Agent, or any other agent of the Trust, in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to Sections 6.07 and 6.13
hereof, may otherwise deal with the Trust or any Affiliate of the Trust with the
same rights it would have if it were not Indenture Trustee, Agent or such other
agent.
Section 6.06. Money Held in Trust. Money held by the Indenture
Trustee in trust hereunder need not be segregated from other funds except to the
extent required by this Indenture or by law. The Indenture Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Trust and except to the extent of income or other gain
on investments that are obligations of the Indenture Trustee, in its commercial
capacity, and income or other gain actually received by the Indenture Trustee on
investments, which are obligations of others.
Section 6.07. Eligibility, Disqualification. Irrespective of
whether this Indenture is qualified under the TIA, this Indenture shall always
have an indenture trustee who satisfies the requirements of TIA Sections
310(a)(1) and 310(a)(5). The Indenture Trustee shall always have a combined
capital and surplus as stated in Section 6.08 hereof. The Indenture Trustee
shall be subject to TIA Section 310(b).
Section 6.08. Indenture Trustee's Capital and Surplus. The
Indenture Trustee shall at all times (a)(i) have a combined capital and surplus
of at least $50,000,000, or (ii) be a member of a bank holding company system,
the aggregate combined capital and surplus of which is at least $100,000,000 and
(b) be rated (or have long-term debt rated) "BBB" or better by S&P and "Baa2" by
Moody's; provided, however, that the Indenture Trustee's separate capital and
surplus shall at all times be at least the amount required by TIA Section
310(a)(2). If the Indenture Trustee publishes annual reports of condition of the
type described in TIA Section 310(a)(1), its combined capital and surplus for
purposes of this Section 6.08 shall be as set forth in the latest such report.
If at any time the Indenture Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.08 and TIA Section 310(a)(2), it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article VI.
Section 6.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Article VI shall
become effective until the acceptance of appointment by the successor Indenture
Trustee under Section 6.10 hereof.
(b) The Indenture Trustee may resign at any time by giving
written notice thereof to the Trust, the Note Insurer and each Rating Agency. If
an instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within thirty (30) days after the giving of
such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(c) The Indenture Trustee may be removed at any time by the
Note Insurer or, with the consent of the Note Insurer, by Act of the Holders
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes, by written notice delivered to the Indenture Trustee and
to the Trust.
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(d) If at any time:
(i) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 hereof and shall fail to resign or eliminate
such conflicting interest in accordance with Section 6.07 hereof after
written request therefor by the Trust or by any Noteholder; or
(ii) the Indenture Trustee shall cease to be eligible under
Section 6.08 hereof or shall become incapable of acting or shall be
adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee
or of its property shall be appointed, or any public officer shall take
charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, (x) the Owner Trustee, on behalf of the Trust, by a
Trust Order, with the consent of the Note Insurer, may remove the Indenture
Trustee, and the Owner Trustee, on behalf of the Trust by a Trust Order, shall
join with the Indenture Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper to appoint a successor
Indenture Trustee acceptable to the Note Insurer and to vest in such successor
Indenture Trustee any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Indenture; provided, however,
if the Owner Trustee, on behalf of the Trust and the Note Insurer do not join in
such appointment within fifteen (15) days after the receipt by it of a request
to do so, or in case an Event of Default has occurred and is continuing, the
Indenture Trustee may petition a court of competent jurisdiction to make such
appointment, or (y) subject to Section 5.15 hereof, and, in the case of a
conflicting interest as described in clause (i) above, unless the Indenture
Trustee's duty to resign has been stayed as provided in TIA Section 310(b), the
Note Insurer or any Noteholder who has been a bona fide Holder of a Note for at
least six (6) months may, on behalf of himself and all others similarly
situated, with the consent of the Note Insurer, petition any court of competent
jurisdiction for the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Owner Trustee, on behalf of the Trust, by a
Trust Order shall promptly appoint a successor Indenture Trustee acceptable to
the Note Insurer. If within one (1) year after such resignation, removal or
incapability or the occurrence of such vacancy a successor Indenture Trustee
shall be appointed by the Note Insurer or, with the consent of the Note Insurer,
by Act of the Holders of Notes representing more than 50% of the Note Principal
Balance of the Outstanding Notes of both Classes delivered to the Trust and the
retiring Indenture Trustee, the successor Indenture Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor
Indenture Trustee and supersede the predecessor Indenture Trustee appointed by
the Trust. If no successor Indenture Trustee shall have been so appointed by the
Trust, the Note Insurer or Noteholders and shall have accepted appointment in
the manner hereinafter provided, any Noteholder who has been a bona fide Holder
of a Note for at least six (6) months may, on behalf of himself and all others
similarly situated, with the consent of the Note Insurer, petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
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(f) The Servicer, on behalf of the Trust, shall give notice of
each resignation and each removal of the Indenture Trustee and each appointment
of a successor Indenture Trustee to the Holders of Notes and the Note Insurer.
Each notice shall include the name of the successor Indenture Trustee and the
address of its Corporate Trust Office.
Section 6.10. Acceptance of Appointment by Successor Indenture
Trustee. Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Trust, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the foregoing, on request of
the Owner Trustee, on behalf of the Trust, or the successor Indenture Trustee,
such retiring Indenture Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Indenture Trustee all the
rights, powers and trusts of the retiring Indenture Trustee, and shall duly
assign, transfer and deliver to such successor Indenture Trustee all property
and money held by such retiring Indenture Trustee hereunder. Upon request of any
such successor Indenture Trustee, the Owner Trustee, on behalf of the Trust,
shall, with the written consent of the Note Insurer, execute and deliver any and
all instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment
unless at the time of such acceptance such successor Indenture Trustee shall be
qualified and eligible under this Article VI.
Section 6.11. Merger, Conversion, Consolidation or Succession
to Business of Indenture Trustee. Any corporation or banking association into
which the Indenture Trustee may be merged or converted or with which it may be
consolidated, or any corporation or banking association resulting from any
merger, conversion or consolidation to which the Indenture Trustee shall be a
party, or any corporation or banking association succeeding to all or
substantially all of the corporate trust business of the Indenture Trustee,
shall be the successor of the Indenture Trustee hereunder; provided, that such
corporation or banking association shall be otherwise qualified and eligible
under this Article VI, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes have
been authenticated, but not delivered, by the Indenture Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Indenture Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Indenture Trustee had
authenticated such Notes.
Section 6.12. Preferential Collection of Claims Against Trust.
The Indenture Trustee (and any co-trustee or separate trustee) shall be subject
to TIA Section 311(a), excluding any creditor relationship listed in TIA Section
31l(b), and an Indenture Trustee (and any co-trustee or separate trustee) who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
Section 6.13. Co-Indenture Trustees and Separate Indenture
Trustees. At any time or times, for the purpose of meeting the legal
requirements of the TIA or of any jurisdiction
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in which any of the Trust Estate may at the time be located, the Indenture
Trustee shall have power to appoint, and, upon the written request of the
Indenture Trustee, the Note Insurer or of the Holders of Notes representing more
than 50% of the Note Principal Balance of the Outstanding Notes of both Classes
with respect to which a co-trustee or separate trustee is being appointed, with
the written consent of the Note Insurer, the Owner Trustee, on behalf of the
Trust, shall for such purpose join with the Indenture Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Indenture Trustee either to act
as co-trustee, jointly with the Indenture Trustee, of all or any part of the
Trust Estate, or to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section 6.13. If the Owner Trustee, on behalf of the Trust, does not join
in such appointment within fifteen (15) days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is continuing,
the Indenture Trustee alone shall have power to make such appointment. All fees
and expenses of any co-trustee or separate trustee shall be payable by the
Trust.
Should any written instrument from the Trust be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Owner Trustee, on behalf of the Trust, with the written consent
of the Note Insurer.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms:
(a) The Notes shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee
hereunder, shall be exercised, solely by the Indenture Trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Indenture Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee or by the Indenture
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Indenture Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(c) The Indenture Trustee at any time, by an instrument in
writing, executed by it, with the concurrence of the Owner Trustee, on
behalf of the Trust, evidenced by a Trust Order, may accept the
resignation of or remove any co-trustee or separate trustee appointed
under this Section 6.13, and, in case an Event of Default has occurred
and is continuing, the Indenture Trustee shall have power to accept the
resignation of, or remove, any such co-trustee or separate trustee
without the concurrence of the Trust, but
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upon the written request of the Indenture Trustee, the Owner Trustee,
on behalf of the Trust, shall join with the Indenture Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A
successor to any co-trustee or separate trustee so resigned or removed
may be appointed in the manner provided in this Section 6.13.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Indenture
Trustee, or any other such trustee hereunder.
(e) Any Act of Noteholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
Section 6.14. Authenticating Agents. The Owner Trustee, acting
at the direction of the Majority Certificateholders, shall appoint an
Authenticating Agent with power to act on the Trust's behalf and subject to the
direction of the Majority Certificateholders in the authentication and delivery
of the Notes designated for such authentication and, containing provisions
therein for such authentication (or with respect to which the Owner Trustee
acting at the direction of the Majority Certificateholders, has made other
arrangements, satisfactory to the Indenture Trustee and such Authenticating
Agent, for notation on the Notes of the authority of an Authenticating Agent
appointed after the initial authentication and delivery of such Notes) in
connection with transfers and exchanges under Section 2.06 hereof, as fully to
all intents and purposes as though the Authenticating Agent had been expressly
authorized by Section 2.06 hereof to authenticate and deliver Notes. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Notes pursuant to Sections 2.05 and 2.11 hereof in connection with
their initial issuance), the authentication and delivery of Notes by the
Authenticating Agent pursuant to this Section 6.14 shall be deemed to be the
authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 hereof for the Indenture Trustee hereunder and has
an office for presentation of Notes in the United States of America. The
Indenture Trustee shall initially be the Authenticating Agent and shall be the
Note Registrar as provided in Section 2.06 hereof. The office from which the
Indenture Trustee shall perform its duties as Note Registrar and Authenticating
Agent shall be its Corporate Trust Office. Any Authenticating Agent appointed
pursuant to the terms of this Section 6.14 or pursuant to the terms of any
supplemental indenture shall deliver to the Indenture Trustee as a condition
precedent to the effectiveness of such appointment an instrument accepting the
trusts, duties and responsibilities of Authenticating Agent and of Note
Registrar or co-Note Registrar and indemnifying the Indenture Trustee for and
holding the Indenture Trustee harmless against, any loss, liability or expense
(including reasonable attorneys' fees) incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance, administration
of the trust or exercise of authority by such Authenticating Agent, Note
Registrar or co-Note Registrar.
Any corporation or banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or banking association resulting from any
merger, consolidation or conversion to which any Authenticating Agent shall be a
party, or any corporation or banking association succeeding to the corporate
trust business of any Authenticating Agent, shall be the successor of the
Authenticating Agent
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hereunder, if such successor corporation is otherwise eligible under this
Section 6.14, without the execution or filing of any further act on the part of
the parties hereto or the Authenticating Agent or such successor corporation or
banking association.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trust. The Owner Trustee, acting at the
direction of the Majority Certificateholders, may at any time terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and the Indenture Trustee. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Owner Trustee, acting at the direction of the Majority Certificateholders, shall
promptly appoint a successor Authenticating Agent, shall give written notice of
such appointment to the Indenture Trustee, and shall mail notice of such
appointment to all Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e)
hereof, to pay to any Authenticating Agent from time to time reasonable
compensation for its services and the Indenture Trustee shall be entitled to be
reimbursed for such payments pursuant to Section 6.16 hereof. The provisions of
Sections 2.09, 6.04 and 6.05 hereof shall be applicable to any Authenticating
Agent.
Section 6.15. Review of Mortgage Files. (a) The Indenture
Trustee shall, on or prior to the Closing Date, execute and deliver the
acknowledgement of receipt of the Note Insurance Policy required by Section
2.06(a) of the Sale and Servicing Agreement.
(b) The Indenture Trustee shall cause the Collateral Agent to
(i) on or prior to the Closing Date, execute and deliver the acknowledgement of
receipt of the Mortgage Loans required by Section 2.06(b)(i) of the Sale and
Servicing Agreement, (ii) on or prior to thirty (30) days following the Closing
Date, execute and deliver the Initial Certificate required by Section
2.06(b)(ii) of the Sale and Servicing Agreement, and (iii) on or prior to ninety
(90) days following the Closing Date, execute and deliver the Final
Certification required by Section 2.06(b)(iii) of the Sale and Servicing
Agreement.
(c) In giving each of the acknowledgements, the Initial
Certification and the Final Certification referred to in clauses (a) and (b) of
this Section 6.15, neither the Indenture Trustee nor the Collateral Agent shall
be under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, securities or other papers to determine that they or the
signatures thereto are genuine, enforceable, or appropriate for the represented
purpose or that they have actually been recorded or that they are other than
what they purport to be on their face or (ii) to determine whether any Mortgage
File should include a flood insurance policy, any rider, addenda, surety or
guaranty agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
(d) In the event that the Mortgage Loans are required to be
recorded in accordance with the provisions of Article II of the Sale and
Servicing Agreement, no later than the fifth Business Day of each third month,
commencing in ________, the Indenture Trustee shall cause the Collateral Agent
to deliver to the Servicer and the Note Insurer a recordation report dated as of
the first day of such month, identifying those Mortgage Loans for which it has
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not yet received (i) an original recorded Mortgage or a copy thereof certified
to be true and correct by the public recording office in possession of such
Mortgage or (ii) an original recorded Assignment of Mortgage to the Indenture
Trustee and any required intervening Assignments of Mortgage or a copy thereof
certified to be a true and correct copy by the public recording office in
possession of such Assignment of Mortgage.
Section 6.16. Indenture Trustee Fees and Expenses. The
Indenture Trustee shall be entitled to receive the Indenture Trustee Fee on each
Distribution Date as provided herein. The Indenture Trustee also shall be
entitled to (i) payment of or reimbursement for expenses, disbursements and
advances incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Indenture (including, but not limited to, the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ), and (ii) indemnification against losses,
liability and expenses, including reasonable attorney's fees, incurred, arising
out of or in connection with this Indenture, the Notes and the Sale and
Servicing Agreement. The Indenture Trustee and any director, officer, employee
or agent of the Indenture Trustee shall be indemnified by the Trust and held
harmless against any loss, liability or reasonable expense incurred in
connection with this Indenture or the Notes, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance by the Indenture Trustee of its duties hereunder. The
obligations of the Servicer and the Trust under this Section 6.16 shall survive
termination of the Trust and payment of the Notes, and shall extend to any
co-Indenture Trustee or separate-Indenture Trustee appointed pursuant to this
Article VI.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Note Registrar to Furnish Indenture Trustee
Names and Addresses of Noteholders. (a) The Note Registrar shall furnish or
cause to be furnished to the Indenture Trustee (i) semiannually, not less than
forty-five (45) days nor more than sixty (60) days after the Distribution Date
occurring closest to six (6) months after the Closing Date and each Distribution
Date occurring at six (6) month intervals thereafter, all information in the
possession or control of the Note Registrar, in such form as the Indenture
Trustee may reasonably require, as to names and addresses of the Holders of
Notes, and (ii) at such other times, as the Indenture Trustee may request in
writing, within thirty (30) days after receipt by the Note Registrar of any such
request, a list of similar form and content as of a date not more than ten (10)
days prior to the time such list is furnished; provided, however, that so long
as the Indenture Trustee is the Note Registrar, no such list shall be required
to be furnished.
(b) In addition to furnishing to the Indenture Trustee the
Noteholder lists, if any, required under clause (a) of this Section 7.01, the
Note Registrar shall also furnish all Noteholder lists, if any, required under
Section 3.03 hereof at the times required by such Section 3.03.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list, if any, furnished to the Indenture Trustee as
provided in Section 7.01 hereof and the names and addresses of the Holders
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of Notes received by the Indenture Trustee in its capacity as Note Registrar.
The Indenture Trustee may destroy any list furnished to it as provided in
Section 7.01 hereof upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Trust, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
Section 7.03. Reports by Indenture Trustee. (a) Within sixty
(60) days after December 31 of each year (the "reporting date"), commencing with
the year after the issuance of the Notes, (i) the Indenture Trustee shall, if
required by TIA Section 313(a), mail to all Holders a brief report dated as of
such reporting date that complies with TIA Section 313(a); (ii) the Indenture
Trustee shall, to the extent not set forth in the Indenture Trustee's Remittance
Report pursuant to Section 2.08(d) hereof, also mail to Holders of Notes and the
Note Insurer with respect to which it has made advances, any reports with
respect to such advances that are required by TIA Section 313(b)(2); and, the
Indenture Trustee shall also mail to Holders of Notes and the Note Insurer any
reports required by TIA Section 313(b)(1). For purposes of the information
required to be included in any such reports pursuant to TIA Sections 313(a)(2),
313(b)(1) (if applicable), or 313(b)(2), the principal amount of indenture
securities outstanding on the date as of which such information is provided
shall be the Note Principal Balance of the then Outstanding Notes covered by the
report.
(b) A copy of each report required under this Section 7.03
shall, at the time of such transmission to Holders of Notes and the Note Insurer
be filed by the Indenture Trustee with the Commission and with each securities
exchange upon which the Notes are listed. The Servicer, on behalf of the Trust,
will notify the Indenture Trustee when the Notes are listed on any securities
exchange.
Section 7.04. Reports by Trust. The Servicer, on behalf of the
Trust, (a) shall deliver to the Indenture Trustee within fifteen (15) days after
the Trust is required to file the same with the Commission copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that the Trust is required to file with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and (b)
shall also comply with the other provisions of TIA Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Accounts; Investment; Collection of Moneys. (a)
The Trust hereby directs the Indenture Trustee to establish, on or before the
Closing Date, for each Class of Notes, at its Corporate Trust Office, one or
more Eligible Accounts that shall collectively be the "Distribution Account" for
such Class. The Indenture Trustee shall promptly deposit in the related
Distribution Account (i) the Servicer Remittance Amount for the related Pool
received by
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it from the Servicer on the Servicer Distribution Date pursuant to the Sale and
Servicing Agreement, (ii) any other funds from any deposits for such Pool to be
made by the Servicer pursuant to the Sale and Servicing Agreement, (iii) any
amount for such Pool required to be deposited in such Distribution Account
pursuant to this Section 8.01, (iv) all amounts for such Pool received pursuant
to Section 8.03 hereof, (v) any amount for such Pool required to be deposited
pursuant to Section 8.05 hereof, (vi) on each Distribution Date, in accordance
with the Servicer Remittance Report, the Shortfall Amount for the related Class,
until paid in full, first, from the Distribution Account relating to the other
Class of Notes, to the extent of the Net Monthly Excess Cashflow from the other
Pool of Mortgage Loans remaining after payment of any Net Mortgage Loan Interest
Shortfalls for such other Pool, second, from the Cross-collateralization Reserve
Account relating to this Class of Notes, and third, from the
Cross-collateralization Reserve Account relating to the other Class of Notes,
and (vii) all other amounts for such Pool received for deposit in such
Distribution Account, including the payment of any Loan Repurchase Price for a
Mortgage Loan in such Pool received by the Indenture Trustee. All amounts that
are deposited from time to time in a Distribution Account are subject to
withdrawal by the Indenture Trustee for the purposes set forth in Sections 8.02
hereof. All funds withdrawn from a Distribution Account pursuant to Section 8.02
hereof for the purpose of making payments to the Holders of Notes shall be
applied in accordance with Sections 3.03 and 8.02 hereof.
(b) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Pre-Funding Account" for such Class of Notes. On the
Closing Date, the Indenture Trustee shall deposit the Original Pre-Funded Amount
for each Class of Notes in the related Pre-Funding Account from the proceeds of
the sale of the related Class of Notes. The Indenture Trustee shall withdraw and
distribute or cause to be distributed funds on deposit therein only at the times
specified below, based on written instructions provided by the Servicer or other
party as indicated:
(i) on any Subsequent Transfer Date, the Depositor shall
instruct in writing the Indenture Trustee to withdraw from the related
Pre-Funding Account an amount equal to 100% of the aggregate Principal
Balances as of the related Subsequent Cut-Off Date of the Subsequent
Mortgage Loans sold to the Trust in respect of the related Pool and
pledged to the Indenture Trustee, for the benefit of the Noteholders
and the Note Insurer, on such Subsequent Transfer Date and pay such
amount to or upon the order of the Depositor upon satisfaction of the
conditions set forth in Section 2.14 hereof with respect to such
transfer; the Indenture Trustee may conclusively rely on such written
instructions from the Depositor;
(ii) if the Pre-Funding Amount for a Class of Notes (exclusive
of Pre-Funding Earnings for such Class) has been reduced to $100,000 or
less by the _________ Distribution Date, then, on such Distribution
Date, after giving effect to any reductions in the related Pre-Funding
Account on such date, the Indenture Trustee shall withdraw, from the
related Pre-Funding Account on such date and deposit in the
Distribution Account relating to such Class, the amount on deposit in
such Pre-Funding Account, other than any Pre-Funding Earnings, for
payment to the related Noteholders as a prepayment of principal on such
Distribution Date;
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(iii) if any amounts remain on deposit in either Pre-Funding
Account at the close of business on ________, the Indenture Trustee
shall withdraw, from such Pre-Funding Account on the following
Distribution Date and deposit in the Distribution Account relating to
the related Class, the amount on deposit in such Pre-Funding Account,
other than any Pre-Funding Earnings, for payment to the related
Noteholders as a prepayment of principal on such Distribution Date; and
(iv) on the _________ and _________ Distribution Dates, the
Indenture Trustee shall transfer from each Pre-Funding Account to the
related Distribution Account, the Pre-Funding Earnings, if any,
applicable to such Distribution Date.
(c) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Capitalized Interest Account" for such Class of
Notes. On the Closing Date, the Indenture Trustee shall deposit the Original
Capitalized Interest Amount for each Class of Notes in the related Capitalized
Interest Account from the proceeds of the sale of the related Class of Notes.
The Indenture Trustee shall withdraw and distribute or cause to be distributed
funds on deposit therein only at the times specified below, based on written
instructions provided by the Servicer or other party as indicated:
(i) on the ________ and the _________ Distribution Dates, the
Indenture Trustee shall transfer from each Capitalized Interest Account
to the related Distribution Account, the applicable Capitalized
Interest Requirement, if any, for such Class and such Distribution
Date; and
(ii) on the Distribution Date immediately following, or on
which, the amount on deposit in the related Pre-Funding Account is
reduced to zero, any amounts remaining in either Capitalized Interest
Account, after taking into account the transfers in respect of the
Distribution Date described in clause (i) above, shall be paid to the
Depositor.
(d) The Trust hereby directs the Indenture Trustee to
establish, on or before the Closing Date, for each Class of Notes, at its
Corporate Trust Office, an Eligible Account that shall be the
"Cross-collateralization Reserve Account" for such Class. The Indenture Trustee
shall deposit and withdraw funds in each Cross-collateralization Reserve Account
in accordance with the provisions of Sections 8.01(a) and 8.02(a) hereof.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, amounts held in the Accounts, other than the Note
Insurance Payment Account, shall be invested in Permitted Investments, which
Permitted Investments shall mature no later than the Business Day preceding the
immediately following Distribution Date.
All income or other gains, if any, from investment of moneys
deposited in the Distribution and Collection Accounts shall be for the benefit
of the Servicer and on each Distribution Date, any such amounts may be released
from the Accounts and paid to the Servicer as part of its compensation for
acting as Servicer. Any loss resulting from such investment of moneys deposited
in an Account shall be reimbursed immediately as incurred to the related
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Account by the Servicer. Subject to Section 6.01 hereof and the preceding
sentence, neither the Indenture Trustee nor the Servicer shall in any way be
held liable by reason of any insufficiency in the Accounts.
The Indenture Trustee shall not in any way be held liable by
reason of any insufficiency in any Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Investment included therein
(except to the extent that the Indenture Trustee is the obligor and has
defaulted thereon).
(f) Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall hold
all such money and property received by it as part of the Trust Estate and shall
apply it as provided in this Indenture.
If the Indenture Trustee shall not have received the Servicer
Remittance Amount by close of business on any related Servicer Distribution
Date, the Indenture Trustee shall, unless the Servicer shall have made
provisions satisfactory to the Indenture Trustee for delivery to the Indenture
Trustee of an amount equal to such Servicer Remittance Amount, deliver a notice,
with a copy to the Note Insurer, to the Servicer of its failure to remit such
Servicer Remittance Amount and that such failure, if not remedied by the close
of business on the Business Day after the date upon which such notice is
delivered to the Servicer, shall constitute a Servicer Event of Default under
the Sale and Servicing Agreement. If the Indenture Trustee shall subsequently
receive any such Servicer Remittance Amount by the close of business on such
Business Day, such Servicer Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Servicer, or its designee or assignee, any Servicer
Remittance Amount received with respect to a Mortgage Loan after the related
Servicer Distribution Date to the extent that the Servicer previously made
payment or provision for payment with respect to such Servicer Remittance Amount
in accordance with this Section 8.01, and any such Servicer Remittance Amount
shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and
the Sale and Servicing Agreement, if, following delivery by the Indenture
Trustee of the notice described above, the Servicer shall fail to remit the
Servicer Remittance Amount on any Servicer Distribution Date, the Indenture
Trustee shall deliver a second notice to the Servicer, the Trust and the Note
Insurer by the close of business on the third Business Day prior to the related
Distribution Date indicating that a Servicer Event of Default occurred and is
continuing under the Sale and Servicing Agreement. Thereupon, the Indenture
Trustee shall take such actions as are required of the Indenture Trustee under
Article VII of the Sale and Servicing Agreement. In addition, if a default
occurs in any other performance required under the Sale and Servicing Agreement,
the Indenture Trustee may, and upon the request of the Note Insurer or, with the
consent of the Note Insurer, the Holders of Notes representing more than 50% of
the Note Principal Balance of the Outstanding Notes of both Classes shall, take
such action as may be appropriate to enforce such payment or performance
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a
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Default or Event of Default under this Indenture and to proceed thereafter as
provided in Article V hereof.
Section 8.02. Distributions; Statements. On each Distribution
Date, unless the Notes have been declared due and payable pursuant to Section
5.02 hereof and moneys collected by the Indenture Trustee are being applied in
accordance with Section 5.07 hereof, Available Funds on deposit in each
Distribution Account on any Distribution Date or Redemption Date shall be
withdrawn from such Distribution Account, in the amounts required (based solely
on the Servicer's Remittance Report delivered to the Indenture Trustee on or
before such Distribution Date), for application on such Distribution Date in
respect of payments relating to the applicable Pool of Mortgage Loans and the
related Class of Notes as follows:
(i) to the Indenture Trustee, an amount equal to the Indenture
Trustee Fees then due to it with respect to the related Class of Notes;
(ii) from amounts then on deposit in the related Distribution
Account (excluding any Insured Payments), to the Note Insurer, the
lesser of (x) the excess of (i) the amount then on deposit in such
Distribution Account over (ii) the Insured Distribution Amount for such
Pool on such Distribution Date and (y) the sum of the amount of all
Reimbursement Amounts relating to such Class of Notes which have not
been previously paid as of such Distribution Date and any other amounts
relating to such Class then due to the Note Insurer pursuant to the
Insurance Agreement;
(iii) from amounts then on deposit in the related Distribution
Account, to the Holders of the related Class of Notes, the Distribution
Amount for such Class;
(iv) from amounts then on deposit in the related Distribution
Account, to the Holders of the related Class of Notes, the amount of
any Net Mortgage Loan Interest Shortfalls for such Class;
(v) from amounts then on deposit in the related Distribution
Account, to the Cross-collateralization Reserve Account relating to the
other Class of Notes, the Reserve Payment Amount for such Class;
(vi) following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above, from amounts
then on deposit in the related Distribution Account, the Indenture
Trustee shall distribute to the Holders of the related Trust
Certificates, the amount remaining on such Distribution Date, if any.
Section 8.03. Claims against the Note Insurance Policy. (a)
Within two (2) Business Days of receipt of each Servicer Remittance Report, the
Indenture Trustee shall determine with respect to the immediately following
Distribution Date, the amount to be on deposit in each Distribution Account on
such Distribution Date as a result of the (i) Servicer's remittance of the
Servicer Remittance Amount on the related Servicer Distribution Date, and (ii)
any transfers to each Distribution Account made from the related Capitalized
Interest Account and/or the related Pre-Funding Account relating to such
Distribution Date pursuant to Section 8.01 hereof, excluding the amount of any
Insured Payment and prior to the application of the
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amounts described in clauses (i) through (vi) of Section 8.02 hereof for the
related Distribution Date.
(b) If on any Distribution Date there is an Available Funds
Shortfall for either Pool, the Indenture Trustee shall complete a Notice in the
form of Exhibit A to the Note Insurance Policy and submit such notice to the
Note Insurer no later than 12:00 noon New York City time on the second Business
Day preceding such Distribution Date as a claim for an Insured Payment in an
amount equal to such Available Funds Shortfall for such Pool.
(c) The Indenture Trustee shall establish a separate Eligible
Account for the benefit of Holders of the Notes and the Note Insurer referred to
herein as the "Note Insurance Payment Account" over which the Indenture Trustee
shall have exclusive control and sole right of withdrawal. The Indenture Trustee
shall deposit upon receipt any amount paid under the Note Insurance Policy in
the Note Insurance Payment Account and distribute such amount only for purposes
of payment to the Noteholders of the related Pool of the Insured Distribution
Amount for such Pool for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Indenture Trustee or the Trust. Amounts paid under the Note Insurance Policy, to
the extent needed to pay the Insured Distribution Amount shall be transferred to
the related Distribution Account on the related Distribution Date and disbursed
by the Indenture Trustee to the Noteholders in accordance with Section 8.02. It
shall not be necessary for such payments to be made by checks or wire transfers
separate from the checks or wire transfers used to pay the Insured Distribution
Amount with other funds available to make such payment. However, the amount of
any payment of principal or of interest on the Notes to be paid from funds
transferred from the Note Insurance Payment Account shall be noted as provided
in subsection (d) of this Section 8.03 in the Note Register and in the Indenture
Trustee's Remittance Report. Funds held in the Note Insurance Payment Account
shall not be invested. Any funds remaining in the Note Insurance Payment Account
on the first Business Day following a Distribution Date shall be returned to the
Note Insurer pursuant to the written instructions of the Note Insurer by the end
of such Business Day.
(d) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Note from
moneys received under the Note Insurance Policy. The Note Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon one (1) Business Day's prior notice to the Indenture Trustee.
(e) In the event that the Indenture Trustee has received a
certified copy of an order of the appropriate court that any Insured Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy law, the Indenture Trustee shall so notify the Note Insurer, shall
comply with the provisions of the Note Insurance Policy to obtain payment by the
Note Insurer of such voided Insured Payment, and shall, at the time it provides
notice to the Note Insurer, notify, by mail to the Noteholders of the affected
Notes that, in the event any Noteholder's Insured Payment is so recovered, such
Noteholder will be entitled to payment pursuant to the Note Insurance Policy, a
copy of which shall be made available through the Indenture Trustee, the Note
Insurer or the Note Insurer's fiscal agent, if any, and the Indenture Trustee
shall furnish to the Note Insurer or its fiscal agent, if any, its records
evidencing the
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payments which have been made by the Indenture Trustee and subsequently
recovered from the Noteholders, and dates on which such payments were made.
(f) The Indenture Trustee shall promptly notify the Note
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Indenture Trustee has actual knowledge, seeking the
avoidance as a preferential transfer under applicable bankruptcy, insolvency,
receivership or similar law (a "Preference Claim") of any distribution made with
respect to the Notes. Each Noteholder, by its purchase of Notes, the Servicer
and the Indenture Trustee agree that, the Note Insurer (so long as no Note
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 Note Insurer shall be subrogated to,
and each Noteholder, the Servicer and the Indenture Trustee hereby delegate and
assign to the Note Insurer, to the fullest extent permitted by law, the rights
of the Servicer, the Indenture Trustee and each Noteholder 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.
(g) The Indenture Trustee shall, upon retirement of the Notes,
furnish to the Note Insurer a notice of such retirement, and, upon retirement of
the Notes and the expiration of the term of the Note Insurance Policy, surrender
the Note Insurance Policy to the Note Insurer for cancellation.
(h) Unless a Note Insurer Default exists and is continuing,
the Indenture Trustee and the Trust shall cooperate in all respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests hereunder without limiting the rights or
affecting the interests of the Noteholders as otherwise set forth herein.
(i) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless a Note Insurer Default exists and is
continuing, the Note Insurer shall have the right to direct all matters relating
to the Notes in any proceeding in a bankruptcy of the Trust, including without
limitation any proceeding relating to a Preference Amount and the posting of any
surety or Note pending any such appeal.
(j) Anything herein to the contrary notwithstanding, any
payment with respect to principal of or interest on the Notes which is made with
moneys received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of the Notes from the Trust. The Trust and the Indenture
Trustee acknowledge, and each Holder by its acceptance of a Note agrees, that
without the need for any further action on the part of the Note Insurer, the
Trust, the Indenture Trustee or the Note Registrar (x) to the extent the Note
Insurer makes payments, directly or indirectly, on account of principal of or
interest on the Notes to the Holders of such Notes, the Note Insurer will be
fully subrogated to, and each Noteholder, the Trust and the Indenture Trustee
hereby delegate and assign to the Note Insurer, to the fullest extent permitted
by law, the rights of such Holders to receive such principal and interest from
the Trust, including, without limitation, any amounts due to the Noteholders in
respect of securities law
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violations arising from the offer and sale of the Notes, and (y) the Note
Insurer shall be paid such amounts from the sources and in the manner provided
herein for the payment of such amounts.
Section 8.04. General Provisions Regarding the Distribution
Accounts and Mortgage Loans. (a) Each Distribution Account shall relate solely
to the Notes of the related Class and to the Mortgage Loans in the related Pool,
Permitted Investments and other property securing the related Notes. Funds and
other property in each Distribution Account shall not be commingled with the
other Distribution Account or any other moneys or property of the Trust or any
Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee may hold
any funds or other property received or held by it as part of a Distribution
Account in collective accounts maintained by it in the normal course of its
business and containing funds or property held by it for other Persons (which
may include the Trust or an Affiliate); provided, that such accounts are under
the sole control of the Indenture Trustee and the Indenture Trustee maintains
adequate records indicating the ownership of all such funds or property and the
portions thereof held for credit to the related Distribution Account.
(b) If any amounts are needed for payment from a Distribution
Account and sufficient uninvested funds are not available therein to make such
payment, the Indenture Trustee shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Distribution Account.
(c) The Indenture Trustee shall, at all times while any Notes
are Outstanding, maintain in its possession, or in the possession of an agent
whose actions with respect to such items are under the sole control of the
Indenture Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Distribution Accounts. The Indenture Trustee shall
relinquish possession of such items, or direct its agent to do so, only for
purposes of collecting the final payment receivable on such investment or
certificate or, in connection with the sale of any investment held in the
Distribution Accounts, against delivery of the amount receivable in connection
with any sale.
(d) The Indenture Trustee shall not invest any part of the
Trust Estate in Permitted Investments that constitute uncertificated securities
(as defined in Section 8-102 of the Uniform Commercial Code, as enacted in the
relevant jurisdiction) or in any other book-entry securities unless it has
received an Opinion of Counsel reasonably satisfactory in form and substance to
the Indenture Trustee setting forth, with respect to each type of security for
which authority to invest is being sought, the procedures that must be followed
to maintain the lien and security interest created by this Indenture with
respect to the Trust Estate.
Section 8.05. Releases of Deleted Mortgage Loans. Upon notice
or discovery by a Responsible Officer of the Indenture Trustee that any of the
representations or warranties of the Depositor set forth in Section 3.03 of the
Loan Sale Agreement was materially incorrect or otherwise misleading with
respect to any Mortgage Loan as of the time made, the Indenture Trustee shall
direct the Depositor to either cure, repurchase or substitute for such Mortgage
Loan as provided in Section 3.05 of the Loan Sale Agreement. Upon any purchase
of or substitution for a Deleted Mortgage Loan by the in accordance with Section
3.05 of the Loan Sale Agreement, the Indenture Trustee shall cause the
Collateral Agent to deliver the Indenture Trustee's Mortgage File relating to
such Deleted Mortgage Loan to the Depositor, and the Trust,
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the Collateral Agent and the Indenture Trustee shall execute such instruments of
transfer as are necessary to convey title to such Deleted Mortgage Loan to the
Depositor from the lien of this Indenture.
Section 8.06. Reports by Indenture Trustee to Noteholders;
Access to Certain Information. On each Distribution Date, the Indenture Trustee
shall deliver the written reports required by Section 2.08(d) to Noteholders of
record as of the related Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate
Trust Office, during normal business hours, for review by any Noteholder or any
person identified to the Indenture Trustee as a prospective Noteholder,
originals or copies of the following items: (a) the Indenture and any amendments
thereto, (b) all Indenture Trustee's Remittance Reports and other reports
delivered since the Closing Date pursuant to Section 2.08(d) hereof, (c) any
Officers' Certificates delivered to the Indenture Trustee since the Closing Date
as described in the Indenture and (d) any Accountants' reports delivered to the
Indenture Trustee since the Closing Date as required under the Sale and
Servicing Agreement. Copies of any and all of the foregoing items will be
available from the Indenture Trustee upon request; however, the Indenture
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies and shall not be required
to provide such copies without reasonable assurances that such sum will be paid.
Section 8.07. Release of Trust Estate. The Indenture Trustee
shall, at such time as there are no Notes Outstanding, release all of the Trust
Estate to the Trust (other than any cash held for the payment of the Notes
pursuant to Section 3.03 or 4.02 hereof).
Section 8.08. Amendment to Sale and Servicing Agreement. The
Indenture Trustee may, without the consent of any Holder, enter into or consent
to any amendment or supplement to the Sale and Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Notes. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation of satisfaction of the Rating Agency Condition or (ii) if
its own rights, duties or immunities would be adversely affected.
Section 8.09. Delivery of the Mortgage Files Pursuant to Sale
and Servicing Agreement. As is appropriate for the servicing or foreclosure of
any Mortgage Loan, the Indenture Trustee shall cause the Collateral Agent to
deliver to the Servicer the Mortgage Files for such Mortgage Loan upon receipt
by the Indenture Trustee and the Collateral Agent on or prior to the date such
release is to be made of:
(a) such Officer's Certificates, if any, as are required by
the Sale and Servicing Agreement; and
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(b) a Request for Release, executed by the Servicer, providing
that the Servicer will hold or retain the Indenture Trustee's Mortgage
Files in trust for the benefit of the Indenture Trustee, the Note
Insurer and the Holders of Notes.
Section 8.10. Servicer as Agent. In order to facilitate the
servicing of the Mortgage Loans by the Servicer of such Mortgage Loans, the
Servicer of the Mortgage Loans has been appointed by the Trust to retain, in
accordance with the provisions of the Sale and Servicing Agreement and this
Indenture, all Servicer Remittance Amounts on such Mortgage Loans prior to their
deposit into the related Distribution Account on or prior to the related
Servicer Distribution Date.
Section 8.11. Termination of Servicer. In the event of an
event of the occurrence of a Servicer Event of Default specified in Section 7.01
of the Sale and Servicing Agreement, the Indenture Trustee may, with the consent
of the Note Insurer or, with the prior written consent of the Note Insurer, the
Holder of Notes representing not less than 50% of the Note Principal Balance of
the Outstanding Notes of both Classes, and shall, upon the direction of the Note
Insurer (or as otherwise provided in the Sale and Servicing Agreement),
terminate the Servicer as provided in Section 7.01 of the Sale and Servicing
Agreement. If the Indenture Trustee terminates the Servicer, the Indenture
Trustee shall, pursuant to Section 7.02 of the Sale and Servicing Agreement,
assume the duties of the Servicer or appoint a successor Servicer acceptable to
the Trust, the Note Insurer and the Rating Agencies and meeting the requirements
set forth in the Sale and Servicing Agreement.
Section 8.12. Opinion of Counsel. The Indenture Trustee shall
be entitled to receive at least five (5) Business Days' notice of any action to
be taken pursuant to Sections 8.08 and 8.09 hereof (other than in connection
with releases of Mortgage Loans that were subject to a prepayment in full),
accompanied by copies of any instruments involved, and the Indenture Trustee
shall be entitled to receive an Opinion of Counsel, in form and substance
reasonably satisfactory to the Indenture Trustee, stating the legal effect of
any such action, outlining the steps required to complete the same, and
concluding that all conditions precedent to the taking of such action have been
complied with. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.13. Appointment of Collateral Agents. The Indenture
Trustee may, at no additional cost to the Trust or to the Indenture Trustee,
with the consent of the Note Insurer, appoint one or more Collateral Agents to
hold all or a portion of the Indenture Trustee Mortgage Files, as Agent for the
Indenture Trustee. Such Collateral Agent shall meet the requirements of Article
IX of the Sale and Servicing Agreement. Matters concerning the Collateral Agents
shall be governed by said Article IX. _________ is hereby appointed as the
initial Collateral Agent hereunder.
Section 8.14. Rights of the Note Insurer to Exercise Rights of
Noteholders. By accepting its Notes, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall have the right to exercise all
rights of the Noteholders under this Indenture, without any further consent of
the Noteholders, including, without limitation:
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(a) the right to require the Servicer to effect foreclosures
upon Mortgage Loans upon failure of the Servicer to do so;
(b) the right to require the to repurchase or substitute for
Deleted Mortgage Loans pursuant to Section 8.05;
(c) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default; and
(d) the right to vote on proposed amendments to this
Indenture.
In addition, each Noteholder agrees that, unless a Note
Insurer Default exists, the rights specifically set forth above may be exercised
by the Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.03 hereof and
notwithstanding any provision in this Indenture to the contrary, so long as a
Note Insurer Default has occurred and is continuing, the Note Insurer shall have
no rights to exercise any voting rights of the Noteholders hereunder, nor shall
the Indenture Trustee be required to obtain the consent of, or act at the
direction of, the Note Insurer.
All notices, statements, reports, certificates or opinions
required by this Indenture to be sent to any other party hereto or to the
Noteholders shall also be sent to the Note Insurer.
Section 8.15. Trust Estate and Accounts Held for Benefit of
the Note Insurer. The Collateral Agent, on behalf of the Indenture Trustee,
shall hold the Trust Estate and the Indenture Trustee's Mortgage Files, for the
benefit of the Noteholders and the Note Insurer, and all references in this
Indenture and in the Notes to the benefit of Holders of the Notes shall be
deemed to include the Note Insurer (provided there does not exist a Note Insurer
Default).
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of
Noteholders. With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Trust and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(a) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
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(b) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance,
authentication and delivery of any Notes, as herein set forth,
additional conditions, limitations and restrictions thereafter to be
observed;
(c) to evidence the succession of another Person to the Trust
to the extent permitted herein, and the assumption by any such
successor of the covenants of the Trust herein and in the Notes
contained;
(d) to add to the covenants of the Trust, for the benefit of
the Holders of all Notes and the Note Insurer, or to surrender any
right or power herein conferred upon the Trust;
(e) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other
provision herein, or to amend any other provisions with respect to
matters or questions arising under this Indenture, which shall not be
inconsistent with the provisions of this Indenture, provided that such
action shall not adversely affect in any material respect the interests
of the Holders of the Notes or the Holders of the Trust Certificates;
provided, that the amendment shall not be deemed to adversely affect in
any material respect the interests of the Holders of the Notes and the
Note Insurer if the Person requesting the amendment obtains written
confirmation of the satisfaction of the Rating Agency Condition; or
(f) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted, and to add to this Indenture such
other provisions as may be expressly required by the TIA.
Section 9.02. Supplemental Indentures With Consent of
Noteholders. With the consent of the Note Insurer and with the consent of
Holders of Notes representing not less than a majority of the Note Principal
Balance of all Outstanding Notes of both Classes by Act of said Holders
delivered to the Trust and the Indenture Trustee, the Trust and the Indenture
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change any Distribution Date or the Final Stated Maturity
Date of the Notes or, with respect to the Notes, reduce the Note
Principal Balance thereof, the Note Rate thereon or the Redemption
Price with respect thereto, change the earliest date on which any Note
may be redeemed at the option of the Servicer, change any place of
payment where, or the coin or currency in which, any Note or any
interest thereon is payable, or impair the right to institute suit for
the enforcement of the payment of any installment of interest due on
any Note on or after the Final Stated Maturity Date thereof or for the
enforcement of the payment of the entire remaining unpaid principal
amount of any Note on or after the Final Stated Maturity Date (or, in
the case of redemption, on or after the applicable Redemption Date);
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(b) reduce the percentage of the Note Principal Balance of the
Outstanding Notes, the consent of the Holders of which is required for
any such supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with provisions of this
Indenture or Defaults hereunder and their consequences provided for in
this Indenture;
(c) modify any of the provisions of this Section 9.02 or
Sections 5.13 or 5.17(b) hereof, except to increase any percentage
specified therein or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Note affected thereby;
(d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(e) permit the creation of any lien other than the lien of
this Indenture with respect to any part of the Trust Estate or
terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security
afforded by the lien of this Indenture;
(f) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Interest Distribution Amount
or Principal Distribution Amount for any Distribution Date and any
Class (including the calculation of any of the individual components of
such amounts) or to affect rights of the Holders of the Notes to the
benefits of any provisions for the mandatory redemption of Notes
contained herein; or
(g) incur any indebtedness, other than the Notes, that would
cause the Trust or the Trust Estate to be treated as a "taxable
mortgage pool" within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Trust and the Indenture
Trustee of any supplemental indenture pursuant to this Section 9.02, the
Indenture Trustee shall mail to the Holders of the Notes to which such
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the
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modifications thereby of the trusts created by this Indenture, the Indenture
Trustee shall be entitled to receive, and (subject to Section 6.01 hereof) shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties or immunities under this Indenture or otherwise. The Servicer, on behalf
of the Trust, shall cause executed copies of any supplemental indentures to be
delivered to the Note Insurer and the Rating Agencies.
Section 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article IX, this Indenture
shall be modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every Holder of Notes to
which such supplemental indenture relates that have theretofore been or
thereafter are authenticated and delivered hereunder shall be bound thereby.
Section 9.05. Conformity With Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article IX shall conform to the
requirements of the TIA as then in effect so long as this Indenture shall then
be qualified under the TIA.
Section 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Owner Trustee,
acting at the direction of the Majority Certificateholders, shall so determine,
new Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Owner Trustee, acting at the direction of the Majority Certificateholders,
to any such supplemental indenture may be prepared by the Servicer and executed
by the Owner Trustee, acting at the direction of the Majority
Certificateholders, on behalf of the Trust, and authenticated and delivered by
the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Governing Documents. The Indenture
Trustee shall, upon a Trust Request, consent to any proposed amendment to the
Trust's governing documents, or an amendment to or waiver of any provision of
any other document relating to the Trust's governing documents, such consent to
be given without the necessity of obtaining the consent of the Holders of any
Notes upon receipt by the Indenture Trustee of:
(a) an Officer's Certificate, to which such proposed amendment
or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or waiver and that all conditions
precedent to such consent specified in this Section 9.07 have been
satisfied; and
(b) written confirmation of the satisfaction of the Rating
Agency Condition with respect to such proposed amendment.
Notwithstanding the foregoing, the Indenture Trustee may
decline to consent to a proposed waiver or amendment that adversely affects its
own rights, duties or immunities under this Indenture or otherwise.
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Nothing in this Section 9.07 shall be construed to require
that any Person obtain the consent of the Indenture Trustee to any amendment or
waiver or any provision of any document where the making of such amendment or
the giving of such waiver without obtaining the consent of the Indenture Trustee
is not prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. (a) At the option of the Servicer,
and at its sole cost and expense, (x) this Indenture may be terminated and all
the Notes may be redeemed in whole, but not in part, on any Redemption Date
after the Clean-Up Call Date by purchase of all of the outstanding Mortgage
Loans and REO Properties at a price equal the Termination Price or (y) the Class
A-1 Notes or the Class A-2 Notes may be redeemed in whole, but not in part, on
any Redemption Date after the related Note Clean-Up Call Date at the applicable
Note Termination Price.
(b) Any such purchase or redemption shall be accomplished by
deposit into the related Distribution Account or Accounts of the applicable
Redemption Price on the Servicer Distribution Date preceding the Redemption
Date. The amounts on deposit therein shall be distributed by the Indenture
Trustee on such Redemption Date in accordance with the priority set forth in
Section 8.02 hereof. No termination or redemption is permitted without the prior
written consent of the Note Insurer if it would result in a draw on the Note
Insurance Policy.
(c) Notice of the election to redeem any Notes pursuant to
subsection (a) of this Section 10.01 shall be furnished to the Indenture Trustee
not later than thirty (30) days prior to the Distribution Date selected for such
redemption. Upon receiving such notice, the Indenture Trustee shall notify each
Holder of such Notes and Note Insurer of such election pursuant to Section 10.02
hereof. Any expenses associated with the compliance of the provisions hereof in
connection with a redemption of the Notes shall be paid by the Servicer.
(d) Upon the redemption of all of the Notes, the Mortgage
Loans in the Trust Estate shall be released and delivered to the Servicer. In
the case of a redemption of the Class A-2 Notes only, the Mortgage Loans in Pool
II will not be released from the lien of the Indenture until such time as the
Class A-1 Notes are either redeemed or terminated. In such case, the Pool II
Mortgage Loans will continue to be pledged to the Indenture Trustee, on behalf
of the Noteholders and the Note Insurer, to secure the obligations of the Trust
with respect to the Class A-1 Notes. In the case of a redemption of the Class
A-1 Notes only, the Mortgage Loans in Pool I will not be released from the lien
of the Indenture until such time as the Class A-2 Notes are either redeemed or
terminated. In such case, the Pool I Mortgage Loans will continue to be pledged
to the Indenture Trustee, on behalf of the Noteholders and the Note Insurer, to
secure the obligations of the Trust with respect to the Class A-2 Notes.
(e) Upon receipt of the notice from the Servicer of its
election to redeem any Notes pursuant to Section 10.01(a) hereof, the Indenture
Trustee shall prepare and deliver to the Trust, the Servicer and the Note
Insurer, no later than the related Redemption Date, an Indenture
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Trustee's Remittance Report stating therein that it has determined that the
conditions to redemption at the option of the Servicer have been satisfied and
setting forth the amount, if any, to be withdrawn from each Distribution Account
and paid to the Servicer as reimbursement for Nonrecoverable Advances in respect
of the related Mortgage Loans and such other information as may be required to
accomplish such redemption.
Section 10.02. Form of Redemption Notice. Notice of redemption
shall be given by the Indenture Trustee in the name of and at the expense of the
Trust by first class mail, postage prepaid, mailed not less than ten days prior
to the Redemption Date to each Holder of Notes to be redeemed, such Holders
being determined as of the Record Date for such Distribution Date, and to the
Note Insurer.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price at which the Notes of such Class will
be redeemed; and
(c) the fact of payment in full on such Notes, the place where
such Notes are to be surrendered for payment of the Redemption Price
(which shall be the office or agency of the Trust to be maintained as
provided in Section 3.02 hereof), and that no interest shall accrue on
such Note for any period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein,
to any Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable on Optional Redemption. Notice of
redemption having been given as provided in Section 10.02 hereof, the Notes to
be redeemed shall, on the applicable Redemption Date, become due and payable at
the Redemption Price and (unless the Trust shall default in the payment of the
Redemption Price) no interest shall accrue on such Redemption Price for any
period after such Redemption Date; provided, however, that if such Redemption
Price is not paid on the Redemption Date, the Note Principal Balance shall,
until paid, bear interest from the Redemption Date at the applicable Note Rate.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions. (a) Upon
any application or request by any Person to the Indenture Trustee to take any
action under any provision of this Indenture, such Person shall furnish to the
Indenture Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel, if requested by the
Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the
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furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
(b) Every certificate, opinion or letter with respect to
compliance with a condition or covenant provided for in this Indenture,
including one furnished pursuant to specific requirements of this Indenture
relating to a particular application or request (other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include and shall be deemed to
include (regardless of whether specifically stated therein) the following:
(i) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(iii) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.02. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Trust may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any Opinion of Counsel may be based on the written opinion of other
counsel, in which event such Opinion of Counsel shall be accompanied by a copy
of such other counsel's opinion and shall include a statement to the effect that
such counsel believes that such counsel and the Indenture Trustee may reasonably
rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Wherever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such
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application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Trust to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Section 6.01(b)(ii) hereof.
Whenever in this Indenture it is provided that the absence of
the occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Trust, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Trust's right to make such request or
direction, the Indenture Trustee shall be protected in acting in accordance with
such request or direction if it does not have knowledge of the occurrence and
continuation of such Default or Event of Default as provided in Section 6.01(d)
hereof.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Trust. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Indenture
Trustee and the Trust, if made in the manner provided in this Section 11.03.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Indenture Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Notes.
Section 11.04. Notices, etc., to Indenture Trustee, the Note
Insurer and Trust. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders or
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other documents provided or permitted by this Indenture to be made upon, given
or furnished to, or filed with:
(a) the Indenture Trustee by any Noteholder or by the Trust
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Indenture
Trustee at its Corporate Trust Office; or
(b) the Trust by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder (except as provided in
Section 5.01(c) and (d)) hereof if in writing and mailed, first-class
postage prepaid, to the Trust addressed to it at _____________, in care
of ______________________________, Attention: Corporate Trust
Administration, or at any other address previously furnished in writing
to the Indenture Trustee by the Trust.
(c) the Note Insurer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to _________________
addressed to it at _________________________, Attention: Surveillance
Department (in each case in which notice or other communication to the
Note Insurer refers to an Event of Default, a claim on the Note
Insurance Policy or with respect to which failure on the part of the
Note Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should
also be sent to the attention of each of the General Counsel and the
Head--Financial Guaranty Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED"), or at any other address previously furnished in
writing to the Indenture Trustee by the Note Insurer; or
(d) the Depositor or the Servicer by the Indenture Trustee or
by any Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to such party, in care
of ___________________________________, Attention: General Counsel or
at any other address previously furnished in writing to the Indenture
Trustee by the or the Servicer; or
(e) the Underwriter by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to Prudential Securities Incorporated,
One New York Plaza, New York, New York 10292, Attention: Managing
Director - Asset-Backed Finance, or at any other address previously
furnished in writing to the Indenture Trustee by the Underwriter.
Notices required to be given to the Rating Agencies by the
Trust or the Indenture Trustee shall be in writing, personally delivered or
mailed first-class postage pre-paid, to (i) in the case of Moody's, at the
following address: Moody's Investors Service, Inc., Residential Mortgage
Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Services,
26 Broadway, 15th Floor, New York, New York, 10004, Attention: Asset-Backed
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designed by written notice to the other parties.
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Section 11.05. Notices and Reports to Noteholders; Waiver of
Notices. Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder as
it appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Section 11.06. Rules by Indenture Trustee. The Indenture
Trustee may make reasonable rules for any meeting of Noteholders.
Section 11.07. Conflict With Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this Indenture by any of the provisions of
the TIA, such required provision shall control.
Section 11.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and
agreements in this Indenture by the Trust shall bind its successors and assigns,
whether so expressed or not.
Section 11.10. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.11. Benefits of Indenture. Nothing in this
Indenture or in the Notes, expressed or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, any separate trustee or
co-trustee appointed under Section 6.14 hereof and the Noteholders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
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Section 11.12. Legal Holidays. In any case where the date of
any Distribution Date, Redemption Date or any other date on which principal of
or interest on any Note is proposed to be paid shall not be a Business Day, then
(notwithstanding any other provision of the Notes or this Indenture) payment
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the nominal date of any such
Distribution Date, Redemption Date or other date for the payment of principal of
or interest on any Note and no interest shall accrue for the period from and
after any such nominal date, provided such payment is made in full on such next
succeeding Business Day.
Section 11.13. Governing Law. IN VIEW OF THE FACT THAT
NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES
AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A
WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF
THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
Section 11.14. Counterparts. This instrument may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15. Recording of Indenture. This Indenture is
subject to recording in any appropriate public recording offices, such recording
to be effected by the Servicer, on behalf of the Trust, and at its expense in
compliance with any Opinion of Counsel delivered pursuant to Sections 2.11(c) or
3.06 hereof.
Section 11.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Trust, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Trust or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee or the Owner Trustee in its individual capacity, any holder of
a beneficial interest in the Trust, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Trust
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of the Trust Agreement.
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Section 11.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder and Beneficial Owner, by accepting a
Note, hereby covenant and agree that they will not at any time institute against
the or the Trust, or join in any institution against the or the Trust of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents. In addition, the Indenture Trustee will
on behalf of the Holders of the Notes, (a) file a written objection to any
motion or other proceeding seeking the substantive consolidation of any
Originator with the or the Trust, (b) file an appropriate memorandum of points
and authorities or other brief in support of such objection, or (c) endeavor to
establish at the hearing on such objection that the substantive consolidation of
such entity would be materially prejudicial to the Noteholders.
This Section 11.17 will survive for one year and one day
following the termination of this Indenture.
Section 11.18. Inspection. The Trust agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee and the Note Insurer, during the Trust's normal business hours, to
examine all of books of account, records, reports and other papers of the Trust,
to make copies and extracts therefrom, to cause such books to be audited by
Independent Accountants selected by the Indenture Trustee or the Note Insurer,
as the case may be, and to discuss its affairs, finances and accounts with its
officers, employees and Independent Accountants (and by this provision the Trust
hereby authorizes its Accountants to discuss with such representatives such
affairs, finances and accounts), all at such reasonable times and as often as
may be reasonably requested. Any expense incident to the exercise by the
Indenture Trustee of any right under this Section 11.18 shall be borne by the
Trust.
Section 11.19. Usury. The amount of interest payable or paid
on any Note under the terms of this Indenture shall be limited to an amount that
shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the United States or the State of New York (whichever shall
permit the higher rate), that could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Note exceeds the Highest Lawful Rate, the Trust stipulates that such excess
amount will be deemed to have been paid as a result of an error on the part of
both the Indenture Trustee, acting on behalf of the Holder of such Note, and the
Trust, and the Holder receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the Trust or the Indenture
Trustee, refund the amount of such excess or, at the option of the Indenture
Trustee, apply the excess to the payment of principal of such Note, if any,
remaining unpaid. In addition, all sums paid or agreed to be paid to the
Indenture Trustee for the benefit of Holders of Notes for the use, forbearance
or detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Notes.
Section 11.20. Note Insurer Default. Any right conferred to
the Note Insurer shall be suspended during any period in which a Note Insurer
Default exists. At such time as the Notes are no longer Outstanding under this
Indenture, and no amounts owed to the Note Insurer under the Basic Documents
remain unpaid, the Note Insurer's rights under this Indenture shall terminate.
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Section 11.21. Third-Party Beneficiary. The Note Insurer is
intended as a third- party beneficiary of this Indenture which shall be binding
upon and inure to the benefit of the Note Insurer; provided, that,
notwithstanding the foregoing, for so long as a Note Insurer Default is
continuing with respect to its obligations under the Note Insurance Policy, the
Noteholders shall succeed to the Note Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Indenture that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Indenture.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Trust and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
___________________________________
By: _______________________________,
_________________________, not in its
individual capacity, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
_______________________________________,
as Indenture Trustee
By:_____________________________________
Name:
Title:
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule 1 to Loan Sale Agreement.]
<PAGE>
EXHIBIT A
FORM OF NOTE
__________________________________
CLASS A-[1][2] NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE 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.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE TRUST, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE NOTE INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE TRUST IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
__________________________________
Note No.: CUSIP No.:
A-[1][2]-
Class A-1 Original Note Principal Balance: Percentage Interest:
$__________ 100%
Date of Indenture: First Distribution Date:
As of _____________ _______________
__________________________________
A-1
<PAGE>
__________________________________
MORTGAGE BACKED NOTES, SERIES __________, CLASS A-[1][2]
_________________________, a business trust organized and
existing under the laws of the State of ___________ (herein referred to as the
"Trust"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of $__________ (_________________________
Dollars) payable on each Distribution Date in an amount equal to the result
obtained by multiplying (x) the Percentage Interest of this Note set forth on
the cover page hereof, by (y) the aggregate amount, if any, payable from the
related Distribution Account in respect of principal on the Class A-[1][2]
Notes, pursuant to the Indenture, dated as of ______________, between the Trust
and __________________, a ____________ banking corporation, as Indenture Trustee
(the "Indenture Trustee"); provided, however, that the entire unpaid Note
Principal Balance of this Note shall be due and payable on the earlier of (i)
the Distribution Date occurring in __________ (this Note's "Final Stated
Maturity Date"), (ii) the Redemption Date, if any, applicable to this Notes
pursuant to Article X of the Indenture or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Notes have been declared
to be immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Appendix
I to the Indenture.
Pursuant to the terms of the Indenture, payments will be made
on the 25th day of each month or, if such day is not a Business Day, on the
Business Day immediately following such 25th day (each a "Distribution Date"),
commencing on the first Distribution Date specified on the cover page hereof, to
the Person in whose name this Note is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Note and (b) the sum of the amounts to be paid on the
Class A-[1][2] Notes with respect to such Distribution Date, all as more
specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive
Notes, upon written request at least five (5) days prior to the related Record
Date with appropriate instructions by the Holder of this Note (holding an
aggregate initial Note Principal Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States of
America designated by such Holder reasonably satisfactory to the Indenture
Trustee.
On each Distribution Date, Noteholders will be entitled to
receive interest payments in an aggregate amount equal to the Current Interest
for such Class for such Distribution Date, together with principal payments in
an aggregate amount equal to the Principal Distribution Amount for such Class
for such Distribution Date, plus, until the Over-collateralization Amount for
the related Pool and such Distribution Date is equal to the Specified
Over-collateralization Amount for such Pool and such Distribution Date, the Net
Monthly Excess Cashflow, if any, for such Pool and such Distribution Date. The
"Note Principal Balance" of a Note as of any date of determination is equal to
the initial Note Principal Balance thereof as of the Closing Date, reduced by
the aggregate of all amounts previously paid with respect to such Note on
account of principal.
A-2
<PAGE>
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Trust with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
This Note is one of a duly authorized issue of Notes of the
Trust, designated as the "________________________, Mortgage Backed Notes,
Series _______, Class A-[1][2]," issued under the Indenture, to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Trust, the Indenture
Trustee and the Holders of the Notes. Also issued under the Indenture are the
"________________________, Mortgage Backed Notes, Series _______, Class
A[1][2]." To the extent that any provision of this Note contradicts or is
inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control and supersede such contradictory or inconsistent
provision herein. The Notes are subject to all terms of the Indenture.
The Class A-[1][2] Notes are and will be equally and ratably
secured by the Mortgage Loans in the Pool [I][II], the other collateral related
thereto pledged as security therefor as provided in the Indenture, and, to the
extent provided in the Indenture, by the Mortgage Loans in Pool [I][II].
As described above, the entire unpaid Note Principal Balance
of this Note shall be due and payable on the earlier of the Final Stated
Maturity Date and any Redemption Date applicable to such Class, pursuant to
Article X of the Indenture. Notwithstanding the foregoing, the entire unpaid
Note Principal Balance of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing if the Indenture
Trustee, at the direction or upon the prior written consent of
______________________ (the "Note Insurer") in the absence of a Note Insurer
Default, or the Holders of the Notes representing not less than 50% of the Note
Principal Balance of the Outstanding Notes (with the prior written consent of
the Note Insurer in the absence of a Note Insurer Default) of both Classes,
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Notes
shall be made pro rata to the Noteholders entitled thereto.
The Note Insurer, in consideration of the payment of the
premium and subject to the terms of the Note Guaranty Insurance Policy (the
"Note Insurance Policy") thereby has unconditionally and irrevocably guaranteed
the payment of the Insured Payments.
Pursuant to the Indenture, unless a Note Insurer Default
exists (i) the Note Insurer shall be deemed to be the holder of the Notes for
certain purposes specified in the Indenture and will be entitled to exercise all
rights of the Noteholders thereunder, including the rights of Noteholders
relating to the occurrence of, and the remedies with respect to, an Event of
Default, without the consent of such Noteholders, and (ii) the Indenture Trustee
may take actions which would otherwise be at its option or within its
discretion, including actions relating to the occurrence of, and the remedies
with respect to, an Event of Default, only at the direction of the Note Insurer.
In addition, on each Distribution Date, after the Noteholders have been paid all
amounts to which they are entitled, the Note Insurer will be entitled to be
reimbursed for any
A-3
<PAGE>
unreimbursed Insured Payments, unreimbursed Premium Amounts (each with interest
thereon at the "Late Payment Rate" specified in the Insurance Agreement) and any
other amounts owed under the Note Insurance Policy.
The Trust shall not be liable upon the indebtedness evidenced
by the Notes except to the extent of amounts available from the Trust Estate
which constitutes security for the payment of the Notes. The assets included in
the Trust Estate and payments under the Note Insurance Policy will be sole
source of payments on the Notes, and each Holder hereof, by its acceptance of
this Note, agrees that (i) such Note will be limited in right of payment to
amounts available from the Trust Estate and the Note Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Trust, the Owner Trustee, the Indenture Trustee, the Depositor, the Servicer or
any of their respective affiliates, or to the assets of any of the foregoing
entities, except the assets of the Trust pledged to secure the Notes pursuant to
the Indenture.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Notwithstanding the foregoing, in the case of
Definitive Notes, upon written request at least five days prior to the related
Record Date with appropriate instructions by the Holder of this Note (holding an
aggregate initial Note Principal Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States of
America designated by such Holder reasonably satisfactory to the Indenture
Trustee. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Trust, will notify the Person who was the Holder hereof as of
the Record Date preceding such Distribution Date by notice mailed or transmitted
by facsimile prior to such Distribution Date, and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes.
As provided in the Indenture, the Indenture may be terminated
and the Notes redeemed in whole, but not in part, at the option of the Servicer,
on any Distribution Date on and after the date on which the Aggregate Principal
Balance of all of the Mortgage Loans is less than 10% of the Maximum Collateral
Amount for Pool I and Pool II. As provided in the Indenture, either Class of
Notes may be redeemed in whole, but not in part, at the option of the Servicer,
on
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<PAGE>
any Distribution Date on and after the date on which the unpaid Note Principal
Balance of such Class of Notes is less than or equal to 10% of the Original Note
Principal Balance for such Class of Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Trust pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes
of authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
In the case of a transfer of a Class A-[1][2] Note, the Note
Registrar shall not register the transfer of this Note unless the Note Registrar
has received a representation letter from the transferee to the effect that
either (i) the transferee is not, and is not acquiring the Note on behalf of or
with the assets of, an employee benefit plan or other retirement plan or
arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of this Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed
to make one of the foregoing representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note
or, in the case of a Beneficial Owner, a beneficial interest in a Note,
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Trust, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Trust or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Trust, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Beneficial Owner, by acceptance of a Note
or, in the case of a Beneficial Owner, a beneficial interest in a Note,
covenants and agrees by accepting the benefits of the Indenture that such
Noteholder or Beneficial Owner will not at any time institute against
A-5
<PAGE>
_______________________ or the Trust, or join in any institution against
_______________________ or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture, the Trust Agreement, the Loan Sale
Agreement, the Sale and Servicing Agreement, the Insurance Agreement and the
Indemnification Agreement (the "Basic Documents").
The Trust has entered into the Indenture and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness of
the Trust secured by the Trust Estate. Each Noteholder, by acceptance of a Note
(and each Beneficial Owner by acceptance of a beneficial interest in a Note),
agrees to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness of the Trust.
Prior to the due presentment for registration of transfer of
this Note, the Trust, the Indenture Trustee and any agent of the Trust or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Trust, the Indenture Trustee or any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Trust and the rights of the Holders of the Notes under the
Indenture at any time by the Trust with the consent of the Note Insurer and the
Holders of Notes representing a majority of the Note Principal Balance of all
Outstanding Notes. The Indenture also contains provisions permitting the (i)
Note Insurer or (ii) if a Note Insurer Default exists, the Holders of Notes
representing specified percentages of the Note Principal Balance of Outstanding
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Trust with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Note
Insurer or by the Holder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the amendment thereof,
in certain limited circumstances, or the waiver of certain terms and conditions
set forth in the Indenture, without the consent of Holders of the Notes issued
thereunder.
The term "Trust" as used in this Note includes any successor
to the Trust under the Indenture.
Initially, each Class of Notes will be represented by one Note
registered in the name of Cede & Co. as nominees of the Clearing Agency. The
Notes will be delivered in denominations as provided in the Indenture and
subject to certain limitations therein set forth. The Notes are exchangeable for
a like aggregate initial Note Principal Balance of Notes of different authorized
denominations, as requested by the Holder surrendering the same.
A-6
<PAGE>
THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Trust,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rate, and in the coin or currency herein
prescribed.
Unless the certificate of authentication hereon has been
executed by the Authenticating Agent whose name appears below by manual
signature, this Note shall not be entitled to any benefit under the Indenture
referred to herein, or be valid or obligatory for any purpose.
A-7
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Dated:
_____________________________________
By: ___________________________,
__________________________, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:____________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-[1][2] Notes designated above and
referred to in the within-mentioned Indenture.
Dated:
______________________,
as Authenticating Agent
By:_____________________
Authorized Signatory
A-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
_______________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:_______________________*/
Signature Guaranteed:
_____________________________*/
*/ NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the face of the within
Note in every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
A-9
<PAGE>
EXHIBIT B
FORM OF SUBSEQUENT PLEDGE AGREEMENT
This SUBSEQUENT PLEDGE AGREEMENT, dated as of __________, ______ (the
"Subsequent Transfer Date"), is entered into by and between
_________________________, as issuer (the "Trust"), and ______________________,
as indenture trustee (the "Indenture Trustee").
W I T N E S S E T H:
Reference is hereby made to that certain Indenture, dated as of __________
(the "Indenture"), by and between the Trust and the Indenture Trustee. Pursuant
to the Indenture, the Trust agreed to pledge, and the Indenture Trustee agreed
to accept, from time to time, a security interest in Subsequent Mortgage Loans
(as defined below). The Indenture provides that each such pledge of Subsequent
Mortgage Loans be evidenced by the execution and delivery of a Subsequent Pledge
Agreement such as this Subsequent Pledge Agreement.
The assets pledged to the Indenture Trustee pursuant to this Subsequent
Pledge Agreement consist of (a) the Subsequent Mortgage Loans in Pool I and Pool
II listed in the Mortgage Loan Schedule attached hereto (including property that
secures a Subsequent Mortgage Loan that becomes an REO Property), including the
related Mortgage Files delivered or to be delivered to the Collateral Agent, on
behalf of the Indenture Trustee, including all payments of principal received,
collected or otherwise recovered after the Subsequent Cut-Off Date for each
Subsequent Mortgage Loan, all payments of interest accruing on each Subsequent
Mortgage Loan after the Subsequent Cut-Off Date therefor whenever received and
all other proceeds received in respect of such Subsequent Mortgage Loans, (b)
the Insurance Policies relating to the Subsequent Mortgage Loans, and (c) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid assets, including, without limitation, all insurance
proceeds and condemnation awards.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Aggregate Principal Balance of such
subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Pool I and $_________ in Pool II.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent
Pledge Agreement, capitalized terms used herein but not otherwise defined shall
have the respective meanings assigned to such terms in Appendix I to the
Indenture.
Section 2. Pledge. In consideration of $__________ (such
amount being approximately 100% of the Aggregate Principal Balance of the
Subsequent Mortgage Loans) from the Indenture Trustee, the Trust hereby pledges
to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer, without recourse, all of the Trust's right, title and interest
B-1
<PAGE>
in, to, and under the Subsequent Mortgage Loans and related assets described
above, whether now existing or hereafter arising.
In connection with such pledge, the Originators shall satisfy
the document delivery requirements set forth in Section 2.05 of the Sale and
Servicing Agreement with respect to each Subsequent Mortgage Loan.
In connection with such pledge, the Servicer shall make a
Special Advance of $________ as set forth in Section 5.18(b) of the Sale and
Servicing Agreement.
Section 3. Representations and Warranties Concerning the
Subsequent Mortgage Loans. With respect to each Subsequent Mortgage Loan, the
Trust hereby assigns each of the representations and warranties made by the
Originators in Section 3 of the Subsequent Transfer Agreement, for the benefit
of the Indenture Trustee, the Note Insurer and the Noteholders, on which the
Indenture Trustee relies in accepting the pledge of the Subsequent Mortgage
Loans and the Note Insurer relies in connection with the Note Insurance Policy.
Such representations and warranties speak as of the Subsequent Transfer Date
unless otherwise indicated, and shall survive each pledge, assignment, transfer
and conveyance of the respective Subsequent Mortgage Loans to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer.
Section 4. Repurchase of Subsequent Mortgage Loans. Upon
discovery by any of the Depositor, an Originator, the Indenture Trustee, the
Servicer (on behalf of the Trust), the Note Insurer or any Noteholder of a
breach of any of the representations and warranties made by the Originators and
the pursuant to Section 3.03 of the Loan Sale Agreement or Section 3 of any
Subsequent Transfer Agreement, the party discovering such breach shall give
prompt written notice to such other Person; provided, that the Indenture Trustee
shall have no duty to inquire or to investigate the breach of any such
representations and warranties. The Originators and the will be obligated to
repurchase a Subsequent Mortgage Loan which breaches a representation or
warranty in accordance with the provisions of Section 4.02 of the Sale and
Servicing Agreement or to indemnify as described in Section 3.05(g) of the Loan
Sale Agreement. Such repurchase and indemnification obligation of the
Originators shall constitute the sole remedy against the Originators, and the
Trust for such breach available to the Servicer, the Trust, the Indenture
Trustee, the Note Insurer and the Noteholders.
Section 5. Amendment. This Subsequent Pledge Agreement may be
amended from time to time by the Trust and the Indenture Trustee only with the
prior written consent of the Note Insurer (or, in the event of a Note Insurer
Default, the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
SUBSEQUENT PLEDGE AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT PLEDGE
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
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<PAGE>
Section 7. Counterparts. This Subsequent Pledge Agreement may
be executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. Binding Effect; Third-Party Beneficiaries. This
Subsequent Pledge Agreement will inure to the benefit of and be binding upon the
parties hereto, the Note Insurer, the Noteholders, and their respective
successors and permitted assigns.
Section 9. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 10. Exhibits. The exhibits attached hereto and
referred to herein shall constitute a part of this Subsequent Pledge Agreement
and are incorporated into this Subsequent Pledge Agreement for all purposes.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Trust and the Indenture Trustee have caused this
Subsequent Pledge Agreement to be duly executed by their respective officers as
of the day and year first above written.
_______________________________________________
_____, as Issuer
By: ______________________________,
_______________________, not in its
individual capacity but solely as Owner
Trustee
By:___________________________________
Name:
Title:
________________________________,
as Indenture Trustee
By:___________________________________
Name:
Title:
[Signature Page to Subsequent Pledge Agreement]
B-4
<PAGE>
EXHIBIT C
FORM OF NOTE INSURER CONSENT TO
SUBSEQUENT MORTGAGE LOANS
___________, _____
___________________,
as Indenture Trustee
___________________
_____________________
Re: __________________________;
Mortgage Backed Notes, Series
_____________________________
Ladies and Gentlemen:
Reference is made to the Indenture, dated as of __________
(the "Indenture"), by and between ______________________, as issuer (the
"Trust"), and you, as indenture trustee (the "Indenture Trustee"). Pursuant to
Section 2.14(b)(viii) of the Indenture, the undersigned hereby approves and
consents to the acquisition of the Subsequent Mortgage Loans listed on Schedule
I attached hereto aggregating $____________ in Aggregate Principal Balance by
the Trust and the subsequent pledge of such Subsequent Mortgage Loans by the
Trust to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer.
___________________________________
By:__________________________
Name:
Title:
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<PAGE>
APPENDIX I
DEFINED TERMS
"Accepted Servicing Practices": The Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service, for their own
account, mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Account": Any of the Collection Account, the Distribution
Accounts, the Cross-collateralization Reserve Accounts, the Note Insurance
Payment Account, the Pre-Funding Accounts or the Capitalized Interest Accounts.
"Accountant": A Person engaged in the practice of accounting
who (except when the Indenture provides that an Accountant must be Independent)
may be employed by or affiliated with the Trust or an Affiliate of the Trust.
"Accrual Period": With respect to the Notes and any
Distribution Date, the prior calendar month.
"Act": With respect to any Noteholder, as defined in Section
11.03 of the Indenture.
"Addition Notice": A written notice from the to the Depositor,
the Trust, the Indenture Trustee, the Collateral Agent, the Rating Agencies and
the Note Insurer that the desires to make a Subsequent Transfer.
"Adjusted Note Rate": With respect to any Distribution Date
for the Class A-1 Notes, the percentage equal to (i) the Class A-1 Note Rate
plus (ii) the Premium Percentage for such Class; with respect to any
Distribution Date for the Class A-2 Notes, the percentage equal to (i) the Class
A-2 Note Rate plus (ii) the Premium Percentage for such Class.
"Administrative Costs": With respect to each Class of Notes
and any Distribution Date, the sum of the Indenture Trustee Fee, the Premium
Amount and the Servicing Fee for such Distribution Date and such Class of Notes.
"Affiliate": With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent": Any Note Registrar, Collateral Agent, or
Authenticating Agent.
"Aggregate Principal Balance": With respect to any Mortgage
Loans and any date of determination, the aggregate of the Principal Balances of
such Mortgage Loans as of such date of determination.
App.A-1
<PAGE>
"Appraised Value": As to any Mortgaged Property, the appraised
value of the Mortgaged Property based upon the appraisal made by or on behalf of
the related Originator at the time referred to in the related Basic Documents
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the Mortgaged Property, if such sales price is less than such
appraised value.
"Assignment of Mortgage": 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
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
"Authenticating Agent": The Person, if any, appointed as
Authenticating Agent by the Owner Trustee, acting at the direction of the
Majority Certificateholders, pursuant to Section 6.14 of the Indenture, until
any successor Authenticating Agent for the Notes is named, and thereafter
"Authenticating Agent" shall mean such successor. The initial Authenticating
Agent shall be the Indenture Trustee. Any Authenticating Agent other than the
Indenture Trustee shall sign an instrument under which it agrees to be bound by
all of the terms of this Indenture applicable to the Authenticating Agent.
"Authorized Denominations": Each Class of Notes is issuable
only in the minimum Percentage Interest corresponding to a minimum denomination
of $1,000 or integral multiples of $1,000 in excess thereof; provided, however,
that one Note of each Class is issuable in a denomination equal to any such
multiple plus an additional amount such that the aggregate denomination of all
Notes of such Class shall be equal to the Original Note Principal Balance of
such Class.
"Authorized Officer": With respect to (i) the Indenture
Trustee, any Responsible Officer, (ii) the Owner Trustee or the Collateral
Agent, the president, any vice president, any assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer, any financial services officer or any other officer of the Owner
Trustee or the Collateral Agent customarily performing functions similar to
those performed by the above officers and (iii) any other Person, the chairman,
chief operating officer, president or any vice president of such Person.
"Available Funds": With respect to any Distribution Date and
any Distribution Account, the amount to be on deposit in such Distribution
Account on such Distribution Date (excluding the amount of any Insured Payment
and prior to the application of such amounts as described in Section 8.02 of the
Indenture for such Distribution Date) as a result of (a) the Servicer's
remittance of the Servicer Remittance Amount on the related Servicer
Distribution Date, (b) any transfers to such Distribution Account made from the
related Capitalized Interest Account and/or the related Pre-Funding Account and
relating to such Distribution Date pursuant to Section 8.01 of the Indenture,
and (c) any transfers to such Distribution Account in respect of the Shortfall
Amount for such Class and such Distribution Date pursuant to Section 8.01 of the
Indenture, until such Shortfall Amount is paid in full, made first, to the
extent of the Net Monthly Excess Cashflow for the other Pool of Mortgage Loans
remaining after payment of any Net Mortgage Loan Interest Shortfalls for such
other Pool, from the Distribution Account relating to such other Pool, second,
from the Cross-collateralization Reserve Account relating to this Pool,
App.A-2
<PAGE>
and third, from the Cross-collateralization Reserve Account relating to the
other Pool. For purposes of calculating the Available Funds, any Loan Repurchase
Price or Substitution Adjustment that is paid shall be deemed deposited in the
Distribution Account in the Due Period preceding such Servicer Distribution
Date.
"Available Funds Shortfall": With respect to any Distribution
Date and any Class, an amount equal to the excess of the Insured Distribution
Amount for such Distribution Date and for such Class over the Available Funds
for such Distribution Date and such Class available for distribution in respect
of such Insured Distribution Amount.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Basic Documents": The Indenture, the Trust Agreement, the
Sale and Servicing Agreement, the Loan Sale Agreement, the Insurance Agreement
and the Indemnification Agreement.
"Beneficial Owner": With respect to a Book-Entry Note, the
Person who is the beneficial owner of such Note as reflected on the books of the
Clearing Agency for the Notes or on the books of a Person maintaining an account
with such Clearing Agency (as either a Direct Participant or an Indirect
Participant, in accordance with the rules of such Clearing Agency).
"Best Efforts": Efforts determined to be in good faith and
reasonably diligent by the Person performing such efforts, specifically the
Trust or the Servicer or any other agent of the Trust, as the case may be, in
its reasonable discretion. Such efforts do not require the Trust or the Servicer
or any other agent of the Trust, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Trust or the Servicer or any other agent of the Trust, as the case
may be, to advance or expend fees or sums of money in addition to those
specifically set forth in this Indenture and the Sale and Servicing Agreement.
"Book-Entry Notes": Any Notes registered in the name of the
Clearing Agency or its nominee, ownership of which is reflected on the books of
the Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (as either a Direct Participant or an Indirect Participant in
accordance with the rules of such Clearing Agency).
"Book-Entry Termination": The time at which the book-entry
registration of the Book-Entry Notes shall terminate, as specified in Section
2.13 of the Indenture.
"Business Day": Any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Delaware, the State
of New Jersey, the State of North Carolina, or the state in which the Indenture
Trustee's office from which payments will be made to Certificateholders, are
authorized or obligated by law, regulation or executive order to be closed.
"Business Purpose Property": Any mixed-use property,
commercial property, or four or more unit multifamily property.
App.A-3
<PAGE>
"Capitalized Interest Account": Each of the Capitalized
Interest Accounts established in accordance with Section 8.01(c) of the
Indenture and maintained by the Indenture Trustee.
"Capitalized Interest Requirement": With respect to each Class
of Notes and the Distribution Date occurring in ________ and _________, (A) the
product of (i) one-twelfth of the related Adjusted Note Rate as calculated as of
such Distribution Date and (ii) the related Pre-Funded Amount as of the first
day of the related Due Period, minus (B) thirty (30) days' interest, at the
related Mortgage Interest Rate, on the Subsequent Mortgage Loans for the related
Pool transferred to the Trust during the related Due Period which had a Due Date
after the related Subsequent Cut-Off Date during the related Due Period, minus
(C) the amount of any Pre-Funding Earnings for the related Pool earned from the
last Distribution Date (or the Closing Date with respect to the ________
Distribution Date). In no event will the Capitalized Interest Requirement for
either Pool be less than zero.
"CERCLA": The Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the related Mortgage Interest Rate.
"Class": Each class of Notes designated as the Class A-1 Notes
and the Class A-2 Notes.
"Class A-1 Current Interest": With respect to the Class A-1
Notes for any Distribution Date, the interest accrued during the related Accrual
Period at the Class A-1 Note Rate applicable to such Distribution Date on the
Class A-1 Note Principal Balance as of such Distribution Date (and prior to
making any distributions on such Distribution Date).
"Class A-1 Distribution Amount": With respect to the Class A-1
Notes for any Distribution Date, the amount to be distributed to the Holders of
the Class A-1 Notes on such Distribution Date, applied first to interest and
then to principal, which amount shall be the sum of (i) any moneys released from
the Pre-Funding Account as a prepayment of principal on the Class A-1 Notes
pursuant to Section 8.01(b) of the Indenture, and (ii) the lesser of (x) the
Class A-1 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-1 Notes for such Distribution Date.
"Class A-1 Formula Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, the sum of the Class A-1 Interest
Distribution Amount and the Class A-1 Principal Distribution Amount.
App.A-4
<PAGE>
"Class A-1 Interest Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, an amount equal to the Class A-1
Current Interest less the Class A-1 Mortgage Loan Interest Shortfall Amount.
"Class A-1 Mortgage Loan Interest Shortfall Amount": With
respect to the Mortgage Loans in Pool I and any Distribution Date, the sum of
(x) the excess, if any, of the aggregate Prepayment Interest Shortfalls for the
related Due Period over the aggregate amount of Compensating Interest paid by
the Servicer in respect thereto and (y) the aggregate amount of Civil Relief Act
Interest Shortfalls in respect of which the Servicer did not make a Servicer
Advance.
"Class A-1 Note": Any Note designated as a "Class A-1 Note" on
the face thereof, in the form of Exhibit A to the Indenture. The Class A-1 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"Class A-1 Note Principal Balance": As of any date of
determination, the Original Note Principal Balance of the Class A-1 Notes less
any amounts actually distributed with respect to principal thereon on all prior
Distribution Dates.
"Class A-1 Note Rate": With respect to any Distribution Date,
the per annum rate equal to _____%; provided, that, on any Distribution Date
after the Note Clean-Up Call Date for the Class A-1 Notes, the Class A-1 Note
Rate will be _____%.
"Class A-1 Principal Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, the lesser of (x) the Principal
Distribution Amount for Pool I for such Distribution Date, and (y) the Class A-1
Note Principal Balance as of such Distribution Date.
"Class A-2 Current Interest": With respect to the Class A-2
Notes for any Distribution Date, the interest accrued during the related Accrual
Period at the Class A-2 Note Rate applicable to such Distribution Date on the
Class A-2 Note Principal Balance as of such Distribution Date (and prior to
making any distributions on such Distribution Date).
"Class A-2 Distribution Amount": With respect to the Class A-2
Notes for any Distribution Date, the amount to be distributed to the Holders of
the Class A-2 Notes on such Distribution Date, applied first to interest and
then to principal, which amount shall be the lesser of (x) the Class A-2 Formula
Distribution Amount for such Distribution Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution on account
of the Class A-2 Notes for such Distribution Date.
"Class A-2 Formula Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, the sum of the Class A-2 Interest
Distribution Amount and the Class A-2 Principal Distribution Amount.
"Class A-2 Interest Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, an amount equal to (a) the related
Class A-2 Current Interest, less the Class A-2 Mortgage Loan Interest Shortfall
Amount.
App.A-5
<PAGE>
"Class A-2 Mortgage Loan Interest Shortfall Amount": With
respect to the Mortgage Loans in Pool II and any Distribution Date, the sum of
(x) the excess, if any, of the aggregate Prepayment Interest Shortfalls for the
related Due Period over the aggregate amount of Compensating Interest paid by
the Servicer in respect thereto and (y) the aggregate amount of Civil Relief Act
Interest Shortfalls in respect of which the Servicer did not make a Servicer
Advance.
"Class A-2 Note": Any Note designated as a "Class A-2 Note" on
the face thereof, in the form of Exhibit A to the Indenture. The Class A-2 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"Class A-2 Note Principal Balance": As of any date of
determination, the Original Note Principal Balance of the Class A-2 Notes less
any amounts actually distributed with respect to principal thereon on all prior
Distribution Dates.
"Class A-2 Note Rate": With respect to any Distribution Date,
the per annum rate equal to ______%; provided that, on any Distribution Date
after the Note Clean-up Call Date for the Class A-2 Notes, the Class A-2 Note
Rate will be ______%.
"Class A-2 Principal Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, the lesser of (x) the Principal
Distribution Amount for Pool II for such Distribution Date and (y) the Class A-2
Note Principal Balance as of such Distribution Date.
"Clean-Up Call Date": The first Distribution Date after the
sum of the Aggregate Principal Balances of the Mortgage Loans in Pool I and Pool
II is less than 10% of the sum of the Maximum Collateral Amount for Pool I and
Pool II.
"Clearing Agency": An organization registered as a "clearing
agency" pursuant to Section 17A of the Securities and Exchange Act of 1934, as
amended, and the regulations of the Commission thereunder and shall initially be
The Depository Trust Company of New York, the nominee for which is Cede & Co.
"Clearing Agency Participants": The entities for whom the
Clearing Agency will maintain book-entry records of ownership and transfer of
Book-Entry Notes, which may include securities brokers and dealers, banks and
trust companies and clearing corporations and certain other organizations.
"Closing Date": ____________.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral Agent": _________________, a national banking
association, or its successor-in-interest, or any successor Collateral Agent
appointed as provided in Section 9.08 of the Sale and Servicing Agreement.
"Collection Account": The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b) of the Sale and Servicing
Agreement.
App.A-6
<PAGE>
"Combined Loan-to-Value Ratio" or "CLTV": As to any Mortgage
Loan at any time, the fraction, expressed as a percentage, the numerator of
which is the sum of (i) the Principal Balance thereof at such time and (ii) if
such Mortgage Loan is subject to a second mortgage, the unpaid principal balance
of any related first mortgage loan or loans, if any, as of such time, and the
denominator of which is the Appraised Value of any related Mortgaged Property or
Properties as of the date of the appraisal used by or on behalf of the to
underwrite such Mortgage Loan.
"Commission": The United States Securities and Exchange
Commission.
"Compensating Interest": As defined in Section 6.05 of the
Sale and Servicing Agreement.
"Corporate Trust Office": With respect to (x) the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of the Basic Documents is located at
______________________, Attention: ____________________; (y) the Owner Trustee,
the principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be principally administered, which office at the
date of the execution of the Basic Documents is located at
_____________________________, Attention: Corporate Trust Administration; and
(z) the Collateral Agent, the principal office of the Collateral Agent at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of the Basic Documents
is located at ______________________, Attention: Custody Manager.
"Cross-collateralization Reserve Accounts": With respect to
each Class of Notes, the segregated trust account, which shall be an Eligible
Account, established and maintained pursuant to Section 8.01(d) of the Indenture
and entitled "____________, as Indenture Trustee for _____________________
Mortgage Backed Notes, Series _____, Class A-[1][2], Cross-collateralization
Reserve Account," as the case may be, on behalf of the related Noteholders and
the Note Insurer.
"Cumulative Loan Loss": With respect to any period, the sum of
all Liquidated Loan Losses which occurred during such period.
"Cumulative Loss Percentage": As of any date of determination
thereof, the aggregate of all Liquidated Loan Losses since the Closing Date as a
percentage of the sum of (i) the aggregate Principal Balance of the Initial
Mortgage Loans as of the Initial Cut-Off Date and (ii) the aggregate Principal
Balance of any Subsequent Mortgage Loans transferred to the Trust as of the
related Subsequent Cut-Off Date.
"Cumulative Loss Test": The Cumulative Loss Test for each
period indicated below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
------ __________________________
1st - 24th Distribution Date _____%
App.A-7
<PAGE>
25th - 36th Distribution Date _____%
37th - 48th Distribution Date _____%
49th - 60th Distribution Date
and thereafter _____%
"Curtailment": 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 not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
Delinquency.
"Cut-Off Date": With respect to the Initial Mortgage Loans,
the Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
"Cut-Off Date Aggregate Principal Balance": Means the
aggregate unpaid principal balance of the Initial Mortgage Loans as of the
Initial Cut-Off Date (or, with respect to Initial Mortgage Loans which were
originated after the Initial Cut-Off Date, as of the date of origination). The
Cut-Off Date Aggregate Principal Balance for the Trust is $___________. The
Cut-Off Date Aggregate Principal Balance for Pool I and Pool II is $___________
and $____________, respectively.
"Cut-Off Date Principal Balance": Means as to each Initial
Mortgage Loan, its unpaid principal balance as of the Initial Cut-Off Date (or,
with respect to Initial Mortgage Loans which were originated after the Initial
Cut-Off Date, as of the date of origination).
"Debt Service Reduction": 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.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding Principal Balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Notes": Notes other than Book-Entry Notes.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Ratio": With respect to any Distribution Date,
the percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are sixty (60) or more
days Delinquent, in foreclosure or converted to REO Property as of the last day
of such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
App.A-8
<PAGE>
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "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": ____________________, a __________ corporation.
"Direct Participant": Any broker-dealer, bank or other
financial institution for which the Clearing Agency holds Notes from time to
time as a securities depositary.
"Distribution Account": With respect to each Class of Notes,
the segregated trust account, which shall be an Eligible Account, established
and maintained pursuant to Section 8.01(a) of the Indenture and entitled
"____________, as Indenture Trustee for ___________________ Mortgage Backed
Notes, Series _____, Class A-[1][2], Distribution Account," as the case may be,
on behalf of the related Noteholders and the Note Insurer.
"Distribution Amount": The Class A-1 Distribution Amount or
the Class A-2 Distribution Amount, as applicable.
"Distribution Date": The ____ day of any month or if such ___
day is not a Business Day, the first Business Day immediately following,
commencing on _________.
"Due Date": With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
"Due Period": With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
"Eligible Account": Either (A) an account or accounts
maintained with an institution (which may include the Indenture Trustee;
provided, that the Indenture Trustee otherwise meets these requirements) 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 in the highest short term rating category 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 Indenture 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 Note Insurer and the Rating
Agencies or (B) a trust account or accounts maintained with the trust department
of a federal or state chartered depository institution or trust company (which
may include the Indenture Trustee; provided, that the Indenture Trustee
otherwise meets these requirements), having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity.
App.A-9
<PAGE>
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Excess Over-collateralized Amount": With respect to a Pool of
Mortgage Loans and any Distribution Date, the excess, if any, of (x) the
Over-collateralized Amount for such Pool that would apply on such Distribution
Date after taking into account the payment of the Class A-1 Distribution Amount
or the Class A-2 Distribution Amount, as applicable, on such Distribution Date
(except for any distributions of Over-collateralization Reduction Amounts for
such Pool on such Distribution Date) over (y) the related Specified
Over-collateralized Amount for such Pool for such Distribution Date; provided,
however, that the Excess Over-collateralized Amount for the period beginning
with the Distribution Date as to which clause (b)(i)(y)(A) of "Specified
Over-collateralized Amount" applies (the "Trigger Date") and ending on the
Distribution Date occurring in the month six months subsequent to the Trigger
Date (inclusive) shall be limited to the amount obtained using the following
formula.
n
--- x E.S.A.
6
Where "n" is equal to the number of Distribution Dates that
have occurred since the Trigger Date and "E.S.A." is equal to the amount of
Excess Over-collateralized Amount that would otherwise be obtained for such
Distribution Date without regard to the provisions of this proviso.
"Exchange Act": Means the Securities Exchange Act of 1934, as
amended.
"Event of Default": As defined in Section 5.01 of the
Indenture.
"FDIC": The Federal Deposit Insurance Corporation, and any
successor thereto.
"Final Certification": A certification as to the completeness
of each Indenture Trustee's Mortgage File prepared by the Collateral Agent, on
behalf of the Indenture Trustee, and provided by the Collateral Agent within
ninety (90) of the Closing Date pursuant to Section 2.06(a)(iii) of the Sale and
Servicing Agreement.
"Final Stated Maturity Date": With respect to both the Class
A-1 Notes and the Class A-2 Notes, the ________ Distribution Date.
"Foreclosure Profits": As to any Distribution Date, the
excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan
that became a Liquidated Mortgage Loan during the related Due Period 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 on 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 on which interest was last deemed
to have been paid pursuant to Section 5.06 of the Sale and Servicing Agreement)
to the next succeeding Due Date following the date such Loan became a Liquidated
Mortgage Loan.
"GAAP": Generally accepted accounting principles, consistently
applied.
App.A-10
<PAGE>
"Grant": To assign, transfer, mortgage, pledge, create and
grant a security interest in, deposit, set-over and confirm. A Grant of a
Mortgage Loan and the related Mortgage Files, a Permitted Investment, the Sale
and Servicing Agreement, the Loan Sale Agreement, or any other instrument shall
include all rights, powers and options (but none of the obligations) of the
Granting party thereunder, including without limitation the immediate and
continuing right to claim for, collect, receive and give receipts for principal
and interest payments thereunder, Insurance Proceeds, Loan Purchase Prices and
all other moneys payable thereunder and all proceeds thereof, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything that the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Highest Lawful Rate": As defined in Section 11.19 of the
Indenture.
"I&I Payments": Payments due and owing under the Insurance
Agreement other than pursuant to Section 3.02(b) of such Insurance Agreement.
"Indemnification Agreement": As defined in the Insurance
Agreement.
"Indenture": The Indenture, dated as of __________, between
the Trust and the Indenture Trustee, relating to the issuance of the Notes.
"Indenture Trustee": _________________, a __________banking
corporation, or its successor-in-interest, or any successor Indenture Trustee
appointed as provided for in Section 6.09 of the Indenture.
"Indenture Trustee Fee": As to any Distribution Date, the fee
payable to the Indenture Trustee in respect of its services as Indenture Trustee
pursuant to Section 6.16 of the Indenture that accrues at a monthly rate equal
to one-twelfth of _____% on the Principal Balance of each Mortgage Loan, as of
the immediately preceding Due Date.
"Indenture Trustee's Mortgage File": The documents delivered
to the Collateral Agent, on behalf of the Indenture Trustee, pursuant to Section
2.05 of the Sale and Servicing Agreement.
"Indenture Trustee's Remittance Report": The statement
prepared pursuant to Section 2.08(d) of the Indenture, containing the following
information with respect to each Class:
(a) the amount of the distribution with respect to the each
Class of Notes and the Trust Certificates;
(b) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately identifying
any Over-collateralization Increase Amounts for each Pool;
(c) the amount of such distributions allocable to interest and
the calculation thereof;
App.A-11
<PAGE>
(d) the Note Principal Balance of each Class of Notes as of
such Distribution Date, together with the Note Principal Balance of each Class
of Notes (based on a Note in an original Note Principal Balance of $1,000) then
outstanding, in each case after giving effect to any payment of principal on
such Distribution Date;
(e) the amount of any Insured Payment included in the amounts
distributed to the Noteholders on such Distribution Date;
(f) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution;
(g) the amounts, if any, of any Liquidated Loan Losses for
consumer purpose loans and for business purpose loans for the related Due Period
and cumulative Liquidated Loan Losses since the Closing Date for consumer
purpose loans and for business purpose loans; and
(h) the Pre-Funding Amount for each Class on such Distribution
Date.
Items (a), (b) and (c) above shall, with respect to each Class
of Notes, be presented on the basis of a Note having a $1,000 denomination. In
addition, by January 31 of each calendar year following any year during which
the Notes are outstanding, the Indenture Trustee shall furnish a report to each
Holder of record if so requested in writing at any time during each calendar
year as to the aggregate of amounts reported pursuant to (a), (b) and (c) with
respect to the Notes for such calendar year.
"Independent": When used with respect to any specified Person,
means such a Person who (i) is in fact independent of the Trust and any other
obligor upon the Notes, (ii) does not have any direct financial interest or any
material indirect financial interest in the Trust or in any such other obligor
or in an Affiliate of the Trust or such other obligor, and (iii) is not
connected with the Trust or any such other obligor as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is herein provided that any Independent Person's opinion
or certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by a Trust Order and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning hereof.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Note.
"Individual Note": A Note of an Original Note Principal
Balance of $1,000; a Note of an Original Note Principal Balance in excess of
$1,000 shall be deemed to be a number of Individual Notes equal to the quotient
obtained by dividing such Original Note Principal Balance amount by $1,000.
"Initial Certification": A certification as to the
completeness of each Mortgage File prepared by the Collateral Agent, on behalf
of the Indenture Trustee, and provided by the Collateral Agent within thirty
(30) of the Closing Date pursuant to Section 2.06(a)(ii) of the Sale and
Servicing Agreement.
App.A-12
<PAGE>
"Initial Cut-Off Date": The close of business on _____________
(or with respect to any Initial Mortgage Loan originated or otherwise acquired
by an Originator after _____________, the date of origination or acquisition of
such Initial Mortgage Loan).
"Initial Mortgage Loans": The Mortgage Loans delivered by the
Trust on the Closing Date.
"Initial Over-collateralized Amount": With respect to any
Pool, an amount equal to _____% of the Maximum Collateral Amount for such Pool.
"Insurance Agreement": The Insurance and Indemnity Agreement
dated as of ___________ among the Note Insurer, the Depositor, the Trust, the
Servicer, the , and the Originators as such agreement may be amended or
supplemented in accordance with the provisions thereof.
"Insurance Policies": All insurance policies insuring any
Mortgage Loan or Mortgaged Property, to the extent the Trust or the Indenture
Trustee has any interest therein.
"Insurance Proceeds": 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."
"Insured Distribution Amount": With respect to any
Distribution Date and for any Pool, is the sum of (i) the Interest Distribution
Amount for such Pool, (ii) the amount of the Over-collateralization Deficit
applicable to such Pool, if any, with respect to such Distribution Date, and
(iii) with respect to the Distribution Date which is a Final Stated Maturity
Date, the outstanding Note Principal Balance for the related Class of Notes.
"Insured Payment": With respect to any Distribution Date and
any Class of Notes, the Available Funds Shortfall for such Class.
"Interest Distribution Amount": The Class A-1 Interest
Distribution Amount or the Class A-2 Interest Distribution Amount, as
applicable.
"Late Payment Rate": Has the meaning ascribed thereto in the
Insurance Agreement.
"Letter Agreement": The Letter of Representations to the
Clearing Agency from the Indenture Trustee and the Trust dated __________.
"Liquidated Loan Loss": With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution 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 next succeeding Due Date following the date such
Loan became a Liquidated
App.A-13
<PAGE>
Mortgage Loan, over (ii) Net Liquidation Proceeds with respect to such
Liquidated Mortgage Loan.
"Liquidated Mortgage Loan": A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
"Liquidation Expenses": Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (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 5.04 and 5.06 of the Sale and Servicing Agreement respecting the
related Mortgage Loan and any unreimbursed expenditures for real property taxes
or for property restoration or preservation of the related Mortgaged Property.
Liquidation Expenses shall not include any previously incurred expenses in
respect of an REO Mortgage Loan which have been netted against related REO
Proceeds.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
Indenture Trustee's sale, foreclosure sale, REO Disposition or otherwise or
(iii) the liquidation of any other security for such Mortgage Loan, including,
without limitation, pledged equipment, inventory and working capital and
assignments of rights and interests made by the related Mortgagor.
"Loan Repurchase Price": With respect to any Mortgage Loan,
the Principal Balance of such Mortgage Loan as of the date of purchase, plus all
accrued and unpaid interest on such Principal Balance computed, as of the next
succeeding Due Date for such repurchased Mortgage Loan, at the Mortgage Interest
Rate, net of the Servicing Fee if the or any of its Affiliates is the Servicer,
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
Collection Account on the next succeeding Servicer Distribution Date, after
deducting therefrom any amounts received in respect of such repurchased Mortgage
Loan or Loans and being held in the Collection Account for future distribution
to the extent such amounts have not yet been applied to principal or interest on
such Mortgage Loan.
"Loan Sale Agreement": The Loan Sale Agreement, dated as of
___________, among the Originators and the Depositor relating to the sale of the
Mortgage Loans from the Originators to the Depositor.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage
Loan as of its date of origination, the ratio on such date borne by the
outstanding Principal Balance of the Mortgage Loan to the Appraised Value of the
related Mortgaged Property.
"Majority Certificateholders": The Holder or Holders of Trust
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
App.A-14
<PAGE>
"Majority Noteholders": The Holder or Holders of Notes
evidencing Percentage Interests in excess of 51% in the aggregate.
"Maximum Collateral Amount": The sum of the Original Pool
Principal Balance and the Original Pre-Funded Amount for each Class of Notes.
"Monthly Payment": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (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).
"Monthly Servicing Fee": As defined in Section 5.08 of the
Sale and Servicing Agreement.
"Moody's": 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 Note Insurer.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
"Mortgage File": As described in Exhibit A to the Sale and
Servicing Agreement.
"Mortgage Interest Rate": As to any Mortgage Loan, the per
annum fixed rate at which interest accrues on the unpaid Principal Balance
thereof.
"Mortgage Loan Interest Shortfall": With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) the excess, if any,
of the Prepayment Interest Shortfall for such Mortgage Loan for the related Due
Period over the Compensating Interest for such Mortgage Loan paid by the
Servicer in respect thereto and (b) any Civil Relief Act Interest Shortfall in
respect of which the Servicer did not make a Servicer Advance.
"Mortgage Loan Schedule": The schedule of Initial Mortgage
Loans as of the Initial Cut-Off Date attached as Schedule I to the Indenture,
which will be deemed to be modified automatically to reflect any replacement,
sale, substitution, liquidation, transfer or addition of any Mortgage Loan,
including the addition of a Subsequent Mortgage Loan, pursuant to the terms
hereof. The initial Mortgage Loan Schedule sets forth as to each Initial
Mortgage Loan, and any subsequent Mortgage Loan Schedule provided in connection
with the Subsequent Mortgage Loans will set forth as to each Subsequent Mortgage
Loan: (i) its identifying number and the name of the related Mortgagor; (ii) the
billing address for the related Mortgaged Property including the state and zip
code; (iii) its date of origination; (iv) the original number of months to
stated maturity; (v) the original stated maturity; (vi) the original Principal
Balance; (vii) its Principal Balance as of the applicable Cut-Off Date; (viii)
the Mortgage Interest Rate; (ix) the scheduled monthly payment of principal and
interest and (x) a Pool designation.
App.A-15
<PAGE>
"Mortgage Loans": The Initial Mortgage Loans and the
Subsequent Mortgage Loans, together with any Qualified Substitute Mortgage Loans
substituted therefor in accordance with the Basic Documents, as from time to
time are held as a part of the Trust, the Initial Mortgage Loans originally so
held being identified in the initial Mortgage Loan Schedule. When used in
respect of any Distribution Date, the term Mortgage Loans shall mean all
Mortgage Loans (including those in respect of which the Indenture Trustee has
acquired the related Mortgaged Property) which have not been repaid in full
prior to the related Due Period, did not become Liquidated Mortgage Loans prior
to such related Due Period or were not repurchased or replaced by the prior to
such related Due Period.
"Mortgage Note": The original, executed note or other evidence
of any indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if either
(a) (i) the Rolling Six Month Delinquency Rate is less than or equal to ____%,
(ii) the Over-collateralization Loss Test is satisfied and (iii) if the Twelve
Month Loss Amount is not greater than or equal to ____% of the Principal Balance
of the Mortgage Loans in each Pool as of the first day of the twelfth preceding
calendar month or (b) the Note Insurer, by notice to the Trust, the Servicer,
the Indenture Trustee and the Collateral Agent, expressly waives in writing
compliance with the foregoing tests for such Distribution Date.
"Mortgaged Property": The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple interest in one or more
parcels of land.
"Mortgagor": The obligor on a Mortgage Note.
"Net Foreclosure Profits": As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances and Servicing Advances made by the Servicer. For
all purposes of the Basic Documents, 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.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date and any Pool, the excess of (x) the Available Funds for such
Pool then on deposit in the related Distribution Account over (y) the sum of (i)
the Interest Distribution Amount for such Pool and such Distribution Date, (ii)
the Principal Distribution Amount for such Pool and such Distribution Date,
calculated for this purpose without regard to any Over-collateralization
Increase Amount (or portion thereof included therein) for such Pool and such
Distribution Date, (iii) the amounts due to the Note Insurer for such Pool on
such Distribution Date pursuant to Section 8.02(ii) of the Indenture, and (iv)
the Indenture Trustee Fees allocable to such Pool for such Distribution Date.
App.A-16
<PAGE>
"Net Mortgage Loan Interest Shortfall Amount": The Class A-1
Mortgage Loan Interest Shortfall or the Class A-2 Mortgage Loan Interest
Shortfall Amount, as applicable.
"Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
"Net Weighted Average Mortgage Interest Rate": With respect to
any Due Period, the weighted average Mortgage Interest Rates (weighted by
Principal Balances) of the Mortgage Loans, calculated at the opening of business
on the first day of such Due Period, less the Servicing Fee Rate, and less the
Premium Percentage.
"Nonrecoverable Advances": With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.03 of the Sale and Servicing Agreement, 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 Note Insurer and the
Indenture Trustee no later than the Business Day following such determination,
would not ultimately be recoverable pursuant to Section 5.03 of the Sale and
Servicing Agreement.
"Note": Any Class A-1 Note or Class A-2 Note executed by the
Owner Trustee on behalf of the Trust and authenticated by the Indenture Trustee.
"Noteholder" or "Holder": Each Person in whose name a Note is
registered in the Note Register, except that, solely for the purposes of giving
any consent, waiver, request or demand pursuant to the Indenture, any Note
registered in the name of the Servicer or any Subservicer or the , or any
Affiliate of any of them, shall be deemed not to be outstanding and the
undivided Percentage Interest evidenced thereby shall not be taken into account
in determining whether the requisite percentage of Notes necessary to effect any
such consent, waiver, request or demand has been obtained. For purposes of any
consent, waiver, request or demand of Noteholders pursuant to the Indenture,
upon the Indenture Trustee's request, the Servicer and the shall provide to the
Indenture Trustee a notice identifying any of their respective Affiliates or the
Affiliates of any Subservicer that is a Noteholder as of the date(s) specified
by the Indenture Trustee in such request. Any Notes on which payments are made
under the Note Insurance Policy shall be deemed to be Outstanding and held by
the Note Insurer to the extent of such payment.
"Note Clean-Up Call Date": With respect to the Class A-1
Notes, the first Distribution Date after the Class A-1 Note Principal Balance is
less than or equal to 10% of the Original Note Principal Balance of the Class
A-1 Notes; with respect to the Class A-2 Notes, the first Distribution Date
after the Class A-2 Note Principal Balance is less than or equal to 10% of the
Original Note Principal Balance of the Class A-2 Notes.
"Note Insurance Payment Account": The Note Insurance Payment
Account established in accordance with Section 8.03(c) of the Indenture and
maintained by the Indenture Trustee.
App.A-17
<PAGE>
"Note Insurance Policy": The Financial Guaranty Insurance
Policy No. _______, all endorsements thereto dated the Closing Date, issued by
the Note Insurer for the benefit of the Noteholders.
"Note Insurer": _______________________, a monoline stock
insurance company organized and created under the laws of the State of ________,
and any successors thereto.
"Note Insurer Default": The existence and continuance of any
of the following:
(i) the Note Insurer shall have failed to make a required
payment when due under the Note Insurance Policy;
(j) the Note Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
Bankruptcy Code, the New York State Insurance Law or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization, (ii) made a general assignment for the benefit of its creditors
or (iii) had an order for relief entered against it under the Bankruptcy Code,
the New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(k) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a custodian,
indenture trustee, agent, or receiver for the Note Insurer or for all or any
material portion of its property or (ii) authorizing the taking of possession by
a custodian, indenture trustee, agent, or receiver of the Note Insurer or of all
or any material portion of its property.
"Note Principal Balance": As to any particular Note and date
of determination, the product of the Percentage Interest evidenced thereby and
the aggregate principal balance of all Notes of the same Class as of such date
of determination. The Trust Certificates do not have a "Note Principal Balance".
"Note Rate": The Class A-1 Note Rate or the Class A-2 Note
Rate, as applicable.
"Note Register": As defined in Section 2.06 of the Indenture.
"Note Registrar": As defined in Section 2.06 of the Indenture.
"Note Termination Price": With respect to either Class, an
amount equal to the sum of (i) 100% of the aggregate Note Principal Balance of
such Class, plus accrued and unpaid interest thereon, and (ii) any unreimbursed
amounts due to the Note Insurer under the Basic Documents and any I&I Payments.
"Notes": The Class A-1 Notes and the Class A-2 Notes.
"Officer's Certificate": 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
App.A-18
<PAGE>
assistant secretaries of the , the Servicer, or the Depositor, or, with respect
to the Trust, a certificate signed by a Responsible Officer of the Owner
Trustee, at the direction of the related Majority Certificateholders as required
by any Basic Document.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the , the Servicer, the Depositor, the
Indenture Trustee, the Owner Trustee, a Noteholder or a Noteholder's prospective
transferee or the Note 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.
"Original Note Principal Balance": As of the Closing Date and
as to the Class A-1 Notes, $____________ and as to the Class A-2 Notes,
$____________. The Trust Certificates do not have an "Original Note Principal
Balance."
"Original Pool Principal Balance": The aggregate Principal
Balance of the Mortgage Loans, as of the Initial Cut-Off Date, which amount for
the Trust is equal to $_____________. The Original Pool Principal Balance for
Pool I and Pool II is $_____________ and $__________, respectively.
"Original Capitalized Interest Amount": With respect to the
Class A-1 Notes, $__________ and with respect to the Class A-2 Notes,
$___________.
"Original Pre-Funded Amount": With respect to the Class A-1
Notes, $___________ and with respect to the Class A-2 Notes, $____________.
"Originators": ___________________.
"Outstanding": As of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(l) Definitive Notes theretofore canceled by the Note
Registrar or delivered to the Note Registrar for cancellation;
(m) Notes or portions thereof for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Notes; provided, however, that if such
Notes are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor, satisfactory to the Indenture Trustee,
has been made;
(n) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are held
by a bona fide purchaser (as defined by the Uniform Commercial Code of the
applicable jurisdiction); and
(o) Notes alleged to have been destroyed, lost or stolen that
have been paid as provided for in Section 2.07 of the Indenture;
App.A-19
<PAGE>
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Principal Balance of the Outstanding Notes have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Notes owned by the Trust, any other obligor upon the Notes or any Affiliate of
the Trust, the , the Servicer or the Depositor or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Trust, any other obligor upon the Notes or any Affiliate of the Trust, the ,
the Servicer or the Depositor or such other obligor; provided, further, however,
that Notes that have been paid with the proceeds of the Note Insurance Policy
shall be deemed to be Outstanding for the purposes of this Indenture, such
payment to be evidenced by written notice from the Note Insurer to the Indenture
Trustee, and the Note Insurer shall be deemed to be the Holder thereof to the
extent of any payments thereon made by the Note Insurer which have not been
reimbursed.
"Over-collateralization Deficit": As of any Distribution Date,
the amount, if any, by which (a) the aggregate Note Principal Balance of the
Notes, after taking into account the payment of the Principal Distribution
Amount for each Pool (except for any amount in respect of the
Over-collateralization Deficit) on such date exceeds (b) the sum of (i) the
Aggregate Principal Balances of the Mortgage Loans in such Pool determined as of
the end of the immediately preceding Due Period, (ii) the amount, if any, on
deposit in the Pre-Funding Accounts as of the close of business on the last day
of the immediately preceding Due Period, and (iii) the amount on deposit in the
Cross-collateralization Reserve Accounts on such Distribution Date, after
application of all amounts due on such Distribution Date.
"Over-collateralization Deficiency Amount": With respect to
any Distribution Date and any Pool, the difference, if greater than zero,
between (a) the Specified Over-collateralized Amount for such Pool applicable to
such Distribution Date and (b) the Over-collateralized Amount for such Pool
applicable to such Distribution Date prior to taking into account the payment of
any related Over-collateralization Increase Amount for such Pool on such
Distribution Date.
"Over-collateralization Increase Amount": With respect to any
Distribution Date and any Pool, the lesser of:
(p) the Over-collateralization Deficiency Amount for such Pool
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount for such Pool on such Distribution Date (except
for any Over-collateralization Increase Amount for such Pool)); and
(b) (i) with respect to the first Distribution Date, zero, and
(ii) with respect to any other Distribution Date, 100% of the
amount of Net Monthly Excess Cashflow on such Distribution Date.
App.A-20
<PAGE>
"Over-collateralization Loss Test": The Over-collateralization
Loss Test for any period set out below is satisfied if the Cumulative Loss
Percentage for such period does not exceed the percentage set out for such
period below:
Period Cumulative Loss Percentage
------ --------------------------
1st - 12th Distribution Date _____%
13th - 24th Distribution Date _____%
25th - 36th Distribution Date _____%
37th - 48th Distribution Date _____%
49th - 60th Distribution Date
and thereafter _____%
"Over-collateralization Reduction Amount": With respect to any
Pool and Distribution Date, is the positive difference, if any, between (a) the
Over-collateralized Amount for such pool that would apply on such Distribution
Date after taking into account all distributions to be made on such Distribution
Date (except for any distributions of related Over-collateralization Reduction
Amounts as described in this sentence) and (b) the Specified Over-collateralized
Amount for such Pool to the extent of principal available for distribution.
"Over-collateralized Amount": As of any Distribution Date and
any Pool, the difference, if any, between (a) the sum of (i) the aggregate
Principal Balances of the Mortgage Loans in such Pool as of the close of
business on the last day of the related Due Period and (ii) the amount on
deposit in the related Pre-Funding Account as of the close of business on the
last day of the immediately preceding Due Period and (b) the aggregate Note
Principal Balance of the related Class as of such Distribution Date (after
taking into account the payment of the Principal Distribution Amount for such
Pool on such Distribution Date, except for any portion thereof related to an
Insured Payment); provided, however, that such amount shall not be less than
zero.
"Overfunded Interest Amount": With respect to each Pool and
each Subsequent Transfer Date occurring in __________, the excess of (i) the
amount on deposit in the related Capitalized Interest Account, over (ii)
two-months' interest calculated at the related Adjusted Note Rate on the amount
on deposit in the related Pre-Funding Account (net of any Pre-Funding Earnings
for such Pre-Funding Account) immediately following such Subsequent Transfer
Date (disregarding any amount applied from such Pre-Funding Account to a
Subsequent Mortgage Loan that does not have a Due Date in __________).
With respect to each Pool and each Subsequent Transfer Date
occurring in __________, the excess of (i) the amount on deposit in the related
Capitalized Interest Account, over (ii) one-month's interest calculated at the
related Adjusted Note Rate on the amount on deposit in the related Pre-Funding
Account (net of any Pre-Funding Earnings for such Pre-Funding Account)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the such Pre-Funding Account to a Subsequent Mortgage Loan that
does not have a Due Date in ___________).
"Owner-Occupied Mortgaged Property": A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary residence at
App.A-21
<PAGE>
the origination of the Mortgage Loan, and (b) the has no actual knowledge that
such Residential Dwelling is not so occupied.
"Ownership Interest": As to any Note, any ownership or
security interest in such Note, including any interest in such Note as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
"Owner Trustee": First Union Trust Company, National
Association, a national banking association, not in its individual capacity, but
solely as owner trustee under the Trust Agreement, and any successor owner
trustee thereunder.
"Owner Trustee Fee": As defined in Section 8.01 of the Trust
Agreement.
"Paying Agent": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Trust pursuant to Section
3.03 of the Indenture to pay the principal of, or interest on, any Notes on
behalf of the Trust, which agent, if not the Indenture Trustee, shall have
signed an instrument agreeing to be bound by the terms of the Indenture
applicable to such Paying Agent.
"Percentage Interest": With respect to a Note of any Class,
the portion evidenced by such Note, expressed as a percentage rounded to four
decimal places, equal to a fraction the numerator of which is the denomination
represented by original principal balance of such Note and the denominator of
which is the Original Note Principal Balance of such Class. With respect to a
Trust Certificate, the portion evidenced thereby as stated on the face of such
Trust Certificate.
"Periodic Advance": The aggregate of the advances required to
be made by the Servicer on any Servicer Distribution Date pursuant to Section
5.18 of the Sale and Servicing Agreement, the amount of any such advances being
equal to the sum of:
(q) with respect to each Mortgage Loan that was Delinquent as
of the close of business on the last day of the Due Period preceding
the related Servicer Distribution Date, the product of (i) the
Principal Balance of such Mortgage Loan and (ii) one-twelfth of the
Mortgage Interest Rate for such Mortgage Loan net of the Servicing Fee,
and
(r) 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 (i) interest on the Principal Balance
of such REO Mortgage Loan at the Mortgage Interest Rate for such REO
Mortgage Loan net of the Servicing Fee, for the most recently ended Due
Period over (ii) the net proceeds from the REO Property transferred to
the Distribution Account for such Distribution Date;
provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
App.A-22
<PAGE>
"Permitted Investments": As used herein, Permitted Investments
shall include the following:
(a) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(b) repurchase agreements on obligations specified in clause
(a) maturing not more than three months from the date of acquisition
thereof, provided that the unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated in one of the two
highest rating categories by the Rating Agencies;
(c) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any U.S.
depository institution or trust company, incorporated under the laws of
the United States or any state; provided, that the debt obligations of
such depository institution or trust company at the date of acquisition
thereof have been rated in one of the two highest rating categories by
the Rating Agencies;
(d) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated in the highest short-term rating category by the Rating
Agencies;
(e) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as
any such fund is rated in the highest rating category by Moody's or
S&P;
provided, 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.
"Person": 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": A pension or benefit plan or individual retirement
arrangement that is subject to ERISA or Section 4975 of the Code.
"Pool": Pool I or Pool II, as the case may be.
"Pool I": The pool of Mortgage Loans held by the Trust, as a
separate sub-trust, which secure the obligations of the Trust with respect to
the Class A-1 Notes, as reflected on the Mortgage Loan Schedule.
App.A-23
<PAGE>
"Pool I Trust Certificate": A certificate evidencing the
beneficial interest of a Trust Certificateholder in the sub-trust of the Trust
consisting of the Mortgage Loans in Pool I, substantially in the form of Exhibit
A to the Trust Agreement.
"Pool II": The pool of Mortgage Loans held by the Trust, as a
separate sub-trust, which secure the obligations of the Trust with respect to
the Class A-2 Notes, as reflected on the Mortgage Loan Schedule.
"Pool II Trust Certificate": A certificate evidencing the
beneficial interest of a Trust Certificateholder in the sub-trust of the Trust
consisting of the Mortgage Loans in Pool II, substantially in the form of
Exhibit A to the Trust Agreement.
"Predecessor Notes": With respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.07 of the Indenture in lieu of
a lost, destroyed or stolen Note shall be deemed to evidence the same debt as
the lost, destroyed or stolen Note.
"Preference Amount": Any amounts distributed in respect of the
Notes which are recovered from any Holder of a Note as a voidable preference by
a trustee in bankruptcy pursuant to the Bankruptcy Code or other similar law in
accordance with a final, nonappealable order of a court having competent
jurisdiction and which have not theretofore been repaid to such Holder.
"Preference Claim": As defined in Section 8.03(f) of the
Indenture.
"Pre-Funding Account": Each of the Pre-Funding Accounts
established in accordance with Section 8.01(b) of the Indenture and maintained
by the Indenture Trustee.
"Pre-Funding Amount": With respect to either Pool and any date
of determination, the amount on deposit in the related Pre-Funding Account.
"Pre-Funding Earnings": With respect to either Pool and any
date of determination, the actual investment earnings realized on amounts
deposited in the related Pre-Funding Account.
"Pre-Funding Period": With respect to either Pre-Funding
Account, the period commencing on the Closing Date and ending on the earliest to
occur of (i) the date on which the amount on deposit in such Pre-Funding Account
(exclusive of any investment earnings) is less than $100,000, (ii) the date on
which any Event of Default or Servicer Event Default occurs and (iii) the close
of business on _________.
"Premium Amount": The product of the Premium Percentage and
the aggregate outstanding Note Principal Balance for the related Class on the
related Distribution Date, but prior to any distributions on such Distribution
Date.
"Premium Percentage": The rate at which the "Premium" is
determined, as described in the letter dated ___________ between the Servicer
and the Note Insurer.
App.A-24
<PAGE>
"Premium Supplement Event": Means any Event of Default,
Servicer Event of Default or an "Event of Default" as defined in the Insurance
Agreement.
"Prepayment Assumption": A constant prepayment rate of ____%
HEP, used solely for determining the accrual of original issue discount and
market discount on the Notes for federal income tax purposes.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate
as may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus
(ii) the Servicing Fee Rate over (b) the amount of interest actually remitted by
the Mortgagor in connection with such Principal Prepayment less the Servicing
Fee for such Mortgage Loan in such month.
"Principal Balance": As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such date of determination. The Principal Balance of a Mortgage Loan which
becomes a Liquidated Mortgage Loan on or prior to such date of determination
shall be zero.
"Principal Distribution Amount": For any Distribution Date and
any Pool of Mortgage Loans will be the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date,
of (A) the Available Funds for such Pool and (B) any Insured Payment
with respect to the related Class of Notes plus, if the Note Insurer
shall so elect in its sole discretion, an amount of principal
(including Liquidated Loan Losses) that would have been payable
pursuant to clauses (b)(i) through (ix) below if sufficient funds were
made available to the Indenture Trustee, in accordance with the terms
of the Note Insurance Policy, over (ii) the sum of (w) the Interest
Distribution Amount for such Pool, (x) the Indenture Trustee Fee
allocable to such Pool and (y) the amount due the Note Insurer on such
Distribution Date pursuant to Section 8.02(ii) of the Indenture in
respect to the related Class of Notes; and
(b) the sum, without duplication, of:
(i) all principal in respect of the Mortgage Loans in such
Pool actually collected during the related Due Period;
(ii) the principal balance of each Mortgage Loan that either
was repurchased by the or purchased by the Servicer on the
related Servicer Distribution Date from such Pool, to the
extent such principal balance is actually received by the
Indenture Trustee;
(iii) any Substitution Adjustments delivered by the on the
related Servicer Distribution Date in connection with a
substitution of a Mortgage Loan
App.A-25
<PAGE>
in such Pool, to the extent such Substitution Adjustments
are actually received by the Indenture Trustee;
(iv) the Net Liquidation Proceeds actually collected by the
Servicer with respect to Mortgage Loans in such Pool during
the related Due Period (to the extent such Net Liquidation
Proceeds relate to principal);
(v) with respect to the _________ or __________ Distribution
Dates, moneys released from the related Pre-Funding Account,
if any;
(vi) the proceeds received by the Indenture Trustee upon the
exercise by the Servicer of the optional redemption of the
related Class of Notes pursuant to Section 10.01 of the
Indenture (to the extent such proceeds relate to principal);
(vii) the amount of any Over-collateralization Deficit with
respect to such Pool for such Distribution Date;
(viii) the proceeds received by the Indenture Trustee on any
termination of the Trust pursuant to Section 10.01 of the
Indenture (to the extent such proceeds relate to principal)
allocable to such Pool;
(ix) the amount of any Over-collateralization Increase
Amount with respect to such Pool for such Distribution Date,
to the extent of any Remaining Excess Cashflow for such Pool
available for such purpose;
(x) if the Note Insurer shall so elect in its sole
discretion, an amount of principal (including Liquidated Loan
Losses) that would have been payable pursuant to clauses (i)
through (ix) above if sufficient funds were made available to
the Indenture Trustee in accordance with the terms of the Note
Insurance Policy;
minus
_____
(xi) the amount of any Over-collateralization Reduction
Amount for such Pool for such Distribution Date.
In no event will the Principal Distribution Amount for a Pool
with respect to any Distribution Date be (x) less than zero or (y) greater than
the then aggregate outstanding Note Principal Balance of the related Class of
Notes.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
App.A-26
<PAGE>
"Prospectus Supplement": The Prospectus Supplement dated
_________ relating to the Notes 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).
"Qualified Appraiser": An appraiser, duly appointed by the ,
who had no interest, direct or indirect, in the Mortgaged Property or in any
loan made on the security thereof, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
"Qualified Substitute Mortgage Loan": A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section
2.06(b) or 4.02(b) of the Sale and Servicing Agreement, which (a) has or have an
interest rate at least equal to those applicable to the Deleted Mortgage Loan,
(b) relates or relate to a detached one-family residence or to the same type of
Residential Dwelling or Business Purpose Property, or any combination thereof,
as the Deleted Mortgage Loan and in each case has or have the same or a better
lien priority as the Deleted Mortgage Loan and has or have the same occupancy
status as the Deleted Mortgage Loan or is or are Owner-Occupied Mortgaged
Property(ies), (c) matures or mature no later than (and not more than one year
earlier than) the Deleted Mortgage Loan, (d) has or have a Loan-to-Value Ratio
or Loan-to-Value Ratios at the time of such substitution no higher than the
Loan-to-Value of the Deleted Mortgage Loan, (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, (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 Principal Balance of the Deleted
Mortgage Loan as of such date, and (g) complies or comply as of the date of
substitution with each representation and warranty set forth in Sections 3.01
and 3.02 of the Loan Sale Agreement.
"Rating Agency": S&P or Moody's.
"Rating Agency Condition": Means, with respect to any action
to which a Rating Agency Condition applies, that each Rating Agency shall have
been given ten (10) days (or such shorter period as is acceptable to each Rating
Agency) prior notice thereof and that each of the Rating Agencies shall have
notified the Indenture Trustee, the Servicer, the Depositor, the Note Insurer
and the Trust in writing that such action will not result in a reduction or
withdrawal of the then current "implied" rating of the Notes that it maintains
without taking into account the Note Insurance Policy.
"Record Date": With respect to the Notes, the last Business
Day of the month immediately preceding a month in which a Distribution Date
occurs.
"Redemption Price": The Termination Price or the Note
Termination Price, as applicable.
"Redemption Date": The Distribution Date, if any, on which (i)
the Indenture is terminated and all of the Notes are redeemed pursuant to
Article X of the Indenture, which date
App.A-27
<PAGE>
may occur on or after the Clean-Up Call Date, or (ii) a Class of Notes is
redeemed pursuant to Article X of the Indenture, which date may occur on or
after the related Note Clean-Up Call Date.
"Reimbursement Amount": With respect to any Distribution Date
and any Pool of Mortgage Loans, equals the sum of (a)(i) all Insured Payments
previously received by the Indenture Trustee and all Preference Amounts
previously paid by the Note Insurer and in each case not previously repaid to
the Note Insurer pursuant to Section 8.02(ii) of the Indenture, plus (ii)
interest accrued on each such Insured Payment and Preference Amounts not
previously repaid calculated at the Late Payment Rate from the date the
Indenture Trustee received the related Insured Payment or Preference Amounts
paid by the Note Insurer, and (b)(i) any amounts then due and owing to the Note
Insurer under the Insurance Agreement (excluding the Premium Amount due on such
Distribution Date), as certified to the Indenture Trustee by the Note Insurer
plus (ii) interest on such amounts at the rate specified in the Insurance
Agreement. The Note Insurer shall notify the Indenture Trustee and the Servicer
of the amount of any Reimbursement Amount.
"Remaining Excess Cashflow": For a Distribution Date and a
Pool of Mortgage Loans, the Net Monthly Excess Cashflow with respect to such
Pool remaining, if any, after payment of (i) any Net Mortgage Loan Interest
Shortfall Amounts for such Pool and such Distribution Date, and (ii) the
Shortfall Amount with respect to the other Pool of Mortgage Loans.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REO Disposition": 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": 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.
"REO Proceeds": Proceeds received in respect of any REO
Mortgage Loan (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"REO Property": A Mortgaged Property acquired by the Servicer
in the name of the Indenture Trustee on behalf of the Noteholders through
foreclosure or deed-in-lieu of foreclosure.
"Request for Release": A request for release in substantially
the form attached as Exhibit F of the Sale and Servicing Agreement.
"Reserve Payment Amount": With respect to any Distribution
Date and any Class of Notes, the amount necessary for the funds on deposit in
the related Cross-collateralization Reserve Account to equal the Specified
Reserve Amount.
App.A-28
<PAGE>
"Residential Dwelling": A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development or a
townhouse.
"Responsible Officer": When used with respect to the Indenture
Trustee or the Owner Trustee, any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Second Vice
President, Senior Trust Officer, Trust Officer, Assistant Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Indenture
Trustee or the Owner 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 or
the Servicer, the president or any vice president, assistant vice president, or
any secretary or assistant secretary.
"Rolling Six Month Delinquency Rate": For any Distribution
Date, the fraction, expressed as a percentage, equal to the average of the
Delinquency Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first
six (6) Distribution Dates, as the case may be) immediately preceding Due
Periods.
"Sale": The meaning specified in Section 5.17 of the
Indenture.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement, dated as of ____________, among the Trust, the Servicer, the
Depositor, the Collateral Agent and the Indenture Trustee, providing for, among
other things, the sale of the Mortgage Loans from the Depositor to the Trust and
the servicing of the Mortgage Loans.
"Securities Act": Means the Securities Act of 1933, as
amended.
"Servicer": __________________, a __________ corporation, or
any successor appointed as herein provided.
"Servicer Distribution Date": With respect to any Distribution
Date, the ____ day of the month in which such Distribution Date occurs, or if
such ____ day is not a Business Day, the Business Day preceding such ____ day.
"Servicer Event of Default": As defined in Section 7.01 of the
Sale and Servicing Agreement.
"Servicer Extension Notice": Has the meaning set forth in
Section 8.04 of the Sale and Servicing Agreement.
"Servicer Remittance Amount": With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to the Sale and Servicing Agreement
but excluding the following:
App.A-29
<PAGE>
(f) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously
made an unreimbursed Periodic Advance;
(g) amounts received on a particular Mortgage Loan with
respect to which the Servicer has previously made an unreimbursed
Servicing Advance, to the extent of such unreimbursed Servicing
Advance;
(h) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(i) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(j) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(k) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(l) certain other amounts which are reimbursable to the
Servicer, as provided in this Sale and Servicing Agreement; and
(m) Net Foreclosure Profits.
"Servicer Remittance Report": The monthly report prepared by
the Servicer and delivered to the parties specified in Section 5.16(a) of the
Sale and Servicing Agreement.
"Servicing Advances": All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.06 of the Sale and Servicing Agreement, all of which
reasonable and customary out-of-pocket costs and expenses are reimbursable to
the Servicer to the extent provided in Sections 5.03 and 5.06 of the Sale and
Servicing Agreement.
"Servicing Compensation": The Servicing Fee and other amounts
to which the Servicer is entitled pursuant to Section 5.08 of the Sale and
Servicing Agreement.
"Servicing Fee": As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) Servicing Fee Rate, and (b) the Principal Balance thereof. Such fee shall
be calculated and payable monthly only from the amounts received in respect of
interest on such Mortgage Loan and shall be computed on the basis of the same
Principal Balance 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.
App.A-30
<PAGE>
"Servicing Fee Rate": _____% per annum
"Servicing Officer": 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 Indenture Trustee, the Collateral Agent and the Note Insurer by the
Servicer, as such list may from time to time be amended.
"Shortfall Amount": With respect to any Distribution Date and
any Class of Notes, an amount, not less than zero, equal to the excess, if any,
of (A) the sum of (x) the amounts specified in clause (a)(ii) of the definition
of the Principal Distribution Amount for such Class and (y) the amount specified
in clause (b)(vii) of the definition of the Principal Distribution Amount for
such Class and (z) any shortfall in the amount distributed to the Holders of
such Class in respect of the Net Mortgage Loan Interest Shortfall Amount for
such Class and such Distribution Date over (B) the Available Funds for such
Class and such Distribution Date, without taking into effect any Insured Payment
or Shortfall Amount and prior to the application of the amounts described in
Section 8.02 of the Indenture.
"Special Advance": As defined in Section 5.18(b) of the Sale
and Servicing Agreement.
"Specified Over-collateralized Amount": Means with respect to
any Distribution Date and any Pool:
(a) With respect to a Distribution Date occurring on or prior
to the Stepdown Date and after the Stepdown Date, if the has given five days
written notice of its election not to "step down" as described in clause (b)
below to the Indenture Trustee and the Note Insurer, the amount which is equal
to ____% of the Maximum Collateral Amount for such Pool;
(b) With respect to a Distribution Date after the Stepdown
Date unless the has given five (5) days written notice of its election not to
"step down" as described in this clause to the Indenture Trustee and the Note
Insurer, (i) if the Stepdown Requirement is satisfied, the lesser of (x) the
amount equal to _____% of the Maximum Collateral Amount for such Pool and (y)
the greater of (A) the amount equal to _____% of the then outstanding aggregate
Principal Balance of the Mortgage Loans in the related Pool of Mortgage Loans or
(B) ____% of the Maximum Collateral Amount for such Pool or (ii) if the Stepdown
Requirement is not satisfied, the amount which is equal to _____% of the Maximum
Collateral Amount for such Pool;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Over-collateralized Amount
will be unlimited during the period that such Mortgage Portfolio Performance
Test is not satisfied.
"Specified Reserve Amount": Means, with respect to any Pool
and any Distribution Date, the excess, if any, of (x) the Specified
Over-collateralized Amount for such Pool and such Distribution Date, over (y)
the Over-collateralized Amount for such Pool and such Distribution Date.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto
and if such corporation no longer for
App.A-31
<PAGE>
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 Note Insurer.
"Startup Day": The day designated as such pursuant to Section
2.07(a) of the Trust Agreement.
"Step Down Date": The Distribution Date occurring in ________.
"Step Down Requirement": The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination either
(i) (x) the Rolling Six Month Delinquency Rate is less than _____%, (y) the
Cumulative Loss Test is satisfied and (z) the Twelve Month Loss Amount is not
greater than or equal to _____% of the Pool Principal Balance as of the first
day of the twelfth preceding calendar month or (ii) the Note Insurer, by notice
to each of the parties hereto in accordance with Section 10.06 of the Sale and
Servicing Agreement, expressly waives in writing compliance with the foregoing
tests for such Distribution Date.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loans, the close of business on the last day of the calendar month
preceding the month in which the Subsequent Transfer Date for such Subsequent
Mortgage Loans occurred.
"Subsequent Contribution Agreement": Any Subsequent
Contribution Agreement, between the Depositor and the Trust, in the form of
Exhibit G to the Sale and Servicing Agreement, relating to the contribution to
the Trust of Subsequent Mortgage Loans.
"Subsequent Mortgage Loans": The Mortgage Loans hereafter
purchased by the Trust and pledged to the Indenture Trustee with funds on
deposit in either Pre-Funding Account pursuant to Section 2.14 of the Indenture.
"Subsequent Pledge Agreement": Any Subsequent Pledge
Agreement, between the Trust and the Indenture Trustee, in the form of Exhibit B
to the Indenture, relating to the pledge to the Indenture Trustee, on behalf of
the Noteholders and the Note Insurer, of Subsequent Mortgage Loans.
"Subsequent Transfer": The purchase by the Trust and pledge to
the Indenture Trustee of the Subsequent Mortgage Loans.
"Subsequent Transfer Agreement": Any Subsequent Transfer
Agreement, among the Originators, the and the Depositor, in the form of the
Exhibit A to the Loan Sale Agreement, relating to the transfer to the Depositor
of any Subsequent Mortgage Loans.
"Subsequent Transfer Date": The date on which Subsequent
Mortgage Loans are purchased by the Trust with funds in either Pre-Funding
Account, such date occurring before the end of either Pre-Funding Period.
"Subservicers": _______________________, a ____________
corporation, or its successor in interest and _______________, a ________
corporation, or its successor in interest.
App.A-32
<PAGE>
"Subservicing Agreement": The agreement between the Servicer
and the Subservicers relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13 of the Sale and Servicing Agreement,
a copy of which shall be delivered, along with any modifications thereto, to the
Indenture Trustee and the Note Insurer.
"Substitution Adjustment": As to any date on which a
substitution occurs pursuant to Sections 2.06(b) or 4.02(b) of the Sale and
Servicing Agreement, 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 Principal Balances of the
related Deleted Mortgage Loans together with 30-days' interest thereon at the
Mortgage Interest Rate.
"Termination Price": The sum of (i) 100% of the Aggregate
Principal Balance of each outstanding Mortgage Loan and (ii) the greater of (A)
the aggregate amount of accrued and unpaid interest on the Mortgage Loans
through the related Due Period and (B) thirty (30) days' interest thereon,
computed at a rate equal to the related Mortgage Interest Rate, in each case net
of the Servicing Fee, and (iii) any unpaid amount due the Note Insurer.
"Trust": _________________, a _________ statutory business
trust.
"Trust Agreement": The Trust Agreement, dated as of
___________, among the , the Depositor and the Owner Trustee, relating to the
establishment of the Trust.
"Trust Certificate": Any one of the Pool I Trust Certificates
or the Pool II Trust Certificates.
"Trust Certificateholder" or "Holder": A Person in whose name
a Trust Certificate is registered.
"Trust Estate": All money, instruments and other property
subject or intended to be subject to the lien of the Indenture, for the benefit
of the Noteholders and the Note Insurer, as of any particular time, including,
without limitation, all property and interests, including all proceeds thereof,
Granted to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, pursuant to the Granting Clauses of the Indenture. The Trust
Estate shall consist of two separate sub-trusts comprised of Pool I and Pool II.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of
1939, as it may be amended from time to time.
"Trust Order" and "Trust Request": A written order or request
of the Trust signed on behalf of the Trust by an Authorized Officer of the Owner
Trustee, at the direction of the related Majority Certificateholders and
delivered to the Indenture Trustee or the Authenticating Agent, as applicable.
"Twelve Month Loss Amount": With respect to any Distribution
Date, an amount equal to the aggregate of all Liquidated Loan Losses on the
Mortgage Loans which became Liquidated Mortgage Loans during the twelve (12)
preceding Due Periods.
App.A-33
<PAGE>
"Underwriter": Prudential Securities Incorporated.
"Underwriting Guidelines": The underwriting guidelines of the
Originators as approved by the Note Insurer and the Depositor.
"United States Person": 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 or a trust if a court within the United States can exercise
primary jurisdiction over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
App.A-34
EXHIBIT 4.3
FORM OF TRUST AGREEMENT
TRUST AGREEMENT
dated as of _____________
by and between
_______________________________
as Depositor
and
______________________________,
as Owner Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS 1
Section 1.01. Capitalized Terms........................................1
Section 1.02. Other Definitional Provisions............................5
ARTICLE II ORGANIZATION........................................................6
Section 2.01. Name.....................................................6
Section 2.02. Office...................................................6
Section 2.03. Purposes and Powers......................................6
Section 2.04. Appointment of Owner Trustee.............................7
Section 2.05. Initial Capital Contribution of Owner Trust Estate.......7
Section 2.06. Declaration of Trust.....................................7
Section 2.07. Liability of the Holders.................................7
Section 2.08. Title to Trust Property..................................7
Section 2.09. Situs of Trust...........................................8
Section 2.10. Representations and Warranties of the Depositor;
Covenant of the Certificateholders.....................8
ARTICLE III CERTIFICATES AND TRANSFER OF INTERESTS.............................9
Section 3.01. Initial Ownership........................................9
Section 3.02. The Certificates.........................................9
Section 3.03. Execution, Authentication and Delivery of Trust
Certificates..........................................10
Section 3.04. Registration of Transfer and Exchange of Trust
Certificates..........................................10
Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates.......11
Section 3.06. Persons Deemed Owners...................................11
Section 3.07. Access to List of Holders' Names and Addresses..........11
Section 3.08. Maintenance of Office or Agency.........................12
Section 3.09. Restrictions on Transfer of Certificates................12
ARTICLE IV ACTIONS BY OWNER TRUSTEE...........................................14
Section 4.01. Prior Notice to Holders with Respect to Certain
Matters...............................................14
Section 4.02. Action by Holders with Respect to Bankruptcy............16
Section 4.03. Restrictions on Holders' Power..........................16
Section 4.04. Majority Control........................................16
ARTICLE V TAX PROVISIONS; CERTAIN DUTIES......................................16
Section 5.01. Federal Income Tax Provisions...........................16
Section 5.02. Withholding Taxes.......................................19
Section 5.03. Accounting and Records to the Noteholders, Owners,
the Internal Revenue Service and Others...............20
Section 5.04. Signature on Returns....................................20
i
<PAGE>
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE..............................20
Section 6.01. General Authority.......................................20
Section 6.02. General Duties..........................................21
Section 6.03. Action upon Instruction.................................21
Section 6.04. No Duties Except as Specified in this Agreement,
the Basic Documents or any Instructions...............22
Section 6.05. No Action Except Under Specified Documents or
Instructions..........................................22
Section 6.06. Restrictions............................................23
ARTICLE VII CONCERNING THE OWNER TRUSTEE......................................23
Section 7.01. Acceptance of Trusts and Duties.........................23
Section 7.02. Furnishing of Documents.................................24
Section 7.03. Representations and Warranties..........................25
Section 7.04. Reliance; Advice of Counsel.............................25
Section 7.05. Not Acting in Individual Capacity.......................26
Section 7.06. Owner Trustee Not Liable for Certificates or Mortgage
Loans.................................................26
Section 7.07. Owner Trustee May Own Certificates and Notes............26
Section 7.08. Licenses................................................26
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE....................................26
Section 8.01. Owner Trustee's Fees and Expenses.......................26
Section 8.02. Indemnification.........................................27
Section 8.03. Payments to the Owner Trustee...........................27
ARTICLE IX TERMINATION OF TRUST AGREEMENT.....................................28
Section 9.01. Termination of Trust Agreement..........................28
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES..............29
Section 10.01. Eligibility Requirements for Owner Trustee..............29
Section 10.02. Resignation or Removal of Owner Trustee.................29
Section 10.03. Successor Owner Trustee.................................30
Section 10.04. Merger or Consolidation of Owner Trustee................30
Section 10.05. Appointment of Co-Trustee or Separate Trustee...........30
ARTICLE XI MISCELLANEOUS......................................................32
Section 11.01. Supplements and Amendments..............................32
Section 11.02. No Legal Title to Owner Trust Estate in Holders.........33
Section 11.03. Limitations on Rights of Others.........................33
Section 11.04. Notices.................................................33
Section 11.05. Severability............................................33
Section 11.06. Separate Counterparts...................................34
Section 11.07. Successors and Assigns..................................34
Section 11.08. No Petition.............................................34
Section 11.09. No Recourse.............................................34
ii
<PAGE>
Section 11.10. Headings................................................34
Section 11.11. GOVERNING LAW...........................................34
Section 11.12. Grant of Certificateholder Rights to Note Insurer.......34
Section 11.13. Third-Party Beneficiary.................................35
Section 11.14. Suspension and Termination of Note Insurer's Rights.....35
Section 11.15. Servicer................................................36
EXHIBITS
EXHIBIT A Form of Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Investment Letter
iii
<PAGE>
This TRUST AGREEMENT, dated as of ________________, by and
among _________________________________________________, as Depositor (the
"Depositor"), and _________________________________________________, a
________________ banking association, as owner trustee (the "Owner Trustee").
ARTICLE I
DEFINITIONS
Section 1.01. Capitalized Terms. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as may be amended
and supplemented from time to time.
"Annual Tax Reports" shall have the meaning assigned thereto
in Section 5.01(k).
"Authorized Officer" shall have the meaning assigned thereto
in Appendix I to the Indenture.
"Basic Documents" shall mean this Agreement, the Sale and
Servicing Agreement, the Loan Sale Agreement, the Indenture and the Insurance
Agreement.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day that is either a legal holiday or a day on which the Note
Insurer or banking institutions in the State of New York, the State of Delaware,
or the state in which the Indenture Trustee's office from which payments will be
made to Certificateholders, are authorized or obligated by law, regulation or
executive order to be closed.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended
from time to time.
"Capital Account" shall have the meaning assigned thereto in
Section 5.01(a).
"Certificates" shall mean the Pool I Certificates and the Pool
II Certificates.
"Certificate of Trust" shall mean the Certificate of Trust, in
the form of Exhibit B, to be filed for the Trust pursuant to Section 3810(a) of
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean
the register mentioned and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose
name a Certificate or Certificates is registered.
"Class" shall mean either the Class A-1 Notes or the Class A-2
Notes.
<PAGE>
"Class A-1 Notes" shall mean the__________________________,
Mortgage Backed Notes, Series ______, Class A-1.
"Class A-2 Notes" shall mean the _________________________,
Mortgage Backed Notes, Series ______, Class A-2.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and, where appropriate in context, Treasury Regulations promulgated
thereunder.
"Collateral Agent" shall mean ________________________, a
________ banking association.
"Collection Account" shall have the meaning assigned thereto
in Appendix I to the Indenture.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
_____________________ __________________________, Attention: Corporate Trust
Administration; or at such other address in the State of Delaware as the Owner
Trustee may designate by notice to the Certificateholders and the Depositor, or
the principal corporate trust office of any successor Owner Trustee (the address
(which shall be in the State of Delaware) of which the successor owner trustee
will notify the Certificateholders and the Depositor).
"Depositor" shall mean ___________________________________, a
________ corporation.
"Distribution Date" shall mean the twenty-fifth day of each
month or, if such twenty-fifth day is not a Business Day, the next succeeding
Business Day, commencing ______________________.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Expenses" shall have the meaning assigned to such term in
Section 8.02.
"Holder Nonrecourse Debt Minimum Gain" shall have the meaning
set forth for "partner nonrecourse debt minimum gain" in Treasury Regulations
Section 1.704-2(i)(2). A Holder's share of Holder Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5).
"Indenture" shall mean the Indenture, dated as of
_____________, by and between the Trust and the Indenture Trustee.
"Indenture Trustee" means _____________________, a
____________ banking corporation, as Indenture Trustee under the Indenture.
2
<PAGE>
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of _______________, among the Note Insurer, the Trust, the
Depositor, the Servicer and the Originators.
"Investment Letter" shall have the meaning assigned to such
term in Section 3.04.
"Loan Sale Agreement" means the Loan Sale Agreement, dated as
of _____________, among the Originators and the Depositor.
"Non-U.S. Person" shall mean an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate that is subject to U.S. federal income tax regardless of the source of
its income or a trust if (i) a court in the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or more
United States fiduciaries have the authority to control all substantial
decisions of the trust.
"Note Insurance Policy" shall mean the financial guaranty
insurance policy issued by the Note Insurer for the benefit of the holders of
the Notes.
"Note Insurer" shall mean __________________________, a
___________ financial guaranty insurance company.
"Note Insurer Default" shall have the meaning assigned to such
term in the Indenture.
"Notes" shall mean the Class A-1 Notes and the Class A-2
Notes.
"Originators" means__________________________________________.
"Ownership Interest" means, with respect 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 Trust Estate" shall mean the Trust Estate (as defined
in Appendix I to the Indenture), including the contribution of $1 referred to in
Section 2.05 hereof.
"Owner Trustee" shall mean ___________________________, a
________ banking association, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.
"Percentage Interest" shall mean with respect to any
Certificate, the percentage portion of all of the Trust Interest evidenced
thereby as stated on the face of such Certificate.
"Pool I Certificate" shall mean a certificate evidencing the
beneficial interest of a Holder in the sub-trust of the Trust consisting of the
Pool I Mortgage Loans, substantially in the form attached hereto as Exhibit A.
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"Pool II Certificate" shall mean a certificate evidencing the
beneficial interest of a Holder in the sub-trust of the Trust consisting of the
Pool II Mortgage Loans, substantially in the form attached hereto as Exhibit A.
"Prospective Holder" shall have the meaning set forth in
Section 3.09(a).
"Rating Agency Condition" means, with respect to any action to
which a Rating Agency Condition applies, that each Rating Agency shall have been
given ten (10) days (or such shorter period as is acceptable to each Rating
Agency) prior notice thereof and that each of the Rating Agencies shall have
notified the Indenture Trustee, the Depositor, the Servicer, the Note Insurer,
the Owner Trustee and the Trust in writing that such action will not result in a
reduction or withdrawal of the then current "implied" rating of the Notes that
it maintains without taking into account the Note Insurance Policy.
"Record Date" shall mean, with respect to the Certificates and
any Distribution Date, the last Business Day of the month immediately preceding
the month in which such Distribution Date occurs.
"REMIC" means a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement, dated as of ______________, among the Depositor, the Trust,
the Indenture Trustee, the Collateral Agent and the Servicer.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Servicer" means ____________________________________________.
"Taxable Year" shall have the meaning assigned thereto in
Section 5.01(j).
"Tax Matters Partner" shall have the meaning assigned thereto
in Section 5.01(l).
"Transfer" means any direct or indirect transfer, sale,
pledge, hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Treasury Regulations" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein
to specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the _______________________________________
established by this Agreement.
"Trust Interest" shall mean the right to receive, on each
Distribution Date, distributions of the amounts, if any, to the Holders of the
Certificates pursuant to Section 8.02 of the Indenture. Holders of the Pool I
Certificates will be entitled to distributions in respect of the sub-trust of
the Trust consisting of the Pool I Mortgage Loans. Holders of the Pool II
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Certificates will be entitled to distributions in respect of the sub-trust of
the Trust consisting of the Pool II Mortgage Loans.
"Trust Minimum Gain" shall have the meaning set forth for
"partnership minimum gain" in Treasury Regulations 1.704-2(b)(2) and 1.704-2(d).
In accordance with Treasury Regulations Section 1.704-2(d), the amount of Trust
Minimum Gain is determined by first computing, for each nonrecourse liability of
the Trust, any gain the Trust would realize if it disposed of the property
subject to that liability for no consideration other than full satisfaction of
the liability, and then aggregating the separately computed gains. A Holder's
share of Trust Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g)(1).
"Loan Sale Agreement" means the Depositor's Agreement, dated
as of ____________, among the Originators and the Depositor.
Section 1.02. Other Definitional Provisions.(a) Capitalized
terms used herein and not otherwise defined herein have the meanings assigned to
them in Appendix I to the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
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ARTICLE II
ORGANIZATION
Section 2.01. Name. The Trust created hereby shall be known as
"__________________________ _______," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued on behalf of the Trust.
Section 2.02. Office. The office of the Trust shall be in care
of the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the
Certificateholders, Indenture Trustee, the Note Insurer and the Depositor.
Section 2.03. Purposes and Powers. The purpose of the Trust is
to engage in the following activities:
(a) to issue the Notes pursuant to the Indenture and to sell
such Notes;
(b) with the proceeds of the sale of the Notes, to pay the
organizational, startup and transactional expenses of the Trust and to
purchase the Mortgage Loans to be included in the Owner Trust Estate
from the Depositor with the balance of such funds pursuant to the Sale
and Servicing Agreement;
(c) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate pursuant to the Indenture and to hold, manage
and distribute to the Certificateholders any portion of the Owner Trust
Estate released from the lien of, and remitted to the Trust pursuant
to, the Indenture;
(d) to enter into and perform its obligations under the Basic
Documents to which it is or is to be a party;
(e) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith;
(f) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
and payments to the Holders and the Noteholders; and
(g) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial
Certificateholders to engage in the foregoing activities. The Trust shall not
engage in any activity other than in connection with the foregoing or other than
as required or authorized by the terms of this Agreement or the Basic Documents.
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Section 2.04. Appointment of Owner Trustee. The Depositor
hereby appoints the Owner Trustee as trustee of the Trust effective as of the
date hereof, to have all the rights, powers and duties set forth herein.
Section 2.05. Initial Capital Contribution of Owner Trust
Estate. The Depositor hereby sells, assigns, transfers, conveys and sets over to
the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the initial Owner Trust
Estate. The Certificateholders shall pay organizational expenses of the Trust as
they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.
Concurrently with the execution of this Agreement, the Trust will enter into the
Sale and Servicing Agreement pursuant to which it will purchase the Mortgage
Loans which comprise the remainder of the Owner Trust Estate.
Section 2.06. Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the Holders, subject
to the obligations of the Trust under the Basic Documents. Each Pool of Mortgage
Loans shall constitute a separate sub-trust of the Trust.
It is the intention of the parties hereto that the Trust
constitute a business trust under the Business Trust Statute and that this
Agreement constitute the governing instrument of such business trust. The
parties agree that no election will be made to treat the sub-trusts of the Trust
consisting of the Pool I Mortgage Loans or the Pool II Mortgage Loans or the
portion of the Owner Trust Estate consisting of the Pool I Mortgage Loans or the
Pool II Mortgage Loans as a REMIC. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, after issuance of the
Certificates, the Trust shall be treated as a partnership, with the assets of
the partnership being the Mortgage Loans and other assets held by the Trust, the
partners of the partnership being the Holders of the Certificates, and the Notes
being non-recourse debt of the partnership (or, if there is only one
Certificateholder, that the Trust shall be disregarded as an entity separate
from such Holder, with the assets held by the Trust being treated as assets of
the Holder and the Notes being treated as non-recourse debt of the Holder). The
parties agree that, unless otherwise required by appropriate tax authorities or
unless the Trust is disregarded as an entity separate from its sole
Certificateholder for income and franchise tax purposes, the Owner Trustee will
file or cause to be filed (at the written direction of the Majority
Certificateholders) annual or other necessary returns, reports and other forms
(such returns, reports and other forms to be prepared by the Depositor)
consistent with the characterization of the Trust as a partnership for such tax
purposes pursuant to Section 5.01(k). Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee shall file the Certificate of Trust with the Secretary of
State.
Section 2.07. Liability of the Holders. No Holder shall have
any personal liability for any liability or obligation of the Trust. The
Certificates shall be fully paid and nonassessable.
Section 2.08. Title to Trust Property. (a) Legal title to all
of the Owner Trust Estate shall be vested at all times in the Trust as a
separate legal entity except where applicable
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law in any jurisdiction requires title to any part of the Owner Trust Estate to
be vested in a trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee and/or a separate trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. No transfer by operation of law or otherwise of
any interest of the Certificateholders shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of any part of the Owner Trust Estate.
Section 2.09. Situs of Trust. The Trust will be located and
administered in the State of Delaware. All accounts maintained at a bank by the
Owner Trustee or the Indenture Trustee on behalf of the Trust shall be located
in the State of Delaware or the State of New York. The Trust shall not have any
employees; provided, however, nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware. The
only office of the Trust will be at the Corporate Trust Office in the State of
Delaware.
Section 2.10. Representations and Warranties of the Depositor;
Covenant of the Certificateholders. The Depositor hereby represents and warrants
to the Owner Trustee and the Note Insurer that:
(i) The Depositor is duly organized and
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority to own
its properties and to conduct its business as such properties
are currently owned and such business is presently conducted.
(ii) The Depositor has the power and
authority to execute and deliver this Agreement and to carry
out its terms; the Depositor has full power and authority to
transfer and assign the property to be transferred and
assigned to and deposited with the Trust and the Depositor has
duly authorized such transfer and assignment and deposit to
the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been
duly authorized by the Depositor by all necessary corporate
action.
(iii) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the
terms hereof do not conflict with, result in any breach of any
of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Depositor, or any indenture,
agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or
imposition of any lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any
law or, to the best of the Depositor's knowledge, any order,
rule or regulation applicable to the Depositor of any court or
of any Federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over
the Depositor or its properties.
(iv) There are no proceedings or
investigations pending or notice of which has been received in
writing before any court, regulatory body, administrative
agency or
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other governmental instrumentality having jurisdiction over
the Depositor or its properties: (x) asserting the invalidity
of this Agreement, (y) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (z)
seeking any determination or ruling that should reasonably be
expected to materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
(v) The representations and warranties of
the Depositor in Article III of the Loan Sale Agreement are
true and correct.
(vi) The Depositor has duly executed and
delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Depositor,
enforceable against the Depositor, in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
by the application of equitable principles.
(b) Each Certificateholder covenants with the Owner Trustee
and the Note Insurer that during the continuance of this Agreement, and while it
holds Certificates, it will comply in all respects with the provisions of its
Certificate of Incorporation in effect from time to time.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.01. Initial Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.05 and until
the issuance of the Certificates, the Depositor shall be the sole beneficiary of
the Trust.
Section 3.02. The Certificates. The Certificates shall be
issued without a principal amount and shall together evidence the entire
beneficial ownership interest in the Trust. The Pool I Certificates shall
evidence the entire beneficial ownership interest in the sub-trust of the Trust
consisting of the Pool I Mortgage Loans, and the Pool II Certificates shall
evidence the entire beneficial ownership interest in the sub-trust of the Trust
consisting of the Pool II Mortgage Loans. The Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an Authorized Officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of authentication
and delivery of such Certificates.
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A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
3.04.
Section 3.03. Execution, Authentication and Delivery of Trust
Certificates. Concurrently with the initial transfer of the Mortgage Loans to
the Trust pursuant to the Sale and Servicing Agreement, the Owner Trustee shall
cause the Certificates, representing 100% of the Percentage Interests of the
related Trust Interest, to be executed on behalf of the Trust, authenticated and
delivered on behalf of the Depositor, as initial Certificateholder. No
Certificate shall entitle its holder to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Owner Trustee or the Owner Trustee's authenticating agent, by
manual or facsimile signature; such authentication shall constitute conclusive
evidence that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Owner Trustee
shall be the initial "Certificate Registrar".
Upon surrender for registration of transfer of any Certificate
at the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause its authenticating agent
to authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 3.08.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Note Insurer, or, upon the occurrence and continuation
of a Note Insurer Default, satisfaction of the Rating Agency Condition, in
addition to the Owner Trustee and the Certificate Registrar duly executed by the
Certificateholder or his attorney duly authorized in writing. In addition, each
Certificate presented or surrendered for registration of transfer and exchange
must be accompanied by a representation letter (an "Investment Letter") from the
Prospective Holder, in the form of Exhibit C hereto, certifying as to the
representations set forth in Section 3.09(a), (b) and (c). Each Certificate
surrendered for registration of transfer or exchange shall be canceled and
disposed of by the Certificate Registrar in accordance with its customary
practice.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the Certificate
Registrar 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.
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The preceding provisions of this Section 3.04 notwithstanding,
the Owner Trustee shall not make and the Certificate Registrar shall not
register transfers or exchanges of Certificates for a period of fifteen (15)
days preceding the Distribution Date with respect to the Certificates.
Notwithstanding anything contained herein to the contrary, the
Owner Trustee shall not be responsible for ascertaining whether any transfer
complies with the registration provisions or exemptions from the Securities Act
of 1933, as amended, the Securities Act of 1934, as amended, applicable state
securities law or the Investment Company Act of 1940, as amended; provided,
however, that if an Investment Letter is specifically required to be delivered
to the Owner Trustee by a purchaser or transferee of a Certificate, the Owner
Trustee shall be under a duty to examine the same to determine whether it
conforms to the form of Investment Letter set forth as Exhibit C hereto and
shall promptly notify the party delivering the same if such Investment Letter
does not so conform.
Section 3.05. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute
and the Owner Trustee, or the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like Percentage
Interest. In connection with the issuance of any new Certificate under this
Section 3.05, the Owner Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners. Each person by virtue of
becoming a Certificateholder in accordance with this Agreement shall be deemed
to be bound by the terms of this Agreement. Prior to due presentation of a
Certificate for registration of transfer, the Owner Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.02 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
Section 3.07. Access to List of Holders' Names and Addresses.
The Certificate Registrar shall furnish or cause to be furnished to the Owner
Trustee, the Servicer, the Depositor and the Indenture Trustee immediately prior
to each Distribution Date, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more Holders of
Certificates, together evidencing Percentage Interests totaling not less than
25%, apply in writing to the Certificate Registrar, and such application states
that the applicants desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates and such
application is accompanied by a copy of the communication that such
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applicants propose to transmit, then the Certificate Registrar shall, within
five (5) Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
Section 3.08. Maintenance of Office or Agency. The Owner
Trustee shall maintain an office or offices or agency or agencies where notices
and demands to or upon the Owner Trustee in respect of the Basic Documents may
be served, and so long as the Owner Trustee is the Certificate Registrar, where
Certificates may be surrendered for registration of transfer or exchange and
notices and demands to or upon the Certificate Registrar in respect of the
Certificates, may be served. The Owner Trustee initially designates the
Corporate Trust Office as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Depositor
and to the Certificateholders of any change in the location of the Certificate
Register or any such office or agency.
Section 3.09. Restrictions on Transfer of Certificates. (a)
Each prospective purchaser and any subsequent transferee of a Certificate (each,
a "Prospective Holder"), other than the Depositor, shall represent and warrant,
in writing, to the Owner Trustee and the Certificate Registrar and any of their
respective successors that:
(i) Such Person is (A) a "qualified
institutional buyer" as defined in Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"), and
is aware that the seller of the Certificate may be relying on
the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such
Certificate for its own account or for the account of one or
more qualified institutional buyers for whom it is authorized
to act, or (B) a Person involved in the organization or
operation of the Trust or an affiliate of such Person within
the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the
Depositor).
(ii) Such Person understands that the
Certificates have not been and will not be registered under
the Securities Act and may be offered, sold, pledged or
otherwise transferred only to a person whom the seller
reasonably believes is (A) a qualified institutional buyer or
(B) a Person involved in the organization or operation of the
Trust or an affiliate of such Person, in a transaction meeting
the requirements of Rule 144A under the Securities Act and in
accordance with any applicable securities laws of any state of
the United States.
(iii) Such Person understands that the
Certificates bear a legend to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR
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INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT
NOT LIMITED TO, _______________) IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
CERTIFICATE UNDER THE ACT OR ANY STATE SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective
Holder agrees and acknowledges that no legal or beneficial interest in all or
any portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance and
settlement of such securities through electronic book-entry changes in accounts
of participating organizations (a "Book-Entry Nominee") and any such purported
transfer shall be void and have no effect.
(c) No transfer of a Certificate or any beneficial interest
therein shall be made to any person unless the Note Insurer has given its prior
written consent to such transfer (or, upon the occurrence and continuance of a
Note Insurer Default, satisfaction of the Rating Agency Condition) and the Owner
Trustee has received a representation letter from the Transferee to the effect
that such transferee (i) is not a person which is an employee benefit plan,
trust or account subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section 4975 of the Code or a governmental
plan, as defined in Section 3(32) of ERISA, subject to any federal, state or
local law which is, to a material extent, similar to the foregoing provisions of
ERISA or the Code (any such person being a "Plan"), (ii) is not an entity,
including an insurance company separate account or general account, whose
underlying assets include "plan assets" by reason of a Plan's investment in the
entity and (iii) is not directly or indirectly purchasing such Certificate or
interest therein on behalf of, as investment manager of, as named fiduciary of,
as trustee of, or with the assets of a Plan.
(d) The Owner Trustee shall not execute, and shall not
countersign and deliver, a Certificate in connection with any transfer thereof
unless the transferor shall have provided to the Owner Trustee an Investment
Letter, signed by the transferee, which certificate shall contain the consent of
the transferee to any amendments of this Agreement as may be required to
effectuate further the foregoing restrictions on transfer of the Certificates to
Book-
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Entry Nominees, and an agreement by the transferee that it will not
transfer a Certificate without providing to the Owner Trustee an Investment
Letter.
(e) The Certificates shall bear an additional legend referring
to the restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Holders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action (and the Certificateholders shall not direct the Owner Trustee to take
any action) unless at least thirty (30) days before the taking of such action,
the Owner Trustee shall have notified the Certificateholders (if the Note
Insurer has directed the Owner Trustee to take action) and the Note Insurer (if
the Certificateholders have directed the Owner Trustee to take action) in
writing of the proposed action and neither the Certificateholders nor the Note
Insurer shall have notified the Owner Trustee in writing prior to the 30th day
after such notice is given that such Certificateholders and/or the Note Insurer
have withheld consent or the Certificateholders have provided alternative
written direction (any direction by the Certificateholders shall require the
prior written consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection
of the Mortgage Loans) and the compromise of any action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of the Mortgage
Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute);
(c) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder is
required; provided, that notwithstanding this Section 4.01, the
prior written consent of the Note Insurer must be obtained for any
amendment or change to this Agreement or any Basic Document;
(d) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder or
the Note Insurer is not required and such amendment materially
adversely affects the interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor
Note Registrar, or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar or the consent to the
assignment by the Note Registrar or Indenture Trustee or Certificate
Registrar of its obligations under the Indenture or this Agreement,
as applicable;
(f) the consent to the waiver of any default of any Basic
Document;
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(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the
Trust's assets to any other entity;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the Basic
Documents;
(k) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.03 hereof;
(l) confess a judgment against the Trust;
(m) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(n) cause the Trust to lend any funds to any entity; or
(o) change the Trust's purpose and powers from those set forth
in this Trust Agreement.
In addition the Trust shall not commingle its assets with
those of any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as expressly
set forth herein, the Trust shall pay its indebtedness, operating expenses and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Trust shall maintain
appropriate minutes or other records of all appropriate actions and shall
maintain its office separate from the offices of the Depositor and the Servicer.
Notwithstanding the other provisions of this Section 4.01, the
Owner Trustee shall not have the power, except upon the written direction of all
of the Certificateholders with the prior written consent of the Note Insurer,
and to the extent otherwise consistent with the Basic Documents, to (i) remove
or replace the Servicer or the Indenture Trustee, (ii) institute proceedings to
have the Trust declared or adjudicated bankrupt or insolvent, (iii) consent to
the institution of bankruptcy or insolvency proceedings against the Trust, (iv)
file a petition or consent to a petition seeking reorganization or relief on
behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, (viii) take any action,
or cause the Trust to take any action, in furtherance of any of the foregoing
(any of the above, a "Bankruptcy Action"). So long as the Indenture and the
Insurance Agreement remain in effect and no Note Insurer Default exists, no
Certificateholder
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shall have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or direct the Owner Trustee to take any Bankruptcy Action
with respect to the Trust.
Section 4.02. Action by Holders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior written consent of
all Certificateholders and the Note Insurer and the delivery to the Owner
Trustee by each such Certificateholder of a certification that such
Certificateholder reasonably believes that the Trust is insolvent.
Section 4.03. Restrictions on Holders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.03 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 4.04. Majority Control. Except as expressly provided
herein, any action that may be taken by the Certificateholders under this
Agreement may be taken by the Holders of Certificates evidencing more than 50%
of the Percentage Interest in each of the Trust Interests and such action shall
be binding upon all Certificateholders. Except as expressly provided herein, any
written notice of the Certificateholders delivered pursuant to this Agreement
shall be effective if signed by Holders of Certificates evidencing more than 50%
of the Percentage Interest in each of the Trust Interests at the time of the
delivery of such notice and such action shall be binding upon all
Certificateholders.
ARTICLE V
TAX PROVISIONS; CERTAIN DUTIES
Section 5.01. Federal Income Tax Provisions. If the Trust is
treated as a partnership (rather than disregarded as a separate entity) for
federal income tax purposes pursuant to Section 2.06, the following provisions
shall apply:
(a) A separate capital account (a "Capital
Account") shall be established and maintained for each
Certificateholder by the Depositor, in accordance with
Treasury Regulations Section 1.704-1 (b)(2)(iv). No
Certificateholder shall be entitled to interest on its Capital
Account or any capital contribution made by such Holder to the
Trust.
(b) Upon termination of the Trust pursuant
to Article IX, any amounts available for distribution to
Holders shall be distributed to the Holders with positive
Capital Account balances in accordance with such balances. For
purposes of this Section 5.01(b), the Capital Account of each
Holder shall be determined after all adjustments made in
accordance with this Section 5.01 resulting from the Trust's
operations and from all sales and dispositions of all or any
part of the assets of the Trust. Any distributions pursuant to
this Section 5.01(b) shall be made by the end of the Taxable
Year in which the termination occurs (or, if later, within 90
days after the date of the termination).
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(c) No Certificateholder shall be required
to restore any deficit balance in its Capital Account.
Furthermore, no Holder shall be liable for the return of the
Capital Account of, or of any capital contribution made to the
Trust by, another Holder.
(d) Profit and loss of the Trust for each
Taxable Year shall be allocated to the Certificateholders in
accordance with their respective Percentage Interests.
(e) Notwithstanding any provision to the
contrary, (i) any expense of the Trust that is a "nonrecourse
deduction" within the meaning of Treasury Regulations Section
1.704-2(b)(1) shall be allocated in accordance with the
Holders' respective Percentage Interests, (ii) any expense of
the Trust that is a "partner nonrecourse deduction" within the
meaning of Treasury Regulations Section 1.704-2(i)(2) shall be
allocated in accordance with Treasury Regulations Section
1.704-2(i)(1), (iii) if there is a net decrease in Trust
Minimum Gain within the meaning of Treasury Regulations
Section 1.704-2(f)(1) for any Taxable Year, items of gain and
income shall be allocated among the Holders in accordance with
Treasury Regulations Section 1.704-2(f) and the ordering rules
contained in Treasury Regulations Section 1.704-2(i), and (iv)
if there is a net decrease in Holder Nonrecourse Debt Minimum
Gain within the meaning of Treasury Regulations Section
1.704-2(i)(4) for any Taxable Year, items of gain and income
shall be allocated among the Holders in accordance with
Treasury Regulations Section 1.704-2(i)(4) and the ordering
rules contained in Treasury Regulations Section 1.704-2(j). A
Holder's "interest in partnership profits" for purposes of
determining its share of the nonrecourse liabilities of the
Trust within the meaning of Treasury Regulations Section
1.752-3(a)(3) shall be such Holder's Percentage Interest.
(f) If a Holder receives in any Taxable Year
an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Treasury Regulations Section
1.704-l(b)(2)(ii)(d) that causes or increases a negative
balance in such Holder's Capital Account that exceeds the sum
of such Holder's shares of Trust Minimum Gain and Holder
Nonrecourse Debt Minimum Gain, as determined in accordance
with Treasury Regulations Sections 1.704-2(g) and 1.704-2(i),
such Holder shall be allocated specially for such Taxable Year
(and, if necessary, later Taxable Years) items of income and
gain in an amount and manner sufficient to eliminate such
negative Capital Account balance as quickly as possible as
provided in Treasury Regulations Section 1.704-l(b)(2)(ii)(d).
After the occurrence of an allocation of income or gain to a
Holder in accordance with this Section 5.01(f), to the extent
permitted by Regulations Section 1.704-l(b), items of expense
or loss shall be allocated to such Holder in an amount
necessary to offset the income or gain previously allocated to
such Holder under this Section 5.01(f).
(g) Loss shall not be allocated to a Holder
to the extent that such allocation would cause a deficit in
such Holder's Capital Account (after reduction to reflect the
items described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Holder's shares of Trust Minimum Gain and Holder
Nonrecourse Debt Minimum Gain. Any loss in excess of that
limitation shall be allocated to all the Holders in accordance
with their respective Percentage Interests. After the
occurrence of an allocation of loss to a Holder in accordance
with this Section 5.01(g), to the extent permitted by Treasury
Regulations Section 1.704-l(b), profit shall be allocated to
such
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Holder in an amount necessary to offset the loss previously
allocated to such Holder under this Section 5.01(g).
(h) If a Holder transfers any part or all of
its Percentage Interest and the transferee is admitted as a
Holder as provided herein (a "Transferee Holder"), the
distributive shares of the various items of profit and loss
allocable among the Holders during such Taxable Year shall be
allocated between the transferor and the Transferee Holder (at
the election of the Holders (including the transferor, but
excluding the Transferee Holder)) either (i) as if the Taxable
Year had ended on the date of the transfer or (ii) based on
the number of days of such Taxable Year that each was a Holder
without regard to the results of Trust activities in the
respective portions of such Taxable Year in which the
transferor and Transferee Holder were Holders.
(i) "Profit" and "loss" and any items of
income, gain, expense or loss referred to in this Section 5.01
shall be determined in accordance with federal income tax
accounting principles as modified by Treasury Regulations
Section 1.704-l(b)(2)(iv), except that profits and losses
shall not include items of income, gain, and expense that are
specially allocated pursuant to Sections 5.01(e), 5.01(f) or
5.01(g) hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained therein) for
federal income tax purposes shall be identical to all
allocations of such items set forth in this Section 5.01,
except as otherwise required by Section 704(c) of the Code and
Section 1.704-l(b)(4) of the Treasury Regulations.
(j) The taxable year of the Trust (the
"Taxable Year") shall be the calendar year or such other
taxable year as may be required by Section 706(b) of the Code.
(k) At the Trust's expense, the Depositor
shall (i) prepare, or cause to be prepared, and file or cause
to be filed such tax returns relating to the Trust (including
a partnership information return, IRS Form 1065) as are
required by applicable federal, state, and local law, (ii)
cause such returns to be signed in the manner required by law,
(iii) make such elections as may from time to time be required
or appropriate under any applicable law so as to maintain the
Trust's classification as a partnership for tax purposes, (iv)
prepare and deliver, or cause to be prepared and delivered, to
the Holders, no later than 120 days after the close of each
Taxable Year (or no later than April 15th), a Schedule K-1, a
copy of the Trust's informational tax return (IRS Form 1065),
and such other reports (collectively, the "Annual Tax
Reports") setting forth in sufficient detail all such
information and data with respect to the transactions effected
by or involving the Trust during such Taxable Year as shall
enable each Holder to prepare its federal, state, and local
income tax returns in accordance with the laws then
prevailing, and (v) collect, or cause to be collected, any
withholding tax as described in Section 5.02(c) with respect
to income or distributions to Certificateholders.
(l) The Depositor shall, if required, be
designated as the tax matters partner for the Trust within the
meaning of Section 6231(a)(7) of the Code (the "Tax Matters
Partner"). The Tax Matters Partner shall have the right and
obligation to take all actions authorized and required,
respectively, by the Code for the Tax Matters Partner. The Tax
Matters Partner shall have the right to retain professional
assistance in respect of any
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audit or controversy proceeding initiated with respect to the
Trust by the Internal Revenue Service or any state or local
taxing authority, and all expenses and fees incurred by the
Tax Matters Partner on behalf of the Trust shall constitute
expenses of the Trust. In the event the Tax Matters Partner
receives notice of a final partnership adjustment under
Section 6223(a)(2) of the Code, the Tax Matters Partner shall
either (i) file a court petition for judicial review of such
adjustment within the period provided under Section 6226(a) of
the Code, a copy of which petition shall be mailed to all
other Holders on the date such petition is filed, or (ii) mail
a written notice to all other Holders, within such period,
that describes the Tax Matters Partner's reasons for
determining not to file such a petition.
(m) Except as otherwise provided in this
Section 5.01 and Section 6.06, the Holders shall instruct the
Depositor in writing as to whether to make any available
election under the Code or any applicable state or local tax
law on behalf of the Trust.
Section 5.02. Withholding Taxes. In the event that any
withholding tax is imposed under federal, state, or local law on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to such Certificateholder in accordance with
this Section 5.02. The Indenture Trustee, on behalf of the Owner Trustee, is
hereby authorized and directed to retain in the Distribution Account from
amounts otherwise distributable to the Certificateholders sufficient funds for
the payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Indenture Trustee from contesting any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The Certificate Registrar will
provide the Indenture Trustee with a statement indicating the amount of any such
withholding tax. The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Indenture Trustee and remitted to the
appropriate taxing authority from the Distribution Account at the direction of
the Indenture Trustee, on behalf of the Owner Trustee. If there is a possibility
that withholding tax is payable with respect to a distribution (such as a
distribution to a Certificateholder who is a Non-U.S. Person), the Indenture
Trustee may in its sole discretion withhold such amounts in accordance with this
paragraph (c). In the event that a Certificateholder wishes to apply for a
refund of any such withholding tax, the Owner Trustee and the Indenture Trustee
shall reasonably cooperate with such Certificateholder in making such claim so
long as such Certificateholder agrees in writing to reimburse the Owner Trustee
for any out-of-pocket expenses incurred.
Any Holder which is organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date such Holder becomes a
Holder, (a) so notify the Owner Trustee and the Indenture Trustee, on behalf of
the Trust, (b) (i) provide the Owner Trustee and the Indenture Trustee, on
behalf of the Trust, with Internal Revenue Service form 1001, 4224, 8709 or W-8,
as appropriate, or (ii) notify the Owner Trustee and the Indenture Trustee, on
behalf of the Trust, that it is not entitled to an exemption from United States
withholding tax or a reduction in the rate thereof on payments of interest. Any
such Holder agrees by its acceptance of a Certificate, on an ongoing basis, to
provide like certification for each taxable year and to notify the Owner Trustee
and the Indenture Trustee, on behalf of the Trust, should subsequent
circumstances arise affecting the information provided. The Trust, the Owner
Trustee and the
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Indenture Trustee shall be fully protected in relying upon, and each Holder by
its acceptance of a Certificate hereunder agrees to indemnify and hold the
Trust, the Owner Trustee and the Indenture Trustee harmless against all claims
or liability of any kind arising in connection with or related to their reliance
upon any documents, forms or information provided by any Holder. In addition, if
the Indenture Trustee has not withheld taxes on any payment made to any Holder,
and the Indenture Trustee is subsequently required to remit to any taxing
authority any such amount not withheld, such Holder shall return such amount to
the Indenture Trustee upon written demand by the Indenture Trustee. Neither the
Owner Trustee nor the Indenture Trustee shall be liable for damages to any
Holder due to a violation of the Code unless and only to the extent such
liability is caused by the Owner Trustee's or the Indenture Trustee's failure to
act in accordance with its standard of care under this Agreement.
Section 5.03. Accounting and Records to the Noteholders,
Owners, the Internal Revenue Service and Others. The Depositor shall (i)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis on the accrual method of accounting, including, without limitation, the
allocations of net income under Section 5.01, (ii) deliver (or cause to be
delivered) to each Holder, as may be required by the Code and applicable
Treasury Regulations, such information as may be required including Schedule
K-1, if applicable) to enable each Holder to prepare its Federal and state
income tax returns and (iii) file or cause to be filed, if necessary, such tax
returns relating to the Trust (including a partnership information return, Form
1065), and direct the Owner Trustee or the Servicer, as the case may be, to make
such elections as may from time to time be required or appropriate under any
applicable state or Federal statute or rule or regulation thereunder so as to
maintain the Trust's characterization as a branch, or if applicable, as a
partnership, for Federal income tax purposes. The Owner Trustee or the Servicer,
as the case may be, shall make all elections pursuant to this Section 5.03 as
directed in writing by the Depositor. An Authorized Officer of the Trust shall
sign all tax information returns, if any, filed pursuant to this Section 5.03
and any other returns as may be required by law, and in doing so shall rely
entirely upon, and shall have no liability for information provided by, or
calculations provided by, the Depositor or the Servicer. The Depositor shall
elect under Section 1278 of the Code to include in income currently any market
discount that accrues with respect to the Mortgage Loans. The Depositor shall
not make the election provided under Section 754 of the Code.
Section 5.04. Signature on Returns. Notwithstanding the
provisions of Section 5.03 and in the event that the Trust is characterized as a
partnership, the Owner Trustee shall sign, on behalf of the Trust, the tax
returns of the Trust, unless applicable law requires a Holder to sign such
documents, in which case such documents shall be signed by the Holders.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority. The Owner Trustee is
authorized and directed to execute and deliver or cause to be executed and
delivered the Notes, the Certificates and the Basic Documents to which the Trust
is to be a party and each certificate or other document attached as an exhibit
to or contemplated by the Basic Documents to which the Trust is to be a party
and any amendment or other agreement or instrument described in Article III, in
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each case, in such form as the Depositor and the Owner Trustee shall approve, as
evidenced conclusively by the Owner Trustee's execution thereof. In addition,
the Owner Trustee is authorized and directed, on behalf of the Trust, to execute
and deliver to the Authenticating Agent the Trust Request and the Trust Orders
referred to in Section 2.11 of the Indenture, directly to the Authenticating
Agent to authenticate and deliver Class A-1 Notes in the Original Note Principal
Balance of $__________, and Class A-2 Notes in the Original Note Principal
Balance of $__________. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust, pursuant to the Basic Documents.
Section 6.02. General Duties. (a) It shall be the duty of the
Owner Trustee:
(i) to discharge (or cause to be discharged)
all of its responsibilities pursuant to the terms of this
Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the
Certificateholders, subject to the Basic Documents and in
accordance with the provisions of this Agreement; and
(ii) to obtain and preserve the Trust's
qualification to do business in the State of Delaware.
(b) The Owner Trustee shall not be responsible for taking any
action on behalf of the Trust under any Basic Document unless specifically
directed in writing to do so in accordance with Section 6.03 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter
regarding the Securities Act, the Exchange Act or the Investment Company Act of
1940, as amended, or the rules or regulations thereunder.
Section 6.03. Action upon Instruction. (a) Subject to Article
IV hereof, and in accordance with the terms of the Basic Documents, the
Certificateholders may by written instruction direct the Owner Trustee in the
management of the Trust but only to the extent consistent with the limited
purpose of the Trust. Such direction may be exercised at anytime by written
instruction of the Certificateholders pursuant to Article IV hereof. Without
limiting the generality of the foregoing, the Owner Trustee shall act as
directed by the Certificateholders in connection with Note redemptions requested
by the Certificateholders, and shall take all actions and deliver all documents
that the Trust is required to take and deliver in accordance with Section 4.01
and Article X of the Indenture in order to effect any redemption requested by
the Certificateholders.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Subject to Article IV hereof, whenever the Owner Trustee
is unable to decide between alternative courses of action permitted or required
by the terms of this Agreement or under any Basic Document, the Owner Trustee
shall promptly give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders and the Note
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Insurer requesting instruction from the Certificateholders as to the course of
action to be adopted, and to the extent the Owner Trustee acts in good faith in
accordance with any written instruction of the Certificateholders received, the
Owner Trustee shall not be liable on account of such action to any Person. If
the Owner Trustee shall not have received appropriate instruction within ten
(10) days of such notice (or within such shorter period of time as reasonably
may be specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) Subject to Article IV hereof, in the event that the Owner
Trustee is unsure as to the application of any provision of this Agreement or
any Basic Document or any such provision is ambiguous as to its application, or
is, or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement permits any determination by the Owner Trustee or is
silent or is incomplete as to the course of action that the Owner Trustee is
required to take with respect to a particular set of facts, the Owner Trustee
may give notice (in such form as shall be appropriate under the circumstances)
to the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten (10) days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 6.04. No Duties Except as Specified in this Agreement,
the Basic Documents or any Instructions. The Owner Trustee shall not have any
duty or obligation to manage, make any payment with respect to, register,
record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
any document contemplated hereby to which the Trust is a party, except as
expressly provided by the terms of this Agreement, any Basic Document or in any
document or written instruction received by the Owner Trustee pursuant to
Section 6.03; and no implied duties or obligations shall be read into this
Agreement or any Basic Document against the Owner Trustee. The Owner Trustee
shall have no responsibility for filing any financing or continuation statement
in any public office at any time or to otherwise perfect or maintain the
perfection of any security interest or lien granted to it hereunder or to
prepare or file any Securities and Exchange Commission filing for the Trust or
to record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee in its
individual capacity that are not related to the ownership or the administration
of the Owner Trust Estate.
Section 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with
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the Basic Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.
Section 6.06. Restrictions. Other than with respect to actions
expressly provided for herein, neither the Owner Trustee nor the Depositor shall
take any action (a) that violates or results in a breach of or is inconsistent
with the purposes of the Trust set forth in Section 2.03 or (b) that, to the
actual knowledge of the Depositor and the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee or the Depositor to take
action that would violate the provisions of this Section 6.06.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.01. Acceptance of Trusts and Duties. The Owner
Trustee accepts the trusts hereby created and agrees to perform its duties
hereunder with respect to such trusts but only upon the terms of this Agreement
and the Basic Documents. The Owner Trustee also agrees to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the Basic Documents and this Agreement. The Owner Trustee shall not be
answerable or accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful breach or misconduct or gross
negligence or (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 7.03 expressly made by the Owner Trustee in its
individual capacity. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable
for any error of judgment made by a Responsible Officer of the
Owner Trustee;
(b) the Owner Trustee shall not be liable
with respect to any action taken or omitted to be taken by it
in accordance with the instructions of the Depositor, the
Certificateholders or the Note Insurer given in accordance
with this Agreement;
(c) no provision of this Agreement or any
Basic Document shall require the Owner Trustee to expend or
risk funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably
assured or provided to it;
(d) under no circumstances shall the Owner
Trustee be liable for indebtedness evidenced by or arising
under any of the Basic Documents, including the principal of
and interest on the Notes;
(e) the Owner Trustee shall not be
responsible for or in respect of the validity or sufficiency
of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust
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Estate or for or in respect of the validity or sufficiency of
the Basic Documents, other than the certificate of
authentication on the Certificates, and the Owner Trustee
shall in no event assume or incur any liability, duty, or
obligation to any Noteholder or to any Certificateholder,
other than as expressly provided for herein and in the Basic
Documents;
(f) the Owner Trustee shall not be liable
for the default or misconduct of the Depositor, the Indenture
Trustee, the Collateral Agent, or the Servicer under any of
the Basic Documents or otherwise and the Owner Trustee shall
have no obligation or liability to perform the obligations of
the Trust under this Agreement or the Basic Documents that are
required to be performed by the Indenture Trustee, the
Servicer or the Collateral Agent;
(g) the Owner Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Agreement, or to institute, conduct or defend any
litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or
direction of the Depositor, any of the Certificateholders or
the Note Insurer, unless such Certificateholders, the
Depositor or the Note Insurer have offered to the Owner
Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of
the Owner Trustee to perform any discretionary act enumerated
in this Agreement or in any Basic Document shall not be
construed as a duty, and the Owner Trustee shall not be
answerable for other than its gross negligence or willful
breach or misconduct in the performance of any such act; and
(h) notwithstanding anything contained
herein to the contrary, neither __________________________ nor
the Owner Trustee shall be required to take any action in any
jurisdiction other than in the State of ________ if the taking
of such action will (i) require the consent or approval or
authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect
of, any state or other governmental authority or agency of any
jurisdiction other than the State of ________; (ii) result in
any fee, tax or other governmental charge under the laws of
any jurisdiction or any political subdivisions thereof in
existence on the date hereof other than the State of ________
becoming payable by _______________________________; or (iii)
subject ______________________________________to personal
jurisdiction in any jurisdiction other than the State of
________ for causes of action arising from acts unrelated to
the consummation of the transactions by
____________________________ or the Owner Trustee, as the case
may be, contemplated hereby. The Owner Trustee shall be
entitled to obtain advice of counsel (which advice shall be an
expense of the Servicer) to determine whether any action
required to be taken pursuant to this Agreement or the other
Basic Documents results in the consequences described in
clauses (i), (ii) and (iii) of the preceding sentence. In the
event that said counsel advises the Owner Trustee that such
action will result in such consequences, the Owner Trustee
will appoint an additional trustee pursuant to Section 10.05
hereof to proceed with such action.
Section 7.02. Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written request
therefor, duplicates or copies of
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all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents. On behalf of the Owner Trustee, the
Depositor shall furnish to Noteholders promptly upon written request therefor,
copies of the Sale and Servicing Agreement and the Indenture.
Section 7.03. Representations and Warranties. The Owner
Trustee hereby represents and warrants to the Depositor and the
Certificateholders, that:
(a) It is a national banking association
duly organized and validly existing in good standing under the
laws of the United States of America. It has all requisite
corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
(b) It has taken all corporate action
necessary to authorize the execution and delivery by it of
this Agreement, and this Agreement will be executed and
delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery
by it of this Agreement nor the consummation by it of the
transactions contemplated hereby nor compliance by it with any
of the terms or provisions hereof will contravene any Federal
or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its
charter documents or by-laws.
Section 7.04. Reliance; Advice of Counsel (a) The Owner
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, Note, or other document or paper believed by it to be genuine and
believed by it to be signed by the proper party or parties. The Owner Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, Accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the
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written opinion or advice of any such counsel, Accountants or other such persons
and not contrary to this Agreement or any Basic Document.
Section 7.05. Not Acting in Individual Capacity. Except as
provided in Section 7.03, in accepting the trusts hereby created,
____________________ acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any Basic
Document shall look only to the Owner Trust Estate for payment or satisfaction
thereof.
Section 7.06. Owner Trustee Not Liable for Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Depositor, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 7.03) or the Notes, or of any Mortgage Loans or related documents. The
Owner Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Mortgage Loan, or
the perfection and priority of any security interest created by any Mortgage
Loan or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation, the existence,
condition and ownership of any Mortgaged Property, the existence and
enforceability of any insurance thereon, the existence and contents of any
Mortgage Loan on any computer or other record thereof, the validity of the
assignment of any Mortgage Loan to the Trust or of any intervening assignment,
the completeness of any Mortgage Loan, the performance or enforcement of any
Mortgage Loan, the compliance by the Depositor or the Servicer with any warranty
or representation made under any Basic Document or in any related document or
the accuracy of any such warranty or representation or any action of the
Indenture Trustee or the Servicer or any subservicer taken in the name of the
Owner Trustee.
Section 7.07. Owner Trustee May Own Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates or Notes and may deal with the Depositor, the
Indenture Trustee and the Servicer in banking transactions with the same rights
as it would have if it were not Owner Trustee.
Section 7.08. Licenses. The Depositor shall cause the Trust to
use its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses. The Owner
Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon
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before the date hereof between the Servicer and the Owner Trustee, and the Owner
Trustee shall be entitled to be reimbursed by the Servicer for its other
reasonable expenses hereunder as separately agreed.
Section 8.02. Indemnification. The Certificateholders shall be
liable as obligor for, and shall indemnify the Owner Trustee (in its individual
and trust capacities) and its successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against any Indemnified Party in any way relating to or arising out of this
Agreement, the Basic Documents, the Owner Trust Estate, the administration of
the Owner Trust Estate or the action or inaction of the Owner Trustee hereunder,
except only that the Certificateholders shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from any of the matters described in the third sentence of Section 7.01. The
indemnities contained in this Section 8.02 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Certificateholders will be entitled to participate
therein, with counsel selected by such Holders and reasonably satisfactory to
the Indemnified Parties, but after notice from an Indemnified Party to the
Certificateholders of its election to assume the defense thereof, the
Certificateholders shall not be liable to the Indemnified Party under this
Section 8.02 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense of such action; provided,
however, that this sentence shall not be in effect if (1) the Certificateholders
shall not have employed counsel reasonably satisfactory to the Indemnified Party
to represent the Indemnified Party within a reasonable time after notice of
commencement of the action, (2) the Certificateholders shall have authorized the
employment of counsel for the Indemnified Party at the expense of the
Certificateholders or (3) in the event any such claim involves a possible
imposition of criminal liability or penalty or a material civil penalty on such
Indemnified Party, a conflict of interest between such Indemnified Party and the
Certificateholders or another indemnitee or the granting of material injunctive
relief against such Indemnified Party, and such Indemnified Party informs the
Certificateholders that such Indemnified Party desires to be represented by
separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Certificateholders. If the
Certificateholders assume the defense of any such proceeding, they shall be
entitled to settle such proceeding without any liability being assessed against
any Indemnified Party or, if such settlement provides for release of any such
Indemnified Party without any liability being assessed against any Indemnified
Party in connection with all matters relating to the proceeding which have been
asserted against such Indemnified Party in such proceeding by the other parties
to such settlement, without the prior written consent of such Indemnified Party,
but otherwise only with the prior written consent of such Indemnified Party.
Certificateholders shall be liable for this indemnification obligation pro rata,
based upon their respective Percentage Interests.
Section 8.03. Payments to the Owner Trustee. Any amounts paid
to the Owner Trustee pursuant to this Article VIII shall be deemed not to be a
part of the Owner Trust Estate immediately after such payment.
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ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 8.02. Termination of Trust Agreement. (a) This
Agreement (other than Article VIII) and the Trust shall terminate and be of no
further force or effect on the earlier of: (i) the final payment or other
liquidation of the Mortgage Loans and the disposition of all REO Properties and
the remittance of all funds due hereunder with respect to such Mortgage Loans
and REO Properties or the disposition of the Mortgage Loans and REO Properties
at the direction of a majority of the Certificateholders, in either case after
the satisfaction and discharge of the Indenture pursuant to Section 4.01 of the
Indenture; and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy (the late ambassador of the
United States to the Court of St. James). The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder or the Depositor shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle the
Depositor's or such Certificateholder's legal representatives or heirs to claim
an accounting or to take any action or proceeding in any court for a partition
or winding up of all or any part of the Trust or Owner Trust Estate nor (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a) above, none of the
Depositor, the Servicer, the Note Insurer nor any Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Certificates to the Indenture Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Note Insurer, the Rating Agencies and the Indenture Trustee mailed within five
(5) Business Days of receipt by the Owner Trustee from the Servicer of notice of
such termination pursuant to Section 9.01(a) above, which notice given by the
Owner Trustee shall state (i) the Distribution Date upon or with respect to
which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Indenture Trustee therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Indenture Trustee therein specified. The Owner Trustee shall give
such notice to the Certificate Registrar (if other than the Owner Trustee) and
the Indenture Trustee at the time such notice is given to Certificateholders.
The Indenture Trustee shall give notice to the Owner Trustee of each
presentation and surrender of Certificates promptly, and the Indenture Trustee
shall promptly cause to be distributed to the related Certificateholders amounts
distributable on such Distribution Date pursuant to the terms of the Indenture.
(d) Upon the winding up of the Trust in accordance with
Section 3808 of the Business Trust Statute and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
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ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by Federal or state authorities; and
having (or having a parent that has) a rating of at least "Baa3" by Moody's and
"A-1" by S&P (or otherwise acceptable to the Rating Agencies) and being
acceptable to the Note Insurer. If such corporation shall publish reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section 10.01, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section 10.01,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.02.
Section 10.02. Resignation or Removal of Owner Trustee. The
Owner Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Depositor, the Servicer, the
Indenture Trustee and the Note Insurer. Upon receiving such notice of
resignation, the Servicer shall promptly appoint a successor Owner Trustee
(acceptable to the Note Insurer) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within thirty (30) days after
the giving of such notice of resignation, the resigning Owner Trustee or the
Note Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Certificateholders or the Servicer, or if at any
time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Note Insurer, or the Certificateholders or
the Servicer with the written consent of the Note Insurer, may remove the Owner
Trustee. If the Certificateholders or the Servicer or the Note Insurer shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Note Insurer, or the Servicer with the written consent of the Note
Insurer, shall promptly appoint a successor Owner Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee and payment
of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section 10.02 shall not become effective until acceptance of appointment by
the successor Owner Trustee pursuant to Section 10.03, written approval by the
Note Insurer and payment of all fees and expenses owed to the outgoing
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Owner Trustee. The Servicer shall provide notice of such resignation or removal
of the Owner Trustee to each of the Rating Agencies, the Indenture Trustee, the
Collateral Agent and the Note Insurer.
Section 10.03. Successor Owner Trustee. Any successor Owner
Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and
deliver to the Depositor, the Indenture Trustee, the Note Insurer and to its
predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon the resignation or removal of the predecessor Owner
Trustee shall become effective and such successor Owner Trustee (if acceptable
to the Note Insurer), without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
moneys held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 10.03, the Depositor shall mail notice of the successor
of such Owner Trustee to all Certificateholders, the Indenture Trustee, the
Collateral Agent, the Noteholders, the Note Insurer and the Rating Agencies. If
the Depositor fails to mail such notice within ten (10) days after acceptance of
appointment by the successor Owner Trustee, the successor Owner Trustee shall
cause such notice to be mailed at the expense of the Depositor.
Any successor Owner Trustee appointed pursuant to this Section
10.03 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of ________.
Section 10.04. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section
10.01, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto, except the filing of an amendment to the
Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; provided, further, that the Owner Trustee shall mail notice of
such merger, conversion or consolidation to the Rating Agencies.
Section 10.05. Appointment of Co-Trustee or Separate Trustee
(a) Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any
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Mortgaged Property may at the time be located, and for the purpose of performing
certain duties and obligations of the Owner Trustee with respect to the Trust
and the Certificates, the Owner Trustee shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the Owner
Trustee and acceptable to the Note Insurer to act as co-trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 10.05, such powers, duties, obligations, rights and trusts as the
Note Insurer and the Owner Trustee may consider necessary or desirable. No
co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 10.01 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.03.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and
obligations conferred or imposed upon the Owner Trustee shall
be conferred upon and exercised or performed by the Owner
Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee
joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to
be performed, the Owner 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 or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
(ii) no trustee under this Agreement shall
be personally liable by reason of any act or omission of any
other trustee under this Agreement; and
(iii) the Owner Trustee may at any time
accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to the separate trustees and
co-trustees, as if given to each of them. Every instrument appointing any
separate trustee or co-trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article X. Each separate trustee and
co-trustee, upon its acceptance of appointment, shall be vested with the estates
specified in its instrument of appointment, either jointly with the Owner
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 Owner Trustee. Each such instrument shall be filed with the Owner
Trustee.
(d) Any separate trustee or co-trustee may at any time appoint
the Owner Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the
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Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Supplements and Amendments. This Agreement may
be amended by the Depositor, and the Owner Trustee, with the prior written
consent of the Note Insurer, and with prior written notice to the Rating
Agencies, but without the consent of any of the Noteholders or the
Certificateholders or the Indenture Trustee, to cure any ambiguity, to correct
or supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, such action shall not adversely
affect in any material respect the interests of any Noteholder or
Certificateholder or the rights of the Note Insurer. An amendment described
above shall be deemed not to adversely affect in any material respect the
interests of any Noteholder if the party requesting the amendment satisfies the
Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the
Depositor and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the Note
Insurer, the Noteholders evidencing more than 50% of the Outstanding Principal
Balance of the Notes, the Holders of Certificates evidencing more than 50% of
the Percentage Interests of the Trust Interest and if the party requesting such
amendment satisfies the Rating Agency Condition with respect to such amendment,
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 Noteholders or the Certificateholders; provided,
however, no such amendment shall (a) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on the
Mortgage Loans or distributions that shall be required to be made for the
benefit of the Noteholders, the Certificateholders or the Note Insurer, (b)
reduce the aforesaid percentage of the Outstanding Principal Balance of the
Notes or the Percentage Interests required to consent to any such amendment, in
either case of clause (a) or (b) without the consent of the holders of all the
outstanding Notes, the Note Insurer and the Holders of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent,
the Depositor shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the Note
Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
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Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
Section 11.02. No Legal Title to Owner Trust Estate in
Holders. The Certificateholders shall not have legal title to any part of the
Owner Trust Estate. The Certificateholders shall be entitled to receive
distributions with respect to their undivided ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
Accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
Section 11.03. Limitations on Rights of Others. The provisions
of this Agreement are solely for the benefit of the Owner Trustee, the
Depositor, the Certificateholders, the Note Insurer and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 11.04. Notices. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been given
if (1) personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Note Insurer, _____________________________; (iii) if to the Depositor,
or, as to each such party, at such other address as shall be designated by such
party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
Section 11.05. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of
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such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 11.06. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 11.07. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Note Insurer, the Owner Trustee and its successors and each
owner and its successors and permitted assigns, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 11.08. No Petition. The Owner Trustee, by entering
into this Agreement, each Certificateholder, by accepting a Certificate, and the
Indenture Trustee and each Noteholder by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy law in connection with any obligations
relating to the Certificates, the Notes, this Agreement or any of the Basic
Documents.
Section 11.09. No Recourse. Each Certificateholder by
accepting a Certificate acknowledges that such Certificateholder's Certificate
represents a beneficial interest in the Trust only and does not represent an
interest in or an obligation of the Servicer, theDepositor, the Owner Trustee or
any Affiliate thereof and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated in this Agreement,
the Certificates or the Basic Documents.
Section 11.10. Headings. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
Section 11.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.12. Grant of Certificateholder Rights to Note
Insurer. (a) In consideration for the issuance of the Certificates and for the
guarantee of the Notes by the Note Insurer pursuant to the Note Insurance
Policy, the Holders of the Certificates hereby grant to the Note Insurer the
right to act as the Holder of 100% of the outstanding Certificates for the
purpose of exercising the rights hereunder of the Certificateholders under this
Agreement without the consent of the Certificateholders, including the voting
rights of such Holders hereunder, but
34
<PAGE>
excluding those rights requiring the consent of all such Holders, and any rights
of such Holders to distributions under the Indenture; provided, that the
preceding grant of rights to the Note Insurer by the Holders of the Certificates
shall be subject to Section 11.14.
(b) The rights of the Note Insurer to direct certain actions
and consent to certain actions of the Certificateholders hereunder will
terminate at such time as the outstanding Principal Balance of the Notes has
been reduced to zero and the Note Insurer has been reimbursed for any amounts
owed under the Note Insurance Policy and the Insurance Agreement and the Note
Insurer has no further obligation under the Note Insurance Policy.
(c) The duties and responsibilities of the Owner Trustee shall
be limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note Insurer's
rights).
(d) Whenever in connection with its performance under this
Agreement the Owner Trustee receives inconsistent notices or advice from the
Note Insurer and the Certificateholders, the Owner Trustee shall, in the absence
of a Note Insurer Default, take the action required by the notices or advice
received from the Note Insurer.
Section 11.13. Third-Party Beneficiary. The Indenture Trustee
and the Note Insurer are intended third-party beneficiaries of this Agreement,
and this Agreement shall be binding upon and inure to the benefit of the
Indenture Trustee and the Note Insurer; provided, that, notwithstanding the
foregoing, for so long as a Note Insurer Default is continuing with respect to
its obligations under the Note Insurance Policy, the Certificateholders shall
succeed to the Note Insurer's rights hereunder. Without limiting the generality
of the foregoing, all covenants and agreements in this Agreement that expressly
confer rights upon the Note Insurer shall be for the benefit of and run directly
to the Note Insurer, and the Note Insurer shall be entitled to rely on and
enforce such covenants to the same extent as if it were a party to this
Agreement.
Section 11.14. Suspension and Termination of Note Insurer's
Rights. During the continuation of a Note Insurer Default, rights granted or
reserved to the Note Insurer hereunder shall vest instead in the
Certificateholders; provided, that the Note Insurer shall be entitled to any
distributions of reimbursements as set forth in the Insurance Agreement and the
Note Insurer shall retain those rights under Section 11.01 to consent to any
amendment of this Agreement.
At such time as either (i) the outstanding Note Principal
Balance of the Notes has been reduced to zero or (ii) the Note Insurance Policy
has been terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions and receive certain notices) shall
terminate and the Certificateholders shall be entitled to
35
<PAGE>
the exercise of such rights and to receive such benefits of the Note Insurer
following such termination to the extent that such rights and benefits are
applicable to the Certificateholders.
Section 11.15. Servicer. The Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust, the Depositor or Owner Trustee to prepare, file
or deliver pursuant to the Basic Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Servicer a limited power of attorney
appointing the Servicer the Trust's agent and attorney-in-fact to prepare, or
cause to be prepared, execute and deliver all such documents, reports, filings,
instruments, certificates and opinions.
[Remainder of Page Intentionally Left Blank]
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
_____________________________, as Depositor
By: _______________________________________
Name:
Title:
______________________________, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By: _______________________________________
Name:
Title:
37
<PAGE>
EXHIBIT A-1
FORM OF CERTIFICATE
POOL [I] [II] CERTIFICATE
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, ___________________) IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM
THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO
THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN"),
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY
A-1
<PAGE>
AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO THIS CERTIFICATE; (B) IS
NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE
CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES
IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST
TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS
CERTIFICATE.
A-2
<PAGE>
Pool [I][II] Certificate No. 1 Percentage Interest:
THIS CERTIFIES THAT ______________ (the "Holder") is the
registered owner of a ___% Percentage Interest of the related Trust Interest in
___________________________ (the "Trust") existing under the laws of the State
of Delaware and created pursuant to that certain Trust Agreement, dated as of
______________ (the "Trust Agreement"), by and among
____________________________________, as Depositor, and
_________________________, not its individual capacity but solely as owner
trustee under the Trust Agreement (the "Owner Trustee"). Capitalized terms used
but not otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement. The Owner Trustee, on behalf of the Trust and not in its
individual capacity, has executed this Certificate by one of its duly authorized
signatories as set forth below. This Certificate is one of the Certificates
referred to in the Trust Agreement and is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement to which the Holder of
this Certificate by virtue of the acceptance hereof agrees and by which the
Holder hereof is bound. Reference is hereby made to the Trust Agreement for the
rights of the Holder of this Certificate, as well as for the terms and
conditions of the Trust created by the Trust Agreement.
The recitals contained herein (other than the signature and
countersignature of the Owner Trustee) shall be taken as the statements of the
Depositor, and the Owner Trustee assumes no responsibility for the correctness
thereof.
The Holder, by its acceptance hereof, agrees not to transfer
this Certificate except in accordance with terms and provisions of the Trust
Agreement.
The Holder, by its acceptance hereof, acknowledges that such
Holder's Certificate represents a beneficial interest in the Trust only and does
not represent an interest in or an obligation of the Servicer, the Depositor,
the Owner Trustee or any Affiliate thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated herein, in the Trust Agreement or the other Basic Documents.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
___________________________________________
By: _______________________________________,
not in its individual capacity but solely
as Owner Trustee under the Trust Agreement
By: _______________________________________
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
__________________________________________,
not in its individual capacity but solely
as Owner Trustee under the Trust Agreement,
as Authenticating Agent
By: _______________________________________
Authorized Signatory
Dated:
A-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing __________ Attorney to transfer said Instrument on
the books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
*/
_________________________________________
Signature Guaranteed:
*/
_________________________________________
____________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRUST
CERTIFICATE OF TRUST OF
--------------------------------
THIS CERTIFICATE OF TRUST OF _________________________________
(the "Trust"), dated as of_____________________________, is being duly executed
and filed by __________________________________________, a _________ banking
association, as owner trustee (the "Owner Trustee"), to form a business trust
under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is
_____________________________________________________.
2. Delaware Trustee. The name and business address of the
Owner Trustee of the Trust in the State of Delaware is
__________________________________________, Attention: Corporate
Trust Administration.
3. Effective Date. This Certificate of Trust shall be
effective at 9:00 a.m. on ________________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
_____________________________________, not in
its individual capacity but solely as Owner
Trustee under a Trust Agreement, dated as of
___________.
By: _________________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF INVESTMENT LETTER
___________________, ____
[Trust]
[Owner Trustee]
Re: ___________ (the "Trust")
Mortgage Backed Notes, Series ____
Ladies and Gentlemen:
_________________________________________ (the "Holder") has
purchased or acquired, or intends to purchase or acquire from ________________,
the current Holder (the "Current Holder"), a Pool [I][II] Certificate
representing a ___% Percentage Interest (the "___% Certificate") in the related
Trust Interest for the referenced Trust, which represents an interest in the
Trust created pursuant to that certain Trust Agreement, dated as of _______ (the
"Trust Agreement"), by and among _______________, as Depositor, _________,
and____________, as Owner Trustee. Capitalized terms used and not otherwise
defined herein have the meanings assigned to such terms in the Trust Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the
Holder, hereby certifies, represents, warrants and agrees on behalf of the
Holder as follows:
1. The Holder is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed and is
authorized to invest in the ___% Certificate. The person executing this letter
on behalf of the Holder is duly authorized to do so on behalf of the Holder.
2. The Holder hereby acknowledges that no transfer of the ___%
Certificate may be made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act");
and applicable state securities laws, or is made in accordance with the
Securities Act and such laws.
3. The Holder understands that the ___% Certificate has not
been and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred apply to a person whom the transferor
reasonably believes is (A) a qualified institutional buyer (as defined in Rule
144A under the Securities Act) or (B) a Person involved in the organization or
operation of the Trust or an affiliate of such Person, in a transaction meeting
the requirements of Rule 144A under the Securities Act and in accordance with
any applicable securities laws of
44
<PAGE>
any state of the United States. The Holder understands that the ___% Certificate
bears a legend to the foregoing effect.
4. The Holder is acquiring the ___% Certificate for its own
account or for accounts for which it exercises sole investment discretion, and
not with a view to or for sale or other transfer in connection with any
distribution of the ___% Certificate in any manner that would violate Section 5
of the Securities Act or any applicable state securities laws, subject
nevertheless to any requirement of law that the disposition of the Holder's
property shall at all times be and remain within its control.
5. The Holder is (A) a "qualified institutional buyer" (a
"QIB") as defined in Rule 144A under the Securities Act, and is aware that the
transferor of the ___% Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and is
acquiring such ___% Certificate for its own Account or for the Account of one or
more qualified institutional buyers for whom it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an affiliate of
such Person within the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the Transferor). The Holder is
able to bear the economic risks of such an investment. The Holder is a QIB
because [STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Holder sells or otherwise transfers the registered
ownership of such ___% Certificate, the Holder will comply with the restrictions
and requirements with respect to the transfer of the ownership of the ___%
Certificate under the Trust Agreement, and the Holder will obtain from any
subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement
in connection with such subsequent sale or transfer thereof.
7. The Holder is not an entity that will hold a ___%
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance and
settlement of such security through electronic book-entry changes in Accounts or
participating organizations.
8. The Holder (i) is not a person which is an employee benefit
plan, trust or account subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code or a
governmental plan, as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (any such person being a "Plan"), (ii) is not an
entity, including an insurance company separate account or general account,
whose underlying assets include "plan assets" by reason of a Plan's investment
in the entity and (iii) is not directly or indirectly purchasing such ___%
Certificate on behalf of, as investment manager of, as named fiduciary of, as
trustee of, or with assets of a Plan.
9. The Holder hereby agrees to indemnify each of the Trust,
the Indenture Trustee and the Owner Trustee against any liability that may
result if the Holder's transfer of a ___% Certificate (or any portion thereof)
is not exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is not made in accordance with such federal
and state laws. Such indemnification of the Trust, the Indenture Trustee and the
Owner Trustee shall survive the termination of the related Trust Agreement.
C-2
<PAGE>
IN WITNESS WHEREOF, the Holder has caused this instrument to
be executed on its behalf, pursuant to the authority of its Board of Directors,
by its duly authorized signatory this ____ day of __________, 199_.
[NAME OF HOLDER]
By: ______________________________________
Name:
Title:
C-3
EXHIBIT 4.4
FORM OF SECURITIZATION
SPONSORSHIP AGREEMENT
SECURITIZATION SPONSORSHIP AGREEMENT
Between
_________________________,
as Originator
and
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Sponsor
Dated as of ________, ____
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..........................................................1
Section 1.1. Definitions...........................................1
ARTICLE II AGREEMENT TO CREATE TRUST; AGREEMENT TO CONVEY MORTGAGE LOANS;
ASSIGNMENT........................................................1
Section 2.1. Agreement to Create Trust.............................1
Section 2.2. Agreement to Convey Mortgage Loans....................2
Section 2.3. Possession of Files...................................2
Section 2.4. Books and Records.....................................2
Section 2.5. Cost of Delivery and Recordation of Documents.........2
Section 2.6. Assignment of Agreement...............................3
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................3
Section 3.1. Representations and Warranties of the Originator......3
Section 3.2. Representations and Warranties of the Sponsor.........4
ARTICLE IV CERTAIN COVENANTS OF THE ORIGINATOR.................................5
Section 4.1. Further Assurances....................................5
Section 4.2. Indemnification.......................................5
ARTICLE V MISCELLANEOUS........................................................5
Section 5.1. Notices...............................................5
Section 5.2. Severability of Provisions............................6
Section 5.3. Survival..............................................6
Section 5.4. Effect of Headings and Table of Contents..............6
Section 5.5. Successors and Assigns................................6
Section 5.6. Miscellaneous.........................................6
Section 5.7. Amendments............................................7
Section 5.8. Third-Party Beneficiaries.............................7
Section 5.9. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL..........................................7
Section 5.10. Execution in Counterparts.............................8
Exhibit A - Mortgage Loan Schedule
i
<PAGE>
This SECURITIZATION SPONSORSHIP AGREEMENT, dated as of ______,
____ (this "Agreement"), by and between ___________, a _________ corporation,
its successors and assigns (the "Originator"), and PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, a Delaware corporation and its successors and assigns
(the "Sponsor").
W I T N E S S E T H:
WHEREAS, Exhibit A attached hereto and made a part hereof
lists certain Mortgage Loans (the "Mortgage Loans") owned by the Originator that
the Originator desires to include in a securitization transaction; and
WHEREAS, the Sponsor has previously filed a Registration
Statement with the Securities and Exchange Commission which allows for the
registration of certain types of asset-backed securities issued by the Sponsor
thereunder; and
WHEREAS, the Sponsor is willing to create a trust (the
"Trust") for which __________________ (the "Owner Trustee") is willing to act as
trustee; and
WHEREAS, the Sponsor is willing to direct the Trust to acquire
the Mortgage Loans from the Originator or its special-purpose affiliate (the
"Depositor") and to issue certain asset-backed securities representing
beneficial interests in the Trust or indebtedness of the Trust (the
"Securities"); and
WHEREAS, the Sponsor is willing to act as the "Issuer" of the
Securities in its capacity as the "manager" of the Trust, as described and
provided in Section 2(4) of the Securities Act of 1933, as amended, and to
assume the responsibilities, obligations and liabilities appurtenant to its
status as an issuer of securities; and
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
Article I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used herein that
are not otherwise defined shall have the respective meanings ascribed thereto in
the Indenture, dated as of ______, ___ (the "Indenture"), between the Trust and
__________, as indenture trustee (the "Indenture Trustee").
Article II
AGREEMENT TO CREATE TRUST; AGREEMENT TO CONVEY
Mortgage Loans; ASSIGNMENT
Section 2.1. Agreement to Create Trust. (a) Subject to the
terms and conditions of this Agreement, the Sponsor agrees to create the Trust
under the Trust Agreement and to
1
<PAGE>
direct the Trust to acquire the Mortgage Loans listed in the Mortgage Loan
Schedule, which schedule is attached hereto as Exhibit A. The Mortgage Loan
Schedule shall conform to the requirements of the Sponsor and to the definition
of "Mortgage Loan Schedule" under the Indenture.
Upon the Trust's acquisition of the Mortgage Loans, the
Sponsor will further direct the Trust to issue the Securities. The transactions
described in this paragraph (a) are the collectively referred to as the
"Securitization".
(b) The closing for the Securitization shall take place at the
offices of ________, _________, at 10:00 a.m., New York time, on _______, _____
or such other place and time as the parties shall agree (such time being herein
referred to as the "Closing Date").
Section 2.2. Agreement to Convey Mortgage Loans. On the
Closing Date, the Originator or the Depositor shall sell, transfer, assign, set
over and convey to the Trust, without recourse but subject to the terms of this
Agreement, all of its right, title and interest in and to the Mortgage Loans
(including, without limitation, the security interests created thereby), and all
its right, title and interest in and to (i) scheduled payments of interest due
on each Mortgage Loan after the Cut-Off Date, (ii) scheduled payments of
principal due, and unscheduled collections of principal received, on each
Mortgage Loan on and after the Cut-Off Date, (iii) the Insurance Policies, and
(iv) escrow accounts.
Section 2.3. Possession of Files. Upon the sale of the
Mortgage Loans, the ownership of each related Mortgage Loan and the contents of
the related Loan File shall immediately vest in the Trust. The contents of any
Loan File in the possession of the Originator or the Depsoitor at any time after
such sale, and any scheduled payments of principal and interest on the Mortgage
Loans due after the Cut-Off Date and received by the Originator or the
Depositor, shall be held in trust by the Originator or the Depositor, as the
case may be, for the benefit of the Trust as the owner thereof, and shall be
promptly delivered by the Originator or the Depositor, as applicable, to or upon
the order of the Sponsor on behalf of the Trust.
Section 2.4. Books and Records. The conveyance of each
Mortgage Loan to the Trust shall be reflected on the Originator's and the
Depositor's accounting and other records, balance sheet and other financial
statements as a sale of assets by Originator or the Depositor, as applicable, to
the Trust. The Originator and the Depositor shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Mortgage Loan which shall be clearly marked to reflect the ownership of each
Mortgage Loan by the Trust for the benefit of the Owners.
Section 2.5. Cost of Delivery and Recordation of Documents.
The costs relating to the delivery and recordation of the documents specified in
this Article II in connection with the Mortgage Loans shall be borne by the
Originator.
Section 2.6. Assignment of Agreement. The Originator hereby
acknowledges and agrees that the Sponsor intends to assign its interest (other
than the Unassigned Rights (as defined in Section 4.02(a) hereof)) under this
Agreement to the Trustee as may be required to effect the purposes of the
Indenture, without further notice to, or consent of, the Originator, and
2
<PAGE>
the Trustee shall succeed to such of the rights and obligations of the Sponsor
hereunder as shall be so assigned.
Article III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Originator.
The Originator hereby represents, warrants and covenants to the Sponsor as of
the Closing Date that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of the State of ________ and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it make such qualification
necessary. The Originator has all requisite corporate power and authority to own
and operate its properties, to enable it to carry out its business as presently
conducted in a material manner and as proposed to be conducted and to enter into
and discharge its obligations under this Agreement in a material manner.
(b) The execution and delivery of this Agreement by the
Originator, and its performance and compliance with the terms of this Agreement
have been duly authorized by all necessary corporate action on the part of the
Originator and will not violate the Originator's organization documents or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Originator is a party or by
which the Originator is bound, or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Originator or any of its properties.
(c) This Agreement, assuming due authorization, execution and
delivery by the other parties hereto and thereto, constitutes a valid, legal and
binding obligation of the Originator, enforceable against it in accordance with
the terms hereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Originator is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of the Originator or its properties or might have consequences that would
materially and adversely affect its performance hereunder.
(e) No litigation is pending or, to the best of the
Originator's knowledge, threatened against the Originator which litigation might
have consequences that would prohibit its entering into this Agreement or that
would materially and adversely affect the condition (financial or otherwise) or
operations of the Originator or its properties or might have consequences that
would materially and adversely affect its performance hereunder.
3
<PAGE>
Section 3.2. Representations and Warranties of the Sponsor.
The Sponsor hereby represents and warrants to the Originator, as of the date of
execution of this Agreement and the Closing Date, that:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Sponsor has the corporate power and authority to
create the Trust, cause the Trust to acquire the Mortgage Loans and issue the
Securities and to execute, deliver and perform, and to enter into and consummate
all the transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Sponsor, and, assuming the due authorization,
execution and delivery hereof by the Originator, constitutes the legal, valid
and binding agreement of the Sponsor, enforceable against the Sponsor 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
Sponsor with this Agreement or the consummation by the Sponsor of any of the
transactions contemplated hereby, except such as have been made on or prior to
the Closing Date; and
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the fulfillment
of or compliance with the terms and conditions of this Agreement, (i) conflicts
or will conflict with the organization documents of the Sponsor or 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,
any term, condition or provision of any indenture, deed of trust, contract or
other agreement or other instrument to which the Sponsor is a party or by which
it is bound and which is material to the Sponsor, or (ii) results or will result
in a violation of any law, rule, regulation, order, judgment or decree of any
court or governmental authority having jurisdiction over the Sponsor.
Article IV
CERTAIN COVENANTS OF THE ORIGINATOR
Section 4.1. Further Assurances. The Originator hereby agrees
to do all acts, transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on behalf of the
Originator as the Sponsor or its counsel may reasonably request in order to
consummate the transfer of the Mortgage Loans to the Trust and the rating,
issuance and sale of the Securities.
Section 4.2. Indemnification. (a) The Originator agrees to
indemnify the Sponsor, its officers and directors and "controlling persons"
within the meaning of the Federal securities laws from and against any losses,
claims, actions or liabilities suffered or incurred by
4
<PAGE>
the Sponsor in connection with the Securitization, except to the extent any such
losses, claims, etc., relate to the "Sponsor Offering Materials", as defined in
the Underwriting Agreement dated as of the Originator (the "Underwriting
Agreement") among the Originator, the Sponsor, the Depositor and ________ (the
"Underwriter"). The rights of the Sponsor under this Section 4.02(a) are the
"Unassigned Rights" which are not being assigned to the Trustee.
(b) The Sponsor agrees to indemnify the Originator, its
officers and directors and "controlling persons" within the meaning of the
federal securities laws from and against any losses, claims, actions or
liabilities suffered or incurred by the Originator relating to the Sponsor
Offering Materials, as defined in the Underwriting Agreement.
Article V
MISCELLANEOUS
Section 5.1. Notices. All demands, notices and communications
hereunder shall be given as follows, until any superseding instructions are
given to all other persons listed below:
The Originator:
[address]
Attention:
Tel:
Fax:
The Sponsor:
[address]
Attention:
Tel:
Fax:
Section 5.2. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 5.3. Survival. The parties to this Agreement agree
that the representations, warranties and agreements made by each of them herein
and in any certificate or
5
<PAGE>
other instrument delivered pursuant hereto shall be deemed to be relied upon by
the other party hereto, notwithstanding any investigation heretofore or
hereafter made by such other party or on such other party's behalf, and that the
representations, warranties and agreements made by the parties hereto in this
Agreement or in any such certificate or other instrument shall survive the
execution and delivery of this Agreement and the delivery of and payment for the
Mortgage Loans pursuant to the Loan Sale Agreement and the Sale and Servicing
Agreement.
Section 5.4. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 5.5. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as expressly permitted by
the terms hereof, this Agreement may not be assigned, pledged or hypothecated by
any party hereto to a third party without the written consent of the other party
to this Agreement; provided, however, that the Sponsor may assign its rights
hereunder without the consent of the Originator.
Section 5.6. Miscellaneous. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
Section 5.7. Amendments. (a) This Agreement may be amended
from time to time by the Originator and the Sponsor by written agreement without
notice to or consent of the Owners, but with the consent of the Note Insurer, 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 Note Insurer,
adversely affect in any material respect the interests of any Owner; 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 Security without the consent of the Owner of such
Security, or change the rights or obligations of any other party hereto without
the consent of such party.
(b) It shall not be necessary for the consent of Owners 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.
(c) The Owners, if they so request, shall be provided with
copies of any amendments to this Agreement, together with copies of any opinions
or other documents or instruments executed in connection therewith.
Section 5.8. Third-Party Beneficiaries. The parties agree that
each of the Note Insurer and the Trustee is an intended third-party beneficiary
of this Agreement to the extent necessary to enforce the rights and to obtain
the benefit of the remedies of the Sponsor under this Agreement which are
assigned to the Trustee for the benefit of the Owners pursuant to the
6
<PAGE>
Indenture and to the extent necessary to obtain the benefit of the enforcement
of the obligations and covenants of the Originator under Section 3.1 of this
Agreement.
Section 5.9. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE SPONSOR AND THE ORIGINATOR EACH HEREBY SUBMITS 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 5.01 OF THIS AGREEMENT 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 SPONSOR AND THE ORIGINATOR EACH HEREBY WAIVES 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 SPONSOR AND THE ORIGINATOR TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S RIGHT TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE SPONSOR AND THE ORIGINATOR 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 RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 5.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
[Signatures Commence on Following Page]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names
to be signed by their respective officers thereunto duly authorized as of the
date first above written.
____________________________________________,
as Originator
By: ________________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Sponsor
By: ________________________________________
Name:
Title:
EXHIBIT 5.1
[Letterhead of Dewey Ballantine LLP]
May 17, 1999
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Re: Mortgage Backed Securities
Ladies and Gentlemen:
We have acted as counsel to Prudential Securities Secured
Financing Corporation ("Prudential" or the "Registrant") in connection with the
preparation and filing of the registration statement on Form S-3 (the
"Registration Statement") being filed today with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), in
respect of the offering of separate series of Mortgage Backed Securities (the
"Securities") which the Registrant plans to sponsor. Each series of Securities
will be issued under a separate pooling and servicing agreement, indenture or
trust agreement (each, an "Issuing Agreement"), in substantially one of the
forms incorporated by reference as Exhibits to the Registration Statement, among
Prudential, a trust to be identified in the prospectus supplement for such
series of Securities (the "Trust"), a servicer to be identified in the
prospectus supplement for such series of Securities (the "Servicer" for such
series), and/or a trustee to be identified in the prospectus supplement for such
series of Securities (the "Trustee" for such series).
We have examined and relied on the originals or copies
certified or otherwise identified to our satisfaction of all such documents and
records of Prudential and such other instruments and other certificates of
public officials, officers and representatives of Prudential and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.
The opinions expressed below are subject to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles.
We are admitted to the Bar of the State of New York and we
express no opinion as to the laws of any other jurisdiction except as to matters
that are governed by Federal law or the
<PAGE>
laws of the State of New York. All opinions expressed herein are based on laws,
regulations and policy guidelines currently in force and may be affected by
future regulations.
Based upon the foregoing, we are of the opinion that:
1. When, in respect of a series of
Securities, an Issuing Agreement has been duly authorized by
all necessary action and duly executed and delivered by
Prudential, the Trust, the Servicer and the Trustee, as
applicable, for such series, such Issuing Agreement will be a
valid and legally binding obligation of Prudential; and
2. When an Issuing Agreement for a series of
Securities has been duly authorized by all necessary action
and duly executed and delivered by Prudential, the Trust, the
Servicer and the Trustee, as applicable, for such series, and
when the Securities of such series have been duly executed and
authenticated in accordance with the provisions of the Issuing
Agreement, and issued and sold as contemplated in the
Registration Statement and the prospectus, as amended or
supplemented and delivered pursuant to Section 5 of the Act in
connection therewith, such Securities will be legally and
validly issued, fully paid and nonassessable, and the holders
of such Securities will be entitled to the benefits of such
Issuing Agreement.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the reference to Dewey Ballantine LLP in
the Registration Statement and in future related prospectus supplements under
the heading "Legal Matters."
This opinion is furnished by us as counsel to the Registrant
and is solely for the benefit of the addressees hereof. It may not be relied
upon by any other person or for any other purpose without our prior written
consent.
Very truly yours,
DEWEY BALLANTINE LLP
EXHIBIT 8.1
[Letterhead of Dewey Ballantine LLP]
May 17, 1999
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Re: Mortgage Backed Securities
Ladies and Gentlemen:
We have acted as counsel to Prudential Securities Secured
Financing Corporation ("Prudential" or the "Registrant") in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") being filed today with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), in
respect of the offering of separate series of Mortgage Backed Securities (the
"Securities") which Registrant plans to sponsor. Our advice formed the basis for
the description of federal income tax consequences appearing under the heading
"Certain Federal Income Tax Consequences" in the prospectus contained in the
Registration Statement. Such description does not purport to discuss all
possible federal income tax consequences of an investment in the Securities, but
with respect to those tax consequences which are discussed in our opinion, the
description is accurate.
We hereby consent to the filing of this letter as an Exhibit
to the Registration Statement and to the reference to Dewey Ballantine LLP in
the Registration Statement and in future related prospectus supplements under
the heading "Certain Federal Income Tax Consequences."
Very truly yours,
DEWEY BALLANTINE LLP
EXHIBIT 10.1
FORM OF LOAN SALE AGREEMENT
LOAN SALE AGREEMENT
dated as of _____
by and among
_____________________________________
as Depositor,
_____________________________________
as an Originator
and
_____________________________________
as an Originator
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .........................................................1
Section 1.01. Definitions.................................................1
ARTICLE II PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS.....................2
Section 2.01. Agreement to Purchase the Initial Mortgage Loans............2
Section 2.02. Agreement to Purchase the Subsequent Mortgage Loans.........3
Section 2.03. Purchase Price..............................................3
Section 2.04. Conveyance of Mortgage Loans; Possession of Mortgage
Files......................................................4
Section 2.05. Delivery of Mortgage Loan Documents.........................4
Section 2.06. Acceptance of Mortgage Loans................................5
Section 2.07. Transfer of Mortgage Loans; Assignment of Agreement.........6
Section 2.08. Examination of Mortgage Files...............................6
Section 2.09. Books and Records...........................................7
Section 2.10. Cost of Delivery and Recordation of Documents...............7
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................7
Section 3.01. Representations and Warranties as to the Originators........7
Section 3.02. [Reserved]..................................................9
Section 3.03. Representations and Warranties Relating to the Mortgage
Loans.....................................................9
Section 3.04. Representations and Warranties of the Depositor............18
Section 3.05. Repurchase Obligation for Defective Documentation and
for Breach of a Representation or Warranty.................19
ARTICLE IV THE ORIGINATORS....................................................22
Section 4.01. Covenants of the Originators...............................22
Section 4.02. Merger or Consolidation....................................22
Section 4.03. Costs......................................................22
Section 4.04. Indemnification............................................23
ARTICLE V CONDITIONS OF CLOSING...............................................25
Section 5.01. Conditions of Depositor's Obligations......................25
Section 5.02. Conditions of Originators' Obligations.....................27
Section 5.03. Termination of Depositor's Obligations.....................28
ARTICLE VI MISCELLANEOUS .....................................................28
Section 6.01. Notices....................................................28
Section 6.02. Severability of Provisions.................................28
<PAGE>
Section 6.03. Agreement of Originators...................................29
Section 6.04. Survival...................................................29
Section 6.05. Effect of Headings and Table of Contents...................29
Section 6.06. Successors and Assigns.....................................29
Section 6.07. Confirmation of Intent; Grant of Security Interest.........29
Section 6.08. Miscellaneous..............................................30
Section 6.09. Amendments.................................................30
Section 6.10. Third-Party Beneficiaries..................................31
Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.......................................31
Section 6.12. Execution in Counterparts..................................32
SCHEDULES AND EXHIBITS
Schedule I - Mortgage Loan Schedule
Exhibit A - Form of Subsequent Transfer Agreement
<PAGE>
This LOAN SALE AGREEMENT, dated as of _________ (this
"Agreement"), by and among ____________________, a ___________ corporation, (the
"Depositor"), and ____________________, a __________ corporation, and
____________________, a __________ corporation (together, the "Originators").
W I T N E S S E T H:
WHEREAS, Schedule I attached hereto and made a part hereof
lists certain fixed rate business and consumer purpose first and second lien
mortgage loans (the "Mortgage Loans") owned by the Originators that the
Originators desire to sell to the Depositor and that the Depositor desires to
purchase;
WHEREAS, it is the intention of the Originators and the
Depositor that simultaneously with the Originators' conveyance of the Mortgage
Loans to the Depositor on the Closing Date, (a) the Depositor shall sell the
Mortgage Loans to ____________________, a ________ business trust (the "Trust")
pursuant to a Sale and Servicing Agreement to be dated as of _____ (the "Sale
and Servicing Agreement"), to be entered into by and among the Depositor, as
depositor, the Trust, as issuer, ________, as servicer (in such capacity, the
"Servicer"), ________, a ________ banking association, as collateral agent (the
"Collateral Agent"), and ________, a ________banking corporation, as indenture
trustee (the "Indenture Trustee"), and (b) the Trust shall issue its Mortgage
Backed Notes (the "Notes"), pursuant to an Indenture, to be dated as of _____
(the "Indenture"), by and between the Trust and the Indenture Trustee, which
Notes will be secured by a pledge of the assets of the Trust.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article I:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Prospectus" means the Prospectus dated _____ relating to the
offering by the Depositor from time to time of its Mortgage Backed Notes
(Issuable in Series) in the form in which it was or will be filed with the
Commission pursuant to Rule 424(b) under the Securities Act with respect to the
offer and sale of the Notes.
"Prospectus Supplement" means the Prospectus Supplement dated
_____, relating to the offering of the Notes in the form in which it was or will
be filed with the Commission pursuant to Rule 424(b) under the Securities Act
with respect to the offer and sale of the Notes.
"Registration Statement" means that certain registration
statement on Form S-3, as amended (Registration No. ________) relating to the
offering by the Depositor from time to
<PAGE>
time of its Mortgage Backed Notes (Issuable in Series) as heretofore declared
effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of
the following conditions:
(a) a stop order suspending the
effectiveness of the Registration Statement shall have been
issued or a proceeding for that purpose shall have been
initiated or threatened by the Commission; or
(b) subsequent to the execution and delivery
of this Agreement, a downgrading, or public notification of a
possible change, without indication of direction, shall have
occurred in the rating afforded any of the debt securities or
claims paying ability of any person providing any form of
credit enhancement for any of the Notes, by any "nationally
recognized statistical rating organization," as that term is
defined by the Commission for purposes of Rule 436(g)(2) under
the Securities Act; or
(c) subsequent to the execution and delivery
of this Agreement, there shall have occurred an adverse change
in the condition, financial or otherwise, earnings, affairs,
regulatory situation or business prospects of the Note Insurer
reasonably determined by the Depositor to be material; or
(d) subsequent to the date of this Agreement
there shall have occurred any of the following: (i) a
suspension or material limitation in trading in securities
substantially similar to the Notes; (ii) a general moratorium
on commercial banking activities in the State of New York
declared by either Federal or New York State authorities; or
(iii) the engagement by the United States in hostilities, or
the escalation of such hostilities, or any calamity or crisis,
if the effect of any such event specified in this clause (iii)
in the reasonable judgment of the Depositor makes it
impracticable or inadvisable to proceed with the public
offering or the delivery of the Notes on the terms and in the
manner contemplated in the Prospectus Supplement.
(b) Capitalized terms used herein that are not otherwise
defined shall have the respective meanings ascribed thereto in Appendix I to the
Indenture.
ARTICLE II
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Agreement to Purchase the Initial Mortgage
Loans. (a) Subject to the terms and conditions of this Agreement, the
Originators agree to sell, and the Depositor agrees to purchase, the Mortgage
Loans having the Cut-Off Date Aggregate Principal Balance or, in accordance with
Section 2.08 hereof, such other balance as is evidenced by the actual Cut-Off
Date Aggregate Principal Balance of the Mortgage Loans accepted by the Depositor
on the Closing Date and listed in the Mortgage Loan Schedule.
2
<PAGE>
(b) Subject to Section 2.08 hereof, the Depositor and the
Originators have agreed upon which of the Originators' Mortgage Loans are to be
purchased by the Depositor on the Closing Date pursuant to this Agreement, and
the Originators has prepared a schedule describing the Mortgage Loans (the
"Mortgage Loan Schedule") setting forth all of the Mortgage Loans to be
purchased under this Agreement, which Mortgage Loan Schedule is attached hereto
as Schedule I. The Mortgage Loan Schedule shall conform to the requirements of
the Depositor and to the definition of "Mortgage Loan Schedule" in Appendix I to
the Indenture.
(c) The closing for the purchase and sale of the Mortgage
Loans shall take place at the offices of ________, New York, New York, at 10:00
a.m., New York time, on the Closing Date, or such other place and time as the
parties shall agree.
Section 2.02. Agreement to Purchase the Subsequent Mortgage
Loans. Subject to the satisfaction of the conditions set forth in Section
2.14(b) of the Indenture, in consideration of the Depositor's delivery on the
related Subsequent Transfer Dates to or upon the order of the Originators of all
or a portion of the balance of funds on deposit in the Pre-Funding Accounts, the
Originators shall on any Subsequent Transfer Date sell, transfer, assign, set
over and convey to the Depositor, without recourse, but subject to the terms and
provisions of this Agreement, all of the right, title and interest of the
Originators in and to the Subsequent Mortgage Loans, including all principal of,
and all interest due on, such Subsequent Mortgage Loans, and all other assets
included or to be included in the Trust Estate.
The amount released from a Pre-Funding Account with respect to
a transfer of Subsequent Mortgage Loans to the related Pool shall be one-hundred
percent (100%) of the Aggregate Principal Balance of such Subsequent Mortgage
Loans so transferred, as of the related Subsequent Cut-Off Date.
The obligation of the Depositor to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the satisfaction of
the requirements set forth in Section 2.14(b) of the Indenture.
Section 2.03. Purchase Price. (a) On the Closing Date, as
consideration for the Originators' sale of the Initial Mortgage Loans to the
Depositor, the Depositor will deliver to the Originators (i) an amount in cash
equal to the sum of (A) ___%, and ____% of the Original Note Principal Balance
as of the Closing Date of the Class A-1 Notes and Class A-2 Notes, respectively,
plus (B) accrued interest on the Original Note Principal Balance of the Class
A-1 Notes and Class A-2 Notes at the rate of ____% per annum and ___% per annum,
respectively, from (and including) _____ to (but not including) _____, minus (C)
the Original Pre-Funded Amount and the Original Capitalized Interest Amount for
each class of Notes, payable by wire transfer of same day funds and (ii) the
Trust Certificates to be issued pursuant to the Trust Agreement.
(a) On each Subsequent Transfer Date, as full consideration
for the Originators' sale of the Subsequent Mortgage Loans to the Depositor, the
Depositor will deliver to the Originators an amount in cash equal to the sum of
100% of the Aggregate Principal Balance of the Subsequent Mortgage Loans of the
related Pool as of the related Subsequent Cut-Off Date.
3
<PAGE>
Section 2.04. Conveyance of Mortgage Loans; Possession of
Mortgage Files. (a) On the Closing Date and on each Subsequent Transfer Date,
the Originators shall sell, transfer, assign, set over and convey to the
Depositor, without recourse, but subject to the terms of this Agreement, all
right, title and interest in and to the applicable Mortgage Loans, including all
principal outstanding as of, and all interest due after, the related Cut-Off
Date, the Insurance Policies relating to each such Mortgage Loan, all right,
title and interest in and to the proceeds of such Insurance Policies and all of
its rights under this Agreement with respect to the Mortgage Loans from and
after the related Cut-Off Date or the Subsequent Cut-Off Date, as applicable.
Upon payment of the purchase price for such Mortgage Loans as provided in
Section 2.03 of this Agreement, the Originators shall have hereby, and shall be
deemed to have, sold, transferred, assigned, set over and conveyed to the
Depositor such Mortgage Loans, the Insurance Policies relating to each such
Mortgage Loan, all right, title and interest in and to the proceeds of such
Insurance Policies and all of its rights under this Agreement with respect to
the Mortgage Loans from and after the related Cut-Off Date or the Subsequent
Cut-Off Date, as applicable.
(b) Upon the sale of such Mortgage Loans, the ownership of
each related Mortgage Note, each related Mortgage and the contents of the
related Mortgage File shall immediately vest in the Depositor and the ownership
of all related records and documents with respect to each Mortgage Loan prepared
by or which come into the possession of the Originators shall immediately vest
in the Depositor. The contents of any Indenture Trustee's Mortgage File in the
possession of the Originators at any time after such sale, and any principal
collected and interest due on the Mortgage Loans after the related Cut-Off Date
and received by the Originators, shall be held in trust by the Originators for
the benefit of the Depositor as the owner thereof, and shall be promptly
delivered by the Originators to or upon the order of the Depositor.
(c) Pursuant to the Sale and Servicing Agreement, the
Depositor shall, on the Closing Date, assign all of its right, title and
interest in and to the Initial Mortgage Loans to the Trust. Pursuant to the
Indenture, the Trust shall, on the Closing Date, pledge all of its right, title
and interest in and to the Initial Mortgage Loans to the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer.
Section 2.05. Delivery of Mortgage Loan Documents. (a) On or
prior to the Closing Date or Subsequent Transfer Date, as applicable, the
related Originator shall deliver to the Collateral Agent, on behalf of the
Indenture Trustee (as pledgee of the Trust pursuant to the Indenture, the Trust
being the assignee of the Depositor pursuant to the Sale and Servicing
Agreement), each of the documents for each applicable Mortgage Loan in
accordance with the provisions of Section 2.05 of the Sale and Servicing
Agreement.
(b) As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the Depositor shall promptly submit, or cause to be submitted by the related
Originator, for recording in the appropriate public office for real property
records, each assignment referred to in Section 2.05(a)(iv) of the Sale and
Servicing Agreement. The Collateral Agent, on behalf of the Indenture Trustee,
shall be required to retain a copy of each assignment submitted for recording.
In the event that any such assignment is lost or returned unrecorded because of
a defect therein, the Depositor or such Originator shall promptly prepare a
substitute assignment or cure such defect, as the case may
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<PAGE>
be, and thereafter the Depositor or such Originator shall submit each such
assignment for recording.
(c) The Depositor or the related Originator shall, within five
(5) Business Days after the receipt thereof, deliver or cause to be delivered to
the Collateral Agent, on behalf of the Indenture Trustee (as pledgee of the
Trust pursuant to the Indenture, the Trust being the assignee of the Depositor
pursuant to the Sale and Servicing Agreement): (i) the original recorded
Mortgage and related power of attorney, if any, in those instances where a copy
thereof certified by the related Originator was delivered to the Collateral
Agent, on behalf of the Indenture Trustee, pursuant to Section 2.05 of the Sale
and Servicing Agreement; (ii) the original recorded assignment of Mortgage from
the related Originator to the Indenture Trustee, which, together with any
intervening assignments of Mortgage, evidences a complete chain of assignment
from the originator of the Mortgage Loan to the Indenture Trustee in those
instances where copies of such assignments certified by the related Originator
were delivered to the Collateral Agent, on behalf of the Indenture Trustee,
pursuant to Section 2.05 of the Sale and Servicing Agreement; and (iii) the
title insurance policy or title opinion required in Section 2.05(a)(vi) of the
Sale and Servicing Agreement.
Notwithstanding anything to the contrary contained in this
Section 2.05, in those instances where the public recording office retains the
original Mortgage, power of attorney, if any, assignment or assignment of
Mortgage after it has been recorded or such original has been lost, the
Depositor or the related Originator shall be deemed to have satisfied its
obligations hereunder upon delivery to the Collateral Agent, on behalf of the
Indenture Trustee, of a copy of such Mortgage, power of attorney, if any,
assignment or assignment of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof.
From time to time the Depositor or the related Originator may
forward or cause to be forwarded to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing an assumption or
modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Collateral Agent, on behalf of the Indenture Trustee,
as permitted by Section 2.05(a) hereof are and shall be held by the Servicer,
the Depositor or the related Originator in trust for the benefit of the
Indenture Trustee, on behalf of the Noteholders and the Note Insurer. In the
event that any such original document is required pursuant to the terms of this
Section 2.05 to be a part of an Indenture Trustee's Mortgage File, such document
shall be delivered promptly to the Collateral Agent, on behalf of the Indenture
Trustee. From and after the sale of the Mortgage Loans to the Depositor pursuant
hereto, to the extent that the related Originator retains legal title of record
to any Mortgage Loans prior to the vesting of legal title in the Indenture
Trustee, such title shall be retained in trust for the Trust as the owner of the
Mortgage Loans, as the Depositor's assignee, and the Indenture Trustee, as the
Trust's pledgee.
Section 2.06. Acceptance of Mortgage Loans. (a) To evidence
the transfer of the Mortgage Loans and related Mortgage Files to the Collateral
Agent, on behalf of the Indenture Trustee, the Collateral Agent shall deliver
the acknowledgement of receipt, the Initial Certification and the Final
Certification required to be delivered pursuant to Section 2.06(b) of the Sale
and Servicing Agreement.
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(b) The Sale and Servicing Agreement provides that, if the
Collateral Agent during the process of reviewing the Indenture Trustee's
Mortgage Files, finds any document constituting a part of a Indenture Trustee's
Mortgage File which is not executed, has not been received, is unrelated to the
Mortgage Loan identified in the Mortgage Loan Schedule, or does not conform to
the requirements of Section 2.05 of the Sale and Servicing Agreement or the
description thereof as set forth in the Mortgage Loan Schedule, the Collateral
Agent shall promptly so notify the Servicer, the Indenture Trustee, the related
Originator and the Note Insurer. The Originators agree that in performing any
such review, the Collateral Agent may conclusively rely on the Originators as to
the purported genuineness of any such document and any signature thereon. Each
of the Originators agrees to use reasonable efforts to remedy a material defect
in a document constituting part of an Indenture Trustee's Mortgage File of which
it is notified. If, however, within sixty (60) days after such notice none of
the Originators has remedied the defect and the defect materially and adversely
affects the interest of the Noteholders in the related Mortgage Loan or the
interests of the Note Insurer, then the Originators shall be obligated to either
substitute in lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan or
purchase such Mortgage Loan in the manner and subject to the conditions set
forth in Section 3.05 hereof.
(c) The failure of the Collateral Agent, the Indenture Trustee
or the Note Insurer to give any notice contemplated herein within the time
periods specified above shall not affect or relieve the Depositor's or the
Originators obligation to repurchase for any Mortgage Loan pursuant to this
Section 2.06 or Section 3.05 of this Agreement.
Section 2.07. Transfer of Mortgage Loans; Assignment of
Agreement. The Originators each hereby acknowledges and agrees that the
Depositor or the Trust may assign its interest under this Agreement to the
Indenture Trustee as may be required to effect the purposes of the Indenture and
the Sale and Servicing Agreement, without further notice to, or consent of, the
Originators, and the Indenture Trustee shall succeed to such of the rights and
obligations of the Depositor and the Trust hereunder as shall be so assigned.
The Depositor shall, pursuant to the Sale and Servicing Agreement, assign all of
its right, title and interest in and to the Mortgage Loans and its right to
exercise the remedies created by Sections 2.06 and 3.05 hereof for breaches of
the representations, warranties, agreements and covenants of the Originators
contained in Sections 2.05, 2.06 and 3.03 hereof to the Trust, and the Trust
shall, pursuant to the Indenture, pledge such right, title and interest to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer. Each
of the Originators agrees that, upon such assignment to the Trust and pledge to
the Indenture Trustee, such representations, warranties, agreements and
covenants will run to and be for the benefit of the Indenture Trustee and the
Indenture Trustee may enforce, without joinder of the Depositor or the Trust,
the repurchase obligations of the Originators set forth herein with respect to
breaches of such representations, warranties, agreements and covenants.
Section 2.08. Examination of Mortgage Files. Prior to the
Closing Date and each Subsequent Transfer Date, as applicable, the Originators
shall make the Mortgage Files available to the Depositor or its designee for
examination at the Originators' offices or at such other place as the
Originators shall reasonably specify. Such examination may be made by the
Depositor or its designee at any time on or before the Closing
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Date or Subsequent Transfer Date, as the case may be. If the Depositor or its
designee makes such examination prior to the Closing Date or Subsequent Transfer
Date, as the case may be, and identifies any Mortgage Loans that do not conform
to the requirements of the Depositor as described in this Agreement, such
Mortgage Loans shall be deleted from the Mortgage Loan Schedule and may be
replaced, prior to the Closing Date or Subsequent Transfer Date, as the case may
be, by substitute Mortgage Loans acceptable to the Depositor. The Depositor may,
at its option and without notice to the Originators, purchase all or part of the
Mortgage Loans without conducting any partial or complete examination. The fact
that the Depositor, the Collateral Agent or the Indenture Trustee has conducted
or has failed to conduct any partial or complete examination of the Mortgage
Files shall not affect the rights of the Depositor or the Indenture Trustee to
demand repurchase or other relief as provided in this Agreement.
Section 2.09. Books and Records. The transfer of each Mortgage
Loan shall be reflected on each of the Originators' accounting and other
records, balance sheet and other financial statements as a sale of assets by the
Originators to the Depositor and by the Depositor to the Trust. Each of the
Originators shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Mortgage Loan which shall be clearly marked to
reflect the ownership of each Mortgage Loan by the Trust, and the pledge of each
Mortgage Loan by the Trust to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
Section 2.10. Cost of Delivery and Recordation of Documents.
The costs relating to the delivery and recordation of the documents in
connection with the Mortgage Loans as specified in this Article II and in
Article II of the Sale and Servicing Agreement shall be borne by the
Originators.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the
Originators. Each of the Originators hereby represents and warrants to the
Depositor, as of the Closing Date, that:
(a) The Originator is a corporation duly
organized, validly existing and in good standing under the
laws of the State of ________ and has all licenses necessary
to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state where a
Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct
business of the type conducted by the Originator and to
perform its obligations as the Originator hereunder, and in
any event the Originator is in compliance with the laws of any
such state to the extent necessary to ensure the
enforceability of the related Mortgage Loan; the Originator
has the full power and authority, corporate and otherwise, 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 Originator 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 Originator;
and all requisite corporate action
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<PAGE>
has been taken by the Originator to make this Agreement valid
and binding upon the Originator in accordance with its terms;
(b) No consent, approval, authorization or
order of any court or governmental agency or body is required
for the execution, delivery and performance by the Originator
of, or compliance by the Originator with, this Agreement or
the sale of the Mortgage Loans pursuant to the terms of this
Agreement or the consummation of the transactions contemplated
by this Agreement, or if required, such approval has been
obtained prior to the Closing Date;
(c) Neither the execution and delivery of
this Agreement, the acquisition nor origination of the
Mortgage Loans by the Originator or the transactions
contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, has or will
conflict with or result in a breach of any of the terms,
conditions or provisions of the Originator's charter or
by-laws or any legal restriction or any agreement or
instrument to which the Originator is now a party or by which
it is bound or to which its property is subject, 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 Originator
or its property is subject, or impair the ability of the
Indenture Trustee (or the Servicer as the agent of the
Indenture Trustee) to realize on the Mortgage Loans, or impair
the value of the Mortgage Loans;
(d) Neither this Agreement nor the
information contained in the Prospectus Supplement (other than
the information under the caption "Underwriting") nor any
statement, report or other document prepared by the Originator
and furnished or to be furnished pursuant to this Agreement or
in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of
any material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light
of the circumstances under which they were made, not
misleading;
(e) There is no action, suit, proceeding or
investigation pending or, to the knowledge of the Originator,
threatened before a court, administrative agency or government
tribunal against the Originator 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 Originator, or in any
material impairment of the right or ability of the Originator
to carry on its business substantially as now conducted, or in
any material liability on the part of the Originator, or which
would draw into question the validity of this Agreement, the
Mortgage Loans, or of any action taken or to be taken in
connection with the obligations of the Originator contemplated
herein, or which would impair materially the ability of the
Originator to perform under the terms of this Agreement or
that will prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) The Originator is not in violation of or
in default with respect to, and the execution and delivery of
this Agreement by the Originator and its performance of and
compliance with the terms hereof will not constitute a
violation or default with respect to, any order or decree of
any court or any order, regulation or demand of any federal,
state,
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municipal or governmental agency, which violation or default
might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that
would materially and adversely affect its performance
hereunder or under any subservicing agreement;
(g) Upon the receipt of each Mortgage File
by the Depositor (or its assignee) under this Agreement, the
Depositor (or its assignee) will have good title to each
related Mortgage Loan and such other items comprising the
corpus of the Trust Estate free and clear of any lien created
by the Originator (other than liens which will be
simultaneously released);
(h) The consummation of the transactions
contemplated by this Agreement are in the ordinary course of
business of the Originator, and the transfer, assignment and
conveyance of the Mortgage Notes and the Mortgages by the
Originator pursuant to this Agreement are not subject to the
bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction;
(i) With respect to any Mortgage Loan
purchased by the Originator, the Originator acquired title to
the Mortgage Loan in good faith, without notice of any adverse
claim;
(j) The Originator 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.
The Originator is solvent and the sale of the Mortgage Loans
by the Originator pursuant to the terms of this Agreement will
not cause the Originator to become insolvent. The sale of the
Mortgage Loans by the Originator pursuant to the terms of this
Agreement was not undertaken with the intent to hinder, delay
or defraud any of the Originator's creditors;
(k) The Mortgage Loans are not intentionally
selected in a manner so as to affect adversely the interests
of the Depositor or of any transferee of the Depositor
(including the Trust and the Indenture Trustee);
(l) The Originator has determined that it
will treat the disposition of the Mortgage Loans pursuant to
this Agreement as a sale for accounting and tax purposes;
(m) The Originator has not dealt with any
broker or agent or anyone else that may be entitled to any
commission or compensation in connection with the sale of the
Mortgage Loans to the Depositor other than to the Depositor or
an affiliate thereof; and
(n) The consideration received by the
Originator upon the sale of the Mortgage Loans under this
Agreement constitutes fair consideration and reasonably
equivalent value for the Mortgage Loans.
Section 3.02. [Reserved].
Section 3.03. Representations and Warranties Relating to the
Mortgage Loans. The Originators represent and warrant to the Depositor that, as
of the Closing Date, as to each
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Initial Mortgage Loan, and as of the Subsequent Transfer Date, as to each
Subsequent Mortgage Loan, immediately prior to the sale and transfer of such
Mortgage Loan by the Originators to the Depositor:
(a) The information set forth in each
Mortgage Loan Schedule is complete, true and correct;
(b) The information to be provided by the
Originators, directly or indirectly, to the Depositor in
connection with a Subsequent Mortgage Loan will be true and
correct in all material respects at the date or dates
respecting which such information is furnished;
(c) Each Mortgage is a valid first or second
lien on a fee simple (or its equivalent under applicable state
law) estate in the real property securing the amount owed by
the Mortgagor under the Mortgage Note subject only to (i) the
lien of current real property taxes and assessments which are
not delinquent, (ii) with respect to any Mortgage Loan
identified on the Mortgage Loan Schedule as secured by a
second lien, the related first mortgage loan, (iii) covenants,
conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of
such Mortgage, such exceptions appearing of record being
acceptable to mortgage lending institutions generally in the
area wherein the property subject to the Mortgage is located
or specifically reflected in the appraisal obtained in
connection with the origination of the related Mortgage Loan
and (iv) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of
the security intended to be provided by such Mortgage;
(d) Immediately prior to the transfer and
assignment by the related Originator to the Depositor, the
Originator, had good title to, and was the sole owner of each
Mortgage Loan, free of any interest of any other Person, and
the Originator has transferred all right, title and interest
in each Mortgage Loan to the Depositor;
(e) As of the applicable Cut-Off Date, no
payment of principal or interest on or in respect of any
Mortgage Loan remains unpaid for thirty (30) or more days past
the date the same was due in accordance with the related
Mortgage Note without regard to applicable grace periods;
(f) As of the Initial Cut-Off Date, no
Mortgage Loan has a Mortgage Interest Rate less than ___% per
annum in Pool I and ___% per annum in Pool II and the weighted
average Mortgage Interest Rate of the Mortgage Loans is ___%
in Pool I and ___% in Pool II;
(g) At origination, no Mortgage Loan in Pool
I or Pool II had an original term to maturity of greater than
___ months;
(h) As of the Initial Cut-Off Date, the
weighted average remaining term to maturity of the Mortgage
Loans is ___ months for the Mortgage Loans in Pool I and ___
months for the Mortgage Loans in Pool II;
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(i) To the best knowledge of each of the
Originators, there is no mechanics' lien or claim for work,
labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the premises
subject to any Mortgage which is or may be a lien prior to, or
equal or coordinate with, the lien of such Mortgage, except
those which are insured against by the title insurance policy
referred to in (ff) below;
(j) To the best knowledge of each of the
Originators, there is no delinquent tax or assessment lien
against any Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and
the Mortgage Note, including, without limitation, the
obligation of the Mortgagor to pay the unpaid principal of and
interest on the Mortgage Note, are each not subject to any
right of rescission (or any such rescission right has expired
in accordance with applicable law), set-off, counterclaim, or
defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the
Mortgage, or the exercise of any right thereunder, render
either the Mortgage Note or the Mortgage unenforceable, in
whole or in part, or subject to any right of rescission,
set-off, counterclaim, or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim,
or defense has been asserted with respect thereto;
(l) To the best knowledge of each of the
Originators, the Mortgaged Property is free of material damage
and is in good repair, and there is no pending or threatened
proceeding for the total or partial condemnation of the
Mortgaged Property;
(m) None of the Originators have received a
notice of default of any first mortgage loan secured by the
Mortgaged Property which has not been cured by a party other
than the Originators;
(n) Each Mortgage Note and Mortgage are in
substantially the forms previously provided to the Depositor
and the Indenture Trustee on behalf of the Originators;
(o) No Mortgage Loan had, at the date of
origination, a CLTV in excess of 100%, and the weighted
average CLTV of all Mortgage Loans as of the Initial Cut-Off
Date is approximately ___% in Pool I and ___% in Pool II;
(p) The Mortgage Loan was not originated in
a program in which the amount of documentation in the
underwriting process was limited in comparison to the
originator's normal documentation requirements;
(q) No more than the following percentages
of the Mortgage Loans by Cut-Off Date Aggregate Principal
Balance are secured by Mortgaged Properties located in the
following states:
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Pool I
-----------------------------------------------------------
State Percentage of Cut-Off
Date Aggregate
Principal Balance
-------------------------- --------------------------
--------------------------
100.00%
==========================
Pool II
-----------------------------------------------------------
State Percentage of Cut-Off
Date Aggregate
Principal Balance
-------------------------- --------------------------
--------------------------
100.00%
==========================
(r) The Mortgage Loans were not selected by
the Originators for sale hereunder or inclusion in the Trust
Estate on any basis adverse to the Trust Estate relative to
the portfolio of similar mortgage loans of the Originators;
(s) None of the Mortgage Loans constitutes a
lien on leasehold interests;
(t) Each Mortgage contains customary and
enforceable provisions which render the rights and remedies of
the holder thereof adequate for the realization against the
related Mortgaged Property of the benefits of the security
including (A) in the case of a Mortgage designated as a deed
of trust, by trustee's sale and (B) otherwise by judicial
foreclosure. To the best of the Originators' knowledge, there
is no homestead or other exemption available to the related
Mortgagor which would materially interfere with the right to
sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage. The Mortgage contains
customary and enforceable provisions for the acceleration of
the payment of the Principal Balance of such Mortgage Loan in
the event all or any part of the related Mortgaged Property is
sold or otherwise transferred without the prior written
consent of the holder thereof;
(u) The proceeds of such Mortgage Loan have
been fully disbursed, including reserves set aside by the
Originators, there is no requirement for, and the Originators
shall not make any, future advances thereunder. Any future
advances made prior to the applicable Cut-Off Date have been
consolidated with the principal balance secured by the
Mortgage, and such principal balance, as consolidated, bears a
single interest rate and single repayment term reflected on
the applicable Mortgage Loan Schedule. The Principal Balance
as of the applicable Cut-Off Date does not exceed the original
principal amount of such Mortgage Loan. Except with respect to
no more than $150,000 of escrow funds, any and all
requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees, and
expenses incurred in making, or recording such Mortgage Loan
have been paid;
(v) All Mortgage Loans were originated in
compliance with the Originators' Underwriting Guidelines;
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(w) The terms of the Mortgage and the
Mortgage Note have not been impaired, waived, altered, or
modified in any respect, except by a written instrument which
has been recorded, if necessary, to protect the interest of
the Indenture Trustee and which has been delivered to the
Collateral Agent, on behalf of the Indenture Trustee. The
substance of any such alteration or modification is or as to
Subsequent Mortgage Loans will be reflected on the applicable
Mortgage Loan Schedule and, to the extent necessary, has been
or will be approved by (i) the insurer under the applicable
mortgage title insurance policy, and (ii) the insurer under
any other insurance policy required hereunder for such
Mortgage Loan where such insurance policy requires approval
and the failure to procure approval would impair coverage
under such policy;
(x) No instrument of release, waiver,
alteration, or modification has been executed in connection
with such Mortgage Loan, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption
agreement which has been approved by the insurer under any
insurance policy required hereunder for such Mortgage Loan
where such policy requires approval and the failure to procure
approval would impair coverage under such policy, and which is
part of the Mortgage File and has been delivered to the
Collateral Agent, on behalf of the Indenture Trustee, and the
terms of which are reflected in the applicable Mortgage Loan
Schedule;
(y) Other than delinquencies described in
clause (e) above, there is no default, breach, violation, or
event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of
acceleration, and the Originators have not waived any such
default, breach, violation or event of acceleration. All
taxes, governmental assessments (including assessments payable
in future installments), insurance premiums, water, sewer, and
municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the
related Mortgaged Property have been paid. The Originators
have not advanced funds, or induced, solicited, or knowingly
received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any
amount required by the Mortgage or the Mortgage Note;
(z) All of the improvements which were
included for the purposes of determining the Appraised Value
of the Mortgaged Property were completed at the time that such
Mortgage Loan was originated and lie wholly within the
boundaries and building restriction lines of such Mortgaged
Property. Except for de minimis encroachments, no improvements
on adjoining properties encroach upon the Mortgaged Property.
To the best of the Originators' knowledge, no improvement
located on or being part of the Mortgaged Property is in
violation of any applicable zoning law or regulation. All
inspections, licenses, and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged
Property (including all such improvements which were included
for the purpose of determining such Appraised Value) and, with
respect to the use and occupancy of the same, including but
not limited to certificates of occupancy and fire underwriters
certificates, have been made or obtained from the appropriate
authorities and the Mortgaged Property is lawfully occupied
under applicable law;
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(aa) To the best of the Originators'
knowledge, there do not exist any circumstances or conditions
with respect to the Mortgage, the Mortgaged Property, the
Mortgagor, or the Mortgagor's credit standing that can be
reasonably expected to cause such Mortgage Loan to become
delinquent or adversely affect the value or marketability of
such Mortgage Loan, other than any such circumstances or
conditions permitted under the Originator's Underwriting
Guidelines;
(bb) All parties which have had any interest
in the Mortgage, whether as mortgagee, assignee, pledgee or
otherwise, are (or, during the period in which they held and
disposed of such interest, were) (i) in compliance with any
and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located and (ii) (A)
organized under the laws of such state, (B) qualified to do
business in such state, (C) federal savings and loan
associations or national banks having principal offices in
such state, (D) not doing business in such state, or (E) not
required to qualify to do business in such state;
(cc) The Mortgage Note and the Mortgage are
genuine, and each is the legal, valid and binding obligation
of the maker thereof, enforceable in accordance with its
terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the enforcement of creditors' rights
generally and except that the equitable remedy of specific
performance and other equitable remedies are subject to the
discretion of the courts. All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note
and the Mortgage and convey the estate therein purported to be
conveyed, and the Mortgage Note and the Mortgage have been
duly and properly executed by such parties or pursuant to a
valid power-of-attorney that has been recorded with the
Mortgage;
(dd) The transfer of the Mortgage Note and
the Mortgage as and in the manner contemplated by this
Agreement is sufficient either (i) fully to transfer to the
Depositor all right, title, and interest of the Originators
thereto as note holder and mortgagee or (ii) to grant to the
Depositor the security interest referred to in Section 6.07
hereof. The Mortgage has been duly assigned and the Mortgage
Note has been duly endorsed. The Assignment of Mortgage
delivered to the Collateral Agent, on behalf of the Indenture
Trustee, pursuant to Section 2.04(a)(iv) of the Sale and
Servicing Agreement is in recordable form and is acceptable
for recording under the laws of the applicable jurisdiction.
The endorsement of the Mortgage Note, the delivery to the
Collateral Agent, on behalf of the Indenture Trustee, of the
endorsed Mortgage Note, and such Assignment of Mortgage, and
the delivery of such Assignment of Mortgage for recording to,
and the due recording of such Assignment of Mortgage in, the
appropriate public recording office in the jurisdiction in
which the Mortgaged Property is located are sufficient to
permit the Indenture Trustee to avail itself of all protection
available under applicable law against the claims of any
present or future creditors of the Originators, and are
sufficient to prevent any other sale, transfer, assignment,
pledge, or hypothecation of the Mortgage Note and Mortgage by
the Originators from being enforceable;
(ee) Any and all requirements of any
federal, state, or local law including, without limitation,
usury, truth-in-lending, real estate settlement procedures,
consumer
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credit protection, equal credit opportunity, or disclosure
laws applicable to such Mortgage Loan have been complied with,
and the Servicer shall maintain in its possession, available
for the Indenture Trustee's inspection, and shall deliver to
the Indenture Trustee or its designee upon demand, evidence of
compliance with all such requirements. The consummation of the
transactions contemplated by this Agreement will not cause the
violation of any such laws;
(ff) Such Mortgage Loan is covered by an
ALTA mortgage title insurance policy or such other generally
used and acceptable form of policy, issued by and the valid
and binding obligation of a title insurer qualified to do
business in the jurisdiction where the Mortgaged Property is
located, insuring the Depositor, and its successors and
assigns, as to the first or second priority lien, as
applicable, of the Mortgage in the original principal amount
of such Mortgage Loan. The assignment to the Indenture Trustee
of the Depositor's interest in such mortgage title insurance
policy does not require the consent of or notification to the
insurer. Such mortgage title insurance policy is in full force
and effect and will be in full force and effect and inure to
the benefit of the Indenture Trustee upon the consummation of
the transactions contemplated by this Agreement. No claims
have been made under such mortgage title insurance policy and
none of the Originators nor any prior holder of the Mortgage
has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy;
(gg) All improvements upon the Mortgaged
Property are insured against loss by fire, hazards of extended
coverage, and such other hazards as are customary in the area
where the Mortgaged Property is located pursuant to insurance
policies conforming to the requirements of Section 3.05
hereof. If the Mortgaged Property at origination was located
in an area identified on a flood hazard boundary map or flood
insurance rate map issued by the Federal Emergency Management
Agency as having special flood hazards (and such flood
insurance has been made available), such Mortgaged Property
was covered by flood insurance at origination. Each individual
insurance policy is the valid and binding obligation of the
insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Indenture
Trustee upon the consummation of the transactions contemplated
by this Agreement, and contain a standard mortgage clause
naming the originator of such Mortgage Loan, and its
successors and assigns, as mortgagee and loss payee. All
premiums thereon have been paid. The Mortgage obligates the
Mortgagor to maintain all such insurance at the Mortgagor's
cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain
such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor, and none of the
related Originators or any prior holder of the Mortgage has
acted or failed to act so as to impair the coverage of any
such insurance policy or the validity, binding effect, and
enforceability thereof;
(hh) If the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves
and is named in such Mortgage, as no fees or expenses are or
will become payable by the trustee or the Noteholders to the
Indenture Trustee under the deed of trust, except in
connection with a trustee's sale after default by the
Mortgagor;
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(ii) The Mortgaged Property consists of one
or more parcels of real property separately assessed for tax
purposes. To the extent there is erected thereon a detached or
an attached one-family residence or a detached two-to
six-family dwelling, or an individual condominium unit in a
low-rise condominium, or an individual unit in a planned unit
development, or a commercial property, a mobile home, or a
mixed use or multiple purpose property, such residence,
dwelling or unit is not (i) a unit in a cooperative apartment,
(ii) a property constituting part of a syndication, (iii) a
time share unit, (iv) a property held in trust, (v) a
manufactured dwelling, (vi) a log-constructed home, or (vii) a
recreational vehicle;
(jj) There exist no material deficiencies
with respect to escrow deposits and payments, if such are
required, for which customary arrangements for repayment
thereof have not been made or which the related Originator
expects not to be cured, and no escrow deposits or payments of
other charges or payments due the Depositor have been
capitalized under the Mortgage or the Mortgage Note;
(kk) Such Mortgage Loan was not originated
at a below market interest rate. Such Mortgage Loan does not
have a shared appreciation feature, or other contingent
interest feature;
(ll) The origination and collection
practices used by the Originators or the Servicer with respect
to such Mortgage Loan have been in all respects legal, proper,
prudent, and customary in the mortgage origination and
servicing business;
(mm) The Mortgagor has, to the extent
required by applicable law, executed a statement to the effect
that the Mortgagor has received all disclosure materials, if
any, required by applicable law with respect to the making of
fixed-rate mortgage loans. The Servicer shall maintain or
cause to be maintained such statement in the Mortgage File;
(nn) All amounts received by the Originators
with respect to such Mortgage Loan after the applicable
Cut-Off Date and required to be deposited in the related
Distribution Account have been so deposited in the related
Distribution Account and are, as of the Closing Date, or will
be as of the Subsequent Transfer Date, as applicable, in the
related Distribution Account;
(oo) The appraisal report with respect to
the Mortgaged Property contained in the Mortgage File was
signed prior to the approval of the application for such
Mortgage Loan by a qualified appraiser, duly appointed by the
originator of such Mortgage Loan, who had no interest, direct
or indirect, in the Mortgaged Property or in any loan made on
the security thereof and whose compensation is not affected by
the approval or disapproval of such application;
(pp) When measured by the Cut-Off Date
Aggregate Principal Balance, the Mortgagors with respect to at
least _______% of the Mortgage Loans in Pool I and _______% of
the Mortgage Loans in Pool II, represented at the time of
origination that the Mortgagor would occupy the Mortgaged
Property as the Mortgagor's primary residence;
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(qq) Each of the Originators _______ has no
knowledge with respect to the Mortgaged Property of any
governmental or regulatory action or third party claim made,
instituted or threatened in writing relating to a violation of
any applicable federal, state or local environmental law,
statute, ordinance, regulation, order, decree or standard;
(rr) [Reserved];
(ss) With respect to second lien Mortgage
Loans:
(i) the Originators have
no knowledge that the Mortgagor has received
notice from the holder of the prior mortgage
that such prior mortgage is in default,
(ii) no consent from the
holder of the prior mortgage is needed for
the creation of the second lien Mortgage or,
if required, has been obtained and is in the
related Mortgage File,
(iii) if the prior
mortgage has a negative amortization, the
CLTV was determined using the maximum loan
amount of such prior mortgage,
(iv) the related first
mortgage loan encumbering the related
Mortgaged Property does not have a mandatory
future advance provision, and
(v) the Mortgage Loans
conform in all material respects to the
description thereof in the Prospectus
Supplement.
(tt) Each of the Originators further represents and warrants
to the Indenture Trustee, the Note Insurer and the Noteholders that as of the
Subsequent Cut-Off Date all representations and warranties set forth in clauses
(a) through (ss) above will be correct in all material respects as to each
Subsequent Mortgage Loan, and the representations so made in this subsection
(tt) as to the following matters will be deemed to be correct if: (i) each
Subsequent Mortgage Loan may not be thirty (30) or more days contractually
delinquent as of the related Subsequent Cut-Off Date; (ii) the original term to
maturity of such Subsequent Mortgage Loan may not exceed _______ months for Pool
I and _______ months for Pool II; (iii) such Subsequent Mortgage Loan must have
a mortgage interest rate of at least _______% for Pool I and _______% for Pool
II; (iv) the purchase of the Subsequent Mortgage Loans is consented to by the
Note Insurer and the Rating Agencies, notwithstanding the fact that the
Subsequent Mortgage Loans meet the parameters stated herein; (v) the principal
balance of any such Subsequent Mortgage Loan may not exceed $_______ for Pool I
and $_______ for Pool II; (vi) no more than _______% for Pool I and _______% for
Pool II of the aggregate principal balance of such Subsequent Mortgage Loans may
be Second Liens; (vii) no such Subsequent Mortgage Loan shall have a CLTV of
more than (a) for consumer purpose loans, _______% for Pool I and _______% for
Pool II, and (b) for business purpose loans, _______% for Pool I and _______%
for Pool II; (viii) no more than _______% for Pool I and _______% for Pool II of
such Subsequent Mortgage Loans may be Balloon Loans; (ix) no more than __% for
Pool I and __% for Pool II of such Subsequent Mortgage Loans may be secured by
mixed-use properties, commercial properties, or five or more
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unit multifamily properties; and (x) following the purchase of such Subsequent
Mortgage Loans by the Trust, the Mortgage Loans (including the Subsequent
Mortgage Loans), (a) will have a weighted average mortgage interest rate, (I)
for consumer purpose loans, of at least _______% for Pool I and _______% for
Pool II and (II) for business purpose loans, of at least _______% for Pool I and
_______% for Pool II; and (b) will have a weighted average CLTV of not more than
(I) for consumer purpose loans, _______% for Pool I and _______% for Pool II,
and (II) for business purpose loans, _______% for Pool I and _______% for Pool
II.
(uu) To the best of the Originators' knowledge, no error,
omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any person, including
without limitation the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Mortgage Loan or in the
application of any insurance in relation to such Mortgage Loan;
(vv) Each Mortgaged Property is in compliance with all
environmental laws, ordinances, rules, regulations and orders of federal, state
or governmental authorities relating thereto. No hazardous material has been or
is incorporated in, stored on or under, released from, treated on, transported
to or from, or disposed of on or from, any Mortgaged Property such that, under
applicable law (A) any such hazardous material would be required to be
eliminated before the Mortgaged Property could be altered, renovated, demolished
or transferred, or (B) the owner of the Mortgaged Property, or the holder of a
security interest therein, could be subjected to liability for the removal of
such hazardous material or the elimination of the hazard created thereby.
Neither the Originators nor any Mortgagor has received notification from any
federal, state or other governmental authority relating to any hazardous
materials on or affecting the Mortgaged Property or to any potential or known
liability under any environmental law arising from the ownership or operation of
the Mortgaged Property. For the purposes of this subsection, the term "hazardous
materials" shall include, without limitation, gasoline, petroleum products,
explosives, radioactive materials, polychlorinated biphenyls or related or
similar materials, asbestos or any material containing asbestos, lead,
lead-based paint and any other substance or material as may be defined as a
hazardous or toxic substance by any federal, state or local environmental law,
ordinance, rule, regulation or order, including, without limitation, CERCLA, the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act and any regulations promulgated pursuant
thereto; and
(ww) With respect to any business purpose loan, the related
Mortgage Note contains an acceleration clause, accelerating the maturity date
under the Mortgage Note to the date the individual guarantying such loan becomes
subject to any bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
Section 3.04 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the Originators, as
of the date of execution of this Agreement and the Closing Date, that:
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(a) The Depositor is a corporation duly
organized, validly existing and in good standing under the
laws of the State of _______;
(b) The Depositor has the corporate power
and authority to purchase each Mortgage Loan and to execute,
deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly
authorized, executed and delivered by the Depositor, and,
assuming the due authorization, execution and delivery hereof
by the Originators, constitutes 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 such as
have been made on or prior to the Closing Date;
(e) The Depositor has filed or will file the
Prospectus and Prospectus Supplement with the Commission in
accordance with Rule 424(b) under the Securities Act; and
(f) None of the execution and delivery of
this Agreement, the purchase of the Mortgage Loans from the
Originators, the consummation of the other transactions
contemplated hereby, or the fulfillment of or compliance with
the terms and conditions of this Agreement, (i) conflicts or
will conflict with the charter or bylaws of the Depositor or
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, any term,
condition or provision of any indenture, deed of trust,
contract or other agreement or other instrument to which the
Depositor is a party or by which it is bound and which is
material to the Depositor, or (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or
decree of any court or governmental authority having
jurisdiction over the Depositor.
Section 3.05 Repurchase Obligation for Defective Documentation
and for Breach of a Representation or Warranty. (a) Each of the representations
and warranties contained in Sections 3.01 and 3.03 shall survive the purchase by
the Depositor of the Mortgage Loans, the subsequent transfer thereof by the
Depositor to the Trust and the subsequent pledge thereof by the Trust to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer, and
shall continue in full force and effect, notwithstanding any restrictive or
qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement, the Sale and Servicing Agreement or the
Indenture.
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(b) With respect to any representation or warranty contained
in Sections 3.01 or 3.03 hereof that is made to the best of the Originators'
knowledge, if it is discovered by the Servicer, any Subservicer, the Indenture
Trustee, the Collateral Agent, the Depositor, the Note Insurer or any Noteholder
that the substance of such representation and warranty was inaccurate as of the
Closing Date or the Subsequent Transfer Date, as applicable, and such inaccuracy
materially and adversely affects the value of the related Mortgage Loan, then
notwithstanding the Originators' 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 Originators, the Servicer, any Subservicer, the Indenture
Trustee, the Collateral Agent, the Note Insurer, the Depositor or any Noteholder
of a breach of any of such representations and warranties which materially and
adversely affects the value of Mortgage Loans or the interest of the
Noteholders, or which materially and adversely affects the interests of the Note
Insurer or the Noteholders 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
Originators' best knowledge), the party discovering such breach shall give,
pursuant to this Section 3.05(b) and pursuant to Section 4.02 of the Sale and
Servicing Agreement, prompt written notice to the others. Subject to the next to
last paragraph of this Section 3.05(b), within sixty (60) days of the earlier of
its discovery or its receipt of notice of any breach of a representation or
warranty, the Originators shall (a) promptly cure such breach in all material
respects, or (b) purchase such Mortgage Loan at a purchase price equal to the
Loan Repurchase Price, or (c) remove such Mortgage Loan from the Trust Estate
(in which case it shall become a Deleted Mortgage Loan) and substitute one or
more Qualified Substitute Mortgage Loans. Any such substitution shall be
accompanied by payment by the Originators of the Substitution Adjustment, if
any, to be deposited in the related Distribution Account pursuant to the Sale
and Servicing Agreement.
The Originators shall cooperate with the Depositor to cure any
breach and shall reimburse the Depositor for the costs and expenses related to
any cure, substitution (including any Substitution Adjustment) or repurchase
incurred by the Depositor pursuant to this Section 3.05.
(c) As to any Deleted Mortgage Loan for which the Depositor or
an Originator substitutes a Qualified Substitute Mortgage Loan or Loans, the
Depositor or such Originator shall effect such substitution by delivering to the
Indenture Trustee and the Collateral Agent, a certification in the form attached
to the Sale and Servicing Agreement as Exhibit H, executed by a Servicing
Officer and the documents described in Section 2.05(a) of the Sale and Servicing
Agreement for such Qualified Substitute Mortgage Loan or Loans. Pursuant to the
Sale and Servicing Agreement, upon receipt by the Indenture Trustee and the
Collateral Agent of a certification of a Servicing Officer of such substitution
or purchase and, in the case of a substitution, upon receipt by the Collateral
Agent, on behalf of the Indenture Trustee of the related Mortgage File, and the
deposit of certain amounts in the related Distribution Account pursuant to
Section 2.07(b) of the Sale and Servicing Agreement (which certification shall
be in the form of Exhibit H to the Sale and Servicing Agreement), the Collateral
Agent, on behalf of the Indenture Trustee, shall be required to release to the
Servicer for release to the Depositor the related Indenture Trustee's Mortgage
File and shall be required to execute, without recourse, and deliver such
instruments of transfer furnished by the Depositor as may be necessary to
transfer such Mortgage Loan to the Depositor or such Originator.
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(d) Pursuant to the Sale and Servicing Agreement, the Servicer
shall deposit in the related Distribution 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 Depositor. The Trust will own all payments received on the Deleted
Mortgage Loan on or before the date of substitution, and the Depositor shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. Pursuant to the Sale and Servicing Agreement, the
Servicer shall be required to give written notice to the Indenture Trustee, the
Collateral Agent and the Note 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 the Sale and Servicing Agreement and the
substitution of the Qualified Substitute Mortgage Loan. The parties hereto agree
to amend the Mortgage Loan Schedule accordingly. Upon such substitution, such
Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of the
Indenture, the Sale and Servicing Agreement and this Agreement in all respects,
and the Depositor shall be deemed to have made with respect to such Qualified
Substitute Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties set forth in Sections 3.02 and 3.03 herein. On
the date of such substitution, the Depositor will remit to the Servicer and,
pursuant to the Sale and Servicing Agreement, the Servicer will deposit into the
related Distribution Account, an amount equal to the Substitution Adjustment, if
any.
(e) [Reserved];
(f) It is understood and agreed that the obligations of the
Depositor and the Originator set forth in Section 2.06 and this Section 3.05 to
cure, purchase or substitute for a defective Mortgage Loan as provided in
Section 2.06 and this Section 3.05 constitute the sole remedies of the
Depositor, the Indenture Trustee, the Note Insurer and the Noteholders
respecting a breach of the foregoing representations and warranties.
(g) The Originator shall be obligated to indemnify the
Indenture Trustee, the Trust, the Depositor, the Owner Trustee, the Collateral
Agent, the Noteholders and the Note Insurer (in their individual and trust
capacities) and their successors, assigns, agents and servants (collectively,
the "Indemnified Parties") from and against, any and all liabilities,
obligations, losses, damages, taxes, claims, actions and suits, and any and all
reasonable costs, expenses and disbursements (including reasonable legal fees
and expenses) of any kind and nature whatsoever (collectively, "Expenses") which
may at any time be imposed on, incurred by, or asserted against any Indemnified
Party in any way relating to or arising out of a breach of the related
Originator of the representations or warranties herein. The indemnities
contained in this Section 3.05 shall survive the resignation or termination of
the Owner Trustee or the termination of this Agreement.
(h) Each of the Originators shall be jointly and severally
responsible for any repurchase, cure or substitution obligation of any of the
Originators under this Agreement, the Indenture and the Sale and Servicing
Agreement.
(i) Any cause of action against an Originator relating to or
arising out of the breach of any representations and warranties or covenants
made in Sections 2.06 or 3.03 shall accrue as to any Mortgage Loan upon (i)
discovery of such breach by any party and notice
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thereof to such Originator, (ii) failure by such Originator to cure such breach
or purchase or substitute such Mortgage Loan as specified above, and (iii)
demand upon such Originator by the Indenture Trustee for all amounts payable in
respect of such Mortgage Loan.
ARTICLE IV
THE ORIGINATORS
Section 4.01 Covenants of the Originators. Each of the
Originators covenants to the Depositor as follows:
(a) The Originators shall cooperate with the
Depositor and the firm of independent certified public
accountants retained with respect to the issuance of the Notes
in making available all information and taking all steps
reasonably necessary to permit the accountants' letters
required hereunder to be delivered within the times set for
delivery herein.
(b) The Originators hereby agree to do all
acts, transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on
behalf of the Originators as the Depositor or its counsel may
reasonably request in order to consummate the transfer of the
Mortgage Loans to the Depositor and the subsequent transfer
thereof to the Indenture Trustee, and the rating, issuance and
sale of the Notes.
Section 4.02 Merger or Consolidation. Each of the Originators
will keep in full effect its existence, rights and franchises as a corporation
and will obtain and preserve its qualification to do business as a foreign
corporation, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement. Any Person into which any of the Originators may be
merged or consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Originators shall be a party, or any Person
succeeding to the business of the Originators, shall be approved by the Note
Insurer which approval shall not be unreasonably withheld. If the approval of
the Note Insurer is not required, the successor shall be an established mortgage
loan servicing institution that is a Permitted Transferee and in all events
shall be the successor of the Originators or the 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 Originators shall send
notice of any such merger or consolidation to the Indenture Trustee and the Note
Insurer.
Section 4.03 Costs. In connection with the transactions
contemplated under this Agreement, the Trust Agreement, the Indenture and the
Sale and Servicing Agreement, shall promptly pay (or shall promptly reimburse
the Depositor to the extent that the Depositor shall have paid or otherwise
incurred): (a) the fees and disbursements of the Depositor's, and the
Originators' counsel; (b) the fees of S&P and Moody's; (c) any of the fees of
the Indenture Trustee and the fees and disbursements of the Indenture Trustee's
counsel; (d) any of the fees of the Owner Trustee and the fees and disbursements
of the Owner Trustee's counsel; (e) expenses incurred in connection with
printing the Prospectus, the Prospectus Supplement, any amendment or supplement
thereto, any preliminary prospectus and the Notes; (f) fees and expenses
relating to the filing of documents with the Commission (including without
limitation periodic reports
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under the Exchange Act); (g) the shelf registration amortization fee of _______%
of the Note Principal Balance of the Notes on the Closing Date, paid in
connection with the issuance of Notes; (h) the fees and disbursements for
______________, accountants for the Originators; and (i) all of the initial
expenses (not to exceed $_______) of the Note Insurer including, without
limitation, legal fees and expenses, accountant fees and expenses and expenses
in connection with due diligence conducted on the Mortgage Files but not
including the initial premium paid to the Note Insurer. For the avoidance of
doubt, the parties hereto acknowledge that it is the intention of the parties
that the Depositor shall not pay any of the Indenture Trustee's or Owner
Trustee's fees and expenses in connection with the transactions contemplated by
this Agreement, the Trust Agreement, the Indenture and the Sale and Servicing
Agreement. All other costs and expenses in connection with the transactions
contemplated hereunder shall be borne by the party incurring such expenses.
Section 4.04 Indemnification. (a) The Originators jointly and
severally, agree
(i) to indemnify and hold harmless the
Depositor, each of its directors, each of its officers who
have signed the Registration Statement, and each of its
directors and each person or entity who controls the Depositor
or any such person, within the meaning of Section 15 of the
Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Depositor or any
such person or entity may become subject, under the Securities
Act or otherwise, and will reimburse the Depositor and each
such controlling person for any legal or other expenses
incurred by the Depositor or such controlling person in
connection with investigating or defending any such loss,
claim, damage, liability or action, 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
Prospectus Supplement or any amendment or supplement to the
Prospectus Supplement or the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements in the Prospectus
Supplement or any amendment or supplement to the Prospectus
Supplement approved in writing by the Originators, in light of
the circumstances under which they were made, not misleading,
but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission relates to
the information contained in the Prospectus Supplement
referred to in Section 3.01(d). This indemnity agreement will
be in addition to any liability which the Originators may
otherwise have; and
(ii) to indemnify and to hold the Depositor
harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Depositor may sustain
in any way related to the failure of any of the Originators to
perform its duties in compliance with the terms of this
Agreement. The Originators shall immediately notify the
Depositor if a claim is made by a third party with respect to
this Agreement, and the Originators shall assume the defense
of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly
pay, discharge and satisfy any judgment or decree which may be
entered against the Depositor in respect of such claim.
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(b) The Depositor agrees to indemnify and hold harmless each
of the Originators, each of their respective directors and each person or entity
who controls the Originators or any such person, within the meaning of Section
15 of the Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Originators or any such person or
entity may become subject, under the Securities Act or otherwise, and will
reimburse the Originators and any such director or controlling person for any
legal or other expenses incurred by such party or any such director or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action, 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, the Prospectus, the Prospectus Supplement, any
amendment or supplement to the Prospectus or the Prospectus Supplement or the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission is other than a statement or omission relating to the information set
forth in subsection (a)(i) of this Section 4.04; provided, however, that in no
event shall the Depositor be liable to the Originators under this paragraph (b)
in an amount in excess of the Depositor's resale profit or the underwriting fee
on the sale of the Notes. This indemnity agreement will be in addition to any
liability which the Depositor may otherwise have. Pursuant to the Indenture, the
Indenture Trustee shall reimburse the Depositor in accordance with the Indenture
for all amounts advanced by the Depositor pursuant to the preceding sentence
except when the claim relates directly to the failure of the Depositor to
perform its duties in compliance with the terms of this Agreement.
(c) Promptly after receipt by an indemnified party under this
Section 4.04 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 4.04, notify the indemnifying party in writing 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 elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.04 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, 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 that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel.
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(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 4.04 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.04 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, 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) subject to the limits set forth in subsection (a)
and subsection (b) of this Section 4.04; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities 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 Originators on the one hand,
and the Depositor on the other, the Originators', the Depositor's 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 Originators, the Depositor agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation. For purposes of this Section 4.04, 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 Securities Act, shall have the same rights to contribution as the
Depositor, and each director of the Originators, and each person, if any who
controls the Originators within the meaning of Section 15 of the Securities Act,
shall have the same rights to contribution as the Originators.
ARTICLE V
CONDITIONS OF CLOSING
Section 5.01 Conditions of Depositor's Obligations. The
obligations of the Depositor to purchase the Mortgage Loans will be subject to
the satisfaction on the Closing Date of the following conditions. Upon payment
of the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) Each of the obligations of the
Originators required to be performed by it on or prior to the
Closing Date pursuant to the terms of this Agreement shall
have been duly performed and complied with and all of the
representations and warranties of the Originators under this
Agreement shall be true and correct as of the Closing Date and
no event shall have occurred which, with notice or the passage
of time, would constitute a default under this Agreement, and
the Depositor shall have received a certificate to the effect
of the foregoing signed by an authorized officer of the
Originators.
(b) The Depositor shall have received a
letter dated the date of this Agreement, in form and substance
acceptable to the Depositor and its counsel, prepared by
Deloitte & Touche LLP, independent certified public
accountants, regarding the numerical information contained in
the Prospectus Supplement including, but not limited to the
information under the captions "_____________" and "_________"
regarding any
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numerical information in any marketing materials relating to
the Notes and regarding any other information as reasonably
requested by the Depositor.
(c) The Mortgage Loans will be acceptable to
the Depositor, in its sole reasonable discretion.
(d) The Depositor shall have received the
following additional closing documents, in form and substance
reasonably satisfactory to the Depositor and its counsel:
(i) the Mortgage Loan
Schedule;
(ii) this Agreement, the
Sale and Servicing Agreement, the Indenture,
the Trust Agreement, and the Underwriting
Agreement dated as of _____ between the
Depositor, the Originators, the Sponsor and
_________ and all documents required
thereunder, duly executed and delivered by
each of the parties thereto other than the
Depositor;
(iii) officer's
certificates of an officer of each of the
Originators, dated as of the Closing Date,
and attached thereto resolutions of the
board of directors and a copy of the charter
and by-laws;
(iv) copy of each of the
Originators charter and all amendments,
revisions, and supplements thereof,
certified by a secretary of each entity;
(v) an opinion of the
counsel for the Originators and the as to
various corporate matters in a form
acceptable to the Depositor, its counsel,
the Note Insurer, S&P and Moody's (it being
agreed that the opinion shall expressly
provide that the Indenture Trustee shall be
entitled to rely on the opinion);
(vi) opinions of counsel
for the Originators, in forms acceptable to
the Depositor, its counsel, the Note
Insurer, S&P and Moody's as to such matters
as shall be required for the assignment of a
rating to the Notes of "AAA" by S&P, and
"Aaa" by Moody's (it being agreed that such
opinions shall expressly provide that the
Indenture Trustee shall be entitled to rely
on such opinions);
(vii) a letter from
Moody's that it has assigned a rating of
"Aaa" to the Notes;
(viii) a letter from S&P
that it has assigned a rating of "AAA" to
the Notes;
(ix) an opinion of counsel
for the Indenture Trustee in form and
substance acceptable to the Depositor, its
counsel, the Note Insurer, Moody's and S&P
(it being agreed that the opinion shall
expressly provide that the Originators shall
be entitled to rely on the opinion);
(x) an opinion of counsel
for the Owner Trustee in form and substance
acceptable to the Depositor, its counsel,
the Note Insurer, Moody's and S&P (it
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being agreed that the opinion shall
expressly provide that the Originators shall
be entitled to rely on the opinion);
(xi) an opinion or
opinions of counsel for the Servicer, in
form and substance acceptable to the
Depositor, its counsel, the Note Insurer,
Moody's and S&P (it being agreed that the
opinion shall expressly provide that the
Originators shall be entitled to rely on the
opinion); and
(xii) an opinion or
opinions of counsel for the Note Insurer, in
each case in form and substance acceptable
to the Depositor, its counsel, Moody's and
S&P (it being agreed that the opinion shall
expressly provide that the Originators shall
be entitled to rely on the opinion).
(e) The Note Insurance Policy shall have
been duly executed, delivered and issued with respect to the
Notes.
(f) All proceedings in connection with the
transactions contemplated by this Agreement and all documents
incident hereto shall be satisfactory in form and substance to
the Depositor and its counsel.
(g) The Originators shall have furnished the
Depositor with such other certificates of its officers or
others and such other documents or opinions as the Depositor
or its counsel may reasonably request.
Section 5.02 Conditions of Originators Obligations. The
obligations of the Originators under this Agreement shall be subject to the
satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor
required to be performed by it at or prior to the Closing Date
pursuant to the terms of this Agreement shall have been duly
performed and complied with and all of the representations and
warranties of the Depositor contained in this Agreement shall
be true and correct as of the Closing Date and the Originators
shall have received a certificate to that effect signed by an
authorized officer of the Depositor.
(b) The Originators shall have received the
following additional documents:
(i) this Agreement and the
Sale and Servicing Agreement, and all
documents required thereunder, in each case
executed by the Depositor as applicable; and
(ii) a copy of a letter
from Moody's to the Depositor to the effect
that it has assigned a rating of "Aaa" to
the Notes and a copy of a letter from S&P to
the Depositor to the effect that it has
assigned a rating of "AAA" to the Notes.
(iii) an opinion of
counsel for the Indenture Trustee in form
and substance acceptable to the Originators
and their counsel;
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(iv) an opinion of counsel
for the Owner Trustee in form and substance
acceptable to the Originators and their
counsel;
(v) an opinion of counsel
for the Note Insurer in form and substance
acceptable to the Originators and their
counsel;
(vi) an opinion of the
counsel for the Depositor as to securities
and tax matters; and
(vii) an opinion of the
counsel for the Depositor as to true sale
matters.
(c) The Depositor shall have furnished the
Originators with such other certificates of its officers or
others and such other documents to evidence fulfillment of the
conditions set forth in this Agreement as the Originators may
reasonably request.
Section 5.03 Termination of Depositor's Obligations. The
Depositor may terminate its obligations hereunder by notice to the Originators
at any time before delivery of and payment of the purchase price for the
Mortgage Loans if: (a) any of the conditions set forth in Section 5.01 are not
satisfied when and as provided therein; (b) there shall have been the entry of a
decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Originators, or for the
winding up or liquidation of the affairs of the Originators; (c) there shall
have been the consent by the Originators 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 Originators
or of or relating to substantially all of the property of the Originators; (d)
any purchase and assumption agreement with respect to the Originators or the
assets and properties of the Originators shall have been entered into; or (e) a
Termination Event shall have occurred. The termination of the Depositor's
obligations hereunder shall not terminate the Depositor's rights hereunder or
its right to exercise any remedy available to it at law or in equity.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Depositor, addressed to the Depositor at ________, Attention: ________,
or to such other address as the Depositor may designate in writing to the
Originators and if to an Originator, addressed to such Originator at ________,
Attention: ________, or to such other address as such Originator may designate
in writing to the Depositor.
Section 6.02 Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without
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invalidating the remaining provisions hereof. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof.
Section 6.03 Agreement of Originators. The Originators agree
to execute and deliver such instruments and take such actions as the Depositor
may, from time to time, reasonably request in order to effectuate the purpose
and to carry out the terms of this Agreement.
Section 6.04 Survival. The parties to this Agreement agree
that the representations, warranties and agreements made by each of them herein
and in any Note or other instrument delivered pursuant hereto shall be deemed to
be relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 6.06 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as expressly permitted by
the terms hereof, this Agreement may not be assigned, pledged or hypothecated by
any party hereto to a third party without the written consent of the other party
to this Agreement and the Note Insurer; provided, however, that the Depositor
may assign its rights hereunder without the consent of the Originators.
Section 6.07 Confirmation of Intent; Grant of Security
Interest. It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Originators to the Depositor as contemplated by this
Loan Sale Agreement be, and be treated for accounting purposes as, a sale of the
Mortgage Loans. It is, further, not the intention of the parties that any such
conveyance be deemed a pledge of the Mortgage Loans by the Originators to the
Depositor to secure a debt or other obligation of the Originators. However, in
the event that, notwithstanding the intent of the parties, the Mortgage Loans
are held to continue to be property of the Originators then (a) this Loan Sale
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the Uniform Commercial Code; (b) the transfer of the
Mortgage Loans provided for herein shall be deemed to be a grant by the
Originators to the Depositor of a security interest in all of such parties'
right, title and interest in and to the Mortgage Loans and all amounts payable
on the Mortgage Loans in accordance with the terms thereof and all proceeds of
the conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property; (c) the possession by the Depositor
(or its assignee) of Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the Uniform Commercial Code; and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Depositor (or its
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assignee) for the purpose of perfecting such security interest under applicable
law. Any assignment of the interest of the Depositor pursuant to any provision
hereof shall also be deemed to be an assignment of any security interest created
hereby. The Originators and the Depositor shall, to the extent consistent with
this Loan Sale Agreement, take such actions as may be necessary to ensure that,
if this Loan Sale Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement.
Section 6.08 Miscellaneous. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
Section 6.09 Amendments. (a) This Agreement may be amended
from time to time by the Originators and the Depositor by written agreement,
upon the prior written consent of the Note Insurer, without notice to or consent
of the Noteholders 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 Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder; 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 Note without the consent of
the Holder of such Note, or change the rights or obligations of any other party
hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the
Originators and the Depositor with the consent of the Note Insurer, the Majority
Noteholders and the Holders of the majority of the Percentage Interest in the
Trust 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 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
Note without the consent of the Holder of such Note or reduce the percentage for
each Class the Holders of which are required to consent to any such amendment
without the consent of the Holders of 100% of each Class of Notes affected
thereby.
(c) It shall not be necessary for the consent of Holders under
this Section 6.09 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
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Section 6.10 Third-Party Beneficiaries. The parties agree that
each of the Trust, the Owner Trustee, the Note Insurer and the Indenture Trustee
is an intended third-party beneficiary of this Agreement to the extent necessary
to enforce the rights and to obtain the benefit of the remedies of the Depositor
under this Agreement which are assigned to the Trust and then to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer, pursuant to
the Sale and Servicing Agreement and the Indenture, respectively, and to the
extent necessary to obtain the benefit of the enforcement of the obligations and
covenants of the Originators under Section 4.01 and 4.04(a)(i) of this
Agreement. The parties further agree that __________________ and each of its
directors and each person or entity who controls ____________________ or any
such person, within the meaning of Section 15 of the Securities Act (each, an
"Underwriter Entity") is an intended third-party beneficiary of this Agreement
to the extent necessary to obtain the benefit of the enforcement of the
obligations and covenants of the Depositor with respect to each Underwriter
Entity under Section 4.04(a)(ii) of this Agreement.
Section 6.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ORIGINATORS AND THE DEPOSITOR EACH 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 6.01 OF THIS AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE ORIGINATORS AND THE DEPOSITOR
EACH HEREBY WAIVES 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 ORIGINATORS AND THE
DEPOSITOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
EITHER'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) THE ORIGINATORS AND THE DEPOSITOR EACH HEREBY WAIVE 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 RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
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Section 6.12 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties to this Loan Sale Agreement
have caused their names to be signed by their respective officers thereunto duly
authorized as of the date first above written.
___________________, as an Originator
By: _________________________________
Name:
Title:
___________________, as an Originator
By: _________________________________
Name:
Title:
___________________, as Depositor
By: _________________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF SUBSEQUENT
TRANSFER AGREEMENT
This SUBSEQUENT TRANSFER AGREEMENT, dated as of ________, _____ (the
"Subsequent Transfer Date"), is entered into by and among ________, as an
originator, and ___________, as an originator, (together, the "Originators"),
and ________, as depositor (the "Depositor").
W I T N E S S E T H:
Reference is hereby made to (x) that certain Loan Sale Agreement, dated
as of _____ (the "Loan Sale Agreement"), by and among the Originators and the
Depositor, and (y) that certain Indenture, dated as of _____ (the "Indenture"),
by and between the ________ (the "Trust") and ________, as indenture trustee
(the "Indenture Trustee"). Pursuant to the Loan Sale Agreement, the Originators
have agreed to sell, assign and transfer, the Depositor has agreed to accept,
from time to time, Subsequent Mortgage Loans (as defined below). The Loan Sale
Agreement provides that each such sale of Subsequent Mortgage Loans be evidenced
by the execution and delivery of a Subsequent Transfer Agreement such as this
Subsequent Transfer Agreement.
The assets sold to the Depositor pursuant to this Subsequent Transfer
Agreement consist of (a) the Subsequent Mortgage Loans in Pool I and Pool II
listed in the Mortgage Loan Schedule attached hereto (including property that
secures a Subsequent Mortgage Loan that becomes an REO Property), including the
related Mortgage Files delivered or to be delivered to the Collateral Agent, on
behalf of the Indenture Trustee, including all payments of principal received,
collected or otherwise recovered after the Subsequent Cut-Off Date for each
Subsequent Mortgage Loan, all payments of interest due on each Subsequent
Mortgage Loan after the Subsequent Cut-Off Date therefor whenever received and
all other proceeds received in respect of such Subsequent Mortgage Loans, (b)
the Insurance Policies relating to the Subsequent Mortgage Loans, and (c) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid assets, including, without limitation, all insurance
proceeds and condemnation awards.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Aggregate Principal Balance of such
Subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Pool I and $__________ in Pool II.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
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Section 1. Definitions. For the purposes of this Subsequent Transfer
Agreement, capitalized terms used herein but not otherwise defined shall have
the respective meanings assigned to such terms in Appendix I to the Indenture.
Section 2. Sale, Assignment and Transfer. In consideration of the
receipt of $__________ (such amount being approximately 100% of the Aggregate
Principal Balance of the Subsequent Mortgage Loans) from the Depositor, each of
the Originators hereby sells, assigns and transfers to the Depositor, without
recourse, all of their respective right, title and interest in, to, and under
the Subsequent Mortgage Loans and related assets described above, whether now
existing or hereafter arising.
In connection with each such sale, assignment and transfer, the
Originators shall satisfy the document delivery requirements set forth in
Section 2.05 of the Sale and Servicing Agreement with respect to each Subsequent
Mortgage Loan.
Section 3. Representations and Warranties of the Originators. With
respect to each Subsequent Mortgage Loan, each of the Originators hereby remake
each of the representations, warranties and covenants made by the Originators in
Section 3.03 of the Loan Sale Agreement, on which the Depositor relies in
accepting the Subsequent Mortgage Loans. Such representations and warranties
speak as of the Subsequent Transfer Date unless otherwise indicated, and shall
survive each sale, assignment, transfer and conveyance of the Subsequent
Mortgage Loans to the Depositor.
Each of the Originators hereby acknowledge that the Depositor is
transferring the Subsequent Mortgage Loans to the Trust, and that the Trust is
pledging the Subsequent Mortgage Loans to the Indenture Trustee, for the benefit
of the Noteholders and the Note Insurer, on the date hereof. Each of the
Originators hereby acknowledge and agree that the Depositor may assign to the
Trust, and the Trust may assign to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, its interest in the representations and
warranties set forth in this Section 3. Each of the Originators agrees that,
upon such assignment to the Trust and pledge to the Indenture Trustee, such
representations, warranties, agreements and covenants will run to and be for the
benefit of the Indenture Trustee and the Indenture Trustee may enforce, without
joinder of the Depositor or the Trust, the repurchase and indemnification
obligations of he Originators set forth herein with respect to breaches of such
representations, warranties, agreements and covenants.
Section 4. Repurchase of Subsequent Mortgage Loans. Upon discovery by
any of the Depositor, an Originator, the Indenture Trustee, the Servicer on
behalf of the Trust, the Note Insurer or any Noteholder of a breach of any of
the representations and warranties made by the Originators pursuant to Section
3.03 of the Loan Sale Agreement or this Section 3, the party discovering such
breach shall give prompt written notice to each other Person; provided, that the
Indenture Trustee shall have no duty to inquire or to investigate the breach of
any such representations and warranties. The Originators and the Depositor will
be obligated to repurchase a Subsequent Mortgage Loan which breaches a
representation or warranty in accordance with the provisions of Section 4.02 of
the Sale and Servicing Agreement or to indemnify as described in Section 3.05(g)
of the Loan Sale Agreement. Such repurchase and indemnification obligation of
the
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Originators and the Depositor shall constitute the sole remedy against the
Originators and the Depositor, and the Trust for such breach available to the
Servicer, the Trust, the Indenture Trustee, the Note Insurer and the
Noteholders.
Section 5. Amendment. This Subsequent Transfer Agreement may be amended
from time to time by the Originators, and the Depositor only with the prior
written consent of the Note Insurer (or, in the event of a Note Insurer Default,
the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS SUBSEQUENT
TRANSFER AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT TRANSFER
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
Section 7. Counterparts. This Subsequent Transfer Agreement may be
executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. Binding Effect; Third-Party Beneficiaries. This Subsequent
Transfer Agreement will inure to the benefit of and be binding upon the parties
hereto, the Note Insurer, the Trust, the Noteholders, and their respective
successors and permitted assigns.
Section 9. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 10. Exhibits. The exhibits attached hereto and referred to
herein shall constitute a part of this Subsequent Transfer Agreement and are
incorporated into this Subsequent Transfer Agreement for all purposes.
Section 11. Intent of the Parties; Security Agreement. The Originators
and the Depositor intend that the conveyance of all right, title and interest in
and to the Subsequent Mortgage Loans and related assets described above by the
Originators to the Depositor pursuant to this Subsequent Transfer Agreement
shall be, and be construed as, a sale of the Subsequent Mortgage Loans from the
Originators to the Depositor.
It is, further, not intended that such conveyances be deemed to be
pledges of the Subsequent Mortgage Loans by the Originators to the Depositor to
secure a debt or other obligation of the Originators. However, in the event that
the Subsequent Mortgage Loans are held to be property of the Originators, or if
for any reason this Subsequent Transfer Agreement is held or deemed to create a
security interest in the Subsequent Mortgage Loans, then it is intended that:
(a) this Subsequent Transfer Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
of any other applicable jurisdiction; (b) the conveyance provided for in
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this Subsequent Transfer Agreement shall be deemed to be a grant by the
Originators to the Depositor of a security interest in all of the Originators'
respective right, title and interest, whether now owned or hereafter acquired,
in and to the Subsequent Mortgage Loans and related assets described above. The
Originators, to the extent consistent with this Subsequent Transfer Agreement,
take such reasonable actions as may be necessary to ensure that, if this
Subsequent Transfer Agreement were deemed to create a security interest in the
Subsequent Mortgage Loans and the other property described above, such interest
would be deemed to be a perfected security interest of first priority under
applicable law and will be maintained as such throughout the term of this
Subsequent Transfer Agreement.
[Remainder of Page Intentionally Left Blank]
A-4
<PAGE>
IN WITNESS WHEREOF, the Originators and the Depositor have caused this
Subsequent Transfer Agreement to be duly executed by their respective officers
as of the day and year first above written.
________________________, as an Originator
By: _____________________________________
Name:
Title:
________________________, as an Originator
By: _____________________________________
Name:
Title:
________________________, as Depositor
By: _____________________________________
Name:
Title:
[Signature Page to Subsequent Transfer Agreement]
EXHIBIT 10.2
FORM OF SALE AND
SERVICING AGREEMENT
SALE AND SERVICING AGREEMENT
dated as of _________
by and among
______________________________,
as Depositor,
______________________________,
as Issuer,
______________________________,
as Servicer,
______________________________,
as Collateral Agent,
and
______________________________,
as Indenture Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.........................................................1
Section 1.01 Certain Defined Terms.....................................1
Section 1.02 Provisions of General Application.........................1
Section 1.03 Business Day Certificate..................................2
ARTICLE II. SALE AND CONVEYANCE OF THE MORTGAGE LOANS..........................2
Section 2.01 Purchase and Sale of Initial Mortgage Loans...............2
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans............3
Section 2.03 Purchase Price............................................3
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files....3
Section 2.05 Delivery of Mortgage Loan Documents.......................4
Section 2.06 Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Collateral Agent...................7
Section 2.07 Grant of Security Interest................................9
Section 2.08 Further Action Evidencing Assignments....................10
Section 2.09 Assignment of Agreement..................................10
ARTICLE III. REPRESENTATIONS AND WARRANTIES...................................10
Section 3.01 Representations of the Servicer..........................10
Section 3.02 Representations, Warranties and Covenants of the
Depositor..............................................12
Section 3.03 Representations, Warranties and Covenants of the
Collateral Agent.......................................13
Section 3.04 Representations, Warranties and Covenants of the
Indenture Trustee......................................14
ARTICLE IV. THE MORTGAGE LOANS................................................14
Section 4.01 Representations and Warranties Concerning the Mortgage
Loans..................................................14
Section 4.02 Purchase and Substitution................................14
ARTICLE V. ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS.................16
Section 5.01 The Servicer.............................................16
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection
Account................................................17
Section 5.03 Permitted Withdrawals from the Collection Account........18
Section 5.04 Hazard Insurance Policies; Property Protection Expenses..19
Section 5.05 Assumption and Modification Agreements...................20
Section 5.06 Realization Upon Defaulted Mortgage Loans................20
Section 5.07 Indenture Trustee to Cooperate...........................21
Section 5.08 Servicing Compensation; Payment of Certain Expenses by
Servicer...............................................22
Section 5.09 Annual Statement as to Compliance........................22
Section 5.10 Annual Independent Public Accountants' Servicing Report..22
Section 5.11 Access to Certain Documentation..........................23
Section 5.12 Maintenance of Fidelity Bond.............................23
Section 5.13 The Subservicers.........................................23
Section 5.14 Reports to the Indenture Trustee; Collection Account
Statements.............................................23
<PAGE>
Section 5.15 Optional Purchase of Defaulted Mortgage Loans............24
Section 5.16 Reports to be Provided by the Servicer...................24
Section 5.17 Adjustment of Servicing Compensation in Respect of
Prepaid Mortgage Loans.................................26
Section 5.18 Periodic Advances; Special Advance.......................26
Section 5.19 Indemnification; Third Party Claims......................27
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer.......................28
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to
Resign.................................................28
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information.....................28
ARTICLE VI. APPLICATION OF FUNDS..............................................29
Section 6.01 Deposits to the Distribution Account.....................29
Section 6.02 Collection of Money......................................29
Section 6.03 Application of Principal and Interest....................29
Section 6.04 Information Concerning the Mortgage Loans................29
Section 6.05 Compensating Interest....................................29
Section 6.06 Effect of Payments by the Note Insurer; Subrogation......30
ARTICLE VII. SERVICER DEFAULT.................................................30
Section 7.01 Servicer Events of Default...............................30
Section 7.02 Indenture Trustee to Act; Appointment of Successor.......32
Section 7.03 Waiver of Defaults.......................................34
Section 7.04 Rights of the Note Insurer to Exercise Rights of the
Noteholders............................................34
Section 7.05 Indenture Trustee To Act Solely with Consent of the Note
Insurer................................................35
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held for
Benefit of the Note Insurer............................35
Section 7.07 Note Insurer Default.....................................36
ARTICLE VIII. TERMINATION.....................................................36
Section 8.01 Termination..............................................36
Section 8.02 Additional Termination Requirements......................37
Section 8.03 Accounting Upon Termination of Servicer..................37
Section 8.04 Retention and Termination of the Servicer................38
ARTICLE IX. THE COLLATERAL AGENT..............................................38
Section 9.01 Duties of the Collateral Agent...........................38
Section 9.02 Certain Matters Affecting the Collateral Agent...........40
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage Loans..41
Section 9.04 Collateral Agent May Own Notes...........................41
Section 9.05 Collateral Agent's Fees and Expenses; Indemnity..........41
Section 9.06 Eligibility Requirements for Collateral Agent............42
Section 9.07 Resignation and Removal of the Collateral Agent..........42
Section 9.08 Successor Collateral Agent...............................43
<PAGE>
Section 9.09 Merger or Consolidation of Collateral Agent..............43
ARTICLE X. MISCELLANEOUS PROVISIONS...........................................43
Section 10.01 Limitation on Liability..................................43
Section 10.02 Acts of Noteholders......................................44
Section 10.03 Amendment................................................44
Section 10.04 Recordation of Agreement.................................45
Section 10.05 Duration of Agreement....................................45
Section 10.06 Notices..................................................45
Section 10.07 Severability of Provisions...............................46
Section 10.08 No Partnership...........................................46
Section 10.09 Counterparts.............................................46
Section 10.10 Successors and Assigns...................................46
Section 10.11 Headings.................................................46
Section 10.12 The Note Insurer Default.................................46
Section 10.13 Third Party Beneficiary..................................46
Section 10.14 Intent of the Parties....................................46
Section 10.15 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL.............................................47
EXHIBITS
EXHIBIT A Contents of the Mortgage File
EXHIBIT B Indenture Trustee's Acknowledgement of Receipt
EXHIBIT C Collateral Agent's Acknowledgement of Receipt
EXHIBIT D Initial Certification of Collateral Agent
EXHIBIT E Final Certification of Collateral Agent
EXHIBIT F Request for Release of Documents
EXHIBIT G Form of Subsequent Contribution Agreement
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of __________ (this
"Agreement"), by and among __________________, a _________corporation, as
depositor (the "Depositor"), ______________________, a _________ business trust,
as issuer (the "Trust"), ________________________, a _________ corporation, as
servicer (the "Servicer"), __________________________, a _________ association,
as collateral agent (the "Collateral Agent"), and ___________________, a
_________ banking corporation, as indenture trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, the Depositor desires to sell to the Trust, and the
Trust desires to purchase from the Depositor, the mortgage loans (the "Mortgage
Loans") listed on Schedule I to this Agreement;
WHEREAS, immediately after such purchase, the Trust will
pledge such Mortgage Loans to the Indenture Trustee pursuant to the terms of an
Indenture, dated as of _________ (the "Indenture"), between the Trust and the
Indenture Trustee, and issue the ____________________________, Mortgage Backed
Notes (the "Notes");
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the Trust;
WHEREAS, the Collateral Agent will hold, on behalf of the
Indenture Trustee, the Mortgage Loans and certain other assets pledged to the
Indenture Trustee pursuant to the Indenture; and
WHEREAS, ____________ (the "Note Insurer") is intended to be a
third-party beneficiary of this Agreement, and is hereby recognized by the
parties hereto to as a third-party beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Trust, the Depositor, the Servicer, the
Collateral Agent and the Indenture Trustee hereby agree as follows:
Article I.
DEFINITIONS
Section 1.01 Certain Defined Terms. Capitalized terms used
herein but not defined herein shall have the meanings ascribed to such terms in
Appendix I attached hereto.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined herein and in Appendix I to the
Indenture include the plural as well as the singular.
<PAGE>
(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) Any 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 with respect to the Notes
provided for herein shall be made on the basis of a 360-day year 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 a 360-day year
consisting of twelve 30-day months, to the extent permitted by applicable law.
(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 Notes, prepayments with respect
to any Mortgage Loan are deemed to be received on the date they are applied in
accordance with Accepted 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.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar years ____ and ____) and thereafter, within
fifteen (15) days prior to the end of each calendar year while this Agreement
remains in effect (with respect to the succeeding calendar years), the Servicer
shall provide to the Indenture Trustee and the Collateral Agent a certificate of
a Servicing Officer specifying the days on which banking institutions in the
____________________ are authorized or obligated by law, executive order or
governmental decree to be closed.
Article II.
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trust,
without recourse, but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, including the outstanding principal of, and interest due on, such Initial
Mortgage Loans listed on Schedule I attached hereto, and all other assets
included or to be included in the Trust Estate. In connection with such transfer
and assignment, and pursuant to Section 2.07 of the Loan Sale Agreement, the
Depositor does hereby also irrevocably transfer, assign, set over and otherwise
convey to the Trust all of its rights under the Loan Sale Agreement, including,
without limitation, its right to exercise the remedies created by Sections 2.06
and 3.05 of the Loan Sale Agreement for defective documentation and for breaches
of representations and warranties, agreements and covenants of the Originators
contained in Sections 3.01 and 3.03 of the Loan Sale Agreement.
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<PAGE>
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in Section 2.14(b)
of the Indenture, in consideration of the Trust'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 related Pre-Funding Account, the
Depositor shall on any Subsequent Transfer Date sell, transfer, assign, set over
and convey to the Trust without recourse, but subject to terms and provisions of
this Agreement, all of the right, title and interest of the Depositor in and to
the Subsequent Mortgage Loans in the related Pool, including the outstanding
principal of, and interest due on, such Subsequent Mortgage Loans, and all other
assets included or to be included in the Trust Estate. In connection with such
transfer and assignment, and pursuant to Section 2.07 of the Loan Sale
Agreement, the Depositor will also irrevocably transfer, assign, set over and
otherwise convey to the Trust all of its rights under the Loan Sale Agreement
and the related Subsequent Transfer Agreement, including, without limitation,
its right to exercise the remedies created by Sections 2.06 and 3.05 of the Loan
Sale Agreement for defective documentation and for breaches of representations
and warranties, agreements and covenants of the Originators contained in
Sections 3.01 and 3.03 of the Loan Sale Agreement.
The amount released from a Pre-Funding Account with respect to
a transfer of Subsequent Mortgage Loans to the related Pool shall be one-hundred
percent (100%) of the Aggregate Principal Balances of the Subsequent Mortgage
Loans so transferred, as of the related Subsequent Cut-Off Date.
(b) In connection with the transfer and assignment of the
Subsequent Mortgage Loans to the Trust, the Depositor shall satisfy the document
delivery requirements set forth in Section 2.05 hereof.
(c) For any Subsequent Mortgage Loan that has a first Due Date
that occurs later than the last day of the Due Period following the Due Period
in which the Subsequent Mortgage Loan was sold to the Trust, on each applicable
Servicer Distribution Date, the Servicer will deposit into the Distribution
Account 30 days' interest at the related Mortgage Interest Rate, net of the
Servicing Fee, for each month after the month in which the Subsequent Transfer
occurs until, but not including, the month in which such first Due Date occurs.
Section 2.03 Purchase Price. On the Closing Date, as full
consideration for the Depositor's sale of the Initial Mortgage Loans to the
Trust, the Underwriter, on behalf of the Trust, will deliver to, or at the
direction of, the Depositor (i) an amount in cash equal to the sum of (A) ____%
and ____% of the Original Note Principal Balance as of the Closing Date of the
Class A-1 Notes and the Class A-2 Notes, respectively, plus (B) accrued interest
on the Original Note Principal Balance of the Class A-1 Notes and the Class A-2
Notes at the rate of ____% per annum and _____% per annum, respectively, from
(and including) _________ to (but not including) the Closing Date, minus (C) the
Original Pre-Funded Amount and the Original Capitalized Interest Amount for each
class of Notes, payable by wire transfer of same day funds, and (ii) the Trust
Certificates to be issued pursuant to the Trust Agreement.
Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. (a) Upon the receipt by the Depositor, or its designee, of the purchase
price for the Initial Mortgage Loans set forth in Section 2.03 hereof and the
issuance of the Notes pursuant to the
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<PAGE>
Indenture, the ownership of each Mortgage Note, each Mortgage and the contents
of the Mortgage File related to each Initial Mortgage Loan will be vested in the
Trust, and will be pledged to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
(b) Pursuant to Section 2.05 hereof and Section 2.05 of the
Loan Sale Agreement, the Depositor has delivered or caused to be delivered the
Indenture Trustee's Mortgage File related to each Initial Mortgage Loan to the
Collateral Agent, on behalf of the Indenture Trustee.
(c) The Collateral Agent will be the custodian, on behalf of
the Indenture Trustee, to hold the Indenture Trustee's Mortgage Files in trust
for the benefit of all present and future Noteholders and the Note Insurer. In
the event the Collateral Agent resigns or is removed, the Indenture Trustee
shall either (x) hold the Indenture Trustee's Mortgage Files, or (y) appoint a
successor Collateral Agent to hold the Indenture Trustee's Mortgage Files as set
forth in Section 9.08 hereof.
(d) The Collateral Agent shall afford the Depositor, the
Trust, the Note 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 prior written
request and during normal business hours at the offices of the Collateral Agent.
Section 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
shall on or before the Closing Date, with respect to the Initial Mortgage Loans,
and shall on or before the Subsequent Transfer Date with respect to Subsequent
Mortgage Loans, deliver to the Collateral Agent, on behalf of the Indenture
Trustee (as pledgee of the Trust pursuant to the Indenture), the following
documents or instruments with respect to each Mortgage Loan so transferred or
assigned:
(i) the original Mortgage Note, endorsed
without recourse in blank by the related Originator, including
all intervening endorsements showing a complete chain of
endorsement;
(ii) the related original Mortgage with
evidence of recording indicated thereon or a copy thereof
certified by the applicable recording office;
(iii) the recorded mortgage assignment, or
copy thereof certified by the applicable recording office, if
any, showing a complete chain of assignment from the
originator of the related Mortgage Loan to the related
Originator (which assignment may, at such Originator's option,
be combined with the assignment referred to in subpart (iv)
hereof, in which case it must be in recordable form, but need
not have been previously recorded);
(iv) a mortgage assignment in recordable
form (which, if acceptable for recording in the relevant
jurisdiction, may be included in a blanket assignment or
assignments) of each Mortgage from the related Originator to
the Indenture Trustee;
4
<PAGE>
(v) originals of all assumption,
modification and substitution agreements in those instances
where the terms or provisions of a Mortgage or Mortgage Note
have been modified or such Mortgage or Mortgage Note has been
assumed; and
(vi) an original title insurance policy (or
(A) a copy of the title insurance policy, or (B) a binder
thereof or copy of such binder together with a certificate
from the related Originator that the original Mortgage has
been delivered to the title insurance company that issued such
binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
related Originator to the Depositor, and by the Depositor to the Collateral
Agent, on behalf of the Indenture Trustee prior to or concurrently with the
execution and delivery of this Agreement (or, with respect to Subsequent
Mortgage Loans, prior to or on the related Subsequent Transfer Date), due to a
delay in connection with recording, the related Originator may:
(x) in lieu of delivering such original
recorded Mortgage, deliver to the Collateral Agent, on behalf
of the Indenture Trustee, a copy thereof; provided, that the
related Originator certifies that the original Mortgage has
been delivered to a title insurance company for recordation
after receipt of its policy of title insurance or binder
therefor; and
(y) in lieu of delivering the completed
assignment in recordable form, deliver to the Collateral
Agent, on behalf of the Indenture Trustee, the assignment in
recordable form, otherwise complete except for recording
information.
The Collateral Agent, on behalf of the Indenture Trustee,
shall promptly upon receipt thereof, with respect to each Mortgage Note
described in Section 2.05(a)(i) hereof and each assignment described in Section
2.05(a)(iv) hereof, endorse such Mortgage Note and assignment as follows:
___________ as Indenture Trustee under the Indenture dated as of
___________________.
(b) As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the Depositor shall promptly submit, or cause to be submitted by the related
Originator, for recording in the appropriate public office for real property
records, each assignment referred to in Section 2.05(a)(iv). The Collateral
Agent, on behalf of the Indenture Trustee, shall retain a copy of each
assignment submitted for recording. In the event that any such assignment is
lost or returned unrecorded because of a defect therein, the Depositor or such
Originator shall promptly prepare a substitute assignment or cure such defect,
as the case may be, and thereafter the Depositor or such Originator shall submit
each such assignment for recording. The costs relating to the delivery and
recordation of the documents in connection with the Mortgage Loans as specified
in this Article II shall be borne by the Depositor.
(c) The Depositor or the related Originator shall, within five
(5) Business Days after the receipt thereof, deliver, or cause to be delivered,
to the Collateral Agent, on behalf of the Indenture Trustee: (i) the original
recorded Mortgage and related power of attorney, if any,
5
<PAGE>
in those instances where a copy thereof certified by the related Originator was
delivered to the Collateral Agent, on behalf of the Indenture Trustee; (ii) the
original recorded assignment of Mortgage from the related Originator to the
Indenture Trustee, which, together with any intervening assignments of Mortgage,
evidences a complete chain of assignment from the originator of the Mortgage
Loan to the Indenture Trustee, in those instances where copies of such
assignments certified by the related Originator were delivered to the Collateral
Agent, on behalf of the Indenture Trustee, and (iii) the title insurance policy
or title opinion required in Section 2.05(a)(vi). The Collateral Agent shall
review the recorded assignment to confirm the information contained therein. The
Collateral Agent shall notify Indenture Trustee, the Note Insurer and the
Servicer, of any defect in such assignment based on such review. The Servicer
shall have a period of sixty (60) days following such notice to correct or cure
such defect. In the event that the Servicer fails to record an assignment of a
Mortgage as provided herein, the Collateral Agent shall, at the Servicer's
expense, use reasonable efforts to prepare and, if required hereunder, file such
assignments for recordation in the appropriate real property or other records
and the Servicer hereby appoints the Collateral Agent as its attorney-in-fact
with full power and authority acting in its stead for the purpose of such
preparation, execution and filing.
Notwithstanding anything to the contrary contained in this
Section 2.05, in those instances where the public recording office retains the
original Mortgage, power of attorney, if any, assignment or assignment of
Mortgage after it has been recorded or such original has been lost, the
Depositor or the related Originator shall be deemed to have satisfied its
obligations hereunder upon delivery to the Collateral Agent, on behalf of the
Indenture Trustee, of a copy of such Mortgage, power of attorney, if any,
assignment or assignment of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof.
From time to time the Depositor or the related Originator may
forward, or cause to be forwarded, to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing any assumption or
modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Collateral Agent, on behalf of the Indenture Trustee,
as permitted by Section 2.05(a) hereof are, and shall be, held by the Servicer,
the Depositor or the related Originator, as the case may be, in trust for the
benefit of the Indenture Trustee, on behalf of the Noteholders and the Note
Insurer. In the event that any such original document is required pursuant to
the terms of this Section 2.05 to be a part of an Indenture Trustee's Mortgage
File, such document shall be delivered promptly to the Collateral Agent, on
behalf of the Indenture Trustee. From and after the sale of the Mortgage Loans
to the Trust pursuant hereto, to the extent that the Depositor or the related
Originator retains legal title of record to any Mortgage Loans prior to the
vesting of legal title in the Trust, such title shall be retained in trust for
the Trust as the owner of the Mortgage Loans, and the Indenture Trustee, as the
pledgee of the Trust under the Indenture. In acting as custodian of any original
document which is part of the Indenture Trustee's Mortgage Files, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in the related Mortgage Loans or the Mortgage Files. Promptly
upon the Servicer's receipt of any such original document, the Servicer, on
behalf of the Trust, shall mark conspicuously each such original document, and
its master data processing records with a legend evidencing that the Trust has
purchased the related Mortgage Loan and all right and title thereto and interest
therein, and pledged such Mortgage Loan and all right and title
6
<PAGE>
thereto and interest therein to the Indenture Trustee, on behalf of the
Noteholders and the Note Insurer.
Section 2.06 Acceptance of the Trust Estate; Certain
Substitutions; Certification by the Collateral Agent. (a) The Indenture Trustee
agrees to execute and deliver to the Depositor, the Note Insurer, the Collateral
Agent and the Servicer on or prior to the Closing Date an acknowledgement of
receipt of the Note Insurance Policy in the form attached as Exhibit B hereto.
(b) The Collateral Agent, on behalf of the Indenture Trustee,
agrees to:
(i) execute and deliver to the Depositor,
the Note Insurer, the Indenture Trustee and the Servicer, on
or prior to the Closing Date or any Subsequent Transfer Date,
as applicable, with respect to each Mortgage Loan transferred
on such date, an acknowledgement of receipt of the Mortgage
File containing the original Mortgage Note (with any
exceptions noted), in the form attached as Exhibit C 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 Estate
and delivered to the Collateral Agent, on behalf of the
Indenture Trustee, in trust upon and subject to the conditions
set forth herein, for the benefit of the Noteholders and the
Note Insurer.
(ii) to review (or cause to be reviewed)
each Indenture Trustee's Mortgage File within thirty (30) days
after the Closing Date or any Subsequent Transfer Date, as
applicable (or, with respect to any Qualified Substitute
Mortgage Loans, within thirty (30) days after the receipt by
the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Servicer, the Depositor, the
Indenture Trustee and the Note Insurer a certification, in the
form attached hereto as Exhibit D, to the effect that, except
as otherwise noted, 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 2.05 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 they reasonably appear to have been initialed by
the Mortgagor), appears regular on its face and relates to
such Mortgage Loan, and (iii) based on its examination and
only as to the foregoing documents, the information set forth
on the Mortgage Loan Schedule as to the information set forth
in (i), (ii), (v) and (vi) of the definition of "Mortgage Loan
Schedule" accurately reflects the information set forth in the
Indenture Trustee's Mortgage File delivered on such date.
(iii) to review (or cause to be reviewed)
each Indenture Trustee's Mortgage File within ninety (90) days
after the Closing Date or any Subsequent Transfer Date, as
applicable (or, with respect to any Qualified Substitute
Mortgage Loans, within ninety (90) days after the receipt by
the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Servicer, the Depositor, the
Indenture Trustee, the Rating Agencies and the Note Insurer a
certification in the form attached hereto as Exhibit E to the
effect that, except as otherwise noted, as to each Mortgage
Loan listed in the related
7
<PAGE>
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
2.05 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
they reasonably appear to be initialed by the Mortgagor),
appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the
foregoing documents, the information set forth in the
definition of "Mortgage Loan Schedule" accurately reflects the
information set forth in the Indenture Trustee's Mortgage File
delivered on such date.
In performing any such review, the Collateral Agent may
conclusively rely on the Depositor as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Collateral Agent's review of the Indenture Trustee's Mortgage Files is limited
solely to confirming that the documents listed in Section 2.05 have been
executed and received and relate to the Indenture Trustee's Mortgage Files
identified in the related Mortgage Loan Schedule. The Collateral Agent 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.
(c) If the Collateral Agent during the process of reviewing
the Indenture Trustee's Mortgage Files finds any document constituting a part of
a Indenture 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 2.05 or the
description thereof as set forth in the related Mortgage Loan Schedule, the
Collateral Agent shall promptly so notify the Servicer, the Depositor, the
Originators, the Note Insurer and the Indenture Trustee. Pursuant to Section
2.06(b) of the Loan Sale Agreement, the Depositor and the Originators have
agreed to use reasonable efforts to cause to be remedied a material defect in a
document constituting part of an Indenture Trustee's Mortgage File of which it
is so notified by the Collateral Agent. If, however, within sixty (60) days
after the Collateral Agent's notice to it respecting such defect the Depositor
or the Originators have not caused to be remedied the defect and the defect
materially and adversely affects the interest of the Noteholders and the Note
Insurer in the related Mortgage Loan, the Depositor and the Originators will be
obligated, pursuant to Section 3.05 of the Loan 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 3.05 of the Loan
Sale Agreement or (ii) purchase such Mortgage Loan at a purchase price equal to
the Loan Repurchase Price. Upon receipt by the Collateral Agent and the
Indenture Trustee of a certification, in the form attached hereto as Exhibit F,
of a Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt by the Collateral Agent, on behalf of the Indenture
Trustee, of the related Indenture Trustee's Mortgage File, and the deposit of
the amounts described above in the Collection Account, the Collateral Agent
shall release to the Servicer for release to the Depositor the related Indenture
Trustee's Mortgage File and the Indenture Trustee shall execute, without
recourse, and deliver such instruments of transfer furnished by the Depositor as
may be necessary to transfer such Mortgage Loan to the Depositor. The Collateral
Agent shall notify the
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Indenture Trustee, who shall notify the Note Insurer if the Depositor fails to
repurchase or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.07 Grant of Security Interest. (a) It is intended
that the conveyance of the Mortgage Loans and other property by the Depositor to
the Trust as provided in this Article II be, and be construed as, a sale of the
Mortgage Loans and such other property by the Depositor to the Trust. It is,
further, not intended that such conveyance be deemed a pledge of the Mortgage
Loans or such other property by the Depositor to the Trust to secure a debt or
other obligation of the Depositor. However, in the event that the Mortgage Loans
or any of such other property are held to be property of the Depositor, or if
for any reason this Agreement is held or deemed to create a security interest in
the Mortgage Loans or any of such other property, then it is intended that: (i)
this Agreement shall also be deemed to be a security agreement within the
meaning of the Uniform Commercial Code; (ii) the conveyance provided for in this
Article II shall be deemed to be a grant by the Depositor to the Trust of a
security interest in all of the Depositor's right, title and interest in and to
the Mortgage Loans and such other property and all amounts payable to the
holders of the Mortgage Loans in accordance with the terms thereof and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including, without limitation,
all amounts from time to time held or invested in the Distribution Account,
whether in the form of cash, instruments, securities or other property; (iii)
the possession by the Collateral Agent, on behalf of the Indenture Trustee, of
the Mortgage Notes and such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be deemed to be "possession
by the secured party" for purposes of perfecting the security interest pursuant
to the Uniform Commercial Code; and (iv) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from financial intermediaries, bailees or agents, as applicable,
of the Indenture Trustee for the purpose of perfecting such security interest
under applicable law. The Depositor, the Servicer, on behalf of the Trust, the
Collateral Agent and the Indenture Trustee, shall, to the extent consistent with
this Agreement, take such actions as may be reasonably necessary to ensure that,
if this Agreement were deemed to create a security interest in the Mortgage
Loans or any of such other property, such security interest would be deemed to
be a perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of this Agreement.
(b) The Depositor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Estate and each 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 other assets in the Trust
Estate are held by the Collateral Agent, on behalf of the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer. In addition, the Depositor,
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
Estate by stating that it is not the owner of such asset and that the Trust is
the owner of such Mortgage Loan or other asset in the Trust Estate, which is
held by the Collateral Agent, on behalf of the Indenture Trustee, for the
benefit of the Noteholders and the Note Insurer.
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Section 2.08 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Depositor to promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or appropriate, or that the
Servicer, the Indenture Trustee or the Collateral Agent may reasonably request,
in order to perfect, protect or more fully evidence the transfer of ownership of
the Mortgage Loans and other assets in the Trust Estate or to enable the
Collateral Agent, on behalf of the Indenture 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, the Indenture
Trustee or the Collateral Agent 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, the Indenture
Trustee and the Collateral Agent powers of attorney to execute all documents on
its behalf under this Agreement and the Loan Sale Agreement as may be necessary
or desirable to effectuate the foregoing.
Section 2.09 Assignment of Agreement. The Depositor hereby
acknowledges and agrees that the Trust may assign its interest under this
Agreement to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, as may be required to effect the purposes of the Indenture,
without further notice to, or consent of, the Depositor, and the Indenture
Trustee shall succeed to such of the rights and obligations of the Trust
hereunder as shall be so assigned. The Trust shall, pursuant to the Indenture,
assign all of its right, title and interest in and to the Mortgage Loans and its
right to exercise the remedies created by Section 2.06 and 3.05 of the Loan Sale
Agreement for breaches of the representations, warranties, agreements and
covenants of the Originators contained in Sections 2.05, 2.06 and 3.03 of the
Loan Sale Agreement, assign such right, title and interest to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer. The Depositor
agrees that, upon such assignment to the Indenture Trustee, such
representations, warranties, agreements and covenants will run to and be for the
benefit of the Indenture Trustee and the Indenture Trustee may enforce, without
joinder of the Depositor or the Trust, the repurchase obligations of the
Originators set forth herein with respect to breaches of such representations,
warranties, agreements and covenants.
Article III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer
hereby represents and warrants to the Indenture Trustee, the Depositor, the
Collateral Agent, the Trust, the Note Insurer and the Noteholders as of the
Closing Date and during the term of this Agreement that:
(a) Each of the Servicer and the
Subservicers is duly organized, validly existing and in good
standing under the laws of their respective states of
incorporation and has the power to own its assets and to
transact the business in which it is currently engaged. Each
of the Servicer and the Subservicers is duly qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it or the
performance of its obligations hereunder requires such
qualification and in which the failure so to qualify
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could reasonably be expected to have a material adverse effect
on the business, properties, assets, or condition (financial
or other) of the Servicer or the Subservicers or the
performance of their respective obligations hereunder;
(b) The Servicer has the power and authority
to make, execute, deliver and perform this Agreement and all
of the transactions contemplated under this Agreement, and has
taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and
assuming the due authorization, execution and delivery hereof
by the other parties hereto constitutes, or will constitute,
the legal, valid and binding obligation of the Servicer,
enforceable in accordance with its terms, except as
enforcement of such terms 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);
(c) The Servicer is not required to obtain
the consent of any other party or any consent, license,
approval or authorization from, or registration or declaration
with, any governmental authority, bureau or agency which
consent already has not been obtained in connection with the
execution, delivery, performance, validity or enforceability
of this Agreement, except such as have been obtained prior to
the Closing Date;
(d) The execution, delivery and performance
of this Agreement by the Servicer will not violate any
provision of any existing law or regulation or any order or
decree of any court or the charter or bylaws of the Servicer,
or constitute a breach of any mortgage, indenture, contract or
other Agreement to which the Servicer is a party or by which
it may be bound;
(e) There is no action, suit, proceeding or
investigation pending or threatened against the Servicer or
the Subservicers which, either in any one instance or in the
aggregate, is, in the Servicer's judgment, likely to result in
any material adverse change in the business, operations,
financial condition, properties, or assets of the Servicer or
the Subservicers, or in any material impairment of the right
or ability of any of them to carry on its business
substantially as now conducted, or in any material liability
on the part of any of them, or which would draw into question
the validity of this Agreement, the Notes, or the Mortgage
Loans or of any action taken or to be taken in connection with
the obligations of the Servicer or the Subservicers
contemplated herein or therein, or which would be likely to
impair materially the ability of the Servicer or the
Subservicers to perform their respective obligations
hereunder;
(f) Neither this Agreement nor any
statement, report, or other document furnished by the Servicer
or the Subservicers pursuant to this Agreement or in
connection with the transactions contemplated hereby,
including, without limitation, the sale or placement of the
Notes, contains any untrue statement of fact provided by or on
behalf of the Servicer or omits to state a fact necessary to
make the statements provided by or on behalf of the Servicer
contained herein or therein not misleading:
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(g) 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; and
(h) None of the Servicer or the Subservicers
is an "investment company" or a company "controlled by an
investment company," within the meaning of the Investment
Company Act of 1940, as amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 shall survive the
delivery of the respective Indenture Trustee's Mortgage Files to the Collateral
Agent, on behalf of the Indenture Trustee or to another custodian, as the case
may be, and inure to the benefit of the Indenture Trustee.
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Collateral Agent and the Servicer 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
other parties hereto, 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 made on or prior to the Closing Date;
(e) None of the execution and delivery of
this Agreement, the consummation of the transactions
contemplated hereby or thereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result
in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under (A) the
charter or bylaws of the Depositor, or (B) of any term,
condition or provision of any material indenture, deed of
trust, contract or other agreement or instrument to which the
Depositor or any of its subsidiaries is a party or by which it
or any of its subsidiaries is bound; (ii) results or will
result in a violation of any
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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 may materially and adversely affect
its performance hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be, and
shall inure to the benefit of the Indenture Trustee.
Section 3.03 Representations, Warranties and Covenants of the
Collateral Agent. The Collateral Agent hereby represents, warrants and covenants
to the Indenture Trustee, the Trust, the Servicer and the Depositor that as of
the date of this Agreement or as of such date specifically provided herein:
(a) The Collateral Agent is a national
banking association duly organized, validly existing and in
good standing under the laws of the United States of America;
(b) The Collateral Agent has the corporate
power and authority to execute, deliver and perform, and to
enter into and consummate transactions contemplated by this
Agreement; and
(c) This Agreement has been duly and validly
authorized, executed and delivered by the Collateral Agent,
all requisite corporate action having been taken, and,
assuming the due authorization, execution and delivery hereof
by the other parties hereto, constitutes or will constitute
the legal, valid and binding agreement of the Collateral
Agent, enforceable against the Collateral Agent 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).
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.03 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be, and
shall inure to the benefit of the Indenture Trustee.
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Section 3.04 Representations, Warranties and Covenants of the
Indenture Trustee. The Indenture Trustee hereby represents, warrants and
covenants to the Collateral Agent, the Trust, the Servicer and the Depositor
that as of the date of this Agreement or as of such date specifically provided
herein:
(a) The Indenture Trustee is a banking
corporation duly organized, validly existing and in good
standing under the laws of the State of ______________;
(b) The Indenture Trustee has the corporate
power and authority 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 Indenture Trustee,
all requisite corporate action having been taken, and,
assuming the due authorization, execution and delivery hereof
by the other parties hereto, constitutes or will constitute
the legal, valid and binding agreement of the Indenture
Trustee, enforceable against the Indenture Trustee 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);
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.04 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be.
Article IV.
THE MORTGAGE LOANS
Section 4.01 Representations and Warranties Concerning the
Mortgage Loans. With respect to each Mortgage Loan, the Depositor hereby assigns
to the Trust, pursuant to Section 2.07 of the Loan Sale Agreement, the
representations, warranties and covenants of the Originators set forth in
Sections 3.01 and 3.03 of the Loan Sale Agreement. Such representations,
warranties and covenants are made or deemed to be made (x) with respect to the
Initial Mortgage Loans, as of the Initial Cut-Off Date and (y) with respect to
the Subsequent Mortgage Loans, as of the related Subsequent Cut-Off Date.
Section 4.02 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01
and 3.03 of the Loan Sale Agreement shall survive the purchase by the Depositor
of the Mortgage Loans, the subsequent transfer thereof by the Depositor to the
Trust, the subsequent pledge thereof by the Trust to the Indenture Trustee, for
the benefit of the Noteholders and the Notes Insurer, and the delivery of the
Notes to the Noteholders, and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage Notes
and notwithstanding subsequent termination of this Agreement or the Loan Sale
Agreement.
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(b) Upon discovery by the Depositor, the Servicer, any
Subservicer, the Indenture Trustee, the Collateral Agent, the Note Insurer or a
Noteholder of a breach of any of the representations and warranties in Sections
3.01 or 3.03 of the Loan Sale Agreement which materially and adversely affects
the value of the Mortgage Loans or the interest of the Noteholders or the Note
Insurer, or which materially and adversely affects the interests of the Note
Insurer or the Noteholders 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 the
Originator's best knowledge), the party discovering such breach or failure shall
promptly (and in any event within five (5) days of the discovery) give written
notice thereof to the others. Within sixty (60) days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Servicer shall, or shall cause an Originator to, (a) promptly cure
such breach in all material respects, (b) purchase such Mortgage Loan on the
next succeeding Servicer Distribution Date, in the manner and at the price
specified in Section 2.06(b) and this Section 4.02, or (c) remove such Mortgage
Loan from the Trust Estate (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans in the
manner specified in Section 2.06(b) and this Section 4.02. The Collateral Agent
shall give prompt written notice to the Indenture Trustee, who shall deliver
such notice to the Note Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 4.02 or Section 2.06(b).
(c) As to any Deleted Mortgage Loan for which the Depositor
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Depositor or an Originator, as applicable, to effect such substitution
by delivering to the Indenture Trustee a certification, in the form attached
hereto as Exhibit F, executed by a Servicing Officer, and the documents
described in Sections 2.05(a)(i)-(vi) for such Qualified Substitute Mortgage
Loan or Loans.
(d) The Servicer shall deposit in the Distribution 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 Loan or Loans on or before the date of
substitution will be retained by the Depositor. The Trust will own all payments
received on the Deleted Mortgage Loan on or before the date of substitution, and
the Depositor 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 Indenture Trustee, the Collateral Agent and the Note
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 or
Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects.
(e) [Reserved];
(f) It is understood and agreed that the obligations of the
Depositor and the Originators set forth in Sections 2.06 and 3.05 of the Loan
Sale Agreement to, and the Servicer's obligation set forth in this Section 4.02
to cause the Depositor and the Originators to, cure, purchase or substitute for
a defective Mortgage Loan, or to indemnify as described in Section 3.05(g) of
the Loan Sale Agreement, constitute the sole remedies of the Indenture Trustee,
the
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Collateral Agent, the Note Insurer and the Noteholders respecting a breach of
the representations and warranties of the Originators set forth in Sections 3.01
and 3.03 of the Loan Sale Agreement.
(g) Pursuant to Section 3.05(g) of the Loan Sale Agreement,
the Depositor and the Originators shall be obligated to indemnify the Indenture
Trustee, the Trust, the Owner Trustee, the Collateral Agent, the Noteholders and
the Note Insurer for any third party claims arising out of a breach by the
Depositor or the related Originator of representations or warranties regarding
the Mortgage Loans.
(h) Pursuant to Section 3.05(h) of the Loan Sale Agreement,
the Depositor and each of the Originators shall be jointly and severally
responsible for any repurchase, cure or substitution obligation of the Depositor
or any of the Originators under this Agreement, the Loan Sale Agreement or the
Indenture.
Article V.
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 The Servicer. The Servicer shall service and
administer the Mortgage Loans in accordance with the Accepted Servicing
Practices and shall have full power and authority to do any and all things not
inconsistent therewith in connection with such servicing and administration
which it may deem necessary or desirable subject to the limitations set forth in
this Agreement. The Indenture Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder. Without limiting
the generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Noteholders and the Indenture 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, and to effect such
modifications, waivers, indulgences and other like matters as are in its
judgment necessary or desirable, with respect to the Mortgage Loans and the
Mortgaged Properties and the servicing and administration thereof. The Servicer
shall notify the Indenture Trustee of any such waiver, release, discharge,
modification, indulgence or other such matter by delivering to the Indenture
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 5.01 together with the original copy of any written agreement
or other document executed in connection therewith, all of which written
agreements or documents shall, for all purposes, be considered a part of the
related Indenture Trustee's Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. Notwithstanding anything
in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would decrease the Mortgage
Interest Rate, reduce or increase the principal balance, decrease the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Note Insurer
consents to such modifications in writing; provided, however, that the Servicer
shall be permitted to extend the final maturity date on a Mortgage Loan by 180
days or less without the consent of the Note Insurer.
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The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Indenture Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make its reasonable 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, follow Accepted Servicing Practices. Consistent with the foregoing,
the Servicer may in its discretion waive any assumption fees or other fees which
may be collected in the ordinary course of servicing such Mortgage Loans.
(b) The Servicer shall establish and maintain, in the name of
the Indenture Trustee, the Collection Account, in trust for the benefit of the
Noteholders and the Note Insurer. The Collection Account shall be established
and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on each Business Day
(except as otherwise permitted herein), the following payments and collections
received or made by it (other than in respect of principal collected and
interest due on the Mortgage Loans on or before the Cut-Off Date):
(i) payments of interest on the Mortgage
Loans;
(ii) payments of principal of the Mortgage
Loans;
(iii) the Loan Repurchase Price of Mortgage
Loans repurchased pursuant to Sections 2.06, 4.02 or 5.05;
(iv) the Substitution Adjustment received in
connection with Mortgage Loans for which Qualified Substitute
Mortgage Loans are received pursuant to Sections 2.06, 4.02
and 3.03;
(v) all Liquidation Proceeds; and
(vi) all Insurance Proceeds (including, for
this purpose, any amounts required to be deposited by the
Servicer pursuant to Section 5.04 hereof).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Indenture Trustee shall invest any funds in the
Collection Account in Permitted Investments as directed by the Servicer, which
shall mature not later than the Business Day next preceding the Servicer
Distribution Date next following the date of such investment (except that any
investment held by the Indenture Trustee may mature on such Servicer
Distribution Date) and shall not be sold or disposed of prior to its maturity.
All net income and gain realized from any such investment shall be for the
benefit of the Servicer and shall be
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subject to its withdrawal or order on a Servicer Distribution Date. The Servicer
shall deposit from its own funds the amount of any loss, to the extent not
offset by investment income or earnings, in the Collection Account upon the
realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Servicer may make withdrawals from the Collection Account, on or
prior to any Servicer Distribution Date, for the following purposes:
(a) to reimburse the Servicer for
Liquidation Expenses theretofore incurred in respect of any
Mortgage Loan in an amount not to exceed the amount of the sum
of the related Insurance Proceeds and Liquidation Proceeds
deposited in the Collection Account pursuant to Section
5.02(c)(v)-(vi);
(b) to reimburse the Servicer for amounts
expended by it pursuant to Section 5.04 in good faith in
connection with the restoration of damaged property, in an
amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant
to Section 5.03(a)) and amounts representing proceeds of other
insurance policies covering the property subject to the
related Mortgage deposited in the Collection Account pursuant
to Section 5.02(c)(v)-(vi);
(c) to pay to the Depositor amounts received
in respect of any Defective Mortgage Loan purchased or
substituted for by the Depositor to the extent that the
distribution of any such amounts on the Servicer Distribution
Date upon which the proceeds of such purchase are distributed
would make the total amount distributed in respect of any such
Mortgage Loan on such Servicer Distribution Date greater than
the Loan Repurchase Price or the Substitution Adjustment
therefor;
(d) to reimburse the Servicer for
unreimbursed Servicing Advances, without interest, with
respect to the Mortgage Loans for which it has made a
Servicing Advance, from subsequent collections with respect to
interest on such Mortgage Loans and from Liquidation Proceeds,
Insurance Proceeds and/or the Loan Repurchase Price or
Substitution Adjustment of or relating to such Mortgage Loans;
(e) to reimburse the Servicer 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;
(f) to withdraw any amount received from a
Mortgagor that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the
Bankruptcy Code in accordance with a final, nonappealable
order of a court having competent jurisdiction;
(g) to withdraw any funds deposited in the
Collection Account that were not required to be deposited
therein; and
(h) to pay the Servicer the Servicing
Compensation pursuant to Section 5.08 hereof to the extent not
retained or paid.
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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 this Section 5.03.
Section 5.04 Hazard Insurance Policies; Property Protection
Expenses. (a) The Servicer shall cause to be maintained for each Mortgage Loan a
hazard insurance policy with extended coverage which contains a standard
mortgagee's clause with an appropriate endorsement in an amount equal to the
lesser of (x) the maximum insurable value of the related Mortgaged Property or
(y) the sum of the Principal Balance of such Mortgage Loan plus the outstanding
balance of any mortgage loan senior to such Mortgage Loan, but in no event shall
such amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the sum of the Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Note Insurer
insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), 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 Property a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the sum of the Principal Balance of the related Mortgage Loan and the
principal balance of the related first lien, if any, (ii) the maximum insurable
value of the related Mortgaged Property, and (iii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).
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Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Note Insurer, to take or enter into an assumption
and modification agreement from or with the Person to whom such property has
been or is about to be conveyed, pursuant to which such Person becomes liable
under the Mortgage Note and the Mortgagor remains liable thereon or, if the
Servicer in its reasonable judgment finds it appropriate, is released from
liability thereon. The Servicer shall notify the Indenture Trustee and the
Collateral Agent that any assumption and modification agreement has been
completed by delivering to the Indenture Trustee, the Collateral Agent and the
Note Insurer an Officer's Certificate certifying that such agreement is in
compliance with this Section 5.05 together with the original copy of such
assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the then current Mortgage
Interest Rate thereon shall not be increased or decreased. Any fee collected by
the Servicer for entering into any such agreement will be retained by the
Servicer as additional servicing compensation. At its sole election, the
Servicer may purchase from the Trust any Mortgage Loan that has been assumed in
accordance with this Section 5.05 within one month after the date of such
assumption at a price equal to the greater of (i) the fair market value of such
Mortgage Loan (as determined by the Servicer in its good faith judgment) and
(ii) the Loan Repurchase Price. Such amount, if any, shall be deposited into the
Collection Account in the Due Period in which such repurchase is made.
Notwithstanding the foregoing paragraph of this Section 5.05
or any other provision of this Agreement, the Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure, without the prior written consent of the Note Insurer. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default) and
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procedures which are consistent with Accepted Servicing Practices as it shall
deem necessary or advisable and as shall be normal and usual in its general
first and second mortgage loan servicing activities. 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 towards the correction of any default on a
related senior mortgage loan or restoration of any property unless, in the
reasonable judgment of the Servicer, such expenses will be recoverable from
Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Indenture Trustee, or to its nominee,
on behalf of Noteholders and the Note Insurer.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Trust Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 10.01 of the
Indenture) will be applied in the following order of priority, in each case to
the extent of Available Funds: first, to pay the Servicer any accrued and unpaid
Servicing Fees relating to such Mortgage Loan; second, to reimburse the Servicer
or any Subservicer for any related unreimbursed Servicing Advances, and any
related unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Interest Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 5.07 Indenture Trustee to Cooperate. Upon the payment
in full of the Principal Balance of any Mortgage Loan, the Servicer will notify
the Indenture Trustee and the Collateral Agent by a certification (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 5.02 have been so deposited) of a
Servicing Officer. Upon any such payment in full, the Servicer is authorized to
execute, pursuant to the authorization contained in Section 5.01, an instrument
of satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be delivered
to the Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction shall be reimbursed
from the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of
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any Mortgage Loan, the Collateral Agent shall, upon request of the Servicer and
delivery to the Collateral Agent of a Request for Release signed by a Servicing
Officer, release the related Mortgage File to the Servicer and shall execute
such documents as shall be necessary for the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return the
Indenture Trustee's Mortgage File to the Collateral Agent 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
that hereinabove specified, the Request for Release shall be released by the
Collateral Agent to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive, and the Indenture Trustee shall pay, out of collections on the
Mortgage Loans for the Due Period, as servicing compensation for such Due
Period, an amount (the "Monthly Servicing Fee") equal to the product of
one-twelfth of the Servicing Fee Rate and the aggregate outstanding Principal
Balance of each Pool of Mortgage Loans as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late payment
charges or extension and other administrative charges shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all fees and
expenses of the Subservicer, payment of the Indenture Trustee Fee and payment of
the Collateral Agent Fee to the extent that monies in the Collection Account are
insufficient therefor, as provided in Section 6.16 of the Indenture and Section
9.05 hereof, and all other fees and expenses not expressly stated hereunder to
be payable by or from another source) and shall not be entitled to reimbursement
therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Indenture Trustee, the Collateral Agent, the Rating
Agencies, the Note Insurer and each Noteholder, on or before April 30 of each
year, beginning April 30, ______, an Officer's Certificate of the Servicer
stating that (a) 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 (b) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its material 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.
Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning April 30, _____, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Indenture Trustee, the Collateral Agent, the Rating Agencies and each Noteholder
to the effect that such firm has examined certain documents and records relating
to the servicing of mortgage loans under servicing agreements (including this
Agreement) substantially similar to this Agreement, and that such examination,
which has been conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers (to the extent that the procedures in
such audit guide are applicable to the servicing obligations set forth in such
agreements), has disclosed no items of noncompliance with the provisions of this
Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.
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Section 5.11 Access to Certain Documentation. The Servicer
shall permit the designated agents or representatives of each Noteholder, the
Note Insurer, the Collateral Agent and the Indenture Trustee (i) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the Servicer
relating to the Mortgage Loans and (ii) to visit the offices and properties of
the Servicer for the purpose of examining such materials and to discuss matters
relating to the Mortgage Loans and the Servicer's performance under this
Agreement with any of the officers or employees of the Servicer having knowledge
thereof and with the independent public accountants of the Servicer (and by this
provision the Servicer authorizes its accountants to discuss their respective
finances and affairs), all at such reasonable times, as often as may be
reasonably requested and without charge to such Noteholder, the Note Insurer,
the Collateral Agent or the Indenture Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as Servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicers. The parties acknowledge that
the Servicer intends to appoint the Subservicers as the Servicer's agents for
the purpose of servicing on the Servicer's behalf such of the Mortgage Loans as
were originated in the States of New Jersey, Pennsylvania and New York. The
Servicer agrees to cause the Subservicers to service such Mortgage Loans in a
manner consistent with the Accepted Servicing Practices set forth in this
Agreement, and agrees that receipt by the Subservicers of any and all amounts
which by the terms hereof are required to be deposited in the Collection Account
shall constitute receipt thereof by the Servicer for all purposes hereof as of
the date so received by the Subservicers. Notwithstanding such designation of
the Subservicers, the Servicer agrees that it is, and it shall remain, fully
obligated under the terms hereof as Servicer with respect to all such Mortgage
Loans, and nothing herein shall relieve or release the Servicer from its
obligations to the other parties hereto to service such Mortgage Loans in the
manner provided in this Agreement.
Section 5.14 Reports to the Indenture Trustee; Collection
Account Statements. Not later than fifteen (15) days after each Distribution
Date, the Servicer shall provide to the Indenture Trustee, the Collateral Agent
and the Note Insurer a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
related Distribution Date, stating that all distributions required by this
Agreement to be made by the Servicer on behalf of the Indenture 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 for each category of deposit specified in Section 5.02 and
each category of withdrawal specified in Section 5.03 and the aggregate of
deposits into the Collection Account as specified in Section 6.01. 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 Distribution Date occurs. Copies of such
statement shall be provided by the Indenture Trustee to any Noteholder upon
request.
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Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) Subject to Section 5.15(b), the Depositor or any Affiliate of the Depositor,
in its sole discretion, shall have the right to elect (by written notice sent to
the Servicer, the Indenture Trustee and the Note Insurer), but shall not be
obligated, to purchase for its own account from the Trust any Mortgage Loan
which is ninety (90) days or more Delinquent in the manner and at the Loan
Purchase Price (except that the amount described in clause (ii) of the
definition of Loan Purchase Price shall in no case be net of the Servicing Fee).
The purchase price for any Mortgage Loan purchased hereunder shall be deposited
in the Collection Account and the Collateral Agent, upon the Indenture Trustee's
receipt of such deposit, shall release or cause to be released to the purchaser
of such Mortgage Loan the related Indenture Trustee's Mortgage File and shall
execute and deliver such instruments of transfer or assignment prepared by the
purchaser of such Mortgage Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan
released pursuant hereto and the purchaser of such Mortgage Loan shall succeed
to all the Indenture Trustee's right, title and interest in and to such Mortgage
Loan and all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free of
any further obligation to the Indenture Trustee, the Collateral Agent, the Note
Insurer or the Noteholders with respect thereto.
(b) After the Depositor or an Affiliate of the Depositor has
repurchased defaulted Mortgage Loans in a Aggregate Principal Balance equal to
1% of the Maximum Collateral Amount, then notwithstanding the foregoing, unless
the Note Insurer consents, any such Depositor or Affiliate of the Depositor may
only exercise its option pursuant to this Section 5.15 with respect to the
Mortgage Loan or Mortgage Loans that have been Delinquent for the longest period
at the time of such repurchase. Any request by the Depositor or Affiliate to the
Depositor for consent to repurchase Mortgage Loans that are not the most
Delinquent shall be accompanied by a description of the Mortgage Loans that have
been Delinquent longer than the Mortgage Loan or Mortgage Loans the Depositor or
such Affiliate proposes to repurchase. If the Note Insurer fails to respond to
such request within ten (10) Business Days after receipt thereof, the Depositor
or such Affiliate may repurchase the Mortgage Loan or Mortgage Loans proposed to
be repurchased without the consent of, or any further action by, the Note
Insurer. Notice to the Note Insurer shall be delivered in accordance with the
terms of the Insurance and Indemnity Agreement.
Section 5.16 Reports to be Provided by the Servicer. (a) Two
(2) Business Days prior to each Servicer Distribution Date, the Servicer shall
deliver to the Indenture Trustee a Servicer Remittance Report for such
Distribution Date, setting forth the information required in the definition of
"Indenture Trustee's Remittance Report."
(b) On each Servicer Distribution Date, the Servicer shall
deliver to the Indenture Trustee and the Note Insurer the following information
with respect to all Mortgage Loans as well as a break out as to (x) consumer
purpose and business purpose Mortgage Loans and (y) each Mortgage Loan Group, in
each case, as of the close of business on the last Business Day of the prior
calendar month (except as otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and
the Aggregate Principal Balances thereof, together with the
number, Aggregate principal balances of such Mortgage Loans
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and the percentage (based on the Aggregate Principal Balances
of the Mortgage Loans) of the Aggregate Principal Balances of
such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans (A) 31-59 days Delinquent, (B) 60-89 days
Delinquent and (C) 90 or more days Delinquent;
(ii) the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
Aggregate Principal Balances of the Mortgage Loans) of the
Aggregate Principal Balances of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
Aggregate Principal Balances of the Mortgage Loans) of any
such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
(iii) the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
Aggregate Principal Balances of the Mortgage Loans) of the
Aggregate Principal Balances of such Mortgage Loans to the
Aggregate Principal Balance of all Mortgage Loans relating to
Mortgagors in bankruptcy proceedings and the number, Aggregate
Principal Balances of all Mortgage Loans and percentage (based
on the Aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans also included in any of the statistics
described in the foregoing clause (i);
(iv) the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the
Aggregate Principal Balances of the Mortgage Loans) of the
Aggregate Principal Balances of such Mortgage Loans to the
Aggregate Principal Balance of all Mortgage Loans relating to
REO Properties and the number, Aggregate Principal Balances of
all Mortgage Loans and percentage (based on the Aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage
Loans also included in any of the statistics described in the
foregoing clause (i);
(v) the weighted average Mortgage Interest
Rate as of the Due Date occurring in the Due Period related to
such Distribution Date;
(vi) the weighted average remaining term to
stated maturity of all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Cumulative Loan Losses and the
aggregate Cumulative Loan Losses since the Closing Date; and
(ix) the total number of Mortgage Loans and
the Pool Principal Balance.
(c) In connection with the transfer of the Notes, the
Indenture Trustee on behalf of any Noteholder may request that the Servicer make
available to any prospective Noteholder annual audited financial statements of
the Servicer for one or more of the most recently completed five (5) fiscal
years for which such statements are publicly available, which request shall not
be unreasonably denied or unreasonably delayed. Such annual audited financial
statements also shall be made available to the Note Insurer upon request.
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(d) The Servicer also agrees to make available on a reasonable
basis to the Note Insurer or any prospective Noteholder 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 Note Insurer or any prospective
Noteholder to inspect the Servicer's servicing facilities during normal business
hours for the purpose of satisfying the Note Insurer or such prospective
Noteholder that the Servicer has the ability to service the Mortgage Loans in
accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to each Mortgage Loan and each Distribution
Date shall be offset on such Distribution Date by an amount equal to the
Prepayment Interest Shortfall with respect to such Mortgage Loan to the extent
that it is the subject of Principal Prepayments during the month preceding the
month of such Distribution Date. The amount of any offset against the Monthly
Servicing Fee with respect to any Distribution Date under this Section 5.17
shall be limited to the Monthly Servicing Fee otherwise payable to the Servicer
(without adjustment on account of Prepayment Interest Shortfalls) with respect
to such Mortgage Loan, and the rights of the Noteholders to the offset of the
aggregate Prepayment Interest Shortfalls against the Monthly Servicing Fee shall
not be cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the end of the related Due Period, the
Servicer shall determine the amount of any Periodic Advance required to be made
with respect to the related Distribution Date. The Servicer shall, one (1)
Business Day after such Servicer Distribution Date, deliver a magnetic tape or
diskette to the Indenture Trustee indicating the payment status of each Mortgage
Loan as of such Servicer Distribution Date. The Servicer shall include in the
amount to be deposited in the Collection Account on such Servicer Distribution
Date an amount equal to the Periodic Advance, if any, 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 Distribution Dates in
subsequent months. Any funds being held for future distribution to Noteholders
and so used shall be replaced by the Servicer from its own funds by deposit in
the Collection Account on or before the Business Day preceding any such future
Servicer Distribution Date to the extent that funds in the Collection Account on
such Servicer Distribution Date shall be less than payments to Noteholders
required to be made on such 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 determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03 hereof.
(b) In addition to the Periodic Advances, the Servicer shall
make special advances ("Special Advances") on the Servicer Distribution Date
occurring in __________, of $__________, with respect to interest on Mortgage
Loans in Pool I not having their first payment due until after __________ and
$__________ with respect to interest on Mortgage Loans in Pool II not having
their first payment due until after __________. The Servicer shall also make a
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Special Advance on the Servicer Distribution Date occurring in __________, of
$__________, with respect to interest on Mortgage Loans in Pool I not having
their first payment due until after __________. The Special Advances shall be
made without regard to recoverability, and shall not be reimbursable. In no
event shall the Indenture Trustee, as successor Servicer, be liable for the
payment of the Special Advances.
On each Subsequent Transfer Date, the Servicer will make the
Special Advance set forth in the related subsequent Pledge Agreement.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Trust, the Owner Trustee,
the Depositor, the Indenture Trustee, the Collateral Agent, the Note Insurer and
each Noteholder 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 Trust, the Owner Trustee, the Depositor, the Indenture
Trustee, the Collateral Agent, the Note Insurer and any Noteholder may sustain
in any way related to the failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement and
the other Basic Document. 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 other Basic Documents, and the
Servicer shall assume the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Trust, the Owner Trustee, the Depositor, the Servicer, the Indenture Trustee,
the Collateral Agent, the Note Insurer and/or a Noteholder in respect of such
claim. The Indenture Trustee shall reimburse the Servicer in accordance with
Section 5.08 hereof, out of collections on the Mortgage Loans for the Due
Period, for all amounts advanced by it pursuant to the preceding sentence except
to the extent that 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. The
obligations of the Servicer under this Section 5.19 arising prior to any
resignation or termination of the Servicer hereunder shall survive the
resignation or termination of the Servicer
(b) The Indenture Trustee may, if necessary, reimburse the
Servicer from amounts otherwise distributable on the related Trust Certificates
for all amounts advanced by it pursuant to Section 4.04(a)(ii) of the Loan Sale
Agreement, except to the extent that the claim relates directly to the failure
of the Servicer, if it is the Depositor, or is an Affiliate of the Depositor, to
perform its obligations to service and administer the Mortgages in compliance
with the terms of the Loan Sale Agreement and this Agreement, or the failure of
the Depositor to perform its duties in compliance with the terms of this
Agreement.
(c) The Indenture Trustee shall reimburse the Depositor from
amounts otherwise distributable on the related Trust Certificates for all
amounts advanced by the Depositor pursuant to the second sentence of Section
4.04(a)(ii) of the Loan Sale Agreement except when the relevant claim relates
directly to the failure of the Depositor to perform its duties in compliance
with the terms of the Loan Sale Agreement.
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Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 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 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 Owner Trustee, the
Indenture Trustee, the Collateral Agent and the Note Insurer.
Section 5.21 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 consent of the
Trust, the Depositor, the Servicer, the Note Insurer, the Collateral Agent and
the Indenture 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 incurring, in the reasonable
judgment of the Note Insurer, 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 Indenture Trustee, the Collateral Agent, the Trust, the
Depositor and the Note Insurer. No such resignation shall become effective until
the Indenture 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 7.02. The Servicer shall provide the
Indenture Trustee, the Collateral Agent, the Rating Agencies and the Note
Insurer with 30 days' prior written notice of its intention to resign pursuant
to this Section 5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Indenture 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 Notes) any and all reports, statements and information respecting the
Trust and/or the Notes required to be filed, and shall solicit any and all
proxies of the Noteholders 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 reasonable 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 Notes.
Fees and expenses incurred by the Indenture Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 6.16 of the Indenture and
shall not be paid by the Trust.
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The Servicer and the Depositor each agree to promptly furnish
to the Indenture Trustee, from time to time upon request, such further
information, reports and financial statements as the Indenture Trustee deems
appropriate to prepare and file all necessary reports with the Commission.
Article VI.
APPLICATION OF FUNDS
Section 6.01 Deposits to the Distribution Account. On each
Servicer Distribution Date, the Servicer shall cause to be deposited in the
Distribution Account, from funds on deposit in the Collection Account, (a) an
amount equal to the Servicer Remittance Amount and (b) Net Foreclosure Profits,
if any with respect to the related Distribution Date, minus any portion thereof
payable to the Servicer pursuant to Section 5.03. On each Servicer Distribution
Date, the Servicer shall also deposit into the Distribution Account any Periodic
Advances with respect to the related Distribution Date calculated in accordance
with Section 5.18 and any amounts required to be deposited in connection with a
Subsequent Mortgage Loan pursuant to Section 2.14(b) of the Indenture; on the
Servicer Distribution Date occurring in _______, the Servicer also will deposit
the related Special Advance pursuant to Section 5.18(b).
Section 6.02 Collection of Money. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of all money and other property payable to or receivable by the Indenture
Trustee pursuant to this Agreement, including (a) all payments due on the
Mortgage Loans in accordance with the respective terms and conditions of such
Mortgage Loans and required to be paid over to the Indenture Trustee by the
Servicer or by any Subservicer and (b) Insured Payments. The Indenture Trustee
shall hold all such money and property received by it, as part of the Trust
Estate and shall apply it as provided in the Indenture.
Section 6.03 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the 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 and then to
principal.
Section 6.04 Information Concerning the Mortgage Loans. No
later than 12:00 noon Pennsylvania time on the fourth Business Day preceding
each Distribution Date, the Servicer shall deliver to the Indenture Trustee a
report in computer-readable form containing such information as to each Mortgage
Loan and as to each Mortgage Loan Pool as of such Distribution Date and such
other information as the Indenture Trustee shall reasonably require.
Section 6.05 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer shall remit to the Indenture Trustee (without right to reimbursement
therefor) for deposit into the related Distribution Account, an amount equal to,
for each Mortgage Loan, the lesser of (a) the Prepayment Interest Shortfall for
such Mortgage Loan for the related Distribution Date resulting from Principal
Prepayments during the related Due Period and (b) its Monthly Servicing Fees
with respect to
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such Mortgage Loan received in the related Due Period and shall not have the
right to reimbursement therefor (the "Compensating Interest").
Section 6.06 Effect of Payments by the Note Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Notes which is made with moneys
received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of the Notes from the Trust Estate. The Depositor, the
Servicer, the Trust, the Collateral Agent and the Indenture Trustee acknowledge
and agree, that without the need for any further action on the part of the Note
Insurer, the Depositor, the Servicer, the Trust, the Collateral Agent, the
Indenture Trustee or the Note Registrar (a) to the extent the Note Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Notes to the Holders of such Notes, the Note Insurer will be fully subrogated
to, and each Noteholder, the Servicer, the Depositor, the Trust, the Collateral
Agent and the Indenture Trustee hereby delegate and assign to the Note Insurer,
to the fullest extent permitted by law, the rights of such Holders to receive
such principal and interest from the Trust Estate, including, without
limitation, any amounts due to the Noteholders in respect of securities law
violations arising from the offer and sale of the Notes, and (b) the Note
Insurer shall be paid such amounts from the sources and in the manner provided
herein for the payment of such amounts and as provided in the Insurance
Agreement. The Indenture Trustee, the Collateral Agent and the Servicer shall
cooperate in all respects with any reasonable request by the Note Insurer for
action to preserve or enforce the Note Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
Article VII.
SERVICER DEFAULT
Section 7.01 Servicer Events of Default. (a) The following
events shall each constitute a "Servicer Event of Default" hereunder:
(i) any failure by the Servicer to remit to
the Indenture Trustee any payment required to be made by the
Servicer under the terms of this Agreement (other than
Servicing Advances covered by clause (ii) below), which
continues unremedied for one (1) Business Day after the date
upon which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer and the
Note Insurer by the Indenture Trustee or to the Servicer and
the Indenture Trustee by the Note Insurer or Noteholders of
Notes evidencing Percentage Interests of at least 25%;
(ii) the failure by the Servicer to make any
required Servicing Advance, which failure continues unremedied
for a period of thirty (30) days after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee
by any Noteholder or the Note Insurer;
(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 failure of any
representation and warranty made
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pursuant to Section 3.01(a) hereof to be true and correct
which continues unremedied for a period of thirty (30) days
after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by the Indenture Trustee or to the Servicer and
the Indenture Trustee by any Noteholder or the Note 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 liquidation 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 sixty (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 generally to pay its debts as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations;
(vii) the Note Insurer shall notify the
Indenture Trustee of any "event of default" under the
Insurance Agreement;
(viii) if on any Distribution Date the
Rolling Six Month Delinquency Rate exceeds ____% of the
aggregate outstanding Principal Balance for the Mortgage
Loans;
(ix) if on any Distribution Date, commencing
in _______, the Twelve Month Loss Amount exceeds ____% of the
aggregate outstanding Principal Balance for the Mortgage
Loans, as of the close of business on the first day of the
twelfth preceding calendar month;
(x) if (a) on any Distribution Date
occurring before ________, the aggregate Cumulative Loan
Losses since the Initial Cut-Off Date exceed ____% of the
Original Pool Principal Balance, (b) on any Distribution Date
on or after _______ and before _______, the aggregate
Cumulative Loan Losses since the Initial Cut-Off Date exceed
_____% of the Original Pool Principal Balance, (c) on any
Distribution Date on or after _______ and before _______, the
aggregate Cumulative Loan Losses since the Initial Cut-Off
Date exceed ____% of the Original Pool Principal Balance, (d)
on any Distribution Date on or after _______ and before
_______, the aggregate Cumulative Loan Losses since the
Initial Cut-Off Date exceed _____% of the Original Pool
Principal Balance, or (e) on any Distribution Date on or after
_______, the aggregate Cumulative Loan Losses since the
Initial Cut-Off Date exceed ____% of the Original Pool
Principal Balance;
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(xi) the occurrence of an Event of Default
under the Indenture; or
(xii) a Servicer Extension Notice shall not
have been delivered as set forth in Section 8.04 hereof.
(b) So long as a Servicer Event of Default shall have occurred
and not have been remedied: (x) with respect solely to Section 7.01(a)(i), if
such payment is in respect of Periodic Advances or Compensating Interest owing
by the Servicer and such payment is not made by 12:00 noon New York time on the
second Business Day prior to the applicable Distribution Date, the Indenture
Trustee, upon receipt of written notice or discovery by a Responsible Officer of
such failure, shall give immediate telephonic and facsimile notice of such
failure to a Servicing Officer of the Servicer and to the Note Insurer and the
Indenture Trustee shall, with the consent of the Note Insurer, terminate all of
the rights and obligations of the Servicer under this Agreement and the
Indenture Trustee, or a successor Servicer appointed in accordance with Section
7.02, shall immediately make such Periodic Advance or payment of Compensating
Interest and assume, pursuant to Section 7.02 hereof, the duties of a successor
Servicer; (y) with respect to that portion of Section 7.01(a)(i) not referred to
in the preceding clause (x) and with respect to clauses (ii), (iii), (iv), (v),
(vi) and (vii) of Section 7.01, the Indenture Trustee shall, but only at the
direction of the Note Insurer or the Majority Noteholders, by notice in writing
to the Servicer and a Responsible Officer of the Indenture Trustee and subject
to the prior written consent of the Note Insurer, in the case of any removal at
the direction of the Majority Noteholders, and in addition to whatever rights
such Noteholders may have at law or equity to damages, including injunctive
relief and specific performance, 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 (viii)-(x) of Section
7.01(a), the Indenture Trustee shall, but only at the direction of the Note
Insurer, after notice in writing to the Servicer and a Responsible Officer of
the Indenture 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 7.02, pass to and be
vested in the Indenture Trustee, or its designee approved by the Note Insurer,
and the Indenture 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 Indenture Trustee in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Indenture 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 Indenture Trustee shall promptly notify the Note Insurer and the Rating
Agencies of the occurrence of a Servicer Event of Default.
Section 7.02 Indenture Trustee to Act; Appointment of
Successor. (a) On and after the time the Servicer receives a notice of
termination pursuant to Section 7.01 or fails to receive a Servicer Extension
Notice pursuant to Section 8.04, or the Indenture Trustee receives
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the resignation of the Servicer evidenced by an Opinion of Counsel pursuant to
Section 5.21, or the Servicer is removed as Servicer pursuant to this Article
VII, in which event the Indenture Trustee shall promptly notify the Rating
Agencies, except as otherwise provided in Section 7.01, the Indenture 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
Indenture 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 2.06 and 4.02 hereof. The
Indenture Trustee, as successor Servicer, shall be obligated to pay Compensating
Interest pursuant to Section 6.05 in any event and to make advances pursuant to
Section 5.18 unless, and only to the extent the Indenture Trustee determines
reasonably and in good faith that such advances would not be recoverable
pursuant to Section 5.04, such determination to be evidenced by a certification
of a Responsible Officer of the Indenture Trustee delivered to the Note Insurer.
(b) Notwithstanding the above, the Indenture Trustee may, if
it shall be unwilling to so act, or shall, if it is unable to so act or if the
Majority Noteholders with the consent of the Note Insurer or the Note Insurer so
requests in writing to the Indenture Trustee, appoint, pursuant to such
direction of the Majority Noteholders and Note Insurer or the Note Insurer, or
if no such direction is provided to the Indenture Trustee, pursuant to the
provisions set forth in Section 7.02(c), or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution
acceptable to the Note 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 Indenture Trustee is the successor
Servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 5.08 hereof as the Servicer if the Servicer had continued to
act as servicer hereunder. In the event the Indenture Trustee is unable or
unwilling to act as successor Servicer, the Indenture 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 (30)
days after any such public announcement, the Indenture Trustee shall negotiate
and effect the sale, transfer and assignment of the servicing rights and
responsibilities hereunder to the qualified party submitting the highest
qualifying bid. The Indenture Trustee shall deduct from any sum received by the
Indenture 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 Indenture Trustee. After such deductions, the remainder of
such sum shall be paid by the Indenture Trustee to the Servicer at the time of
such sale, transfer and assignment to the Servicer's successor.
(d) The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The
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Servicer agrees to cooperate with the Indenture Trustee and any successor
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
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 Indenture 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 Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor Servicer. Neither the Indenture 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. Notwithstanding anything to the
contrary herein, no appointment of a successor Servicer under this Agreement
shall be effective until the Indenture Trustee and the Note Insurer shall have
consented thereto, and written notice of such proposed appointment shall have
been provided by the Indenture Trustee to the Note Insurer and to each
Noteholder. The Indenture Trustee shall not resign as Servicer until a successor
Servicer reasonably acceptable to the Note Insurer has been appointed. The Note
Insurer shall have the right to remove the Indenture Trustee as successor
Servicer under this Section 7.02 without cause, and the Indenture Trustee shall
appoint such other successor Servicer as directed by the Note Insurer.
(e) Pending appointment of a successor Servicer hereunder, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor Servicer 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 5.08, together with other Servicing Compensation.
The Servicer, the Indenture Trustee and such successor Servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
Section 7.03 Waiver of Defaults. The Majority Noteholders may,
on behalf of all Noteholders, and subject to the consent of the Note Insurer,
waive any events permitting removal of the Servicer as servicer pursuant to this
Article VII; provided, however, that the Majority Noteholders may not waive a
default in making a required distribution on a Note without the consent of the
Holder of such Note. Upon any waiver of a past default, such default shall cease
to exist, and any Servicer 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 Indenture Trustee to the Rating Agencies and the Note Insurer.
Section 7.04 Rights of the Note Insurer to Exercise Rights of
the Noteholders. By accepting its Note, each Noteholder agrees that unless a
Note Insurer Default exists, the Note Insurer shall be deemed to be the
Noteholders for all purposes (other than with respect to the receipt of payment
on the Notes) and shall have the right to exercise all rights of the Noteholders
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under this Agreement and under the Notes without any further consent of the
Noteholders, including, without limitation:
(a) the right to require the Originators to
repurchase Mortgage Loans pursuant to Sections 2.06 and 4.02
hereof to the extent set forth therein;
(b) the right to give notices of breach or
to terminate the rights and obligations of the Servicer as
servicer pursuant to Section 7.01 hereof and to consent to or
direct waivers of Servicer defaults pursuant to Section 7.03
hereof;
(c) the right to direct the actions of the
Indenture Trustee during the continuance of a Servicer Event
of Default pursuant to Sections 7.01 and 7.02 hereof;
(d) the right to institute proceedings
against the Servicer pursuant to Section 7.01 hereof;
(e) the right to remove the Indenture
Trustee pursuant to Section 6.09 of the Indenture;
(f) the right to direct foreclosures upon
the failure of the Servicer to do so in accordance with the
provisions of Section 5.06 of this Agreement; and
(g) any rights or remedies expressly given
the Majority Noteholders.
In addition, each Noteholder agrees that, subject to Section
10.02, unless a Note Insurer Default exists, the rights specifically enumerated
above may only be exercised by the Noteholders with the prior written consent of
the Note Insurer.
Section 7.05 Indenture Trustee To Act Solely with Consent of
the Note Insurer. Unless a Note Insurer Default exists, the Indenture Trustee
shall not, without the Note Insurer's consent or unless directed by the Note
Insurer:
(a) terminate the rights and obligations of
the Servicer as Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to
Section 10.03 hereof; or
(c) undertake any litigation.
The Note Insurer may, in writing and in its sole discretion
renounce all or any of its rights under Sections 7.04, 7.05 or 7.06 or any
requirement for the Note Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held
for Benefit of the Note Insurer. (a) The Indenture Trustee shall hold the Trust
Estate and the Indenture Trustee's Mortgage Files, for the benefit of the
Noteholders and the Note Insurer, and all references in this Agreement and in
the Notes to the benefit of Noteholders shall be deemed to include the Note
Insurer. The Indenture Trustee shall cooperate in all reasonable
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respects with any reasonable request by the Note Insurer for action to preserve
or enforce the Note Insurer's rights or interests under this Agreement and the
Notes unless, as stated in an Opinion of Counsel addressed to the Indenture
Trustee and the Note Insurer, such action is adverse to the interests of the
Noteholders or diminishes the rights of the Noteholders or imposes additional
burdens or restrictions on the Noteholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Noteholders and for the
benefit of the Note Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Noteholders shall be deemed to include the Note
Insurer.
Section 7.07 Note Insurer Default. Notwithstanding anything
elsewhere in this Agreement or in the Notes to the contrary, if a Note Insurer
Default exists, or if and to the extent the Note Insurer has delivered its
written renunciation of all of its rights under this Agreement, the provisions
of this Article VII and all other provisions of this Agreement which (a) permit
the Note Insurer to exercise rights of the Noteholders, (b) restrict the ability
of the Noteholders, the Servicer, the Collateral Agent or the Indenture Trustee
to act without the consent or approval of the Note Insurer, (c) provide that a
particular act or thing must be acceptable to the Note Insurer, (d) permit the
Note Insurer to direct (or otherwise to require) the actions of the Indenture
Trustee, the Collateral Agent, the Servicer or the Noteholders, (e) provide that
any action or omission taken with the consent, approval or authorization of the
Note Insurer shall be authorized hereunder or shall not subject the party taking
or omitting to take such action to any liability hereunder or (f) which have a
similar effect, shall be of no further force and effect and the Indenture
Trustee shall administer the Trust Estate and perform its obligations hereunder
solely for the benefit of the Holders of the Notes. Nothing in the foregoing
sentence, nor any action taken pursuant thereto or in compliance therewith,
shall be deemed to have released the Note Insurer from any obligation or
liability it may have to any party or to the Noteholders hereunder, under any
other agreement, instrument or document (including, without limitation, the Note
Insurance Policy) or under applicable law.
Article VIII.
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Indenture Trustee of either: (i)
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 Note Insurer and the Indenture Trustee or (ii) mutual consent of
the Trust, the Indenture Trustee, the Collateral Agent, the Servicer, the Note
Insurer and all Noteholders in writing.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, call the Class A-1 Notes or the
Class A-2 Notes or terminate the Trust in accordance with the terms of Section
10.01 of the Indenture.
(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Estate other than funds in
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the Distribution Account, the Servicer shall send a final distribution notice
promptly to each Noteholder in accordance with Section 8.01(d).
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust will terminate and the Noteholders shall surrender
their Notes to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given promptly by the Servicer by letter to Noteholders
mailed during the month of such final distribution before the Servicer
Distribution Date in such month, specifying (i) the Distribution Date upon which
final payment of the Notes will be made upon presentation and surrender of Notes
at the office of the Indenture Trustee therein designated, (ii) the amount of
any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Notes at the office of the Indenture Trustee
therein specified. The Servicer shall give such notice to the Indenture Trustee
therein specified at the time such notice is given to Noteholders. The
obligations of the Note Insurer hereunder shall terminate upon the deposit by
the Servicer with the Indenture Trustee of a sum sufficient to purchase all of
the Mortgage Loans and REO Properties as set forth in Section 10.01 of the
Indenture or when the Note Principal Balance of the Notes has been reduced to
zero.
(e) In the event that all of the Noteholders do not surrender
their Notes for cancellation within six (6) months after the time specified in
the above-mentioned written notice, the Servicer shall give a second written
notice to the remaining Noteholders to surrender their Notes for cancellation
and receive the final distribution with respect thereto. If within six (6)
months after the second notice, all of the Notes shall not have been surrendered
for cancellation, the Indenture Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining Noteholders
concerning surrender of their Notes and the cost thereof shall be paid out of
the funds and other assets which remain subject hereto. If within nine (9)
months after the second notice all the Notes shall not have been surrendered for
cancellation, the related Trust Certificateholders shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Indenture
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and the Noteholders shall look only to the related Trust
Certificateholders for payment and not to the Note Insurer. Such funds shall
remain uninvested.
Section 8.02 Additional Termination Requirements. By their
acceptance of the Notes, 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 Noteholders hereby appoint the Indenture Trustee as their
attorney in fact to sign such plan) as appropriate or upon the written request
of the Note 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 8.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee, the funds in any
Account;
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(b) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee all Indenture
Trustee's Mortgage Files and related documents and statements held
by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee and, upon request, to
the Noteholders 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 the successor
Servicer and to more fully and definitively vest in such successor
all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
Section 8.0.4 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as Servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on _________ (the
"Initial Term"). Thereafter, the Initial Term shall be extendible in the sole
discretion of the Note Insurer by written notice (each, a "Servicer Extension
Notice") of the Note Insurer (or the Indenture Trustee if revocable written
standing instructions of the Note Insurer have been previously delivered to the
Indenture Trustee), for any specified number of three (3) month terms to the
Servicer. Each such Servicer Extension Notice, if any, shall be delivered by the
Note Insurer (or the Indenture Trustee, as applicable,) to the other parties to
this Agreement. The Servicer hereby agrees that, as of the date hereof and upon
its receipt of any Servicer Extension Notice, the Servicer shall be bound for
the duration of the Initial Term and the term covered by any such Servicer
Extension Notice to act as the Servicer, subject to and in accordance with the
other provisions of this Agreement. The Servicer agrees that if, as of the
fifteenth day prior to the last day of any such servicing term, the Servicer
shall not have received a Servicer Extension Notice from the Note Insurer or
Indenture Trustee, as applicable, the Servicer shall, within five (5) days
thereafter, give written notice of such non-receipt to the Note Insurer and the
Indenture Trustee. The failure of the Note Insurer or the Indenture Trustee, as
applicable, to deliver a Servicer Extension Notice by the end of any such
three-month term shall result in the automatic termination of the Servicer.
ARTICLE IX.
THE COLLATERAL AGENT
THE COLLATERAL AGENT
Section 9.0.1 Duties of the Collateral Agent. (a) The
Collateral Agent, 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 Collateral Agent shall exercise such of the rights and powers 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.
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(b) The Collateral Agent, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Collateral Agent 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 Collateral Agent shall not be responsible
for the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by any Person hereunder.
If any such instrument is found not to conform on its face to the requirements
of this Agreement, the Collateral Agent shall note it as such on the Initial
Certification or Final Certification delivered pursuant to Section 2.06(b).
(c) No provision of this Agreement shall be construed to
relieve the Collateral Agent 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 Collateral Agent shall be
determined solely by the express provisions of this Agreement, the
Collateral Agent 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 Collateral Agent and, in the absence of
bad faith on the part of the Collateral Agent, the Collateral Agent
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 Collateral Agent and conforming to the
requirements of this Agreement;
(ii) the Collateral Agent shall not be personally liable for
an error of judgment made in good faith by a Responsible Officer or
other officers of the Collateral Agent, unless it shall be proved
that the Collateral Agent was negligent in ascertaining the
pertinent facts;
(iii) the Collateral Agent 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 Note Insurer
or the Indenture Trustee or with the consent of the Note Insurer or
the Indenture Trustee;
(iv) the Collateral Agent 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 Collateral Agent to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer or the
Indenture Trustee under this Agreement; and
(v) subject to the other provisions of this Agreement and
without limiting the generality of this Section 9.01, the Collateral
Agent shall have no duty (A) to see to any
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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 Estate, the Noteholders or the Mortgage
Loans, (D) to confirm or verify the contents of any reports or
certificates of any Person delivered to the Collateral Agent
pursuant to this Agreement believed by the Collateral Agent to be
genuine and to have been signed or presented by the proper party or
parties.
Section 9.02 Certain Matters Affecting the Collateral Agent.
Except as otherwise provided in Section 9.01 hereof:
(a) the Collateral Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
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;
(b) the Collateral Agent 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;
(c) the Collateral Agent 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, order or direction of the Note
Insurer or any of the Noteholders, pursuant to the provisions of
this Agreement, unless such Noteholders or the Note Insurer, as
applicable, shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which may be incurred therein by the Collateral Agent or thereby;
nothing contained herein shall, however, relieve the Collateral
Agent 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;
(d) the Collateral Agent shall not be personally liable for
any action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or rights
or powers conferred upon it by this Agreement;
(e) prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, the
Collateral Agent 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 Note Insurer or
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Holders of Class A Notes evidencing Percentage Interests aggregating
not less than 25%; provided, however, that if the payment within a
reasonable time to the Collateral Agent of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Collateral Agent, not
reasonably assured to the Collateral Agent by the security afforded
to it by the terms of this Agreement, the Collateral Agent 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
Collateral Agent, shall be repaid by the Servicer upon demand from
the Servicer's own funds;
(f) the right of the Collateral Agent to perform any
discretionary act enumerated in this Agreement shall not be
construed as a duty, and the Collateral Agent shall not be
answerable for anything other than its negligence or willful
misconduct in the performance of such act;
(g) the Collateral Agent may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or
by or through agents or attorneys.
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage
Loans. (a) The recitals contained herein shall be taken as the statements of the
Trust and the Servicer, as the case may be, and the Collateral Agent assumes no
responsibility for their correctness. The Collateral Agent makes no
representations as to the validity or sufficiency of this Agreement or of any
Mortgage Loan or related document. The Collateral Agent 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 Collateral Agent shall not be responsible for the legality or
validity of the Agreement or the validity, priority, perfection or sufficiency
of the security for the Notes issued or intended to be issued under the
Indenture.
Section 9.04 Collateral Agent May Own Notes. (a) The
Collateral Agent in its individual or any other capacity may become the owner or
pledgor of Notes with the same rights it would have if it were not Collateral
Agent, and may otherwise deal with the parties hereto.
Section 9.0.5 Collateral Agent's Fees and Expenses; Indemnity.
(a) The Collateral Agent acknowledges that in consideration of the performance
of its duties hereunder it is entitled to receive its fees and expenses from the
Servicer, as separately agreed between the Servicer and the Collateral Agent.
The Trust, the Depositor, the Indenture Trustee and the Note Insurer shall not
pay any of the Collateral Agent fees and expenses in connection with this
transaction. The Collateral Agent shall not be entitled to compensation for any
expense, disbursement or advance as may arise from its negligence or bad faith,
and the Collateral Agent shall have no lien on the Trust Estate for the payment
of its fees and expenses.
(b) The Collateral Agent and any director, officer, employee
or agent of the Collateral Agent 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 Estate or the Collateral Agent through the Servicer's
acts or omissions in violation of this Agreement, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or
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negligence of the Collateral Agent in the performance of its duties hereunder or
by reason of the Collateral Agent 's reckless disregard of obligations and
duties hereunder. The obligations of the Servicer under this Section 9.05
arising prior to any resignation or termination of the Servicer hereunder shall
survive termination of the Servicer and payment of the Notes.
Section 9.06 Eligibility Requirements for Collateral Agent.
(a) The Collateral Agent hereunder shall at all times be a banking entity (a)
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 Estate on behalf of the Indenture Trustee, for the benefit of
the Noteholders and the Note Insurer, (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 Note Insurer, and
(e) reasonably acceptable to the Note Insurer as evidenced in writing. If such
banking entity publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of determining an entity's combined capital and surplus for
clause (c) of this Section 9.06, the amount set forth in its most recent report
of condition so published shall be deemed to be its combined capital and
surplus. In case at any time the Collateral Agent shall cease to be eligible in
accordance with the provisions of this Section 9.06, the Collateral Agent shall
resign immediately in the manner and with the effect specified in Section 9.07.
Section 9.07 Resignation and Removal of the Collateral Agent.
(a) The Collateral Agent may at any time resign and be discharged from the
trusts hereby created by giving thirty (30) days' written notice thereof to the
Indenture Trustee, the Servicer, and the Note Insurer.
(b) If at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of Section 9.06 and shall fail to
resign after written request therefor by the Indenture Trustee, the Servicer or
the Note Insurer, or if at any time the Collateral Agent shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Collateral Agent or of its property shall be appointed, or any public officer
shall take charge or control of the Collateral Agent or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Indenture Trustee or the Servicer, with the consent of the Note Insurer, or the
Note Insurer may remove the Collateral Agent.
(c) If the Collateral Agent fails to perform in accordance
with the terms of this Agreement, the Indenture Trustee, the Servicer or the
Majority Noteholders, with the consent of the Note Insurer, or the Note Insurer
may remove the Collateral Agent.
(d) Upon removal or receipt of notice of resignation of the
Collateral Agent, the Indenture Trustee shall either (i) take possession of the
Indenture Trustee's Mortgage Files and assume the duties of the Collateral Agent
hereunder or (ii) appoint a successor Collateral Agent pursuant to Section 9.08.
If the Indenture Trustee shall assume the duties of the Collateral Agent
hereunder, it shall notify the Trust, the Depositor, the Servicer and Note
Insurer in writing.
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Section 9.08 Successor Collateral Agent. Upon the resignation
or removal of the Collateral Agent, the Indenture Trustee may appoint a
successor Collateral Agent, with the written approval of the Note Insurer;
provided, however, that the successor Collateral Agent so appointed shall in no
event be the Depositor or the Servicer or any Person known to a Responsible
Officer of the Indenture Trustee to be an Affiliate of the Depositor or the
Servicer and shall be approved by the Note Insurer. The Indenture Trustee or
such custodian, as the case may be, shall assume the duties of the Collateral
Agent hereunder. Any successor Collateral Agent appointed as provided in this
Section 9.08 shall execute, acknowledge and deliver to the Trust, the Depositor,
the Note Insurer, the Servicer, the Indenture Trustee and to its predecessor
Collateral Agent an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Collateral Agent shall
become effective and such successor Collateral Agent, 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 Collateral Agent herein. The predecessor Collateral Agent
shall deliver to the successor Collateral Agent all Indenture Trustee's Mortgage
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor Collateral Agent 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 Collateral Agent all
such rights, powers, duties and obligations. The cost of any such transfer to
the successor Collateral Agent shall be for the account of the Collateral Agent
in the event of the resignation of the Collateral Agent, and shall be for the
account of the Servicer in the event of the removal of the Collateral Agent. No
successor Collateral Agent shall accept appointment as provided in this Section
9.08 unless at the time of such acceptance such successor Collateral Agent shall
be eligible under the provisions of Section 9.06. Upon acceptance of appointment
by a successor Collateral Agent as provided in this Section 9.08, the Servicer
shall mail notice of the succession of such Collateral Agent hereunder to all
Noteholders at their addresses as shown in the Note Register and to the Rating
Agencies. If the Servicer fails to mail such notice within ten (10) days after
acceptance of appointment by the successor Collateral Agent, the successor
Collateral Agent shall cause such notice to be mailed at the expense of the
Servicer.
Section 9.09 Merger or Consolidation of Collateral Agent. Any
Person into which the Collateral Agent 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 Collateral
Agent shall be a party, or any corporation or national banking association
succeeding to the business of the Collateral Agent, shall be the successor of
the Collateral Agent hereunder; provided, that such corporation or national
banking association shall be eligible under the provisions of Section 9.06,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability. None of the Trust, the
Owner Trustee, the Depositor, the Servicer, the Collateral Agent, the Indenture
Trustee or any of the directors,
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officers, employees or agents of such Persons shall be under any liability to
the Trust, the Noteholders or the Note 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 Trust, the Owner Trustee, the Depositor, the Servicer, the
Collateral Agent, the Indenture Trustee 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
gross negligence in the performance of duties or by reason of reckless disregard
of obligations or duties hereunder. The Trust, the Owner Trustee, the Depositor,
the Servicer, the Collateral Agent, the Indenture Trustee and any director,
officer, employee or agent of such Person 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 10.02 Acts of Noteholders. (a) Except as otherwise
specifically provided herein, whenever Noteholder 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
Noteholders if the Majority Noteholders or the Note Insurer agrees to take such
action or give such consent or approval.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Agreement or the Trust, nor entitle such Noteholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(c) No Noteholder 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, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Notes, be construed
so as to constitute the Noteholders from time to time as partners or members of
an association; nor shall any Noteholder 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.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Owner Trustee, on behalf of the Trust, the Servicer,
the Depositor, the Collateral Agent and the Indenture Trustee by written
agreement, upon the prior written consent of the Note Insurer, without notice to
or consent of the Noteholders 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
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder; 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 Note without the consent of
such Noteholder, or change the rights or obligations of any other party hereto
without the consent of such party. The Indenture Trustee
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shall give prompt written notice to the Rating Agencies of any amendment made
pursuant to this Section 10.03.
(b) This Agreement may be amended from time to time by the
Owner Trustee, on behalf of the Trust, the Servicer, the Depositor, the
Collateral Agent and the Indenture Trustee, with the consent of the Note
Insurer, the Majority Noteholders and the Holders of the majority of the
Percentage Interest in the Trust 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 Noteholders;
provided, however, 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 Class of Notes without the consent of the
Holders of such Class of Notes 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 such Class of Notes affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section 10.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
Section 10.04 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 Noteholders'
expense on direction and at the expense of Majority Noteholders 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
Noteholders or is necessary for the administration or servicing of the Mortgage
Loans.
Section 10.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 10.06 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, the Subservicers, the Originators
or the Depositor, addressed to such Person, c/o _______________________,
Attention: General Counsel; (ii) in the case of the Trust, ___________________,
c/o the Owner Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration; (iii) in the case of the Collateral Agent, ___________________,
at its Corporate Trust Office, Attention: Document Custody Manager; (iv) in the
case of the Indenture Trustee, _________________, at its Corporate Trust Office,
Attention: _____________________; (v) in the case of the Underwriter, Prudential
Securities Secured Financing Corporation or Prudential Securities Incorporated,
One New York Plaza, New York, New York 10292, Attention: Managing Director-
Asset Backed Finance Group; (vi) in the case of the Note Insurer,
_______________________________ Attention: Surveillance Department (in each case
in which notice or other communication to the Note Insurer refers to an Event of
Default, a Servicer Event of Default or a claim on the Note Insurance Policy or
with respect to which failure on the part of the Note Insurer to respond shall
be deemed to constitute consent or
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acceptance, then a copy of such notice or other communication should also be
sent to the attention of each of the General Counsel and the Head- Financial
Guaranty Group, and shall be marked to indicate "URGENT MATERIAL ENCLOSED");
(vii) in the case of Standard & Poor's Rating Services, 26 Broadway, New York,
New York 10004 Attention: Residential Mortgage Surveillance Group; (viii) in the
case of Moody's Investors Service, Inc., 99 Church Street, New York, New York
10007 Attention: Home Equity Monitoring Group; and (ix) in the case of the
Noteholders, as set forth in the Note Register. 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 Noteholders shall be effective upon
mailing or personal delivery.
Section 10.07 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 10.08 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 Noteholders.
Section 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Trust, the Servicer, the
Depositor, the Indenture Trustee, the Collateral Agent and the Noteholders 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 Note Insurer Default. Any right conferred to
the Note Insurer shall be suspended during any period in which a Note Insurer
Default exists. At such time as the Notes are no longer outstanding hereunder,
and no amounts owed to the Note Insurer hereunder remain unpaid, the Note
Insurer's rights hereunder shall terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
each of the Owner Trustee and the Note 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
parties hereto and Noteholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Notes be treated as debt. The parties to this Agreement and the Holder of each
Note, by acceptance of its Note, and each Beneficial Owner
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<PAGE>
thereof, agree to treat, and to take no action inconsistent with the treatment
of, the related Notes 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 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE TRUST, THE SERVICER, THE DEPOSITOR, THE COLLATERAL
AGENT AND THE INDENTURE 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
10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE
TRUST, THE DEPOSITOR, THE SERVICER, THE COLLATERAL AGENT AND THE INDENTURE
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 10.15 SHALL AFFECT THE RIGHT OF THE TRUST, THE
DEPOSITOR, THE SERVICER, THE COLLATERAL AGENT OR THE INDENTURE 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 TRUST, THE DEPOSITOR, THE SERVICER, THE COLLATERAL
AGENT AND THE INDENTURE 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.
[Remainder of Page Intentionally Left Blank]
47
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trust, the Indenture
Trustee, the Collateral Agent 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.
_____________________________________
________________________, as Depositor
By:__________________________________________
Name:
Title:
_____________________________________
By: _____________________________,
__________________________, not in its
individual capacity, but solely as Owner
Trustee under the Trust Agreement
By:__________________________________________
Name:
Title:
__________________________________, as
Servicer
By:__________________________________________
Name:
Title:
________________________, as Indenture Trustee
By:__________________________________________
Name:
Title:
_____________________________, as Collateral
Agent
By:__________________________________________
Name:
Title
[Signature Page to Sale and Servicing Agreement]
<PAGE>
EXHIBIT A
CONTENTS OF THE MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall
include each of the following items (copies to the extent the originals have
been delivered to the Collateral Agent, on behalf of the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer, pursuant to Section 2.05 of
the Sale and Servicing Agreement), all of which shall be available for
inspection by the Noteholders, to the extent required by applicable laws:
1. The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the
originator of the Mortgage Loan to the Person so endorsing the
Mortgage Loan to the Trustee, endorsed by such Person "Pay to
the order of ________________ without recourse" and signed, by
facsimile or manual signature, in the name of the Depositor by
a Responsible Officer.
2. Either: (i) the original Mortgage, and related power of
attorney, if any, with evidence of recording thereon, or (ii)
a copy of the Mortgage and related power of attorney, if any,
certified as a true copy of the original Mortgage or power of
attorney by a Responsible Officer of the Depositor on the face
of such copy substantially as follows: "certified true and
correct copy of original which has been transmitted for
recordation."
3. Either: (i) The original Assignment of Mortgage in recordable
form in blank or (ii) a copy of the Assignment of Mortgage
certified as a true copy of the original Assignment of
Mortgage by a Responsible Officer of the Depositor on the face
of such copy substantially as follows: "certified true and
correct copy of original which has been transmitted for
recordation." Any such Assignments of Mortgage may be made by
blanket assignments for Mortgage Loans secured by the
Mortgaged Properties located in the same county, if permitted
by applicable law.
4. The original lender's policy of title insurance or a true copy
thereof, or if such original lender's title insurance policy
has been lost, a copy thereof certified by the appropriate
title insurer to be true and complete, or if such lender's
title insurance policy has not been issued as of the Closing
Date, a marked up commitment (binder) to issue such policy.
5. All original intervening assignments, if any, showing a
complete chain of assignments from the originator to the
related Originator, including any recorded warehousing
assignments, with evidence of recording thereon, certified by
a Responsible Officer of the related Originator by facsimile
or manual signature as a true copy of the original of such
intervening assignments.
6. Originals of all assumption, written assurance, substitution
and modification agreements, if any.
A-1
<PAGE>
EXHIBIT B
INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
_______________
[Depositor] [Servicer]
[Collateral Agent] [Note Insurer]
Re: Sale and Servicing Agreement, dated as of ___________ among
________________________, as Depositor,
________________________, as Servicer, _______________, as
Indenture Trustee, and ________________________________, as
Collateral Agent
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Sale
and Servicing Agreement, the undersigned, as Indenture Trustee, hereby
acknowledges receipt by it in good faith without notice of adverse claims, of
(x) the Original Pre-Funded Amount and the Original Capitalized Interest Amount
for both Pool I and Pool II and (y) the Note Insurance Policy, and declares that
it holds and will hold such Accounts and the Note Insurance Policy in trust for
the exclusive use and benefit of all present and future Noteholders.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in Appendix I to the Indenture, dated as of
________________, by and between ________________________ and the Indenture
Trustee.
_______________________________,
as Indenture Trustee
By:_____________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
COLLATERAL AGENT'S ACKNOWLEDGEMENT OF RECEIPT
[Depositor] [Servicer]
[Indenture Trustee] [Note Insurer]
Re: Sale and Servicing Agreement, dated as of _____________ among
_______________, as Depositor, ______________________,
__________________, as Servicer, __________________, as
Indenture Trustee, and ______________________, as Collateral
Agent
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Sale
and Servicing Agreement, the undersigned, as Collateral Agent, hereby
acknowledges receipt by it in good faith without notice of adverse claims,
subject to the provisions of Sections 2.04 and 2.05 of the Sale and Servicing
Agreement (as such provisions relate to the Initial Mortgage Loans), of, with
respect to each of the Initial Mortgage Loans, the Mortgage File containing the
original Mortgage Note, except with respect to the list of exceptions attached
hereto, and based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule accurately reflects
information set forth in the Mortgage Note, and declares that it holds and will
hold such documents and the other documents delivered to it constituting the
Indenture Trustee's Mortgage Files, and that it holds or will hold all such
assets and such other assets included in the definition of "Trust Estate" that
are delivered to it, on behalf of the Indenture Trustee, in trust for the
exclusive use and benefit of all present and future Noteholders and the Note
Insurer.
The Collateral Agent has made no independent examination of
any such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement. The Collateral Agent makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any such documents or any of the Mortgage Loans identified on
the Mortgage Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
The Schedule of Mortgage Loans is attached to this Receipt.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in Appendix I to the Indenture, dated as of
_____________, by and between _________________ and the Indenture Trustee.
_______________________________,
as Collateral Agent
By:_____________________________
Name:
Title:
C-1
<PAGE>
EXHIBIT D
INITIAL CERTIFICATION OF COLLATERAL AGENT
[Depositor] [Servicer]
[Indenture Trustee] [Note Insurer]
Re: Sale and Servicing Agreement, dated as of _____________ among
___________________, as Depositor, _________________________,
as Servicer, ___________________________, as Indenture
Trustee, and ___________________, as Collateral Agent
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Sale and Servicing Agreement, the undersigned, as Collateral
Agent, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05 of the Sale and Servicing Agreement and has determined
that (i) all documents required to be delivered to it pursuant to Section 2.05
of the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections do not constitute physical
alteration if they reasonably appear to have been initialed by the Mortgagor)
appears regular on its face and relates to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth in the Mortgage Loan Schedule as to the information in clauses (i), (ii),
(v) and (vi) of the definition of "Mortgage Loan Schedule" respecting such
Mortgage Loan accurately reflects the information set forth in Indenture
Trustee's Mortgage File. The Collateral Agent has made no independent
examination of such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement. The Collateral Agent makes no
representations as to: (x) the validity, legality, enforceability or genuineness
of any such documents contained in each or any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (y) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Sale and Servicing
Agreement.
_______________________________,
as Collateral Agent
By:_____________________________
Name:
Title:
D-1
<PAGE>
EXHIBIT E
FINAL CERTIFICATION OF COLLATERAL AGENT
[Depositor] [Servicer]
[Indenture Trustee] [Note Insurer]
Re: Sale and Servicing Agreement, dated as of _____________ among
_______________________, as Depositor, _____________________,
as Servicer, ________________________, as Indenture Trustee,
and _________________, as Collateral Agent
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Sale and Servicing Agreement, the undersigned, as Collateral
Agent, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05 of the Sale and Servicing Agreement and has determined
that (i) all documents required to be delivered to it pursuant to Section 2.05
of the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections do not constitute physical
alteration if they reasonably appear to have been initialed by the Mortgagor)
appears regular on its face and relates to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth in the Mortgage Loan Schedule respecting such Mortgage Loan accurately
reflects the information set forth in the Indenture Trustee's Mortgage File. The
Collateral Agent has made no independent examination of such documents beyond
the review specifically required in the above-referenced Sale and Servicing
Agreement. The Collateral Agent makes no representations as to: (x) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (y) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Sale and Servicing
Agreement.
_______________________________
as Collateral Agent
By:____________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
REQUEST FOR RELEASE OF DOCUMENTS
________________,
[Collateral Agent]
[Indenture Trustee]
Re: Sale and Servicing Agreement, dated as of _____________ among
________________________, as Depositor,
_______________________, _______________________, as Servicer,
_____________________, as Indenture Trustee, and
____________________, as Collateral Agent
In connection with the administration of the pool of Mortgage
Loans held by ____________________, as Collateral Agent, on behalf of
____________________, as Indenture Trustee, for the benefit of the Noteholders
and the Note Insurer, we request the release, and acknowledge receipt, of the
(Indenture Trustee's Mortgage File/[specify document]) for the Mortgage Loan
described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts received
in connection therewith have been credited to the
Collection Account.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Collection
Account.)
____ 3. Mortgage Loan in Foreclosure
____ 4. Mortgage Loan Repurchased Pursuant to Section 5.18 of the
Pooling and Servicing Agreement.
F-1
<PAGE>
____ 5. Mortgage Loan Repurchased or Substituted pursuant to
Article II or III of the Sale and Servicing Agreement
(Servicer hereby certifies that the repurchase price or
Substitution Adjustment has been credited to the related
Distribution Account and that the substituted mortgage loan
is a Qualified Substitute Mortgage Loan.)
____ 6. Other (explain)_______________________________________________
If box 1 or 2 above is checked, and if all or part of the
Indenture Trustee's Mortgage File was previously released to us, please release
to us our previous receipt on file with you, as well as any additional documents
in your possession relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to the Collateral Agent, please acknowledge your receipt
by signing in the space indicated below, and returning this form.
___________________________________,
as Servicer
By:_________________________________
Name:
Title:
Documents returned to Collateral Agent:
_______________________________,
as Collateral Agent
By:_____________________________
Name:
Title:
Date:
F-2
<PAGE>
EXHIBIT G
FORM OF SUBSEQUENT CONTRIBUTION AGREEMENT
This SUBSEQUENT CONTRIBUTION AGREEMENT, dated as of ________,
1999 (the "Subsequent Transfer Date"), is entered into by and between
________________________, as depositor (the "Depositor"), and the
_____________________________(the "Trust").
W I T N E S S E T H:
Reference is hereby made to (x) that certain Sale and
Servicing Agreement, dated as of _____________ (the "Sale and Servicing
Agreement"), by and among the Depositor and the Trust, and (y) that certain
Indenture, dated as of _____________ (the "Indenture"), by and between the Trust
and _____________, as indenture trustee (the "Indenture Trustee"). Pursuant to
the Sale and Servicing Agreement, the Depositor has agreed to sell, assign and
transfer, and the Trust has agreed to accept, from time to time, Subsequent
Mortgage Loans (as defined below). The Sale and Servicing Agreement provides
that each such sale of Subsequent Mortgage Loans be evidenced by the execution
and delivery of a Subsequent Contribution Agreement such as this Subsequent
Contribution Agreement.
The assets sold to the Trust pursuant to this Subsequent
Contribution Agreement consist of (a) the Subsequent Mortgage Loans in Pool I
and Pool II listed in the Mortgage Loan Schedule attached hereto (including
property that secures a Subsequent Mortgage Loan that becomes an REO Property),
including the related Mortgage Files delivered or to be delivered to the
Collateral Agent, on behalf of the Indenture Trustee, including all payments of
principal received, collected or otherwise recovered after the Subsequent
Cut-Off Date for each Subsequent Mortgage Loan, all payments of interest
accruing on each Subsequent Mortgage Loan after the Subsequent Cut-Off Date
therefor whenever received and all other proceeds received in respect of such
Subsequent Mortgage Loans, (b) the Insurance Policies relating to the Subsequent
Mortgage Loans, and (c) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all insurance proceeds and condemnation awards.
The "Subsequent Mortgage Loans" are those listed on the
Schedule of Mortgage Loans attached hereto. The Aggregate Principal Balance of
such Subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________
in Pool I and $__________ in Pool II.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent
Contribution Agreement, capitalized terms used herein but not otherwise defined
shall have the respective meanings assigned to such terms in Appendix I to the
Indenture.
Section 2. Sale, Assignment and Transfer. In consideration of
the receipt of $_________ (such amount being approximately 100% of the Aggregate
Principal Balance of the
G-1
<PAGE>
Subsequent Mortgage Loans) from the Trust, the Depositor hereby sells, assigns
and transfers to the Trust, without recourse, all of its right, title and
interest in, to, and under the Subsequent Mortgage Loans and related assets
described above, whether now existing or hereafter arising.
In connection with such sale, assignment and transfer, the
Originators shall satisfy the document delivery requirements set forth in
Section 2.05 of the Sale and Servicing Agreement with respect to each Subsequent
Mortgage Loan.
Section 3. Representations and Warranties of Concerning the
Subsequent Mortgage Loans. With respect to each Subsequent Mortgage Loan, the
Depositor hereby assigns each of the representations and warranties made by the
Originators in Section 3 of the Subsequent Transfer Agreement, on which the
Trust relies in accepting the pledge of the Subsequent Mortgage Loans. Such
representations and warranties speak as of the Subsequent Transfer Date unless
otherwise indicated, and shall survive each sale, assignment, transfer and
conveyance of the respective Subsequent Mortgage Loans to the Trust.
Section 4. Repurchase of Subsequent Mortgage Loans. Upon
discovery by any of the Depositor, an Originator, the Indenture Trustee, the
Servicer (on behalf of the Trust), the Note Insurer or any Noteholder of a
breach of any of the representations and warranties made by the Originators
pursuant to Section 3.03 of the Loan Sale Agreement or this Section 3, the party
discovering such breach shall give prompt written notice to such other Person;
provided, that the Indenture Trustee shall have no duty to inquire or to
investigate the breach of any such representations and warranties. The
Originators and the Depositor will be obligated to repurchase a Subsequent
Mortgage Loan which breaches a representation or warranty in accordance with the
provisions of Section 4.02 of the Sale and Servicing Agreement or to indemnify
as described in Section 3.05(g) of the Loan Sale Agreement. Such repurchase and
indemnification obligation of the Originators and the Depositor shall constitute
the sole remedy against the Originators and the Depositor, and the Trust for
such breach available to the Servicer, the Trust, the Indenture Trustee, the
Note Insurer and the Noteholders.
Section 5. Amendment. This Subsequent Contribution Agreement
may be amended from time to time by the Depositor and the Trust only with the
prior written consent of the Note Insurer (or, in the event of a Note Insurer
Default, the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
SUBSEQUENT CONTRIBUTION AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT
CONTRIBUTION AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY
COUNTERCLAIM THEREIN.
Section 7. Counterparts. This Subsequent Contribution
Agreement may be executed in counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which shall
constitute one and the same instrument.
G-2
<PAGE>
Section 8. Binding Effect; Third-Party Beneficiaries. This
Subsequent Contribution Agreement will inure to the benefit of and be binding
upon the parties hereto, the Note Insurer, the Noteholders, and their respective
successors and permitted assigns.
Section 9. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 10. Exhibits. The exhibits attached hereto and
referred to herein shall constitute a part of this Subsequent Contribution
Agreement and are incorporated into this Subsequent Contribution Agreement for
all purposes.
Section 11. Intent of the Parties; Security Agreement. The
Depositor and the Trust intend that the conveyance of all right, title and
interest in and to the Subsequent Mortgage Loans and related assets described
above by the Depositor to the Trust pursuant to this Subsequent Contribution
Agreement shall be, and be construed as, a sale of the Subsequent Mortgage Loans
from the Depositor to the Trust. It is, further, not intended that such
conveyances be deemed to be pledges of the Subsequent Mortgage Loans by the
Depositor to the Trust to secure a debt or other obligation of the Depositor.
However, in the event that the Subsequent Mortgage Loans are held to be property
of the Depositor, or if for any reason this Subsequent Contribution Agreement is
held or deemed to create a security interest in the Subsequent Mortgage Loans,
then it is intended that: (a) this Subsequent Contribution Agreement shall also
be deemed to be a security agreement within the meaning of Articles 8 and 9 of
the Uniform Commercial Code of any other applicable jurisdiction; (b) the
conveyance provided for in this Subsequent Contribution Agreement shall be
deemed to be a grant by the Depositor to the Trust of a security interest in all
of the Depositor's right, title and interest, whether now owned or hereafter
acquired, in and to the Subsequent Mortgage Loans and related assets described
above. The Depositor shall, to the extent consistent with this Subsequent
Contribution Agreement, take such reasonable actions as may be necessary to
ensure that, if this Subsequent Contribution Agreement were deemed to create a
security interest in the Subsequent Mortgage Loans and the other property
described above, such interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of this Subsequent Contribution Agreement.
[Remainder of Page Intentionally Left Blank]
G-3
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Trust have caused this
Subsequent Contribution Agreement to be duly executed by their respective
officers as of the day and year first above written.
__________________________________________
By: _________________________________,
_________________________, not in its
individual capacity, but solely as Owner
Trustee
By:______________________________________
Name:
Title:
__________________________________________
By:________________________________________
Name:
Title:
G-4
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
_______________________________________________________
(Exact name of trustee as specified in its charter)
_______________________________________ _______________________
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
_______________________________________ _______________________
(Address of principal executive offices) (Zip code)
_______________________________________________________
(Exact name of obligor as specified in its charter)
_______________________________________ _______________________
(State or other jurisdiction of (I.R S. employer
incorporation or organization) identification no.)
____________________________________________
(address of principal executive offices)
Debt Securities
______________________________________
(Title of the indenture securities)
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
____ _______
(b) Whether it is authorized to exercise corporate trust powers.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C. F. R.
229.10 (d).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee ______________. A national banking association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the city of New York and State of New York, on the ____ day
of _______, _______.
___________________________
By: _______________________________
Name:
Title:
EXHIBIT 99.1
FORM OF PROSPECTUS
SUPPLEMENT -- NOTES
Prospectus supplement to prospectus dated ____________
================================================================================
$________________
----------------------
Mortgage-Backed Notes, Series _______
$______ _____%(1) Class A-1 Notes $________ ______%(1) Class A-2 Notes
(1) Subject to increase as described in this prospectus supplement
_____________ Prudential Securities Secured
Depositor Financing Corporation
Sponsor
================================================================================
- ------------------------------ The trust fund --
You should read the section o The trust fund consists primarily
entitled "Risk Factors" of two pools of fixed-rate
starting on page S-__ of this business and consumer purpose
prospectus supplement and page home equity loans secured by
__ of the accompanying first- or second-lien mortgages
prospectus and consider these on residential or commercial real
factors before making a properties.
decision to invest in the
notes. The notes --
The notes represent o The notes will be issued in two
non-recourse obligations of classes.
the trust only and are not
interests in or obligations of o Each class will be backed
any other person. primarily by a pledge of one of
the two pools of mortgage loans.
Neither the notes nor the
underlying mortgage loans will Credit enhancement --
be insured or guaranteed by
any governmental agency or o The notes will have the benefit
instrumentality. of a financial guaranty insurance
- ------------------------------ policy to be issued by
[note insurer]
o The notes will be
cross-collateralized to a limited
extent.
o The notes have the benefit of
initial over-collateralization.
o Excess interest will be used in
the early years of the
transaction to increase this
over-collateralization.
<TABLE>
<CAPTION>
Original Note Price to the Underwriting Proceeds to the Ratings Final Stated
Class Principal Balance Public(1) Discount Depositor(2) Moody's/S&P Maturity Date
- ----- ----------------- --------- -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $_____________ ____% ____% $_____________ Aaa/AAA
A-2 $_____________ ____% ____% $____________ Aaa/AAA
----------------- --------- -------- ------------ ----------- -------------
Total $_____________ $__________ $______ $____________
</TABLE>
(1) Plus accrued interest from _____________.
(2) Before deducting expenses estimated to be $_____________.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus supplement.
Any representation to the contrary is a criminal offense.
------------------
The date of this prospectus supplement is ________
<PAGE>
Important notice about the information presented in this
prospectus supplement and the accompanying prospectus
We provide information to you about the notes in two separate documents
that progressively provide more detail: (1) the accompanying prospectus, which
provides general information, some of which may not apply to your series of
notes, and (2) this prospectus supplement, which describes the specific terms of
your series of notes.
This prospectus supplement does not contain complete information about
the offering of the notes. Additional information is contained in the
accompanying prospectus. You are urged to read both this prospectus supplement
and the accompanying prospectus in full. We cannot sell the notes to you unless
you have received both this prospectus supplement and the accompanying
prospectus.
The accompanying prospectus contains information which may not be
applicable your series of notes. This information describes the possible
characteristics of different series of securities, and is not intended to be
contradictory to the information contained in this prospectus supplement. If the
terms of your series of notes vary between this prospectus supplement and the
accompanying prospectus, you should rely on the information in this prospectus
supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further information concerning a particular topic. The following table of
contents provides the pages on which these captions are located.
TABLE OF CONTENTS
SUMMARY.......................................................................1
The Notes and the Trust Certificates.....................................1
Distributions............................................................1
Credit Enhancement.......................................................2
The Mortgage Loans.......................................................2
Servicing of the Mortgage Loans..........................................2
ERISA Considerations.....................................................3
Federal Income Tax Status................................................3
Ratings..................................................................3
RISK FACTORS..................................................................4
TRANSACTION OVERVIEW..........................................................9
Parties..................................................................9
The Transaction.........................................................10
THE MORTGAGE LOAN POOLS......................................................10
General.................................................................10
The Pool I Mortgage Loans...............................................11
The Pool II Mortgage Loans..............................................15
Conveyance of subsequent mortgage loans.................................18
THE ORIGINATORS, THE DEPOSITOR AND THE SERVICER..............................19
Underwriting Guidelines.................................................19
The Servicer............................................................19
Delinquency and Loan Loss Experience....................................19
THE OWNER TRUSTEE............................................................20
THE INDENTURE TRUSTEE........................................................20
THE COLLATERAL AGENT.........................................................20
DESCRIPTION OF THE NOTES AND THE TRUST CERTIFICATES..........................21
Book-Entry Registration.................................................21
Definitive Notes........................................................25
Assignment and Pledge of Initial Mortgage Loans.........................25
Assignment and Pledge of Subsequent Mortgage Loans......................26
Delivery of Mortgage Loan Documents.....................................26
Representations and Warranties of the Depositor.........................27
Payments on the Mortgage Loans..........................................29
Over-collateralization Provisions.......................................31
Cross-collateralization Provisions......................................32
Flow of Funds...........................................................33
Events of Default.......................................................33
Reports to Noteholders..................................................34
Amendment...............................................................35
SERVICING OF THE MORTGAGE LOANS..............................................35
The Servicer............................................................35
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Servicing Fees and Other Compensation and Payment of Expenses...........35
Periodic Advances and Servicer Advances.................................36
Prepayment Interest Shortfalls..........................................36
Civil Relief Act Interest Shortfalls....................................37
Optional Purchase of Defaulted Mortgage Loans...........................37
Servicer Reports........................................................37
Collection and Other Servicing Procedures...............................38
Hazard Insurance........................................................38
Realization Upon Defaulted Mortgage Loans...............................39
Removal and Resignation of the Servicer.................................39
Optional Clean-up Call on the Notes.....................................41
Termination; Purchase of Mortgage Loans.................................41
THE NOTE INSURANCE POLICY....................................................42
THE NOTE INSURER.............................................................45
The Note Insurer........................................................45
Reinsurance.............................................................46
Ratings.................................................................46
Capitalization..........................................................46
Insurance Regulation....................................................46
PREPAYMENT AND YIELD CONSIDERATIONS..........................................47
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS....................................50
Treatment of the Notes..................................................50
Treatment of the Trust..................................................51
ERISA CONSIDERATIONS.........................................................51
LEGAL INVESTMENT.............................................................52
PLAN OF DISTRIBUTION.........................................................52
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................53
ADDITIONAL INFORMATION.......................................................53
EXPERTS......................................................................54
LEGAL MATTERS................................................................54
RATINGS......................................................................54
GLOSSARY.....................................................................55
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SUMMARY
o This summary highlights selected information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the terms
of the offering of the notes, carefully read this entire prospectus
supplement and the accompanying prospectus.
o This summary provides an overview of calculations, cash flows and other
information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in this
prospectus supplement and the accompanying prospectus.
-------------------------------
THE NOTES AND THE TRUST CERTIFICATES
The __________________ will issue two classes of its mortgage backed notes,
series _____, the class A-1 notes and the class A-2 notes. The notes are being
offered to you by this prospectus supplement.
The trust will also issue two classes of trust certificates, together
representing the entire beneficial ownership interest in the trust. The trust
certificates are not offered by this prospectus supplement.
Description of the Notes
Each class of notes will be secured by a pledge of a separate portion of the
assets of the trust, which consist primarily of two pools of mortgage loans The
class A-1 notes will be secured by the mortgage loans in the first pool and the
class A-2 notes will be secured by the mortgage loans in the second pool. Each
pool will constitute a separate sub-trust of the trust.
Each class of notes will accrue interest at an interest rate, have an original
principal balance and final stated maturity date, as follows:
Note Original Note Final Stated
Class Rate(1) Principal Balance Maturity Date
- ----- ------- ----------------- -------------
A-1 ____% $__________
A-2 ____% $__________
(1) If the servicer does not exercise its option to call a class of notes as
described in this Summary under "Servicing of the Mortgage Loans -- Option
of the Servicer to Call Either Class of Notes," the note rate on that class
of notes will be equal to the rate stated above plus _____% per annum.
Description of the Trust Certificates
One class of trust certificates will represent the ownership interest in the
sub-trust of the trust consisting of the mortgage loans in pool I. The other
class of trust certificates will represent the ownership interest in the
sub-trust of the trust consisting of the mortgage loans in pool II. The holder
of a trust certificates is entitled to receive specified payments consisting of
excess interest from its pool of mortgage loans, but only to the extent all
payments have been made on each distribution date to the noteholders.
o Excess Interest. Generally, because more interest is anticipated to be
paid by the mortgage loan borrowers than is necessary to pay the
interest which accrues on the notes, there is expected to be excess
interest each month. Excess interest may be used to cover shortfalls of
interest, to create over-collateralization, for cross-collateralization
or to pay amounts due the note insurer. After all distributions are
made on each distribution date-- including amounts owing for
over-collateralization, cross-collateralization or payment to the note
insurer-- any remaining excess interest from a pool will be distributed
to the holder of the trust certificate for that pool.
DISTRIBUTIONS
Distributions on the notes will be made on each distribution date to the holders
of record on the record date. Distributions to a holder will be made in an
amount equal to the holder's percentage interest of the total amount distributed
to the holder's class of notes on that distribution date.
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o Distribution Date. Distributions on the notes will be made on the ____
day of each month, or, if that ____ day is not a business day, on the
next succeeding business day, beginning on _________.
o Record Date. The record date for the notes will be the last business
day of the month preceding the distribution date, or, in the case of
the _______ distribution date, the closing date.
Distributions of Interest
On each distribution date, each class of notes is entitled to receive its
current interest.
o Current Interest. The current interest for a distribution date is the
interest which accrues on a class of notes at that class's note rate on
the outstanding principal balance of the class during the accrual
period.
o Accrual Period. The accrual period for the notes is the calendar month
preceding the distribution date.
All computations of interest accrued on the notes will be made on the basis of a
360-day year consisting of twelve 30-day months.
Distributions of Principal
The holders of each class of notes are entitled to receive distributions of
principal on each distribution date which generally reflect collections of
principal during the preceding calendar month on the mortgage loans in the pool
relating to their class.
In addition, in accordance with the over-collateralization features of the
transaction, holders may also receive extra distributions of principal from the
excess interest on that distribution date
CREDIT ENHANCEMENT
The credit enhancement provided for the benefit of the holders of the notes
consists solely of:
o over-collateralization,
o cross-collateralization and
o the note insurance policy.
THE MORTGAGE LOANS
The mortgage loans to be included in the trust estate will be primarily
fixed-rate, closed-end, monthly pay, business and consumer purpose home equity
loans secured by first, second or multiple mortgages or deeds of trust on
residential or commercial real properties.
On the closing date, the trust will purchase the mortgage loans. The aggregate
principal balance of the pool I mortgage loans will be approximately
$_____________ and the aggregate principal balance of the pool II mortgage loans
will be approximately $_____________.
The aggregate principal balance of the mortgage loans purchased by the trust on
the closing date will be less than the amount required to be held by the trust.
The amount of the difference will be taken from the proceeds of the sale of the
notes, placed in the pre-funding accounts and used for the purchase of mortgage
loans by the trust after the closing date.
SERVICING OF THE MORTGAGE LOANS
American Business Credit will act as servicer and will be obligated to service
and administer the mortgage loans on behalf of the trust, for the benefit of the
note insurer and the holders of the notes.
The servicer is entitled to a servicing fee of ___% per annum of the outstanding
principal balance of each mortgage loan, calculated and payable monthly from the
interest portion of scheduled monthly payments, liquidation proceeds and other
proceeds.
Option of the Servicer to Call Either Class of Notes
The servicer may, at its option, call the class A-1 notes or the class A-2 notes
on any distribution date on which the aggregate outstanding principal balance of
the class is equal to or less than 10% of the aggregate original principal
balance of the class.
Option of the Servicer to Terminate the Trust
The servicer may, at its option, terminate the trust on the distribution date on
which the aggregate outstanding principal balance of all
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mortgage loans is less than 10% of the sum of the aggregate original principal
balance of the mortgage loans purchased on the closing date and the amount on
deposit in the pre-funding accounts on the closing date.
ERISA CONSIDERATIONS
Subject to the conditions described under "ERISA Considerations" in this
prospectus supplement, the notes may be purchased by any employee benefit plan
or other retirement arrangement subject to ERISA or the Internal Revenue Code.
FEDERAL INCOME TAX STATUS
It is the opinion of ____________, special federal tax counsel to the trust,
that for federal income tax purposes (i) the notes will be characterized as
indebtedness and (ii) the trust will not be characterized as an association (or
a publicly traded partnership) taxable as a corporation or a taxable mortgage
pool. Each noteholder, by the acceptance of a note, will agree to treat the
notes as indebtedness.
RATINGS
In order to be issued, the notes must be rated "AAA" by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. and "Aaa" by
Moody's Investors Service, Inc., taking into account the note insurance policy
issued for the notes.
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RISK FACTORS
Investors should consider, among other things, the following factors --
as well as the factors enumerated under "Risk Factors" in the accompanying
prospectus -- before deciding to invest in the notes.
If the funds on deposit in the pre-funding accounts are not used to purchase
additional mortgage loans, those funds will be distributed as a prepayment of
principal, which may adversely affect the yield on your note.
If the principal balance of the eligible mortgage loans available for
purchase by the trust on _____________ is less than the amount on
deposit in either pre-funding account on that date, the remaining
amount will be applied as a prepayment of principal on the following
distribution date to the holders of the class of notes relating to that
pre-funding account. Although no assurances can be given, it is
anticipated that the aggregate principal balance of the mortgage loans
sold to the trust after the closing date will require the application
of substantially all amounts on deposit in the pre-funding accounts and
that there will be no material principal prepayment to the holders of
the notes. In addition, any purchase of additional mortgage loans by
the trust using funds on deposit in the pre-funding accounts is subject
to the following conditions, among others:
o each additional mortgage loan must satisfy specified
statistical criteria and representations and warranties;
o additional mortgage loans will not be selected in a manner
that is believed to be adverse to the interests of the holders
of the notes and the note insurer; and
o opinions of counsel will be delivered with concerning the
validity of the conveyance of additional mortgage loans.
Each additional mortgage loan purchased after the closing date must
satisfy the eligibility criteria referred to above at the time of its
addition. However, these mortgage loans may have been originated using
credit criteria different from those which were applied to the mortgage
loans purchased on the closing date, and may be of a different credit
quality. Therefore, following the transfer of the additional mortgage
loans to the trust, the aggregate characteristics of the mortgage loans
then held in the trust may vary from those of the mortgage loans
included in the trust on the closing date.
Less stringent underwriting standards and the resultant potential for
delinquencies on the mortgage loans could lead to losses on your securities.
The mortgage loans were made, in part, to borrowers who, for one reason
or another, are not able, or do not wish, to obtain financing from
traditional sources such as commercial banks. These mortgage loans may
be considered to be of a riskier nature than mortgage loans made by
traditional sources of financing, so that the holders of the notes may
be deemed to be at greater risk than if the mortgage loans were made to
other types of borrowers.
The underwriting standards used in the origination of the mortgage
loans held by the trust are generally less stringent than those of
Fannie Mae or Freddie Mac concerning a borrower's credit history and in
certain other respects. Borrowers
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on the mortgage loans may have an impaired or unsubstantiated credit
history. As a result of this less stringent approach to underwriting,
the mortgage loans purchased by the trust may experience higher rates
of delinquencies, defaults and foreclosures than mortgage loans
underwritten in a manner which is more similar to the Fannie Mae and
Freddie Mac guidelines.
Geographic concentration of the mortgage loans in particular jurisdictions may
result in greater losses if those jurisdictions experience economic downturns.
Some geographic regions of the United States from time to time will
experience weaker regional economic conditions and housing markets,
and, consequently, will experience higher rates of loss and delinquency
on mortgage loans generally. Any concentration of the mortgage loans in
such a region may present risk considerations in addition to those
generally present for similar mortgage-backed securities without this
concentration. The mortgaged properties underlying the mortgage loans
are located primarily on the eastern seaboard of the United States.
This may subject the mortgage loans held by the trust to the risk that
a downturn in the economy in this area of the country would more
greatly affect the pool than if the pool were more diversified.
In particular, the states listed below had the following percentages of
mortgage loans in pool I and pool II, measured as of _______, ______,
which are secured by mortgaged properties located in the their states:
--------- -------- ------ ------- ------
Pool I % % % % %
Pool II % % % % %
Because of the relative geographic concentration of the mortgage loans
within the States of _____________, _____________, _____________,
_____________ and _____________, losses on the mortgage loans may be
higher than would be the case if the mortgage loans were more
geographically diversified. For example, some of the mortgaged
properties may be more susceptible to particular types of special
hazards, such as earthquakes and other natural disasters and major
civil disturbances, than residential or commercial properties located
in other parts of the country. In addition, the economies of
_____________, _____________, _____________, _____________ and
_____________ may be adversely affected to a greater degree than the
economies of other areas of the country by regional developments. If
the _____________, _____________, _____________, _____________ and
_____________ residential or commercial real estate markets experience
an overall decline in property values after the dates of origination of
the respective mortgage loans, then the rates of delinquencies,
foreclosures and losses on the mortgage loans may be expected to
increase and this increase may be substantial.
A portion of the mortgage loans require large balloon payments at maturity;
these balloon loans may involve a greater risk of default due to these large
payments, which could lead to losses on your securities.
Approximately ____% of the mortgage loans in pool I, measured as of
_____, ____, and ____% of the mortgage loans in pool II, measured as of
____, ____, are not fully amortized over their terms and instead
require substantial balloon payments on their maturity dates. Because
the principal balances of these balloon loans do not fully amortize
over their term, these balloon loans may
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involve greater risks of default than mortgage loans whose principal
balance is fully amortized over the term of the mortgage loan. The
borrower's ability to pay the balloon amount due at maturity of his or
her balloon loan will depend on the borrower's ability to obtain
adequate refinancing or funds from other sources to repay the balloon
loan.
The originators believe that the mortgage loans are or will be
adequately collateralized. In light of the collateralization and the
relatively small average size of the mortgage loans, they believe the
borrowers are likely to have the ability to obtain adequate refinancing
or secure funds from other sources. However, the originators have only
limited historical default data concerning their balloon loans and they
do not believe that their data is sufficient to predict the default
experience of the balloon loans.
Even assuming that the mortgaged properties provide adequate security
for the balloon loans, substantial delays could be encountered in
connection with the liquidation of defaulted mortgage loans and
corresponding delays in the receipt of proceeds by the holders of the
notes could occur.
A portion of the mortgage loans are secured by subordinate mortgages; in the
event of a default, these mortgage loans are more likely to experience losses.
General economic conditions have an impact on the ability of borrowers
to repay loans. Loss of earnings, illness and other similar factors may
lead to an increase in delinquencies and bankruptcy filings by
borrowers. In the event of a bankruptcy of a mortgagor, it is possible
that the trust could experience a loss on the mortgagor's mortgage
loan. In conjunction with a mortgagor's bankruptcy, a bankruptcy court
may suspend or reduce the payments of principal and interest to be paid
on the mortgage loan or permanently reduce the principal balance of the
mortgage loan, thus either delaying or permanently limiting the amount
received by the trust on the mortgage loan. Moreover, in the event a
bankruptcy court rejects the transfer of the mortgaged property to the
trust, any remaining balance on the mortgage loan may not be
recoverable.
Approximately _____% of the mortgage loans in pool I, measured as of
____, _____, and ____% of the mortgage loans in pool II, measured as of
____, ____, are secured by subordinate or junior mortgages which are
subordinate to the rights of the holder of the senior mortgages. As a
result, the proceeds from any liquidation, insurance or condemnation
proceedings will be available to satisfy the principal balance of such
a mortgage loan only to the extent that the claims, if any, of each
senior mortgagee are satisfied in full, including any foreclosure
costs. In addition, a holder of a junior mortgage may not foreclose on
the mortgaged property securing the mortgage unless it forecloses
subject to the related senior mortgages, in which case it must either
pay the entire amount of the senior mortgages to the mortgagees at or
prior to the foreclosure sale or undertake the obligation to make
payments on each senior mortgage in the event of default thereunder. In
servicing business and consumer purpose home equity loans in its
portfolio, it is the servicer's practice to satisfy or reinstate each
such first mortgage at or prior to the foreclosure sale only to the
extent that it determines any amount so paid will be recoverable from
future payments and collections on the mortgage loans or otherwise. The
trust will have no source of funds to satisfy any senior mortgage or
make payments due to any senior mortgagee.
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An overall decline in the residential or commercial real estate markets
could adversely affect the values of the mortgaged properties such that
the outstanding principal balances of the mortgage loans, together with
the primary senior financing thereon, equals or exceeds the value of
the mortgaged properties. Such a decline would adversely affect the
position of a second mortgagee before having such an effect on that of
the first mortgagee. A rise in interest rates over a period of time and
the general condition of the mortgaged property as well as other
factors may have the effect of reducing the value of the mortgaged
property from the appraised value at the time the mortgage loan was
originated. If there is a reduction in value of the mortgaged property,
the ratio of the amount of the mortgage loan to the value of the
mortgaged property may increase over what it was at the time the
mortgage loan was originated. Such an increase may reduce the
likelihood of liquidation or other proceeds being sufficient to satisfy
the mortgage loan after satisfaction of any first liens.
Prepayments on the mortgage loans could lead to shortfalls in the payment of
interest on your note.
The scheduled monthly payment dates for the mortgage loans occur
throughout a month. When a principal prepayment in full is made on a
mortgage loan, the mortgagor is charged interest only up to the date of
the prepayment, instead of for a full month. However, the principal
receipts will only be passed through to the holders of the notes once a
month, on the distribution date which follows the calendar month in
which the prepayment was received by the servicer. The servicer is
obligated to pay, without any right of reimbursement, those shortfalls
in interest collections payable on the notes that are attributable to
the difference between the interest paid by a mortgagor in connection
with a prepayment in full and thirty (30) days' interest on the
mortgage loan, but only to the extent of the servicing fee for that
calendar month.
If the servicer fails to make these payments or the shortfall exceeds
the servicing fee, there will be less funds available for the payment
of interest on the related class of notes. These shortfalls of
interest, if they result in the inability of the trust to pay the full
amount of the current interest on the related class of notes, are not
covered by the note insurance policy.
Year 2000 issues could lead to delays in payment or losses on your note.
There is a significant uncertainty regarding the effect of the Year
2000 problem because computer systems that do not properly recognize
date sensitive information when the year changes to 2000 could generate
erroneous data or altogether fail. The servicer and its affiliates have
assessed their internal systems, programs and data processing
applications as well as those provided to them by third-party vendors
concerning Year 2000 data processing issues. The servicer and its
affiliates believe that the computer equipment and software used by
them will function properly for dates in the Year 2000 and thereafter.
The servicer and its affiliates have not incurred significant expense
to date, and do not anticipate incurring significant future expense, to
address Year 2000 issues although there can be no assurance that the
servicer and its affiliates will not incur significant future expenses.
However, third parties that have relationships with them, including
vendors and borrowers, may experience significant Year 2000 issues.
These issues may have a serious adverse effect on the operations of
these third parties, including a shut-down of operations for a period
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of time, which may, in turn, have a material adverse effect on their
business, financial condition and results of operations.
If DTC experiences year 2000 problems, you could experience delays in payment or
losses on your note.
The management of DTC is aware that some computer applications, systems
and the like for processing data that are dependant upon calendar
dates, including dates before, on and after January 1, 2000, may
encounter year 2000 issues. DTC has informed its participants and
members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the
timely payment of distributions, including principal and interest
payments, to securityholders, book-entry deliveries, and settlement of
trades within DTC continue to function appropriately on and after
January 1, 2000. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to properly perform its services is also
dependent upon other parties, including, but not limited to, issuers,
their agents and its participating organizations as well as third party
vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service
providers among others. DTC has informed the financial community that
it is contacting, and will continue to contact, third party vendors
from whom DTC acquires services to: (i) impress upon them the
importance of these services being Year 2000 compliant and (ii)
determine the extent of their efforts for Year 2000 remediation and, as
appropriate, testing of their services. In addition, DTC has stated
that it is in the process of developing contingency plans as it deems
appropriate.
If problems associated with the year 2000 issue were to occur with
respect to DTC and the services described above, distributions to the
beneficial owners of notes could be delayed or otherwise adversely
affected.
According to DTC, the foregoing information concerning DTC has been
provided to the financial community for information purposes only and
is not intended to serve as a representation, warranty or contract
modification of any kind.
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Some of the terms used in this prospectus supplement are capitalized.
These capitalized terms have specified definitions, which are included at the
end of this prospectus supplement under the heading "Glossary."
TRANSACTION OVERVIEW
Parties
The Trust. ___________________, a Delaware business trust. The
principal executive office of the trust is in Wilmington, Delaware, in care of
the owner trustee, at the address of the owner trustee specified below.
The Sponsor. Prudential Securities Secured Financing Corporation, a
Delaware corporation. The principal executive office of the sponsor is located
at One New York Plaza, 14th Floor, New York, New York 10292, and its telephone
number is (212) 778-1000.
The Depositor. ________________, a __________ corporation, which is
owned by the originators. The principal executive office of the depositor is at
___________________________, and its telephone number is _____________.
The Originators. _____________, a _____________ corporation, and
_____________, a _____________ corporation, originated or purchased the mortgage
loans. For a description of the business of the originators, see "The
Originators, the Depositor and the Servicer" in this prospectus supplement.
The Servicer and the Subservicers. _____________ will act as servicer
of the mortgage loans, and _____________ and _____________ will act as
subservicers for different portions of the mortgage loans. For a description of
the business of the servicer, see "The Originators, the Depositor and the
Servicer" in this prospectus supplement.
The Indenture Trustee. _____________, a _____________ banking
corporation. The corporate trust office of the indenture trustee is located at
_____________, and its telephone number is _____________. For a description of
the indenture trustee and its responsibilities with respect to the notes, see
"The Indenture Trustee" in this prospectus supplement.
The Owner Trustee. ___________________________, a national banking
association. The corporate trust office of the owner trustee is located at
_______________________, and its telephone number is _____________. For a
description of the owner trustee and its responsibilities with respect to the
notes and the mortgage loans, see "The Owner Trustee" in this prospectus
supplement.
The Collateral Agent. _________________________, a national banking
association. The corporate trust office of the collateral agent is located at
________________________, and its telephone number is ________________.
The Note Insurer. ___________________________, a _____________
financial guaranty insurance company. The note insurer will issue a financial
guaranty insurance policy for the benefit of the holders of the notes. For a
description of the business and selected financial information of the note
insurer, see "The Note Insurance Policy" and "The Note Insurer" in this
prospectus supplement.
The Rating Agencies. [Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, Inc.] and [Moody's Investors Service, Inc.] will
issue ratings for each class of notes.
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The Transaction
Formation of the Trust and Issuance of the Trust Certificates. The
trust will be formed pursuant to the terms of a Trust Agreement, dated as of
_____________, between the owner trustee and the depositor. Under the Trust
Agreement, the trust will also issue the trust certificates to the depositor,
each evidencing the entire beneficial ownership interest in the sub-trust of the
trust consisting of a pool of mortgage loans.
Sale and Servicing of the Mortgage Loans. The mortgage loans have been
originated or purchased by the originators pursuant to their respective
underwriting guidelines, as described under "The Originators, the Depositor and
the Servicer." The originators will sell the mortgage loans to the depositor,
pursuant to Loan Sale Agreement, dated as of _____________, among the
originators and the depositor. The depositor will sell the mortgage loans to the
trust pursuant to a Sale and Servicing Agreement, dated as of _____________,
among the depositor, the trust, the servicer, the collateral agent and the
indenture trustee. The servicer will service the mortgage loans pursuant to the
terms of the Sale and Servicing Agreement.
Issuance of the Notes. Pursuant to the terms of an Indenture, dated as
of _____________, between the trust and the indenture trustee, the trust will
pledge the trust estate to the indenture trustee, for the benefit of the holders
of the notes and the note insurer, and issue the notes.
Issuance of the Note Insurance Policy. The note insurer will issue the
note insurance policy pursuant to the terms of an Insurance and Indemnity
Agreement, dated as of _____________, among the note insurer, the trust, the
depositor, the originators and the servicer.
THE MORTGAGE LOAN POOLS
General
Difference between Statistical Calculation Date and Closing Date Pools.
The statistical information presented in this prospectus supplement concerning
the mortgage loans is based on the pools of mortgage loans that existed on a
statistical calculation date, in this case _______, ____. Pool I aggregated
$_____________ as of the statistical calculation date and pool II aggregated
$_____________ as of the statistical calculation date. The depositor expects
that the actual pools on the closing date will represent approximately
$_____________ in aggregate principal balance of mortgage loans in pool I, as of
the Cut-Off Date and approximately $_____________ in aggregate principal balance
of mortgage loans in pool II, as of the Cut-Off Date. The additional mortgage
loans will represent mortgage loans acquired or to be acquired by the trust on
or prior to the closing date. In addition, with respect to the pools as of the
statistical calculation date as to which statistical information is presented in
this prospectus supplement, some amortization will occur prior to the closing
date. Moreover, some mortgage loans included in the pools as of the statistical
calculation date may prepay in full, or may be determined not to meet the
eligibility requirements for the final pools, and may not be included in the
final pools. As a result of the foregoing, the statistical distribution of
characteristics as of the closing date for the final mortgage loan pools will
vary somewhat from the statistical distribution of the characteristics as of the
statistical calculation date as presented in this prospectus supplement,
although this variance should not be material. In the event that the depositor
does not, as of the closing date, have the full amount of mortgage loans which
the depositor expects to sell to the trust on this date, the depositor will
increase the size of the pre-funding accounts and the capitalized interest
accounts, as applicable.
Additional mortgage loans are intended to be purchased by the trust
from time to time on or before _____________ from funds on deposit in the
pre-funding accounts. These subsequent mortgage loans to be purchased by the
trust, if available, will be originated or purchased by the originators, sold by
S-10
<PAGE>
the originators to the depositor and then sold by the depositor to the trust.
The Indenture will provide that the mortgage loans, following the conveyance of
the subsequent mortgage loans, must in the aggregate conform to specified
characteristics described below under " -- Conveyance of subsequent mortgage
loans."
Unless otherwise noted, all statistical percentages in this prospectus
supplement are approximate and are measured by the aggregate principal balance
of the applicable mortgage loans in relation to the aggregate principal balance
of the mortgage loans in the applicable pool, in each case, as of the
statistical calculation date.
The mortgage loans will be predominantly business or consumer purpose
residential home equity loans used to refinance an existing mortgage loan, to
consolidate debt, or to obtain cash proceeds by borrowing against the
mortgagor's equity in the mortgaged property in order to provide funds for,
working capital for business, business expansion, equipment acquisition, or
personal acquisitions. The mortgaged properties securing the mortgage loans
consist primarily of single-family residences -- which may be detached, part of
a multi-family dwelling, a condominium unit, a townhouse, a mobile home or a
unit in a planned unit development -- and commercial or mixed use property. The
mortgaged properties may be owner-occupied properties, which includes second and
vacation homes, non-owner occupied investment properties or business purpose
properties.
The majority of the mortgage loans have a prepayment fee clause. These
prepayment fee clauses generally provide that the mortgagor pay, upon
prepayment, one or more of the following:
o a fee equal to a percentage, negotiated at origination, of the
outstanding principal balance of the mortgage loan,
o a fee which is designed to allow the holder of the mortgage
note to earn interest on the mortgage loan as if the mortgage
loan remained outstanding until a designated point in time, or
o a fee equal to the amount of interest on the outstanding
principal balance of the mortgage loan calculated pursuant to
a rule of 78's calculation, which has the effect of requiring
the mortgagor to pay a greater amount of interest than would
be required to be paid if the actuarial method of calculating
interest was utilized.
The Pool I Mortgage Loans
As of the statistical calculation date, each of the mortgage loans in
pool I had a remaining term to maturity of no greater than 360 months and had a
mortgage interest rate of at least ____% per annum.
The combined loan-to-value ratios or CLTV's described in this
prospectus supplement were calculated based upon the appraised values of the
mortgaged properties at the time of origination. No assurance can be given that
the appraised values of the mortgaged properties have remained or will remain at
the levels that existed on the dates of origination of the mortgage loans. If
property values decline such that the outstanding principal balances of the
mortgage loans, together with the outstanding principal balances of any first
liens, become equal to or greater than the value of the mortgaged properties,
the actual rates of delinquencies, foreclosures and losses could be higher than
those historically experienced by the servicer, as desscribed below under "The
Originators, the Depositor and the Servicer -- Delinquency and Loan Loss
Experience," and in the mortgage lending industry generally.
As of the statistical calculation date, the mortgage loans in pool I
had the following characteristics:
S-11
<PAGE>
o there were ___ mortgage loans under which the mortgaged
properties are located in __ states,
o the aggregate principal balance, after application of all
payments due on or before the statistical calculation date,
was $_____________,
o the minimum principal balance was $_____________, the maximum
principal balance was $_____________, and the average
principal balance was $_____________,
o the mortgage interest rates ranged from _____% to ____% per
annum, and the weighted average mortgage interest rate was
approximately ____% per annum,
o the original term to stated maturity ranged from ___ months to
360 months,
o the remaining term to stated maturity ranged from __ months to
____ months, the weighted average original term to stated
maturity was approximately ___ months and the weighted average
remaining term to stated maturity was approximately ____
months,
o no mortgage loan had a maturity later than _________,
o approximately _______% of the aggregate principal balance of
the mortgage loans require monthly payments of principal that
will fully amortize these mortgage loans by their respective
maturity dates, and approximately ____% of the aggregate
principal balance of the mortgage loans are balloon loans,
o the weighted average CLTV was approximately _____%,
o approximately _____% of mortgage loans are secured by first
liens, and approximately _____% of mortgage loans are secured
by second liens, and
o approximately _____%, _____%, ____%, _____% and ____% of the
mortgage loans are secured by mortgaged properties located in
the States of _____________, _____________, _____________,
_____________ and _____________, respectively.
On or prior to _____________, the trust is expected to purchase,
subject to availability, subsequent mortgage loans to be added to pool I. The
maximum aggregate principal balance of subsequent mortgage loans that may be
purchased is expected to be approximately $_____________.
The following tables present statistical information on the mortgage
loans in pool I. Due to rounding, the percentages shown may not precisely total
100.00%.
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
State Mortgage Loans Principal Balance Balance
----- -------------- ----------------- --------------------
TOTAL
S-12
<PAGE>
DISTRIBUTION OF CLTV RATIOS
Pool I
% of Statistical
Calculation Date
Original Number of Aggregate Unpaid Aggregate Principal
CLTV Range Mortgage Loans Principal Balance Balance
---------- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF GROSS MORTGAGE INTEREST RATES
Pool I
% of Statistical
Gross Calculation Date
Mortgage Interest Number of Aggregate Unpaid Aggregate Principal
Rate Range Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL TERMS TO MATURITY
(in months)
Pool I
% of Statistical
Range of Calculation Date
Original Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF REMAINING TERMS TO MATURITY
(in months)
Pool I
% of Statistical
Range of Calculation Date
Remaining Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES
Pool I
Range of % of Statistical
Original Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-13
<PAGE>
DISTRIBUTION OF CURRENT PRINCIPAL BALANCES
Pool I
Range of % of Statistical
Current Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY LIEN STATUS
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Lien Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY AMORTIZATION TYPE
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Amortization Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY OCCUPANCY STATUS
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Occupancy Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY PROPERTY TYPE
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Property Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-14
<PAGE>
The Pool II Mortgage Loans
As of the statistical calculation date, each of the mortgage loans in
pool II had a remaining term to maturity of no greater than 360 months and had a
mortgage interest rate of at least _____% per annum.
The CLTVs described in this prospectus supplement were calculated based
upon the appraised values of the mortgaged properties at the time of
origination. No assurance can be given that the appraised values of the
mortgaged properties have remained or will remain at the levels that existed on
the dates of origination of the mortgage loans. If property values decline such
that the outstanding principal balances of the mortgage loans, together with the
outstanding principal balances of any first liens, become equal to or greater
than the value of the mortgaged properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those historically experienced by
the servicer, as described below under "The Originators, the Depositor and the
Servicer -- Delinquency and Loan Loss Experience," and in the mortgage lending
industry.
As of the statistical calculation date, the mortgage loans in pool II
had the following characteristics:
o there were ___ mortgage loans under which the mortgaged
properties are located in ___ states,
o the aggregate principal balance, after application of all
payments due on or before the statistical calculation date,
was $_____________,
o the minimum principal balance was $_____________, the maximum
principal balance was $_____________, and the average
principal balance was $_____________,
o the mortgage interest rates ranged from ____% to ___% per
annum, and the weighted average mortgage interest rate was
approximately ___% per annum,
o the original term to stated maturity ranged from __ months to
360 months,
o the remaining term to stated maturity ranged from __ months to
___ months, the weighted average original term to stated
maturity was approximately ___ months and the weighted average
remaining term to stated maturity was approximately ___
months,
o no mortgage loan had a maturity later than _____________,
o approximately ____% of the aggregate principal balance of the
mortgage loans require monthly payments of principal that will
fully amortize these mortgage loans by their respective
maturity dates, and approximately ____% of the aggregate
principal balance of the mortgage loans are balloon loans,
o the weighted average CLTV was approximately ____%,
o approximately ____% of mortgage loans are secured by first
liens, and approximately ____% of mortgage loans are secured
by second liens, and
o approximately ___%, ___%, ____%, ____% and ____% of the
mortgage loans are secured by mortgaged properties located in
the States of _____________, _____________, _____________,
_____________ and _____________, respectively.
On or prior to _____________, the trust is expected to purchase,
subject to availability, subsequent mortgage loans to be added to pool II. The
maximum aggregate principal balance of subsequent mortgage loans that may be
purchased is expected to be approximately $_____________.
S-12
<PAGE>
The following tables present statistical information on the mortgage
loans in pool II. Due to rounding, the percentages shown may not precisely total
100.00%.
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
State Mortgage Loans Principal Balance Balance
----- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF CLTV RATIOS
Pool II
% of Statistical
Calculation Date
Original Number of Aggregate Unpaid Aggregate Principal
CLTV Range Mortgage Loans Principal Balance Balance
---------- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF GROSS MORTGAGE INTEREST RATES
Pool II
% of Statistical
Gross Calculation Date
Mortgage Interest Number of Aggregate Unpaid Aggregate Principal
Rate Range Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL TERMS TO MATURITY
(in months)
Pool II
% of Statistical
Range of Calculation Date
Original Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF REMAINING TERMS TO MATURITY
(in months)
Pool II
% of Statistical
Range of Calculation Date
Remaining Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-16
<PAGE>
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES
Pool II
Range of % of Statistical
Original Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF CURRENT PRINCIPAL BALANCES
Pool II
Range of % of Statistical
Current Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY LIEN STATUS
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Lien Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY AMORTIZATION TYPE
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Amortization Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY OCCUPANCY STATUS
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Occupancy Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY PROPERTY TYPE
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Property Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-17
<PAGE>
Conveyance of subsequent mortgage loans
The Indenture permits the trust to acquire subsequent mortgage loans
with the funds on deposit in the pre-funding accounts. It is expected that the
amount on deposit in the pre-funding accounts on the closing date will be
approximately $_____________ for pool I and $_____________ for pool II.
Accordingly, the statistical characteristics of the mortgage loans in pool I and
pool II will vary as of any subsequent cut-off date upon the acquisition of
subsequent mortgage loans.
The obligation of the trust to purchase the subsequent mortgage loans
on any subsequent transfer date during the Pre-Funding Period is subject to the
following requirements:
o the subsequent mortgage loan may not be 30 or more days
contractually delinquent as of a subsequent cut-off date which
is the close of business on the last day of the calendar month
preceding the month in which the subsequent mortgage loan was
purchased by the trust;
o the original term to maturity of the subsequent mortgage loan
may not exceed 360 months for pool I and 360 months for pool
II;
o the subsequent mortgage loan must have a mortgage interest
rate of at least ____% for pool I and ____% for pool II;
o the purchase of the subsequent mortgage loans is consented to
by the note insurer and the rating agencies, notwithstanding
the fact that the subsequent mortgage loans meet the
parameters stated in this prospectus supplement;
o the principal balance of any subsequent mortgage loan may not
exceed $_____________ for pool I and $_____________ for pool
II;
o no more than _____% for pool I and ____% for pool II of the
aggregate principal balance of the subsequent mortgage loans
may be second liens;
o no such subsequent mortgage loan shall have a CLTV of more
than (a) for consumer purpose loans, ___% for pool I and ____%
for pool II, and (b) for business purpose loans, ___% for pool
I and ___% for pool II;
o no more than ____% for pool I and ___% for pool II of the
subsequent mortgage loans may be balloon loans;
o no more than ____% for pool I and ____% for pool II of the
subsequent mortgage loans may be secured by mixed-use
properties, commercial properties, or five or more unit
multifamily properties; and
o following the purchase of the subsequent mortgage loans by the
trust, the mortgage loans, including the subsequent mortgage
loans, (a) will have a weighted average mortgage interest
rate, (I) for consumer purpose loans, of at least ____% for
pool I and ____% for pool II and (II) for business purpose
loans, of at least ____% for pool I and ____% for pool II; and
(b) will have a weighted average CLTV of not more than (I) for
consumer purpose loans, ____% for pool I and ____% for pool
II, and (II) for business purpose loans, ____% for pool I and
____% for pool II.
The Indenture will provide that any of these requirements may be waived
or modified in any respect upon prior written consent of the note insurer, with
the exception of the requirements concerning maximum principal balance.
S-18
<PAGE>
THE ORIGINATORS, THE DEPOSITOR AND THE SERVICER
[Corporate description]
[To be supplied by originators, depositor and servicer]
Underwriting Guidelines
[To be supplied by originators]
The Servicer
[To be supplied by servicer]
Delinquency and Loan Loss Experience
The following tables present information relating to the delinquency
and loan loss experience on the mortgage loans included in originators servicing
portfolio for the periods shown. The delinquency and loan loss experience
represents the historical experience of the originators, and there can be no
assurance that the future experience on the mortgage loans in the trust will be
the same as, or more favorable than, that of the mortgage loans in the
originators' overall servicing portfolio.
Delinquency and Foreclosure Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
At At At
------------------ ------------------- -------------------
% of % of % of
Amount Amount Amount Amount Amount Amount
Serviced Serviced Serviced Serviced Serviced Serviced
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Servicing portfolio..............
Past due loans(1):
60-89 days...................
90 days or more .............
-------- -------- -------- -------- -------- --------
Total past due loans(2)..........
REO Properties(3)................
-------- -------- -------- -------- -------- --------
Total past due loans,
foreclosures pending and REO
Properties(3)....................
</TABLE>
(1) The past due period is based on the actual number of days that a
payment is contractually past due. A loan as to which a monthly payment
was due 60-89 days prior to the reporting period is considered 60-89
days past due, etc.
(2) Includes pending foreclosures.
(3) An "REO property" is a property acquired and held as a result of
foreclosure or deed in lieu of foreclosure.
S-19
<PAGE>
Loan Charge-Off Experience
(Dollars in Thousands)
At At At
--------- -------- -------
Servicing portfolio at period end......
Average outstanding(1).................
Gross losses(2)......................
Loan recoveries......................
Net loan charge-offs.................
Net loan charge-offs as a percentage
of servicing portfolio at period end.
Net loan charge-offs as a percentage
of average outstanding...............
(1) "Average outstanding" presented is the arithmetic average of the principal
balances of the loans in the originators' servicing portfolio outstanding
at the opening and closing of business for this period.
(2) "Gross losses" means the outstanding principal balance plus accrued but
unpaid interest on liquidated mortgage loans.
While the above delinquency and foreclosure and loan charge-off
experiences are typical of the originators' experiences at the dates for the
periods indicated, there can be no assurance that the delinquency and
foreclosure and loan charge-off experiences on the mortgage loans will be
similar. Accordingly, the information should not be considered to reflect the
credit quality of the mortgage loans included in the trust, or as a basis of
assessing the likelihood, amount or severity of losses on the mortgage loans.
The statistical data in the tables is based on all of the mortgage loans in the
originators' servicing portfolio. The mortgage loans, in general, may have
characteristics which distinguish them from the majority of the loans in the
originators' servicing portfolio.
THE OWNER TRUSTEE
________________________, a national banking association, has its
corporate trust offices located at ________________________. The owner trustee
will perform limited administrative functions on behalf of the trust pursuant to
the Trust Agreement. The owner trustee's duties in connection with the issuance
and sale of the notes are limited solely to its express obligations under the
Trust Agreement.
THE INDENTURE TRUSTEE
________________________, a ____________ banking corporation, has an
office at ________________________. The indenture trustee will act as initial
authenticating agent, paying agent and note registrar pursuant to the terms of
the Indenture.
THE COLLATERAL AGENT
________________________, a national banking association, has its
corporate trust office at ________________________. The collateral agent's
duties are limited solely to its express obligations under the Sale and
Servicing Agreement.
S-20
<PAGE>
DESCRIPTION OF THE NOTES AND THE TRUST CERTIFICATES
On the closing date, the trust will issue the class A-1 notes and the
class A-2 notes pursuant to the Indenture. Each class A-1 note represents a debt
obligation of the trust secured by a pledge of the portion of the trust estate
consisting of the pool I mortgage loans and, to the extent provided in this
prospectus supplement, the pool II mortgage loans. Each class A-2 note
represents a debt obligation of the trust secured by a pledge of the portion of
the trust estate consisting of the pool II mortgage loans and, to the extent
provided in this prospectus supplement, the pool I mortgage loans. Pursuant to
the Trust Agreement, the trust will also issue two classes of trust
certificates, together representing the entire beneficial ownership interest in
the trust. Each class of trust certificate will represent the entire beneficial
ownership interest in one pool of mortgage loans. There will be two trust
certificates relating to each pool, which will be held by the depositor and
ABFS. None of the trust certificates may be transferred without the consent of
the note insurer and compliance with the transfer provisions of the Trust
Agreement.
The trust estate consists of
o the mortgage loans, together with the mortgage files relating
thereto and all collections thereon and proceeds thereof
collected after the Cut-Off Date,
o the assets as from time to time are identified as REO property
and collections thereon and proceeds thereof,
o assets that are deposited in the accounts relating to the
trust, including amounts on deposit in the Accounts and
invested in accordance with the Indenture and the Sale and
Servicing Agreement,
o the indenture trustee's rights with respect to the mortgage
loans under all insurance policies required to be maintained
pursuant to the Sale and Servicing Agreement and any insurance
proceeds,
o Liquidation Proceeds and
o released mortgaged property proceeds. In addition, the
depositor will cause the note insurer to issue the note
insurance policy under which it will guarantee payments to the
holders of the notes as described in this prospectus
supplement.
The notes will be issued only in book-entry form, in denominations of
$1,000 initial principal balance and integral multiples of $1,000 in excess
thereof, except that one note of each class may be issued in a different amount.
Book-Entry Registration
The notes are sometimes referred to in this prospectus supplement as
"book-entry notes." No person acquiring an interest in the book-entry notes will
be entitled to receive a definitive note representing an obligation of the
trust, except under the limited circumstances described in this prospectus
supplement. beneficial owners may elect to hold their interests through DTC, in
the United States, or Cedelbank or the Euroclear System, in Europe. Transfers
within DTC, Cedelbank or Euroclear, as the case may be, will be in accordance
with the usual rules and operating procedures of the relevant system. So long as
the notes are book-entry notes, these notes will be evidenced by one or more
notes registered in the name of Cede & Co., which will be the "holder" of these
notes, as the nominee of DTC or one of the relevant depositaries. Cross-market
transfers between persons holding directly or indirectly through DTC, on the one
hand, and counterparties holding directly or indirectly through Cedelbank or
Euroclear, on the other, will be effected in DTC through The Chase Manhattan
Bank, the relevant depositories of
S-21
<PAGE>
Cedelbank or Euroclear, respectively, and each a participating member of DTC.
The notes will initially be registered in the name of Cede & Co.. The interests
of the holders of these notes will be represented by book-entries on the records
of DTC and participating members thereof. All references in this prospectus
supplement to any notes reflect the rights of beneficial owners only as these
rights may be exercised through DTC and its participating organizations for so
long as these notes are held by DTC.
The beneficial owners of notes may elect to hold their notes through
DTC in the United States, or Cedelbank or Euroclear if they are participants in
these systems, or indirectly through organizations which are participants in
these systems. The book-entry notes will be issued in one or more notes per
class of notes which in the aggregate equal the outstanding principal balance of
the related class of notes and will initially be registered in the name of Cede
& Co., the nominee of DTC. Cedelbank and Euroclear will hold omnibus positions
on behalf of their participants through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective depositaries
which in turn will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Chase will act as depositary for
Cedelbank and Morgan Guaranty Trust Company of New York will act as depositary
for Euroclear. Investors may hold their beneficial interests in the book-entry
notes in minimum denominations representing principal amounts of $1,000. Except
as described below, no beneficial owner will be entitled to receive a physical
or definitive note representing this note. Unless and until definitive notes are
issued, it is anticipated that the only "holder" of these notes will be Cede &
Co., as nominee of DTC. beneficial owners will not be "holders" or "noteholders"
as those terms are used in the Indenture and the Sale and Servicing Agreement.
Beneficial owners are only permitted to exercise their rights indirectly through
participants and DTC.
The beneficial owner's ownership of a book-entry note will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains the beneficial owner's account for such
purpose. In turn, the financial intermediary's ownership of the book-entry note
will be recorded on the records of DTC or on the records of a participating firm
that acts as agent for the financial intermediary, whose interest will in turn
be recorded on the records of DTC, if the beneficial owner's financial
intermediary is not a DTC participant and on the records of Cedelbank or
Euroclear, as appropriate.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of notes. participants
include securities brokers and dealers, including the underwriter, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly through "indirect participants".
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers of book-entry
notes, such as the notes, among participants on whose behalf it acts for the
book-entry notes and to receive and transmit distributions of principal of and
interest on the book-entry notes. Participants and indirect participants with
which beneficial owners have accounts with respect to the book-entry notes
similarly are required to make book-entry transfers and receive and transmit
these payments on behalf of their respective beneficial owners.
Beneficial owners that are not participants or indirect participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, book-entry notes may do so only through participants and indirect
participants. In addition, beneficial owners will receive all distributions of
S-22
<PAGE>
principal and interest from the indenture trustee, or a paying agent on behalf
of the indenture trustee, through DTC participants. DTC will forward these
distributions to its participants, which thereafter will forward them to
indirect participants or beneficial owners. beneficial owners will not be
recognized by the indenture trustee, the servicer or any paying agent as holders
of the notes, and beneficial owners will be permitted to exercise the rights of
the holders of the notes only indirectly through DTC and its participants.
Because of time zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. These credits or any transactions in the
securities settled during this processing will be reported to the relevant
Euroclear or Cedelbank participants on that business day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank participant or Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC. For information concerning tax documentation
procedures relating to the notes, see "Certain Federal Income Tax Consequences
- -- REMIC Securities" in the accompanying prospectus.
Transfers between participants will occur in accordance with DTC rules.
Transfers between Cedelbank participants and Euroclear participants will occur
in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
participants or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the relevant depositary; however, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in this system in accordance
with its rules and procedures and within its established deadlines. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to the relevant depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same day funds settlement applicable to DTC. Cedelbank
participants and Euroclear participants may not deliver instructions directly to
the European Depositaries.
Cedelbank is incorporated under the laws of Luxembourg as a
professional depository. Cedelbank holds securities for its participant
organizations and facilitates the clearance and settlement of securities
transactions between Cedelbank participants through electronic book-entry
changes in accounts of Cedelbank participants, thereby eliminating the need for
physical movement of notes. Transactions may be settled in Cedelbank in any of
28 currencies, including United States dollars. Cedelbank provides to its
Cedelbank participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedelbank interfaces with domestic markets
in several countries. As a professional depository, Cedelbank is subject to
regulation by the Luxembourg Monetary Institute. Cedelbank participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to Cedelbank is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedelbank participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of notes and any risk from lack of
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simultaneous transfers of securities and cash. Transactions may now be settled
in any of 31 currencies, including United States dollars. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear Operator,
and all Euroclear Securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not Euroclear Clearance. Euroclear
Clearance establishes policy for Euroclear on behalf of Euroclear participants.
Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the Operating Procedures of the Euroclear System and applicable Belgian law. The
Terms and Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments on
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific notes to specific securities clearance
accounts. The Euroclear operator acts under the Terms and Conditions only on
behalf of Euroclear participants, and has no record of or relationship with
persons holding through Euroclear participants.
Distributions on the book-entry notes will be made on each distribution
date by the indenture trustee to Cede & Co., as nominee of DTC. DTC will be
responsible for crediting the amount of these payments to the accounts of the
applicable DTC participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing this payment to the beneficial
owners of the book-entry notes that it represents and to each financial
intermediary for which it acts as agent. Each financial intermediary will be
responsible for disbursing funds to the beneficial owners of the book-entry
notes that it represents.
Under a book-entry format, beneficial owners of the book-entry notes
may experience some delay in their receipt of payments, since these payments
will be forwarded by the indenture trustee to Cede & Co., as nominee of DTC.
Distributions on notes held through Cedelbank or Euroclear will be credited to
the cash accounts of Cedelbank participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by the relevant depositary. These distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Because DTC can only act on behalf of financial intermediaries, the ability of a
beneficial owner to pledge book-entry notes to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of the
book-entry notes, may be limited due to the lack of physical notes for the
book-entry notes. In addition, issuance of the book-entry notes in book-entry
form may reduce the liquidity of the notes in the secondary market since some
potential investors may be unwilling to purchase notes for which they cannot
obtain physical notes.
Monthly and annual reports on the trust provided by the indenture
trustee to Cede & Co., as nominee of DTC, may be made available to beneficial
owners upon request, in accordance with the rules,
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regulations and procedures creating and affecting DTC, and to the financial
intermediaries to whose DTC accounts the book-entry notes of the beneficial
owners are credited.
DTC has advised the depositor and the servicer that it will take any
action permitted to be taken by a holder of the notes under the Indenture only
at the direction of one or more participants to whose accounts with DTC the
book-entry notes are credited. Additionally, DTC has advised the depositor that
it will take these actions concerning specified percentages of voting rights
only at the direction of and on behalf of participants whose holdings of
book-entry notes evidence the specified percentages of voting rights. DTC may
take conflicting actions with respect to percentages of voting rights to the
extent that participants whose holdings of book-entry notes evidence the
percentages of voting rights authorize divergent action.
None of the trust, the owner trustee, the depositor, the servicer, the
note insurer or the indenture trustee will have any responsibility for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the book-entry notes held by Cede & Co., as nominee for
DTC, or for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Cedelbank and Euroclear, they are under no obligation to perform or continue to
perform these procedures and these procedures may be discontinued at any time.
Definitive Notes
The notes, which will be issued initially as book-entry notes, will be
converted to definitive notes and reissued to beneficial owners or their
nominees, rather than to DTC or its nominee, only if (a) DTC or the servicer
advises the indenture trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as depository of the book-entry notes
and DTC or the servicer is unable to locate a qualified successor or (b) the
indenture trustee, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC will be required to notify all participants of the availability
through DTC of definitive notes. Upon delivery of definitive notes, the
indenture trustee will reissue the book-entry notes as definitive notes to
beneficial owners. Distributions of principal of, and interest on, the
book-entry notes will thereafter be made by the indenture trustee, or a paying
agent on behalf of the indenture trustee, directly to holders of definitive
notes in accordance with the procedures set forth in the Indenture.
Definitive notes will be transferable and exchangeable at the offices
of the indenture trustee or the note registrar. No service charge will be
imposed for any registration of transfer or exchange, but the indenture trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
Assignment and Pledge of Initial Mortgage Loans
Pursuant to the Loan Sale Agreement, the originators will sell,
transfer, assign, set over and otherwise convey the mortgage loans, without
recourse, to the depositor on the closing date. Pursuant to the Sale and
Servicing Agreement, the depositor will sell, transfer, assign, set over and
otherwise convey without recourse to the trust, all right, title and interest in
and to each mortgage loan, including all principal outstanding as of, and
interest due after, the Cut-Off Date. Each transfer will convey all right, title
and interest in and to (a) principal outstanding as of the Cut-Off Date, and (b)
interest due on each mortgage loan after the Cut-Off Date; provided, however,
that the originators will not convey, and the
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originators reserve and retain all their respective right, title and interest in
and to, (i) principal, including principal prepayments in full and curtailments
(i.e., partial prepayments), received on each mortgage loan on or prior to the
Cut-Off Date and (ii) interest due on each mortgage loan on or prior to the
Cut-Off Date.
Pursuant to the Indenture, the trust will pledge to the indenture
trustee in trust for the benefit of the holders of the notes and the note
insurer, all right, title and interest in and to each mortgage loan, including
all principal outstanding as of, and interest due after, the Cut-Off Date, as
collateral security for the notes.
Assignment and Pledge of Subsequent Mortgage Loans
The trust may acquire subsequent mortgage loans with the funds on
deposit in either pre-funding account at any time during the period from the
closing date until the earliest of (i) the date on which the amount on deposit
in pre-funding account is less than $100,000, (ii) the date on which an event of
default occurs under the terms of the Indenture, or (iii) the close of business
on ____________. The amount on deposit in the pre-funding accounts will be
reduced during the this period by the amount thereof used to purchase subsequent
mortgage loans in accordance with the terms of the Indenture. The depositor
expects that the amount on deposit in each of the pre-funding accounts will be
reduced to less than $100,000 by ____________. To the extent funds in the
pre-funding accounts are not used to purchase subsequent mortgage loans by
____________, these funds will be used to prepay the principal of the related
class of notes on the following distribution date. Subsequent mortgage loans
will be transferred by the originators to the depositor and transferred by the
depositor to the trust. The trust will then pledge the subsequent mortgage loans
to the indenture trustee, on behalf of the holders of the notes and the note
insurer.
Delivery of Mortgage Loan Documents
In connection with the sale, transfer, assignment or pledge of the
mortgage loans to the trust, the trust will cause to be delivered to the
collateral agent, on behalf of the indenture trustee, on the closing date, the
following documents concerning each mortgage loan which constitute the mortgage
file:
(a) the original mortgage note, endorsed without recourse in blank
by the originator, including all intervening endorsements
showing a complete chain of endorsement;
(b) the original mortgage with evidence of recording indicated
thereon or, in limited circumstances, a copy thereof certified
by the applicable recording office;
(c) the recorded mortgage assignment(s), or copies thereof
certified by the applicable recording office, if any, showing
a complete chain of assignment from the originator of the
mortgage loan to the originator -- which assignment may, at
the originator's option, be combined with the assignment
referred to in clause (d) below;
(d) a mortgage assignment in recordable form, which, if acceptable
for recording in the relevant jurisdiction, may be included in
a blanket assignment or assignments, of each mortgage from the
originator to the indenture trustee;
(e) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of
a mortgage or mortgage note have been modified or the mortgage
or mortgage note has been assumed; and
(f) an original title insurance policy or (A) a copy of the title
insurance policy, or (B) a binder thereof or copy of the
binder together with a certificate from the originator that
the
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original mortgage has been delivered to the title insurance
company that issued the binder for recordation.
Pursuant to the Sale and Servicing Agreement, the collateral agent, on
behalf of the indenture trustee, agrees to execute and deliver on or prior to
the closing date, or, for subsequent mortgage loans, on or prior to the
subsequent transfer date, an acknowledgment of receipt of the original mortgage
note, item (a) above, for each of the mortgage loans, with any exceptions noted.
The collateral agent, on behalf of the indenture trustee, agrees, for the
benefit of the holders of the notes and the note insurer, to review, or cause to
be reviewed, each mortgage file within thirty (30) days after the closing date
or the subsequent transfer date, as applicable -- or, for any Qualified
Substitute Mortgage Loan, within thirty (30) days after the receipt by the
collateral agent thereof -and to deliver a certification generally to the effect
that, as to each mortgage loan listed in the schedule of mortgage loans, (a) all
documents required to be delivered to it pursuant to the Sale and Servicing
Agreement are in its possession, (b) each of these documents has been reviewed
by it and has not been mutilated, damaged, torn or otherwise physically altered,
appears regular on its face and relates to the mortgage loan, and (c) based on
its examination and only as to the foregoing documents, specified information
included on the schedule of mortgage loans accurately reflects the information
included in the mortgage file delivered on that date.
If the collateral agent, during the process of reviewing the mortgage
files, finds any document constituting a part of an mortgage file which is not
executed, has not been received or is unrelated to the mortgage loans, or that
any mortgage loan does not conform to the requirements above or to the
description thereof as included in the schedule of mortgage loans, the
collateral agent shall promptly so notify the indenture trustee, the servicer,
the depositor and the note insurer in writing with details thereof. The
depositor agrees to use reasonable efforts to cause to be remedied a material
defect in a document constituting part of an mortgage file of which it is so
notified by the collateral agent. If, however, within sixty (60) days after the
collateral agent's notice of the defect, the depositor has not caused the defect
to be remedied and the defect materially and adversely affects the interest of
the holders of the notes or the interests of the note insurer in the mortgage
loan, the depositor or the originator will either (a) substitute in lieu of the
mortgage loan a Qualified Substitute Mortgage Loan and, if the then outstanding
principal balance of the Qualified Substitute Mortgage Loan is less than the
principal balance of the mortgage loan as of the date of the substitution plus
accrued and unpaid interest thereon, deliver to the servicer a substitution
adjustment equal to the amount of any such shortfall or (b) purchase the
mortgage loan at a price equal to the outstanding principal balance of the
mortgage loan as of the date of purchase, plus the greater of (i) all accrued
and unpaid interest thereon and (ii) thirty (30) days' interest thereon,
computed at the mortgage interest rate, net of the servicing fee if the servicer
is effecting the repurchase, plus the amount of any unreimbursed servicing
advances made by the servicer, which purchase price shall be deposited in the
Distribution Account on the next succeeding servicer remittance date after
deducting therefrom any amounts received in respect of the repurchased mortgage
loan or Loans and being held in the Distribution Account for future distribution
to the extent these amounts have not yet been applied to principal or interest
on the mortgage loan. In addition, the depositor and the originators shall be
obligated to indemnify the indenture trustee, the collateral agent, the holders
of the notes and the note insurer for any third-party claims arising out of a
breach by the depositor or the originators of representations or warranties
regarding the mortgage loans. The obligation of the depositor and the
originators to cure a breach or to substitute or purchase any mortgage loan and
to indemnify constitute the sole remedies respecting a material breach of any
representation or warranty to the holders of the notes, the indenture trustee,
the collateral agent and the note insurer.
Representations and Warranties of the Depositor
The depositor will represent, among other things, for each mortgage
loan, as of the closing date or the subsequent transfer date, as applicable, the
following:
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1. the information included in the schedule of mortgage loans for each
mortgage loan is true and correct;
2. all of the original or certified documentation constituting the
mortgage files, including all material documents related thereto, has been or
will be delivered to the collateral agent, on behalf of the indenture trustee,
on the closing date or the subsequent transfer date, as applicable;
3. the mortgaged property consists of a single parcel of real property
separately assessed for tax purposes, upon which is erected a detached or an
attached one-family residence or a detached two- to six-family dwelling, or an
individual condominium unit in a low-rise condominium, or a mobile home unit, or
an individual unit in a planned unit development, or a commercial property, or a
mixed use or multiple purpose property. The residence, dwelling or unit is not,
o a unit in a cooperative apartment,
o a property constituting part of a syndication,
o a time share unit,
o a property held in trust,
o a manufactured dwelling,
o a log-constructed home, or
o a recreational vehicle;
4. each mortgage is a valid first or second lien on a fee simple, or
its equivalent under applicable state law, estate in the real property securing
the amount owed by the mortgagor under the mortgage note subject only to,
o the lien of current real property taxes and assessments which
are not delinquent,
o any first mortgage loan on the property,
o covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of
recording of the mortgage, the exceptions appearing of record
being acceptable to mortgage lending institutions generally in
the area wherein the property subject to the mortgage is
located or specifically reflected in the appraisal obtained in
connection with the origination of the mortgage loan obtained
by the depositor, and
o other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the
security intended to be provided by the mortgage;
5. immediately prior to the transfer and assignment by the depositor to
the depositor, the depositor had good title to, and was the sole owner of each
mortgage loan, free of any interest of any other person, and the depositor has
transferred all right, title and interest in each mortgage loan to the
depositor;
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6. each mortgage loan conforms, and all the mortgage loans in the
aggregate conform, to the description thereof in this prospectus supplement; and
7. all of the mortgage loans were originated in accordance with the
underwriting criteria described in this prospectus supplement.
Pursuant to the Sale and Servicing Agreement, upon the discovery by any
of the holder of the notes, the depositor, the servicer, any subservicer, the
note insurer, the collateral agent or the indenture trustee that any of the
representations and warranties contained in the Sale and Servicing Agreement
have been breached in any material respect as of the closing date or the
subsequent transfer date, as applicable, with the result that the interests of
the holders of the notes in the mortgage loan or the interests of the note
insurer were materially and adversely affected, notwithstanding that any
representation and warranty was made to the depositor's or the originator's best
knowledge and the depositor or the originator lacked knowledge of the breach,
the party discovering the breach is required to give prompt written notice to
the other parties. Subject to specified provisions of the Sale and Servicing
Agreement, within sixty (60) days of the earlier to occur of the depositor's or
an originator's discovery or its receipt of notice of any breach, the depositor
or the originators will (a) promptly cure the breach in all material respects,
(b) remove each mortgage loan which has given rise to the requirement for action
by the depositor or the originators, substitute one or more Qualified Substitute
Mortgage Loans and, if the outstanding principal balance of the Qualified
Substitute Mortgage Loans as of the date of the substitution is less than the
outstanding principal balance, plus accrued and unpaid interest thereon, of the
replaced mortgage loans as of the date of substitution, deliver to the trust as
part of the amounts remitted by the servicer on the distribution date the amount
of the shortfall, or (c) purchase the mortgage loan at a price equal to the
principal balance of the mortgage loan as of the date of purchase plus the
greater of (i) all accrued and unpaid interest thereon and (ii) thirty (30)
days' interest thereon computed at the mortgage interest rate, net of the
servicing fee if ____________ is the servicer, plus the amount of any
unreimbursed servicing advances made by the servicer, and deposit the purchase
price into the Distribution Account on the next succeeding servicer remittance
date after deducting therefrom any amounts received in respect of this
repurchased mortgage loan or mortgage loans and being held in the Distribution
Account for future distribution to the extent these amounts have not yet been
applied to principal or interest on the mortgage loan. In addition, the
depositor and the originators shall be obligated to indemnify the trust, the
owner trustee, the indenture trustee, the collateral agent, the holders of the
notes and the note insurer for any third-party claims arising out of a breach by
the depositor or the originators of representations or warranties regarding the
mortgage loans. The obligation of the depositor and the originators to cure any
breach or to substitute or purchase any mortgage loan and to indemnify
constitute the sole remedies respecting a material breach of any representation
or warranty to the holders of the notes, the indenture trustee, the collateral
agent and the note insurer.
Payments on the Mortgage Loans
The Sale and Servicing Agreement provides that the servicer, for the
benefit of the holders of the notes, shall establish and maintain the Collection
Account, which will generally be (i) an account maintained with a depository
institution or trust company whose long term unsecured debt obligations are
rated by each rating agency in one of its two highest rating categories at the
time of any deposit therein or (ii) trust accounts maintained with a depository
institution acceptable to each rating agency and the note insurer. The Sale and
Servicing Agreement permits the servicer to direct any depository institution
maintaining the Collection Account to invest the funds in the Collection Account
in one or more eligible investments that mature, unless payable on demand, no
later than the business day preceding the date on which the servicer is required
to transfer the servicer remittance amount from the Collection Account to the
Distribution Account, as described below.
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The servicer is obligated to deposit or cause to be deposited in the
Collection Account on a daily basis, amounts representing the following payments
received and collections made by it after the Cut-Off Date, other than in
respect of monthly payments on the mortgage loans due on each mortgage loan up
to and including any due date occurring on or prior to the Cut-Off Date:
o all payments on account of principal, including prepayments of
principal;
o all payments on account of interest on the mortgage loans;
o all Liquidation Proceeds and all Insurance Proceeds to the
extent the proceeds are not to be applied to the restoration
of the mortgaged property or released to the borrower in
accordance with the express requirements of law or in
accordance with prudent and customary servicing practices;
o all Net REO Proceeds;
o all other amounts required to be deposited in the Collection
Account pursuant to the Sale and Servicing Agreement; and
o any amounts required to be deposited in connection with net
losses realized on investments of funds in the Collection
Account.
The indenture trustee will be obligated to set up an account for each
class of notes a distribution account into which the servicer will deposit or
cause to be deposited the servicer remittance amount on the _____ day of each
month.
The servicer remittance amount" for a servicer remittance date is equal
to the sum, without duplication, of (i) all collections of principal and
interest on the mortgage loans, including principal prepayments, Net REO
Proceeds and Liquidation Proceeds, if any, collected by the servicer during the
prior calendar month, (ii) all Periodic Advances made by the servicer with
respect to payments due to be received on the mortgage loans on the due date and
(iii) any other amounts required to be placed in the Collection Account by the
servicer pursuant to the Sale and Servicing Agreement, but excluding the
following:
(a) amounts received on particular mortgage loans, for which the
servicer has previously made an unreimbursed Periodic Advance,
as late payments of interest, or as Net Liquidation Proceeds,
to the extent of the unreimbursed Periodic Advance;
(b) amounts received on a particular mortgage loan for which the
servicer has previously made an unreimbursed servicing
advance, to the extent of the unreimbursed servicing advance;
(c) for the servicer remittance date, the aggregate servicing fee;
(d) all net income from eligible investment that is held in the
Collection Account for the account of the servicer;
(e) all amounts actually recovered from the servicer in respect of
late fees, assumption fees, prepayment fees and similar fees;
(f) Net Foreclosure Profits; and
(g) other amounts which are reimbursable to the servicer, as
provided in the Sale and Servicing Agreement.
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The amounts described in clauses (a) through (g) above may be withdrawn
by the servicer from the Collection Account on or prior to each servicer
remittance date.
Over-collateralization Provisions
Over-collateralization Resulting from Cash Flow Structure. The
Indenture requires that, starting with the second distribution date, the Excess
Interest for a pool of mortgage loans, if any, that is not used to make
cross-collateralization payments will be applied on each distribution date as an
accelerated payment of principal on the related class of notes, but only to the
limited extent hereafter described. The application of Excess Interest as a
payment of principal has the effect of accelerating the amortization of a class
of notes relative to the amortization of the related pool of mortgage loans. The
Excess Interest from a pool of mortgage loans will be used
o to reimburse the note insurer for any amounts due to it,
o as needed to pay Net Mortgage Loan Interest Shortfalls
relating to that class,
o as needed to make cross-collateralization payments in respect
of the other pool of mortgage loans,
o as a payment of principal to the related class of notes until
the distribution date on which the amount of
over-collateralization has reached the required level, and
o as needed to fund the Cross-collateralization Reserve Account
relating to the other pool of mortgage loans.
Notwithstanding the foregoing, in the event specified tests enumerated in the
Indenture are violated, all available Excess Interest will be used as a payment
of principal to the related class of notes to accelerate the amortization of the
notes.
The Indenture requires that, starting with the second distribution
date, Excess Interest from a pool of mortgage loans that is not used to make
cross-collateralization payments will be applied as an accelerated payment of
principal on the related class of notes until the Over-collateralized Amount has
increased to the level required by the Indenture. After this time, if it is
necessary to re-establish the required level of over-collateralization, Excess
Interest from each pool of mortgage loans that is not used to make
cross-collateralization payments will again be applied as an accelerated payment
of principal on the related class of notes. Notwithstanding the foregoing, in
the event specified tests enumerated in the Indenture are violated, all
available Excess Interest from each pool of mortgage loans will be used as a
payment of principal to accelerate the amortization of the related class of
notes. Initially, the Over-collateralized Amount of each pool of mortgage loans
will be an amount equal to approximately 0.50% of the sum of (x) the aggregate
principal balance of the mortgage loans in each pool on the closing date and (y)
the original amount on deposit in the related pre-funding account on the closing
date.
In the event that the required level of the Specified
Over-collateralized Amount for a pool of mortgage loans is permitted to decrease
or "step down" on a distribution date in the future, the Indenture provides that
a portion of the principal which would otherwise be distributed to the holders
of the related class of notes on the distribution date shall instead be
distributed in the priority described in this prospectus supplement under
"--Flow of Funds." This has the effect of decelerating the amortization of the
related class of notes relative to the amortization of that pool of mortgage
loans, and of reducing the Over-collateralized Amount. If, on any distribution
date, the Excess Over-collateralized Amount is, or, after taking into account
all other distributions to be made on the distribution date would be, greater
than zero -- i.e., the Over-collateralized Amount is or would be greater than
the related Specified Over-collateralized Amount -- then any amounts relating to
principal which would otherwise be distributed to the holders of the related
class of notes on this distribution date shall instead be distributed in the
priority
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described in this prospectus supplement under "--Flow of Funds", in an amount
equal to the Over-collateralization Reduction Amount.
The Indenture provides that, on any distribution date, all amounts
collected on account of principal -- other than any such amount applied to the
payment of an Over-collateralization Reduction Amount -- for each pool of
mortgage loans during the a due period of the prior calendar month will be
distributed to the holders of the related class of notes on the distribution
date. In addition, the Sale and Servicing Agreement provides that the principal
balance of any mortgage loan which becomes a Liquidated Mortgage Loan shall then
equal zero. The Sale and Servicing Agreement does not contain any rule which
requires that the amount of any Liquidated Loan Loss be distributed to the
holders of the related class of notes on the distribution date which immediately
follows the event of loss; i.e., the Sale and Servicing Agreement does not
require the current recovery of losses. However, the occurrence of a Liquidated
Loan Loss will reduce the Over-collateralized Amount for that pool of mortgage
loans, which, to the extent that the reduction causes the Over-collateralized
Amount to be less than the Specified Over-collateralized Amount applicable to
the related distribution date, will require the payment of an
Over-collateralization Increase Amount on that distribution date, or, if
insufficient funds are available on that distribution date, on subsequent
distribution dates, until the Over-collateralized Amount equals the related
Specified Over-collateralized Amount. The effect of the foregoing is to allocate
losses to the holders of the related trust certificates by reducing, or
eliminating entirely, payments of Excess Interest and Over-collateralization
Reduction Amounts which the holders would otherwise receive.
Over-collateralization and the Note Insurance Policy. The Indenture
requires the indenture trustee to make a claim for an Insured Payment under the
note insurance policy not later than the third business day prior to any
distribution date as to which the indenture trustee has determined that an
Over-collateralization Deficit will occur for the purpose of applying the
proceeds of the Insured Payment as a payment of principal to the holders of the
related class of notes on that distribution date. The note insurer has the
option on any distribution date to make a payment of principal, including in
respect of Liquidated Loan Losses, up to the amount that would have been payable
to the holders of the notes if sufficient funds were available thereof.
Additionally, under the terms of the Indenture, the note insurer will have the
option to cause Excess Interest to be applied without regard to any limitation
upon the occurrence of particular trigger events, or in the event of an "event
of default" under the Insurance Agreement. However, investors in the notes
should realize that, under extreme loss or delinquency scenarios, they may
temporarily receive no distributions of principal.
Cross-collateralization Provisions
Cross-collateralization Payments. On each distribution date, available
Excess Interest from a pool of mortgage loans, if any, will be paid to the
holders of the class of notes relating to the other pool of mortgage loans to
the extent of the Shortfall Amount for the other pool. The
cross-collateralization provisions of the transaction are limited to the payment
of specified credit losses, certain interest shortfalls and any amounts due the
note insurer. Excess Interest from one pool of mortgage loans will not be used
to build over-collateralization for the other pool of mortgage loans.
Cross-collateralization Reserve Account. Each class of notes will have
the benefit of a Cross-collateralization Reserve Account. On each distribution
date, available Excess Interest from a pool of mortgage loans, if any, will be
paid into the Cross-collateralization Reserve Account relating to the other pool
of mortgage loans, until the amount of funds on deposit therein equals the
Specified Reserve Amount for the other pool. If the amount on deposit in the
Cross-collateralization Reserve Account for a pool of mortgage loans on any
distribution date exceeds the Specified Reserve Amount for the pool and the
distribution date, the amount of this excess shall be distributed in the
priority described in this prospectus supplement under "--Flow of Funds."
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Funds on deposit in a Cross-collateralization Reserve Account will be
used on any distribution date to make payments in respect of the Shortfall
Amount for either pool, to the extent that there is no Excess Interest available
therefor on that distribution date.
Flow of Funds
On each distribution date, the indenture trustee, based solely on the
information received from the servicer in the servicer remittance report prior
to the distribution date, shall make payments in respect of each pool of
mortgage loans to the holders of the related class of notes and reimbursement to
the note insurer under the Insurance Agreement, to the extent of funds,
including any Insured Payments, on deposit in the related Distribution Account,
as follows:
(a) to the indenture trustee, an amount equal to the fees then due
to it for the related class of notes;
(b) from amounts then on deposit in the related Distribution
Account, excluding any Insured Payments, to the note insurer
the Reimbursement Amount as of that distribution date;
(c) from amounts then on deposit in the related Distribution
Account, the Interest Distribution Amount for the related
class of notes;
(d) from amounts then on deposit in the related Distribution
Account, the Principal Distribution Amount for the related
class of notes, until the principal balance of the class of
notes is reduced to zero;
(e) from amounts then on deposit in the related Distribution
Account the amount of any Net Mortgage Loan Interest
Shortfalls for the related class of notes;
(f) from amounts then on deposit in the related Distribution
Account, to the holders of the other class of notes, the
Shortfall Amount for the other class;
(g) from amounts then on deposit in the related Distribution
Account, to the Cross-collateralization Reserve Account
relating to the other class of notes, the amount necessary for
the balance of the account to equal the Specified Reserve
Amount; and
(h) following the making by the indenture trustee of all
allocations, transfers and disbursements described above, to
the holders of the related trust certificates, the amount
remaining on the distribution date in the related Distribution
Account, if any.
Events of Default
Upon the occurrence of an event of default, the indenture trustee, upon
the direction of the majority holders -- which shall be the note insurer in the
absence of a default by the note insurer under the Insurance Agreement -- shall
declare or, with respect to an event of default described in clauses (1) through
(7) below, the occurrence shall result in the automatic declaration of, the
aggregate outstanding principal balance of all the notes to be due and payable
together with all accrued and unpaid interest thereon without presentment,
demand, protest or other notice of any kind, all of which are waived by the
trust. An event of default, wherever used in this prospectus supplement, means
any one of the following events:
1. the trust shall fail to distribute or cause to be
distributed to the indenture trustee, for the benefit of the holders of
the notes, on any distribution date, all or part of any Interest
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Distribution Amount due on the notes on the distribution date and all
or a part of any Net Mortgage Loan Interest Shortfalls due on the notes
on the distribution date;
2. the trust shall fail to distribute or cause to be
distributed to the indenture trustee, for the benefit of the holders of
the notes, (x) on any distribution date an amount equal to the
principal due on the outstanding notes on the distribution date, to the
extent that sufficient funds are on deposit in the Collection Account
or (y) on the final stated maturity date for any class of notes, the
aggregate outstanding principal balance of the related class of notes.
3. the trust shall breach or default in the due observance of
any one or more of the negative covenants under the Indenture.
4. the trust shall consent to the appointment of a custodian,
receiver, trustee or liquidator, or other similar official, of itself,
or of a substantial part of its property, or shall admit in writing its
inability to pay its debts generally as they come due, or a court of
competent jurisdiction shall determine that the trust is generally not
paying its debts as they come due, or the trust shall make a general
assignment for the benefit of creditors;
5. the trust shall file a voluntary petition in bankruptcy or
a voluntary petition or an answer seeking reorganization in a
proceeding under any bankruptcy laws, as now or hereafter in effect, or
an answer admitting the material allegation of a petition filed against
the trust in any such proceeding, or the trust shall, by voluntary
petition, answer or consent, seek relief under the provisions of any
now existing or future bankruptcy or other similar law providing for
the reorganization or winding-up of debtors, or providing for an
agreement, composition, extension or adjustment with its creditors;
6. an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without
the consent, express or legally implied, of the trust, a custodian,
receiver, trustee or liquidator, or other similar official, of the
trust or any substantial part of its property, or sequestering any
substantial part of its respective property, and any such order,
judgment or decree or appointment or sequestration shall remain in
force undismissed, unstayed or unvacated for a period of ninety (90)
days after the date of entry thereof; or
7. a petition against the trust in a proceeding under
applicable bankruptcy laws or other insolvency laws, as now or
hereafter in effect, shall be filed and shall not be stayed, withdrawn
or dismissed within ninety (90) days thereafter, or if, under the
provisions of any law providing for reorganization or winding-up of
debtors which may apply to the trust, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the trust
or any substantial part of its property, and such jurisdiction, custody
or control shall remain in force unrelinquished, unstayed or
unterminated for a period of ninety (90) days.
Reports to Noteholders
Pursuant to the Indenture, on each distribution date the indenture
trustee will deliver to the servicer, the note insurer, the depositor and each
holder of a note or a trust certificate a written remittance report containing
information including, without limitation, the amount of the distribution on the
distribution date, the amount of the distribution allocable to principal and
allocable to interest, the aggregate outstanding principal balance of the notes
as of the distribution date, the amount of any Insured Payment included in the
distributions on the distribution date and any other information as required by
the Indenture.
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Amendment
The Indenture may be amended from time to time by the trust and the
indenture trustee by written agreement, upon the prior written consent of the
note insurer, without notice to, or consent of, the holder of the notes, to cure
any ambiguity, to correct or supplement any provisions in this prospectus
supplement, to comply with any changes in the Code, or to make any other
provisions concerning matters or questions arising under the Indenture which
shall not be inconsistent with the provisions of the Indenture; provided, that
this action shall not, as evidenced by an opinion of counsel delivered to, but
not obtained at the expense of, the indenture trustee, adversely affect in any
material respect the interests of any holder of the notes; 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 note without the consent of the holder of the note, or change
the rights or obligations of any other party to the Indenture without the
consent of that party.
The Indenture may be amended from time to time by the trust and the
indenture trustee with the consent of the note insurer, and the holders of the
majority of the percentage interest of the notes and trust certificates for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of modifying in any manner the rights of
the holders; provided, however, 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 note without the consent of
the holder of the note or reduce the percentage for each class whose holders are
required to consent to any such amendment without the consent of the holders of
100% of each class of notes affected thereby.
The Loan Sale Agreement and the Sale and Servicing Agreement contain
substantially similar restrictions regarding amendment.
SERVICING OF THE MORTGAGE LOANS
The Servicer
____________ will act as the servicer of the mortgage loan pools.
____________ and ____________ will act as subservicers for a portion of the
mortgage loans. See "The Originators, the Depositor, the Servicer and the
Subservicer" in this prospectus supplement. The servicer and the subservicers
will be required to use the same care as they customarily employ in servicing
and administering mortgage loans for their own account, in accordance with
accepted mortgage servicing practices of prudent lending institutions, and
giving due consideration to the reliance of the note insurer and the holders of
the notes on them.
Servicing Fees and Other Compensation and Payment of Expenses
As compensation for its activities as servicer under the Sale and
Servicing Agreement, the servicer shall be entitled to a servicing fee for each
mortgage loan, which shall be payable monthly from amounts on deposit in the
Collection Account. The servicing fee shall be an amount equal to interest at
one-twelfth of the servicing fee rate for the mortgage loan on the outstanding
principal balance of the mortgage loan. The servicing fee rate for each mortgage
loan will be 0.50% per annum. In addition, the servicer shall be entitled to
receive, as additional servicing compensation, to the extent permitted by
applicable law and the mortgage notes, any late payment charges, assumption
fees, prepayment fees or similar items. The servicer shall also be entitled to
withdraw from the Collection Account any net interest or other income earned on
deposits therein. The servicer shall pay all expenses incurred by it in
connection with its servicing activities under the Sale and Servicing Agreement
and shall not be entitled to reimbursement therefor except as specifically
provided in the Sale and Servicing Agreement.
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Periodic Advances and Servicer Advances
Periodic Advances. Subject to the servicer's determination that the
action would not constitute a nonrecoverable advance, the servicer is required
to make Periodic Advances on each servicer remittance date. This Periodic
Advances by the servicer are reimbursable to the servicer subject to a number of
conditions and restrictions, and are intended to provide both sufficient funds
for the payment of interest to the holders of the notes, plus an additional
amount intended to maintain a specified level of over-collateralization and to
pay the indenture trustee's fees, and the premium due the note insurer.
Notwithstanding the servicer's good faith determination that a Periodic Advance
was recoverable when made, if the Periodic Advance becomes a nonrecoverable
advance, the servicer will be entitled to reimbursement therefor from the trust
estate. See "Description of the Notes -- Payments on the Mortgage Loans" in this
prospectus supplement.
Servicing Advances. Subject to the servicer's determination that the
action would not constitute a nonrecoverable advance and that a prudent mortgage
lender would make a like advance if it or an affiliate owned the mortgage loan,
the servicer is required to advance amounts on the mortgage loans constituting
"out-of-pocket" costs and expenses relating to
o the preservation and restoration of the mortgaged property,
o enforcement proceedings, including foreclosures,
o expenditures relating to the purchase or maintenance of a
first lien not included in the trust estate on the mortgaged
property, and
o other customary amounts described in the Sale and Servicing
Agreement.
These servicing advances by the servicer are reimbursable to the
servicer subject to a number of conditions and restrictions. In the event that,
notwithstanding the servicer's good faith determination at the time the
servicing advance was made, that it would not be a nonrecoverable advance, the
servicing advance becomes a nonrecoverable advance, the servicer will be
entitled to reimbursement therefor from the trust estate.
Recovery of Advances. The servicer may recover Periodic Advances and
servicing advances to the extent permitted by the Sale and Servicing Agreement
or, if not recovered from the mortgagor on whose behalf the servicing advance or
Periodic Advance was made, from late collections on the mortgage loan, including
Liquidation Proceeds, Insurance Proceeds and any other amounts as may be
collected by the servicer from the mortgagor or otherwise relating to the
mortgage loan. In the event a Periodic Advance or a servicing advance becomes a
nonrecoverable advance, the servicer may be reimbursed for the advance from the
Distribution Account.
The servicer shall not be required to make any Periodic Advance or
servicing advance which it determines would be a nonrecoverable Periodic Advance
or nonrecoverable servicing advance. A Periodic Advance or servicing advance is
"nonrecoverable" if in the good faith judgment of the servicer, the Periodic
Advance or servicing advance would not ultimately be recoverable.
Prepayment Interest Shortfalls
Not later than the close of business on the _____ day of each month,
the servicer is required to remit to the indenture trustee a payment of
Compensating Interest in respect of Prepayment Interest Shortfalls and shall not
have the right to reimbursement therefor. Insured Payments do not cover
Prepayment Interest Shortfalls.
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Civil Relief Act Interest Shortfalls
The reduction, if any, in interest payable on the mortgage loans in the
applicable pool attributable to the application of the Civil Relief Act will not
reduce the amount of Current Interest due to the holders of the class A-1 notes
or class A-2 notes, respectively. However, in the event the full amount of
Current Interest is not available on any distribution date due to Civil Relief
Act interest shortfalls in the applicable pool, the amount of this shortfall
will not be covered by the note insurance policy. These shortfalls in Current
Interest will be paid from the Excess Interest, if any, otherwise payable in
respect of over-collateralization, cross-collateralization or to the holder of
the trust certificate relating to the applicable pool. See "Risk Factors --
Legal Considerations" in this prospectus supplement.
Optional Purchase of Defaulted Mortgage Loans
The depositor, or any affiliate of the depositor, has the option, but
is not obligated, to purchase from the trust any mortgage loan ninety (90) days
or more delinquent at a purchase price equal to the outstanding principal
balance thereof as of the date of purchase, plus all accrued and unpaid interest
on the principal balance, computed at the mortgage interest rate -- net of the
servicing fee, if ________ is the servicer -- plus the amount of any
unreimbursed Periodic Advances and servicing advances made by the servicer for
the mortgage loan in accordance with the provisions specified in the Sale and
Servicing Agreement.
Servicer Reports
On each servicer remittance date, the servicer is required to deliver
to the note insurer, the indenture trustee, and the collateral agent, a servicer
remittance report setting forth the information necessary for the indenture
trustee to make the distributions described under "--Flow of Funds" in this
prospectus supplement and containing the information to be included in the
indenture trustee's remittance report for that distribution date.
The servicer is required to deliver to the note insurer, the indenture
trustee, the collateral agent, S&P and Moody's, not later than April 30th of
each year an officer's certificate stating that (i) the servicer has fully
complied with the servicing provisions of the Sale and Servicing Agreement, (ii)
a review of the activities of the servicer during the preceding calendar year
and of performance under the Sale and Servicing Agreement has been made under
the officer's supervision, and (iii) to the best of the officer's knowledge,
based on that review, the servicer has fulfilled all its obligations under the
Sale and Servicing Agreement for that year, or, if there has been a default in
the fulfillment of any obligation, specifying each default known to that officer
and the nature and status thereof including the steps being taken by the
servicer to remedy the default. The first such officer's certificate shall be
delivered by the servicer in ______.
Not later than April 30th of each year, the servicer, at its expense,
is required to cause to be delivered to the note insurer, the indenture trustee,
the collateral agent, S&P and Moody's from a firm of independent certified
public accountants, who may also render other services to the servicer, a
statement to the effect that the firm has examined certain documents and records
relating to the servicing of the mortgage loans during the preceding calendar
year, or any longer period from the closing date to the end of the following
calendar year, and that, on the basis of the examination conducted substantially
in compliance with generally accepted auditing standards and the requirements of
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for Freddie Mac, the servicing has been conducted in
compliance with the Sale and Servicing Agreement except for any significant
exceptions or errors in records that, in the opinion of the firm, generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for Freddie Mac
require it to report, in which case the exceptions and errors shall be so
reported.
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Collection and Other Servicing Procedures
The servicer will be responsible for making reasonable efforts to
collect all payments called for under the mortgage loans and will, consistent
with the Sale and Servicing Agreement, follow the collection procedures as it
follows for loans held for its own account which are comparable to the mortgage
loans. Consistent with the above, the servicer may, in its discretion, (i) waive
any late payment charge and (ii) arrange with a mortgagor a schedule for the
liquidation of delinquencies, subject to the provisions of the Sale and
Servicing Agreement.
If a mortgaged property has been or is about to be conveyed by the
mortgagor, the servicer will be obligated to accelerate the maturity of the
mortgage loan, unless it reasonably believes it is unable to enforce that
mortgage loan's "due-on-sale" clause under applicable law. If it reasonably
believes it may be restricted for any reason from enforcing any "due-on-sale"
clause, the servicer may enter into an assumption and modification agreement
with the person to whom the property has been or is about to be conveyed,
pursuant to which that person becomes liable under the mortgage note.
Any fee collected by the servicer for entering into an assumption
agreement will be retained by the servicer as additional servicing compensation.
In connection with any assumption, the mortgage interest rate borne by the
mortgage note relating to each mortgage loan may not be decreased. For a
description of circumstances in which the servicer may be unable to enforce
"due-on-sale" clauses, see "Certain Legal Aspects of the Mortgage Loans and
Contracts -- The Mortgage Loans -- 'Due-on-Sale' Clauses" in the accompanying
prospectus.
Hazard Insurance
The servicer is required to cause to be maintained for each mortgaged
property a hazard insurance policy with coverage which contains a standard
mortgagee's clause in an amount equal to the lesser of (a) the maximum insurable
value of the mortgaged property or (b) the principal balance of the mortgage
loan plus the outstanding balance of any mortgage loan senior to the mortgage
loan, but in no event may this amount be less than is necessary to prevent the
borrower from becoming a coinsurer thereunder. As stated above, all amounts
collected by the servicer under any hazard policy, except for amounts to be
applied to the restoration or repair of the mortgaged property or released to
the borrower in accordance with the servicer's normal servicing procedures, to
the extent they constitute Net Liquidation Proceeds or Insurance Proceeds, will
ultimately be deposited in the related Distribution Account. The ability of the
servicer to assure that hazard insurance proceeds are appropriately applied may
be dependent on its being named as an additional insured under any hazard
insurance policy, or upon the extent to which information in this regard is
furnished to the servicer by a borrower. The Sale and Servicing Agreement
provides that the servicer may satisfy its obligation to cause hazard policies
to be maintained by maintaining a blanket policy issued by an insurer acceptable
to the rating agencies insuring against losses on the mortgage loans. If this
blanket policy contains a deductible clause, the servicer is obligated to
deposit in the related Distribution Account the sums which would have been
deposited therein but for that clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the mortgage loans will be
underwritten by different insurers under different state laws in accordance with
different applicable state forms and therefore will not contain identical terms
and conditions, the terms thereof are dictated by respective state laws, and
most of these policies typically do not cover any physical damage resulting from
the following: war, revolution, governmental actions, floods and other
weather-related causes, earth movement, including earthquakes, landslides and
mudflows, nuclear reactions, wet or dry rot, vermin, rodents, insects or
domestic animals,
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theft and, in some cases, vandalism. The foregoing list is merely indicative of
the types of uninsured risks and is not intended to be all-inclusive.
The hazard insurance policies covering the mortgaged properties
typically contain a co-insurance clause which in effect requires the insured at
all times to carry insurance of a specified percentage, generally 80% to 90%, of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, that clause generally provides that the
insurer's liability in the event of partial loss does not exceed the greater of
(i) the replacement cost of the improvements less physical depreciation or (ii)
this proportion of the loss as the amount of insurance carried bears to the
specified percentage of the full replacement cost of these improvements.
Since residential and commercial properties, generally, have
historically appreciated in value over time, if the amount of hazard insurance
maintained on the improvements securing the mortgage loans were to decline as
the principal balances owing thereon decreased, hazard insurance proceeds could
be insufficient to restore fully the damaged property in the event of a partial
loss.
Realization Upon Defaulted Mortgage Loans
The servicer will foreclose upon, or otherwise comparably convert to
ownership, mortgaged properties securing such of the mortgage loans as come into
default when, in the opinion of the servicer, no satisfactory arrangements can
be made for the collection of delinquent payments. In connection with the
foreclosure or other conversion, the servicer will follow the practices as it
deems necessary or advisable and as are in keeping with the servicer's general
loan servicing activities and the Sale and Servicing Agreement; provided, that
the servicer will not expend its own funds in connection with foreclosure or
other conversion, correction of a default on a senior mortgage or restoration of
any property unless the foreclosure, correction or restoration is determined to
increase Net Liquidation Proceeds.
Removal and Resignation of the Servicer
The note insurer may, pursuant to the Sale and Servicing Agreement,
remove the servicer upon the occurrence and continuation beyond the applicable
cure period of an event described in clauses (g), (h) or (i) below and the
indenture trustee, only at the direction of the note insurer or the majority
holders of notes, with the consent of the note insurer, in the case of any
direction of the majority holders, may remove the servicer upon the occurrence
and continuation beyond the applicable cure period of an event described in
clause (a), (b), (c), (d), (e) or (f) below. Each of the following constitutes a
servicer event of default:
(a) any failure by the servicer to remit to the indenture trustee
any payment required to be made by the servicer under the
terms of the Sale and Servicing Agreement, other than
servicing advances covered by clause (b) below, which
continues unremedied for one (1) business day after the date
upon which written notice of any failure, requiring the same
to be remedied, shall have been given to the servicer and the
note insurer by the indenture trustee or to the servicer and
the indenture trustee by the note insurer or the holders of
notes evidencing percentage interests of at least 25%;
(b) the failure by the servicer to make any required servicing
advance which failure continues unremedied for a period of
thirty (30) days after the date on which written notice of any
failure, requiring the same to be remedied, shall have been
given to the servicer by the indenture trustee or to the
servicer and the indenture trustee by any holder of a note or
the note insurer;
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(c) 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 the Sale
and Servicing Agreement, or the failure of any representation
and warranty enumerated in the Sale and Servicing Agreement,
which continues unremedied for a period of thirty (30) days
after the date on which written notice of any failure,
requiring the same to be remedied, shall have been given to
the servicer by the indenture trustee, or to the servicer and
the indenture trustee by any holder of a note or the note
insurer;
(d) 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 this
decree or order shall have remained in force, undischarged or
unstayed for a period of sixty (60) days;
(e) 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;
(f) the servicer shall admit in writing its inability generally to
pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations;
(g) the delinquency or loss experience of the mortgage loans
exceeds levels specified in the Sale and Servicing Agreement;
(h) the note insurer shall notify the indenture trustee of any
"event of default" under the Insurance Agreement; or
(i) the occurrence of an event of default under the Indenture.
The servicer may not assign its obligations under the Sale and
Servicing Agreement nor resign from the obligations and duties thereby imposed
on it except by mutual consent of the servicer, ABC, if ABC is not the servicer,
the note insurer, the collateral agent and the indenture trustee, or upon the
determination that the servicer's duties thereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the servicer without
the incurrence, in the reasonable judgment of the note insurer, of unreasonable
expense. No such resignation shall become effective until a successor has
assumed the servicer's responsibilities and obligations in accordance with the
Sale and Servicing Agreement.
Upon removal or resignation of the servicer, the indenture trustee will
be the successor servicer. The indenture trustee, as successor servicer, will be
obligated to make Periodic Advances and servicing advances and other advances
unless it determines reasonably and in good faith that the advances would not be
recoverable. If, however, the indenture trustee is unwilling or unable to act as
successor servicer, or if the majority holders, with the consent of the note
insurer, or the note insurer so requests, the indenture trustee shall appoint,
or petition a court of competent jurisdiction to appoint, in accordance with the
provisions of the Sale and Servicing Agreement and subject to the approval of
the note insurer, any established mortgage loan servicing institution acceptable
to the note insurer having a net worth of not
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less than $____________ as the successor servicer in the assumption of all or
any part of the responsibilities, duties or liabilities of the servicer.
Pursuant to the Sale and Servicing Agreement, the servicer covenants
and agrees to act as the servicer for an initial term from the closing date to
____________, which term will be extendable by the note insurer by notice to the
indenture trustee for successive terms of three (3) calendar months each, until
the termination of the trust estate. The servicer will, upon its receipt of each
notice of extension, become bound for the duration of the term covered by the
extension notice to continue as the servicer subject to and in accordance with
the other provisions of the Sale and Servicing Agreement. If as of the fifteenth
(15th) day prior to the last day of any term of the servicer the indenture
trustee shall not have received any extension notice from the note insurer, the
indenture trustee will, within five (5) days thereafter, give written notice of
non-receipt to the note insurer and the servicer. The note insurer has agreed to
extend each three (3) month term of the servicer, in the absence of a servicer
event of default under the Sale and Servicing Agreement.
The indenture trustee and any other successor servicer in that capacity
is entitled to the same reimbursement for advances and no more than the same
servicing compensation as the servicer. See "--Servicing and Other Compensation
and Payment of Expenses" in this prospectus supplement.
Optional Clean-up Call on the Notes
The servicer may, at its option, call the class A-1 notes or the class
A-2 notes, separately, on the Note Clean-up Call Date by depositing an amount
equal to the aggregate outstanding principal balance of the class of notes on
that distribution date, plus accrued and unpaid interest thereon, and any unpaid
amounts due the note insurer in respect of the class of notes into the related
Distribution Account. The mortgage loans relating to the redeemed class will
remain pledged to the indenture trustee, for the benefit of the holders of the
notes, to secure the cross-collateralization obligations of the trust with
regard to the other class.
Termination; Purchase of Mortgage Loans
The Indenture will terminate upon notice to the indenture trustee of
either: (a) the later of the distribution to noteholders of the final payment or
collection on the last mortgage loan, or Periodic Advances of same by the
servicer, or the disposition of all funds from the last mortgage loan and the
remittance of all funds due under the Indenture and the payment of all amounts
due and payable to the note insurer, the collateral agent and the indenture
trustee or (b) mutual consent of the servicer, the note insurer and all holders
in writing; provided, however, that in no event will the trust terminate later
than twenty-one (21) years after the death of the last surviving lineal
descendant of the person named in the Trust Agreement.
Subject to provisions in the Indenture concerning adopting a plan of
complete liquidation, the servicer may, at its option and at its sole cost and
expense, terminate the Indenture on any date on which the aggregate principal
balance of the mortgage loans is less than 10% of the sum of (x) the aggregate
original principal balance of the mortgage loans purchased on the closing date
and (y) the original amount on deposit in the pre-funding accounts, by
purchasing, on the next succeeding distribution date, all of the outstanding
mortgage loans and REO Properties at a price equal to the sum of
o 100% of the principal balance of each outstanding
mortgage loan and each REO property,
o the greater of (i) the aggregate amount of accrued
and unpaid interest on the mortgage loans through the
due period and (ii) thirty (30) days'
S-41
<PAGE>
accrued interest thereon computed at a rate equal to
the mortgage interest rate, in each case net of the
servicing fee,
o any unreimbursed amounts due to the note insurer
under the Indenture, the Sale and Servicing
Agreement, the Insurance Agreement and, without
duplication, accrued and unpaid Insured Payments, and
o the indenture trustee's fees.
Any such purchase shall be accomplished by depositing into each Distribution
Account the portion of the purchase price specified above which relates to the
class of notes. No such termination is permitted without the prior written
consent of the note insurer if it would result in a draw on the note insurance
policy.
THE NOTE INSURANCE POLICY
The following summary of the terms of the note insurance policy does
not purport to be complete and is qualified in its entirety by reference to the
note insurance policy. A form of the note insurance policy may be obtained, upon
request, from the depositor.
Simultaneously with the issuance of the notes, the note insurer will
deliver the note insurance policy to the indenture trustee, for the benefit of
the holders of the notes. Under the note insurance policy, the note insurer will
irrevocably and unconditionally guarantee payment on each distribution date to
the indenture trustee, for the benefit of the holders of the notes, of the
Insured Distribution Amounts for the related class of notes calculated in
accordance with the original terms of the notes when issued and without regard
to any amendment or modification of the notes or the Indenture except amendments
or modifications to which the note insurer has given its prior written consent.
In addition, for any distribution date occurring on a date when an event of
default under the Insurance Agreement, as described below, has occurred and is
continuing or a date on or after the first date on which a claim is made under
the note insurance policy, the note insurer at its sole option, may pay any or
all of the outstanding principal balance of the notes. Mortgage Loan Interest
Shortfalls will not be covered by payments under the note insurance policy.
Payment of claims under the note insurance policy will be made by the
note insurer following Receipt by the note insurer of the appropriate notice for
payment on the later to occur of (a) 12:00 noon, New York City time, on the
second business day following Receipt of notice for payment, and (b) 12:00 noon,
New York City time, on the relevant distribution date.
If any payment of an amount guaranteed by the note insurer pursuant to
the note insurance policy is avoided as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law the note insurer will pay
the amount out of the funds of the note insurer on the later of
o the date when due to be paid pursuant to the bankruptcy order
referred to below or
o the first to occur of
o the fourth business day following Receipt by the note
insurer from the indenture trustee of (A) a certified
copy of the order of the court or other governmental
body which exercised jurisdiction to the effect that
a holder is required to return principal or interest
distributed on a note during the term of the note
insurance policy because these distributions were
avoidable preferences under applicable bankruptcy
law, (B) a certificate of the holder(s) that the
bankruptcy order has been entered and
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<PAGE>
is not subject to any stay, and (C) an assignment
duly executed and delivered by the holder(s), in such
form as is reasonably required by the note insurer
and provided to the holder(s) by the note insurer,
irrevocably assigning to the note insurer all rights
and claims of the holder(s) relating to or arising
under the notes against the debtor which made the
preference payment or otherwise concerning the
preference payment, or
o the date of Receipt by the note insurer from the
indenture trustee of the items referred to in clauses
(A), (B) and (C) above if, at least four (4) business
days prior to the date of Receipt, the note insurer
shall have Received written notice from the indenture
trustee that these items were to be delivered on that
date and that date was specified in the notice.
This payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the bankruptcy order and
not to the indenture trustee or any holder directly -unless a holder has
previously paid the amount to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the bankruptcy order, in which case the payment
shall be disbursed to the indenture trustee for distribution to the holder upon
proof of the payment reasonably satisfactory to the note insurer.
The terms "Receipt" and "Received," with respect to the note insurance
policy, means actual delivery to the note insurer and to its fiscal agent
appointed by the note insurer at its option, if any, prior to 12:00 p.m., New
York City time, on a business day; delivery either on a day that is not a
business day or after 12:00 p.m., New York City time, shall be deemed to be
Receipt on the next succeeding business day. If any notice or certificate given
under the note insurance policy by the indenture trustee is not in proper form
or is not properly completed, executed or delivered, it shall be deemed not to
have been Received, and the note insurer or the fiscal agent shall promptly so
advise the indenture trustee and the indenture trustee may submit an amended
notice.
Under the note insurance policy, "business day" means any day other
than (i) a Saturday or Sunday or (ii) a day on which banking institutions in the
City of New York, New York or the State of New York, are authorized or obligated
by law or executive order to be closed. The note insurer's obligations under the
note insurance policy to make Insured Payments shall be discharged to the extent
funds are transferred to the indenture trustee as provided in the note insurance
policy, whether or not the funds are properly applied by the indenture trustee.
The note insurer shall be subrogated to the rights of each holder to
receive payments of principal and interest, as applicable, with respect to
distributions on the notes to the extent of any payment by the note insurer
under the note insurance policy. To the extent the note insurer makes Insured
Payments, either directly or indirectly, as by paying through the indenture
trustee, to the holders of notes, the note insurer will be subrogated to the
rights of the holders, as applicable, with respect to this Insured Payment and
shall be deemed to the extent of the payments so made to be a registered holder
for purposes of payment.
Claims under the note insurance policy will rank equally with any other
unsecured debt and unsubordinated obligations of the note insurer except for
particular obligations in respect of tax and other payments to which preference
is or may become afforded by statute. Claims against the note insurer under the
note insurance policy constitute pari passu claims against the general assets of
the note insurer. The terms of the note insurance policy cannot be modified or
altered by any other agreement or instrument, or by the merger, consolidation or
dissolution of the trust. The note insurance policy is governed by the laws of
the State of New York. The note insurance policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
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<PAGE>
To the fullest extent permitted by applicable law, the note insurer
agrees under the note insurance policy not to assert, and waives, for the
benefit of each holder, all its rights, whether by counterclaim, setoff or
otherwise, and defenses, including, without limitation, the defense of fraud,
whether acquired by subrogation, assignment or otherwise, to the extent that
these rights and defenses may be available to the note insurer to avoid payment
of its obligations under the note insurance policy in accordance with the
express provisions of the note insurance policy.
Pursuant to the terms of the Indenture, unless a note insurer default
exists, the note insurer shall be deemed to be the holder of the notes for all
purposes, other than for payment on the notes, will be entitled to exercise all
rights of the holders thereunder, without the consent of the holders, and the
holders may exercise these rights only with the prior written consent of the
note insurer. In addition, the note insurer will, as a third-party beneficiary
to the Indenture, the Sale and Servicing Agreement and the Loan Sale Agreement,
have, among others, the following rights:
o the right to give notices of breach or to terminate the rights
and obligations of the servicer under the Sale and Servicing
Agreement in the event of a servicer event of default and to
institute proceedings against the servicer;
o the right to consent to or direct any waivers of defaults by
the servicer;
o the right to remove the indenture trustee pursuant to the
Indenture;
o the right to direct the actions of the indenture trustee
during the continuation of a servicer default;
o the right to require the depositor to repurchase mortgage
loans for breach of representation and warranty or defect in
documentation;
o the right to direct foreclosures upon the failure of the
servicer to do so in accordance with the Sale and Servicing
Agreement;
o the right to direct all matters relating to a bankruptcy or
other insolvency proceeding involving the depositor; and
o the right to direct the indenture trustee to investigate
specified matters.
The note insurer's consent will be required prior to, among other things, (x)
the removal of the indenture trustee, (y) the appointment of any successor
indenture trustee or servicer or (z) any amendment to the Indenture or the Sale
and Servicing Agreement.
The trust, the depositor, the servicer, the originators and the note
insurer will enter into the Insurance Agreement pursuant to which the trust, the
depositor, the servicer and the originators will agree to reimburse, with
interest, the note insurer for amounts paid pursuant to claims under the note
insurance policy; provided, the payment obligations shall be non-recourse
obligations of the depositor, the originators, the trust and the servicer and
shall be payable only from monies available for the payment in accordance with
the provisions of the Indenture. The servicer will further agree to pay the note
insurer all reasonable charges and expenses which the note insurer may pay or
incur relative to any amounts paid under the note insurance policy or otherwise
in connection with the transaction and to indemnify the note insurer against
specified liabilities. Except to the extent provided therein, amounts owing
under the Insurance Agreement will be payable solely from the trust estate. An
"event of default" under the Insurance Agreement will constitute an event of
default under the Indenture and a servicer event of default under the Sale and
Servicing Agreement and allow the note insurer, among other things, to direct
the indenture trustee to terminate the servicer. An "event of default" under the
Insurance Agreement includes:
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<PAGE>
o the originators', the depositor's or the servicer's failure to
pay when due any amount owed under the Insurance Agreement or
other documents,
o the inaccuracy or incompleteness in any material respect of
any representation or warranty of the originators, the
depositor or the servicer in the Insurance Agreement, the Sale
and Servicing Agreement, the Indenture or other documents,
o the originators', the depositor's or the servicer's failure to
perform or to comply with any covenant or agreement in the
Insurance Agreement, the Sale and Servicing Agreement, the
Indenture and other documents,
o a finding or ruling by a governmental authority or agency that
the Insurance Agreement, the Sale and Servicing Agreement, the
Indenture or other documents are not binding on the
originators, the depositor or the servicer,
o the originators', the depositor's or the servicer's failure to
pay its debts in general or the occurrence of specified events
of insolvency or bankruptcy with respect to the depositor or
the servicer, and
o the occurrence of specified "performance test violations"
designed to measure the performance of the mortgage loans.
THE NOTE INSURER
The following information has been obtained from
________________________ and has not been verified by the originators, the
servicer, the depositor or the underwriter. No representation or warranty is
made by the depositor, the originators, the servicer, the depositor or the
underwriter with respect thereto.
The Note Insurer
____________ is a monoline insurance company incorporated in ______
under the laws of the State of ____________. ________________________ is
licensed to engage in the financial guaranty insurance business in all 50
states, the District of Columbia and Puerto Rico.
___________ and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's securities --
thereby enhancing the credit rating of those securities -- in consideration for
the payment of a premium to the insurer. ____________ and its subsidiaries
principally insure asset-backed, collateralized and municipal securities.
Asset-backed securities are generally supported by residential or commercial
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
____________ insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy ____________
underwriting criteria.
The principal executive offices of ____________ are located at
________________________, and its telephone number at that location is
____________.
S-45
<PAGE>
Reinsurance
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by ____________ or
any of its domestic operating insurance company subsidiaries are generally
reinsured among these companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, ____________ reinsures a
portion of its liabilities under some of its financial guaranty insurance
policies with other reinsurers under various treaties and on a
transaction-by-transaction basis. This reinsurance is utilized by ____________
as a risk management device and to comply with statutory and rating agency
requirements; it does not alter or limit ____________ obligations under any
financial guaranty insurance policy.
Ratings
____________ insurance financial strength is rated "Aaa" by Moody's and
____________ insurer financial strength is rated "AAA" by Standard & Poor's and
Standard & Poor's (Australia) Pty. Ltd. ____________ claims-paying ability is
rated "AAA" by Fitch IBCA, Inc. and Japan Rating and Investment Information,
Inc. These ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by the rating agencies.
Capitalization
The following table sets forth the capitalization of ____________ and
its wholly owned subsidiaries on ____________ the basis of generally accepted
accounting principles as of ____________:
[Note insurer to provide]
For further information concerning ____________, see the Consolidated
Financial Statements of ____________, and the notes thereto, incorporated by
reference in this prospectus supplement. ____________ financial statements are
included as exhibits to the annual report on Form 10-K and Quarterly Reports on
Form 10-Q filed with the Commission by ____________ and may be reviewed at the
EDGAR website maintained by the Commission. Copies of the statutory quarterly
and annual statements filed with the State of ____________ Insurance Department
by ____________ are available upon request to the State of ____________
Insurance Department.
Insurance Regulation
____________ is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of ____________, its
state of domicile. In addition, ____________ and its insurance subsidiaries are
subject to regulation by insurance laws of the various other jurisdictions in
which they are licensed to do business. As a financial guaranty insurance
corporation licensed to do business in the State of ____________, ____________
is subject to Article __ of the ____________ Insurance Law which, among other
things, limits the business of each such insurer to financial guaranty insurance
and related lines, requires that each such insurer maintain a minimum surplus to
policyholders, establishes contingency, loss and unearned premium reserve
requirements for each such insurer, and limits the size of individual
transactions -- "single risks" -- and the volume of transactions -- "aggregate
risks" -- that may be underwritten by each such insurer. Other provisions of the
____________ Insurance Law, applicable to non-life insurance companies such as
____________, regulate, among other things, permitted investments, payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liability for borrowings.
S-46
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The weighted average life of, and, if purchased at other than par, the
yield to maturity on, a note will be directly related to the rate of payment of
principal of the mortgage loans, including for this purpose voluntary payment in
full of mortgage loans prior to stated maturity, liquidations due to defaults,
casualties and condemnations, and repurchases of or substitutions for mortgage
loans by ____________ or an affiliate of ____________ as required or permitted
under the Indenture, the Sale and Servicing Agreement or the Loan Sale
Agreement.
The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. In addition,
the rate of principal prepayments may differ among pools of mortgage loans at
any time because of specific factors relating to the mortgage loans in the
particular pool, including, among other things, the age of the mortgage loans,
the geographic locations of the properties securing the loans and the extent of
the mortgagors' equity in these properties, and changes in the mortgagors'
housing needs, job transfers and unemployment.
The rate of prepayments on conventional mortgage loans has fluctuated
significantly in recent years. In general, if prevailing interest rates fall
significantly below the interest rates of some mortgage loans at the time of
origination, these mortgage loans may be subject to higher prepayment rates than
if prevailing rates remain at or above those at the time these mortgage loans
were originated. Conversely, if prevailing interest rates rise appreciably above
the interest rates of some mortgage loans at the time of origination, these
mortgage loans may experience a lower prepayment rate than if prevailing rates
remain at or below those at the time these mortgage loans were originated.
However, there can be no assurance that the mortgage loans will conform to the
prepayment experience of conventional mortgage loans or to any past prepayment
experience or any published prepayment forecast. No assurance can be given as to
the level of prepayments on mortgage loans that the trust estate will
experience.
As indicated above, if purchased at other than par, the yield to
maturity on a note will be affected by the rate of the payment of principal on
the mortgage loans. If the actual rate of payments on the mortgage loans is
slower than the rate anticipated by an investor who purchases a note at a
discount, the actual yield to the investor will be lower than the investor's
anticipated yield. If the actual rate of payments on the mortgage loans is
faster than the rate anticipated by an investor who purchases a note at a
premium, the actual yield to the investor will be lower than the investor's
anticipated yield.
The final stated maturity date is expected to be ____________ for the
class A-1 notes and the class A-2 notes. Each final stated maturity date was
calculated using the assumption that the final stated maturity date is thirteen
(13) months after the final stated maturity date of the mortgage loan having the
latest maturity date in each pool and assuming a subsequent mortgage loan having
a final stated maturity date of ____________ is purchased by the trust and
included in each pool. The weighted average life of the notes is likely to be
shorter than would be the case if payments actually made on the mortgage loans
conformed to the foregoing assumptions, and the final distribution date for any
class of the notes could occur significantly earlier than the final stated
maturity date because:
o prepayments, including, for this purpose, prepayments
attributable to foreclosure, liquidation, repurchase and the
like, on mortgage loans are likely to occur,
o thirteen (13) months have been added to obtain the final
stated maturity date above,
o the over-collateralization provisions of the transaction
result in the application of Excess Interest to the payment of
principal;
S-47
<PAGE>
o the servicer may cause a liquidation of the trust estate when
the aggregate outstanding principal amount of the mortgage
loans is less than 10% of the sum of (a) the aggregate
principal balance of the mortgage loans purchased on the
closing date and (b) the original amount on deposit in the
pre-funding accounts; and
o the servicer may, at its option, call the class A-1 notes or
the class A-2 notes, separately, when the aggregate
outstanding principal balance of the class A-1 notes or the
class A-2 notes, respectively, is equal to or less than 10% of
the aggregate original principal balance of the class A-1
notes or the class A-2 notes, respectively.
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal of
the security is scheduled to be repaid to an investor. The weighted average life
of the notes will be influenced by the rate at which principal of the mortgage
loans is paid, which may be in the form of scheduled amortization or prepayments
- -- for this purpose, the term "prepayment" includes liquidations due to default.
Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The model used in this prospectus supplement, Home
Equity Prepayment or HEP, is a prepayment assumption which represents an assumed
rate of prepayment each month relative to the then outstanding principal balance
of a pool of mortgage loans for the life of the mortgage loans. For example, 25%
HEP assumes a constant prepayment rate of 2.5% per annum of the then outstanding
principal balance of the mortgage loans in the first month of the life of the
mortgage loans and an additional 2.5% per annum in each month thereafter up to
and including the tenth month. Beginning in the eleventh month and in each month
thereafter during the life of the mortgage loans, 25% HEP assumes a constant
prepayment rate of 25% per annum. As used in the table below, 0% prepayment
assumption assumes prepayment rates equal to 0% of the prepayment assumption,
i.e., no prepayments on the mortgage loans having the characteristics described
below. The prepayment assumption does not purport to be a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment
of any pool of mortgage loans, including the mortgage loans.
The following table has been prepared on the basis of the following
modeling assumptions:
o The mortgage loans prepay at the indicated percentage of the
prepayment assumption,
o distributions on the notes are received in cash on the ____
day of each month commencing in ____________,
o no defaults or delinquencies in, or modifications, waivers or
amendments respecting the payment by the mortgagors of
principal and interest on the mortgage loans occur,
o scheduled payments are assumed to be received on the last day
of each month commencing in ____________, or as presented in
the following table, and prepayments represent payments in
full of individual mortgage loans and are assumed to be
received on the last day of each month, commencing in
____________, or as presented in the following table, and
include thirty (30) days' interest thereon,
o the notes are purchased on ____________,
o the Specified Over-collateralized Amount is as enumerated in
the Indenture,
o on each distribution date, all Excess Interest for each pool
is applied to build up over-collateralization necessary to
satisfy the Specified Over-Collateralized Amount for each
pool, except for the first distribution date, on which the
amount of Excess Interest applied to build up
over-collateralization is zero,
S-48
<PAGE>
o the mortgage loans in pool I consist of ____________ mortgage
loans having the following characteristics:
<TABLE>
<CAPTION>
Principal Mortgage Net Mortgage Original Amortizing Remaining Amortizing Remaining Term to
Balance($) Interest Rate(%) Interest Rate(%) Term (in months) Term (in months) Maturity (in months)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
o The mortgage loans in pool II consists of ____________
mortgage loans having the following characteristics:
<TABLE>
<CAPTION>
Principal Mortgage Net Mortgage Original Amortizing Remaining Amortizing Remaining Term to
Balance($) Interest Rate(%) Interest Rate(%) Term (in months) Term (in months) Maturity (in months)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
The foregoing modeling assumptions are assumptions and are not
necessarily indicative of actual performance.
Based upon the foregoing modeling assumptions, the tables below
indicate the weighted average life and earliest retirement date of the notes
assuming that the mortgage loans prepay according to the indicated percentages
of the prepayment assumption.
Weighted Average Lives
Class A-1 Certificates
Prepayment Weighted Average Earliest
Assumption (HEP) Life in Years(1)(2) Retirement Date(2)
---------------- ------------------- ------------------
Class A-2 Certificates
Prepayment Weighted Average Earliest
Assumption (HEP) Life in Years(1)(2) Retirement Date(2)
---------------- ------------------- ------------------
35%
(1) The weighted average life of each class of notes is determined by (a)
multiplying the amount of each principal payment used to retire the
related class of notes by the number of years from the closing date to
the final distribution date when the related class of notes is fully
retired; (b) adding the results; and (c) dividing the sum by the
original principal balance of that class.
(2) Determined assuming the call of the class A-1 notes or the class A-2
notes, respectively, occurs as stated herein.
----------------------
There is no assurance that prepayments will occur or, if they do occur,
that they will occur at any percentage of HEP.
The Indenture provides that none of the note insurer, the trust, the
owner trustee, the indenture trustee, the depositor, the depositor, the
originators or the servicer will be liable to any holder for any loss or damage
incurred by the holder as a result of any difference in the rate of return
received by the holder as compared to the applicable Note Rate, with respect to
any holder of notes upon reinvestment of the funds received in connection with
any premature repayment of principal on the notes, including any such repayment
resulting from any prepayment by the mortgagor, any liquidation of the mortgage
loan, or any repurchase of or substitution for any mortgage loan by the
depositor or the servicer.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain material federal income tax
consequences of the purchase, ownership and disposition of the notes is to be
considered only in connection with "Certain Federal Income Tax Consequences" in
the accompanying prospectus. The discussion in this prospectus supplement and in
the accompanying prospectus is based upon laws, regulations, rulings and
decisions now in effect, all of which are subject to change. The discussion
below and in the accompanying prospectus does not purport to deal with all
federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. Investors should consult their own tax
advisors in determining the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of the notes.
Treatment of the Notes
The originators, the depositor and the trust agree, and the holders of
the notes will agree by their purchase of the notes, to treat the notes as
indebtedness for all federal, state and local income tax purposes. There are no
regulations, published rulings or judicial decisions involving the
characterization for federal income tax purpose of securities with terms
substantially the same as the notes. In general, whether instruments such as the
notes constitute indebtedness for federal income tax purposes is a question of
fact, the resolution of which is based primarily upon the economic substance of
the instruments and the transaction pursuant to which they are issued rather
than merely upon the form of the transaction or the manner in which the
instruments are labeled. The Internal Revenue Service and the courts have stated
various factors to be taken into account in determining, for federal income tax
purposes, whether an instrument constitutes indebtedness and whether a transfer
of property is a sale because the transferor has relinquished substantial
incidents of ownership in the property or whether the transfer is a borrowing
secured by the property. On the basis of its analysis of these factors as
applied to the facts and its analysis of the economic substance of the
contemplated transaction, ________________________, special tax counsel to the
depositor, is of the opinion that, for federal income tax purposes, the notes
will be treated as indebtedness, and not as an ownership interest in the
mortgage loans, or an equity interest in the sub-trust of the trust consisting
of the pool I mortgage loans or the pool II mortgage loans, as the case may be,
or in a separate association taxable as a corporation or other taxable entity.
See "Certain Federal Income Tax Consequences -- Debt Securities" in the
accompanying prospectus.
If the notes are characterized as indebtedness, interest paid or
accrued on a note will be treated as ordinary income to holders of the notes and
principal payments on a note will be treated as a return of capital to the
extent of the holder's basis in the note allocable thereto. An accrual method
taxpayer will be required to include in income interest on the notes when
earned, even if not paid, unless it is determined to be uncollectible. The
indenture trustee, on behalf of the trust, will report to the holders of the
notes of record and the IRS the amount of interest paid and original issue
discount, if any, accrued on the notes to the extent required by law.
Possible Alternative Characterizations of the Notes. Although, as
described above, it is the opinion of tax counsel that for federal income tax
purposes, the notes will be characterized as indebtedness, this opinion is not
binding on the IRS and thus no assurance can be given that such a
characterization will prevail. If the IRS successfully asserted that the notes
did not represent debt for federal income tax purposes, holders of the notes
would likely be treated as owning an interest in a partnership and not an
interest in an association, or a publicly traded partnership, taxable as a
corporation or a taxable mortgage pool. If the holders of the notes were treated
as owing an equitable interest in a partnership, the partnership itself would
not be subject to federal income tax; rather each partner would be taxed
individually on their respective distributive share of the partnership's income,
gain, loss, deductions
S-50
<PAGE>
and credits. The amount, timing and characterization of items of income and
deduction for a holder of a note would differ if the notes were held to
constitute partnership interests, rather than indebtedness. Since the parties
will treat the notes as indebtedness for federal income tax purposes, none of
the servicer, the indenture trustee or the owner trustee will attempt to satisfy
the tax reporting requirements that would apply under this alternative
characterization of the notes. Investors that are foreign persons are strongly
advised to consult their own tax advisors in determining the federal, state,
local and other tax consequences to them of the purchase, ownership and
disposition of the notes.
Special Tax Attributes. The notes will not represent "real estate
assets" for purposes of Section 856(c)(4)(A) of the Code or "[l]oans ... secured
by an interest in real property" within the meaning of Section 7701(a)(19)(C) of
the Code.
Discount and Premium. It is not anticipated that the notes will be
issued with any original issue discount. See "Certain Federal Income Tax
Consequences -- Discount and Premium -- Original Issue Discount" in the
accompanying prospectus. The prepayment assumption that will be used for
purposes of computing original issue discount, if any, for federal income tax
purposes is the prepayment assumption using 25% HEP. See "Prepayment and Yield
Considerations" in this prospectus supplement. In addition, a subsequent
purchaser who buys a note for less than its principal amount may be subject to
the "market discount" rules of the Code. See "Certain Federal Income Tax
Consequences -- Discount and Premium -- Market Discount" in the accompanying
prospectus. A subsequent purchaser who buys a note for more than its principal
amount may be subject to the "market premium" rules of the Code. See "Certain
Federal Income Tax Consequences -- Discount and Premium -- Securities Purchased
at a Premium" in the accompanying prospectus.
Sale or Redemption of the Notes. If a note is sold or retired, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale and that holder's adjusted basis in the note. See "Certain
Federal Income Tax Consequences -- Debt Securities -- Sale or Exchange" in the
accompanying prospectus.
Other Matters. For a discussion of backup withholding and taxation of
foreign investors in the notes, see "Certain Federal Income Tax Consequences --
Backup Withholding" and " --Foreign Investors -- Grantor Trust, REMIC Regular
and Debt Securities" in the accompanying prospectus.
Treatment of the Trust
Tax counsel is of the opinion that neither the sub-trust of the trust
consisting of the pool I mortgage loans nor the sub-trust of the trust
consisting of the pool II mortgage loans will be characterized as an
association, or a publicly traded partnership, taxable as a corporation or a
taxable mortgage pool.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974 and the Code impose
certain restrictions on (a) employee benefit plans (as defined in Section 3(3)
of ERISA), (b) plans described in section 4975(e)(1) of the Code, including
individual retirement accounts or Keogh plans, (c) any entities whose underlying
assets include plan assets by reason of a plan's investment in such entities and
(d) persons who have specified relationships to such plans --
"Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code.
Section 406 of ERISA prohibits plans from engaging in particular transactions
involving the assets of such plans with Parties in Interest with respect to such
plans, unless a statutory or administrative exemption is applicable to the
transaction. Excise taxes under Section 4975 of the Code, penalties under
Section 502 of ERISA and other penalties may be imposed on plan fiduciaries and
Parties-in-Interest, or Disqualified Persons, that engage in "prohibited
transactions" involving assets of a
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plan. Individual retirement arrangements and other plans that are not subject to
ERISA, but are subject to Section 4975 of the Code, and Disqualified Persons
with respect to these arrangements and plans, also may be subject to excise
taxes and other penalties if they engage in prohibited transactions. Moreover,
based on the reasoning of the United States Supreme Court in John Hancock Life
Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an insurance
company's general account may be deemed to include assets of the Plans investing
in the general account -- e.g., through the purchase of an annuity contract.
ERISA also imposes specified duties on persons who are fiduciaries of Plans
subject to ERISA.
Some transactions involving the purchase, holding or transfer of the
notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the trust were deemed to be assets of a plan. Under a
regulation issued by the United States Department of Labor, the assets of the
trust would be treated as plan assets of a plan for the purposes of ERISA and
the Code only if the lan acquires an "equity interest" in the trust and none of
the exceptions contained in this plan assets regulation is applicable. An equity
interest is defined under the plan assets regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there is little guidance on
the subject, the depositor believes that the notes should be treated as
indebtedness without substantial equity features for purposes of the plan assets
regulation. This determination is based in part on the traditional debt features
of the notes, including the reasonable expectation of purchasers of the notes
that the notes will be repaid when due, as well as the absence of conversion
rights, warrants and other typical equity features. The debt treatment of the
notes could change if the trust incurs losses. However, even if the notes are
treated as debt for such purposes, the acquisition or holding of notes by or on
behalf of a plan could be considered to give rise to a prohibited transaction if
the trust or any of its affiliates is or becomes a Party-in-Interest or a
Disqualified Person with respect to such plan. In this case, particular
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a note. Included among these exemptions are: PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 95-60, regarding
investments by insurance company general accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 96-23, regarding
transactions affected by in-house asset managers; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers." Each investor
using the assets of a plan which acquires the notes, or to whom the notes are
transferred, will be deemed to have represented that the acquisition and
continued holding of the notes will be covered by one of the exemptions listed
above or by another Department of Labor Class Exemption.
LEGAL INVESTMENT
The notes will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement dated
____________ between the depositor and ____________, as underwriter, the
depositor has agreed to sell to the underwriter and the underwriter has agreed
to purchase from the depositor the notes. The depositor is obligated to sell,
and the underwriter is obligated to purchase, all of the notes offered hereby if
any are purchased.
The underwriter has advised the depositor that it proposes to offer the
notes purchased by the underwriter for sale from time to time in one or more
negotiated transactions or otherwise, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
underwriter may effect these transactions by selling these notes to or through
dealers, and these dealers
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may receive compensation in the form of underwriting discounts, concessions or
commissions from the underwriter or purchasers of the notes for whom they may
act as agent. Any dealers that participate with the underwriter in the
distribution of the notes purchased by the underwriter may be deemed to be
underwriters, and any discounts or commissions received by them or the
underwriter and any profit on the resale of notes by them or the underwriter may
be deemed to be underwriting discounts or commissions under the Securities Act
of 1933.
In connection with the offering of the notes, the underwriter and its
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the notes. These transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M,
pursuant to which that person may bid for or purchase the notes for the purpose
of stabilizing its market price. Any of the transactions described in this
paragraph may result in the maintenance of the price of the notes at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are taken,
may be discontinued at any time without notice.
For further information regarding any offer or sale of the notes
pursuant to this prospectus supplement and the accompanying prospectus, see
"Plan of Distribution" in the accompanying prospectus.
The Underwriting Agreement provides that the depositor will indemnify
the underwriter or contribute to losses arising out of specified liabilities,
including liabilities under the Securities Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" certain information already on file with it. This means that we can
disclose important information to you by referring you to those documents. This
information is considered part of this prospectus supplement, and later
information that is filed will automatically update and supersede this
information. We incorporate by reference all of the documents listed in the
accompanying prospectus under the heading "Incorporation of Certain Information
by Reference" and the financial statements of ________________________ included
in, or as exhibits to, the following documents:
o the Annual Report on Form 10-K for the year ended
____________; and
o the Quarterly Report on Form 10-Q for the quarter ended
____________.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
cover page of this prospectus supplement or the accompanying prospectus.
ADDITIONAL INFORMATION
Prudential Securities Secured Financing Corporation has filed with the
Securities and Exchange Commission a registration statement (Registration No.
____________) under the Securities Act of 1933, for the notes offered pursuant
to this prospectus supplement. This prospectus supplement and the accompanying
prospectus, which form a part of the registration statement, omit certain
information contained in such registration statement pursuant to the rules and
regulations of the Securities and Exchange Commission. You may read and copy the
registration statement at the Public Reference Room at the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
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and at the Securities and Exchange Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York, 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, the Securities and
Exchange Commission maintains a site on the World Wide Web containing reports,
proxy materials, information statements and other items. The address is
http://www.sec.gov.
EXPERTS
The consolidated balance sheets of ____________ and subsidiaries as of
____________ and the related consolidated statements of income, changes in
shareholder's equity, and cash flows for each of the three years in the period
ended ________________________, incorporated by reference in this prospectus
supplement, have been incorporated in this prospectus supplement in reliance on
the report of ____________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the notes will be passed upon
for the originators, the depositor and the servicer by ____________,
____________, for the trust by ____________, ____________, and for the depositor
and the underwriter by ____________, ____________.
RATINGS
It is a condition to the original issuance of the notes that they will
receive ratings of "AAA" by S&P and "Aaa" by Moody's. The ratings assigned to
the notes will take into account the claims-paying ability of the note insurer.
Explanations of the significance of these ratings may be obtained from Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007 and Standard
& Poor's Rating Services, 25 Broadway, New York, New York 10004. These ratings
will be the views only of the rating agencies. There is no assurance that any
such ratings will continue for any period of time or that these ratings will not
be revised or withdrawn. Any such revision or withdrawal of these ratings may
have an adverse effect on the market price of the notes.
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GLOSSARY
The following terms have the meanings given below when used in this
prospectus supplement.
Available Amount means, for any pool of mortgage loans and any
distribution date, the amount on deposit in the related Distribution Account,
exclusive of the amount of any Insured Payment and the Servicing Fee, on that
distribution date.
Class A-1 Interest Distribution Amount means, for any distribution
date, an amount equal to the sum of the Current Interest for the class A-1 notes
on that distribution date, less the amount of any Class A-1 Mortgage Loan
Interest Shortfalls relating to that distribution date.
Class A-1 Mortgage Loan Interest Shortfalls means, for any distribution
date, the aggregate of the Mortgage Loan Interest Shortfalls in pool I, if any,
for that distribution date, to the extent any Mortgage Loan Interest Shortfalls
are not paid by the servicer as Compensating Interest.
Class A-1 Note Rate means, with respect to any distribution date, the
per annum rate equal to ____%; provided, that, on any distribution date after
the Note Clean-Up Call Date for the class A-1 notes, the Class A-1 Note Rate
will be _____%.
Class A-2 Interest Distribution Amount for any distribution date will
be an amount equal to the sum of the Current Interest for the class A-2 notes on
that distribution date, less the amount of any Class A-2 Mortgage Loan Interest
Shortfalls relating to that distribution date.
Class A-2 Mortgage Loan Interest Shortfalls for any distribution date
will be the aggregate of the Mortgage Loan Interest Shortfalls in pool II, if
any, for that distribution date, to the extent any Mortgage Loan Interest
Shortfalls are not paid by the servicer as Compensating Interest.
Class A-2 Note Rate means, for any distribution date, the per annum
rate equal to _____%; provided, that, on any distribution date after the Note
Clean-up Call Date for the class A-2 notes, the Class A-2 Note Rate will be
_____%.
Compensating Interest means an amount equal to the lesser of (a) the
aggregate of the Prepayment Interest Shortfalls for the related distribution
date resulting from principal prepayments in full during the related due period
and (b) its aggregate servicing fees received in the related due period
Current Interest for any pool of mortgage loans and any distribution
date is the interest that will accrue on the related class of notes at the
applicable Note Rate on the aggregate outstanding principal balance of such
class during the accrual period.
Cut-Off Date means the close of business on ____________.
Excess Interest for any pool of mortgage loans and any distribution
date is equal to the excess of (x) the Available Amount for that pool and that
distribution date over (y) the sum of
o the Interest Distribution Amount for that pool and that
distribution date,
o Principal Distribution Amount for that pool and that
distribution date -- calculated for this purpose without
regard to any Over-collateralization Increase Amount or
portion thereof included therein,
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o any Reimbursement Amount or other amount owed to the note
insurer relating to that pool and
o the indenture trustee's fees for that pool and that
distribution date.
Excess Over-collateralized Amount means, for each pool of mortgage
loans and a distribution date, the difference, if any, between (a) the
Over-collateralized Amount that would apply on that distribution date after
taking into account all distributions to be made on that distribution date,
except for any distributions of related Over-collateralization Reduction
Amounts, and (b) the Specified Over-collateralized Amount.
Foreclosure Profits as to any servicer remittance date, are 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 that servicer remittance date over (ii) the sum of the unpaid principal
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest
on the unpaid principal balance from the due date to which interest was last
paid by the mortgagor.
Insurance Proceeds are proceeds paid by any insurer pursuant to any
insurance policy covering a mortgage loan to the extent these proceeds are not
applied to the restoration of the mortgaged property or released to the
mortgagor. "Insurance Proceeds" do not include "Insured Payments."
Insured Distribution Amount for any pool of mortgage loans and any
distribution date, is the sum of:
o the Interest Distribution Amount for that pool and that
distribution date,
o the amount of the Over-collateralization Deficit applicable to
that pool and that distribution date, if any, and
o on the distribution date which is a final stated maturity
date, the aggregate outstanding principal balance for the
related class of notes.
Insured Payment for any pool of mortgage loans and any distribution
date will equal the amount by which the Insured Distribution Amount for that
pool and that distribution date exceeds the Available Amount less the indenture
trustee's fees for that pool and that distribution date.
Interest Distribution Amount means the Class A-1 Interest Distribution
Amount or the Class A-2 Interest Distribution Amount, as applicable.
Liquidation Expenses as to any Liquidated Mortgage Loan are all
expenses incurred by the servicer in connection with the liquidation of the
mortgage loan, including, without duplication, unreimbursed expenses for real
property taxes and unreimbursed servicing advances. In no event may Liquidation
Expenses on a Liquidated Mortgage Loan exceed the Liquidation Proceeds.
Liquidated Loan Loss as to any Liquidated Mortgage Loan is the excess,
if any, of (i) the unpaid principal balance of that Liquidated Mortgage Loan
plus accrued and unpaid interest on the unpaid principal balance from the due
date to which interest was last paid by the Mortgagor over (ii) the sum of the
Net Liquidation Proceeds and the amount of any previously unreimbursed Periodic
Advances in respect of the mortgage loan.
Liquidation Proceeds are amounts, other than Insurance Proceeds,
received by the servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted mortgage loan through a sale, foreclosure
sale, REO Disposition or otherwise.
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Mortgage Loan Interest Shortfalls means Civil Relief Act interest
shortfalls and Prepayment Interest Shortfalls.
Net Foreclosure Profits as to any servicer remittance date, are the
excess, if any, of (i) the aggregate Foreclosure Profits on that servicer
remittance date over (ii) Liquidated Loan Losses on that servicer remittance
date.
Net Liquidation Proceeds as to any Liquidated Mortgage Loan, are
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the servicer.
Net Mortgage Loan Interest Shortfalls means the Class A-1 Mortgage Loan
Interest Shortfalls or the Class A-2 Mortgage Loan Interest Shortfalls, as
applicable.
Net REO Proceeds as to any REO property, are REO Proceeds net of any
expenses of the servicer.
Note Clean-up Call Date means the first distribution date on which the
aggregate outstanding principal balance of the related class of notes is equal
to or less than 10% of the aggregate original principal balance of such class of
notes
Note Rate means the Class A-1 Note Rate or the Class A-2 Note Rate, as
applicable.
Over-collateralized Amount means, for any distribution date and a pool
of mortgage loans, the excess, if any, of (x) the sum of (i) the aggregate
principal balances of the mortgage loans in that pool as of the close of
business on the last day of the preceding calendar month and (ii) the amounts,
if any, on deposit in the pre-funding accounts, over (y) the aggregate principal
balance of the related class of notes as of that distribution date --following
the making of all distributions on that distribution date, other than any
Over-collateralization Increase Amount for that distribution date.
Over-collateralization Deficit for any distribution date, is the amount
by which the aggregate outstanding principal balance of the notes exceeds the
sum of
o the aggregate principal balance of the mortgage loans,
o any amount on deposit in the pre-funding accounts on that
distribution date, and
o any amounts on deposit in the Cross-collateralization Reserve
Accounts on that distribution date, after application of all
amounts due on that distribution date.
Over-collateralization Increase Amount for any pool of mortgage loans
and any distribution date is the amount of Excess Interest to be applied as an
accelerated payment of principal on the related class of notes until the
over-collateralization for that pool reaches the Specified Over-collateralized
Amount. This payment is limited to the extent of the Available Amount as
described in the definition of "Principal Distribution Amount.
Over-collateralization Reduction Amount for any pool of mortgage loans
and any distribution date, is the difference, if any, between (a) the
Over-collateralized Amount for that pool that would apply on that distribution
date after taking into account all distributions to be made on that distribution
date -- except for any distributions of related Over-collateralization Reduction
Amounts -- and (b) the Specified Over-collateralized Amount for that pool and
that distribution date to the extent of principal available for distribution.
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Periodic Advances means advances made by the servicer on each
distribution date for delinquent payments of interest on the mortgage loans, at
a rate equal to the interest rate on the mortgage note, less the servicing fee
rate.
Prepayment Interest Shortfall means, for any distribution date, an
amount equal to the excess, if any, of (a) thirty (30) days' interest on the
outstanding principal balance of these mortgage loans at a per annum rate equal
to the mortgage interest rate -- or at any lower rate as may be in effect for
these mortgage loan because of application of the Civil Relief Act, any
reduction as a result of a bankruptcy proceeding and/or any reduction by a court
of the monthly payment due on these mortgage loan -- minus the rate at which the
servicing fee is calculated, over (b) the amount of interest actually remitted
by the mortgagor in connection with the principal prepayment in full, less the
servicing fee for such mortgage loan in such month.
Principal Distribution Amount for any pool of mortgage loans and any
distribution date will be the lesser of:
(a) the excess of (i) the sum, as of that distribution date,
of (A) the Available Amount for that pool and (B) any Insured Payment
on the related class of notes over (ii) the sum of Interest
Distribution Amount for that pool, the indenture trustee's fees, and
the Reimbursement Amount allocable to the related class of notes; and
(b) the sum, without duplication, of:
(i) all principal in respect of the mortgage
loans in that pool actually collected during
the related due period;
(ii) the principal balance of each mortgage loan
that either was repurchased by the depositor
or purchased by the servicer on the servicer
remittance date from that pool, to the
extent the principal balance is actually
received by the indenture trustee;
(iii) any substitution adjustments delivered by
the depositor on the servicer remittance
date in connection with a substitution of a
mortgage loan in that pool, to the extent
the substitution adjustments are actually
received by the indenture trustee;
(iv) the Net Liquidation Proceeds actually
collected by the servicer of all mortgage
loans in that pool during the prior calendar
month, to the extent the Net Liquidation
Proceeds relate to principal;
(v) on the ____________ or ____________
distribution dates, moneys released from the
related pre-funding account, if any;
(vi) the proceeds received by the indenture
trustee upon the exercise by the servicer of
its option to call the related class of
notes, to the extent those proceeds relate
to principal;
(vii) the amount of any Over-collateralization
Deficit for that pool for that distribution
date;
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(viii) the proceeds received by the indenture
trustee on any termination of the trust, to
the extent those proceeds relate to
principal, allocable to that pool;
(ix) the amount of any Over-collateralization
Increase Amount for that pool for that
distribution date, to the extent of any
Excess Interest for that pool available for
that purpose, exclusive of the amount of
Excess Interest for that pool necessary to
make the payment of (A) any Net Mortgage
Loan Interest Shortfalls for that pool and
that distribution date and (B) the Shortfall
Amount for the other pool and that
distribution date;
(x) if the note insurer shall so elect, an
amount of principal, including Liquidated
Loan Losses, that would have been payable
pursuant to clauses (i) through (ix) above
if sufficient funds were available therefor;
minus
(xi) the amount of any Over-collateralization
Reduction Amount for that pool for that
distribution date.
In no event will the Principal Distribution Amount for a pool for any
distribution date be (x) less than zero or (y) greater than the then outstanding
aggregate principal balance for the notes.
Qualified Substitute Mortgage Loan means any mortgage loan or mortgage
loans substituted for a deleted mortgage loan and which, among other things,
o relates or relate to a detached one-family residence or to the
same type of residential dwelling or commercial property as
the deleted mortgage loan and, has or have the same or a
better lien priority as the deleted mortgage loan and has or
have the same occupancy status as the deleted mortgage loan or
is or are owner-occupied mortgaged property or properties,
o matures or mature no later than, and not more than one year
earlier than, the deleted mortgage loan,
o has or have a LTV or LTV at the time of the substitution no
higher than the LTV of the deleted mortgage loan,
o has or have a CLTV or CLTVs at the time of the substitution no
higher than the CLTV of the deleted mortgage loan,
o 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
principal balance of the deleted mortgage loan as of that
date,
o has or have a mortgage interest rate of at least the same
interest rate as the deleted mortgage loan and
o complies or comply, as of the date of substitution, with each
representation and warranty enumerated in the Loan Sale
Agreement.
Reimbursement Amount means, for each pool of mortgage loans and each
distribution date, the lesser of (x) the excess of (i) the amount then on
deposit in the Distribution Account over (ii) the Insured Distribution Amounts
for that pool and that distribution date and (y) the amount of all Insured
Payments
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and other amounts due to the note insurer for that pool pursuant to the
Insurance Agreement, including the premium amount, which have not been
previously paid.
REO Proceeds are monies received from any REO property, including,
without limitation, proceeds from the rental of the mortgaged property.
Shortfall Amount means, for a pool of mortgage loans and any
distribution date, the sum of
o any shortfall in the amount of the Interest Distribution
Amount for that pool actually distributed to the holders of
the related class of notes,
o any shortfall in the amount of the Net Mortgage Loan Interest
Shortfalls for that pool actually distributed to the holders
of the related class of notes,
o the amount of any Over-collateralization Deficit for that pool
and that distribution date and
o any shortfall in the payment of any amounts owed the note
insurer.
Specified Over-collateralized Amount for a pool of mortgage loans and
any distribution date will be the amount of Over-collateralization which the
note insurer requires for that pool and that distribution date.
Specified Reserve Amount means, for each pool of mortgage loans and any
distribution date, the difference between (x) the Specified Over-collateralized
Amount for that pool and that distribution date and (y) the Over-collateralized
Amount for that pool on that distribution date.
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================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this prospectus supplement and
the prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the depositor or by the
underwriter. This prospectus supplement and the prospectus do not constitute an
offer to sell, or a solicitation of an offer to buy, the securities offered
hereby by anyone in any jurisdiction in which such an offer or solicitation is
not authorized or in which the person making the offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make any such offer or
solicitation. Neither the delivery of this prospectus supplement and the
prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that information in this prospectus supplement or in the prospectus
is correct as of any time since the date of this prospectus supplement or the
prospectus.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Table of Contents...........................................................S-__
Summary.....................................................................S-__
Risk Factors................................................................S-__
Transaction Overview........................................................S-__
The Mortgage Loan Pools.....................................................S-__
The Originators, the Depositor, the Servicer and the
Subservicer.............................................................S-__
The Owner Trustee...........................................................S-__
The Indenture Trustee.......................................................S-__
The Collateral Agent........................................................S-__
Description of the Notes and the Trust Certificates.........................S-__
Servicing of the Mortgage Loans.............................................S-__
The Note Insurance Policy...................................................S-__
The Note Insurer............................................................S-__
Prepayment and Yield Considerations.........................................S-__
Certain Federal Income Tax Considerations...................................S-__
ERISA Considerations........................................................S-__
Legal Investment............................................................S-__
Plan of Distribution........................................................S-__
Experts.....................................................................S-__
Ratings.....................................................................S-__
Legal Matters...............................................................S-__
Glossary....................................................................S-__
PROSPECTUS
Summary of Prospectus.........................................................__
Risk Factors..................................................................__
The Sponsor...................................................................__
Use of Proceeds...............................................................__
The Trustee...................................................................__
The Trust Funds...............................................................__
Description of the Securities.................................................__
Credit Enhancement............................................................__
Prepayment and Yield Considerations...........................................__
Servicing of the Loans........................................................__
Certain Legal Aspects of the Loans............................................__
Certain Federal Income Tax Consequences.......................................__
State Tax Considerations......................................................__
ERISA Considerations..........................................................__
Legal Investment..............................................................__
Plan of Distribution..........................................................__
Incorporation of Certain Information by Reference.............................__
Additional Information........................................................__
Legal Matters.................................................................__
Rating........................................................................__
Glossary...............................__
================================================================================
================================================================================
$_______________
________________
Issuer
_________________________
Servicer
Prudential Securities
Secured Financing Corporation
Sponsor
$__________
Class A-1 Notes
$__________
Class A-2 Notes
Mortgage-Backed Notes,
Series _______
__________________
PROSPECTUS SUPPLEMENT
__________________
___________________
__________
================================================================================
EXHIBIT 99.2
FORM OF PROSPECTUS
SUPPLEMENT -- CERTIFICATES
Prospectus supplement to prospectus dated ____________
================================================================================
$______________
----------------
Mortgage-Backed Certificates, Series _______
$_____ ___% Class A-1 Certificates $_______ ____% Class A-2 Certificates
_____________ Prudential Securities Secured
Depositor Financing Corporation
Sponsor
================================================================================
You should read the section The trust fund --
entitled "Risk Factors"
starting on page S-__ of this o The trust fund consists
prospectus supplement and primarily of two pools of
page __ of the fixed-rate business and
accompanying prospectus consumer purpose home equity
and consider these factors loans secured by and first- or
before making a decision to second-lien mortgages on
invest in the certificates. residential or commercial real
properties.
The certificates ownership
interests in the trust fund only The certificates --
are not interests in or
obligations of any other person. o The offered certificates will
be issued in two classes.
Neither the certificates nor the o Each class of offered
underlying mortgage loans will be certificates will represent a
insured or guaranteed by any beneficial ownership interest
governmental agency or in one pool of mortgage loans.
instrumentality.
Credit enhancement --
o The certificates will have the
benefit of a financial
guaranty insurance policy to
be issued by
[certificate insurer]
o The certificates will be
cross-collateralized to a
limited extent.
o The certificates have the
benefit of initial
over-collateralization.
o Excess interest will be used
in the early years of the
transaction to increase this
over-collateralization.
<TABLE>
<CAPTION>
Original Certificate Price to the Underwriting Proceeds to the Ratings Final Stated
Class Principal Balance Public(1) Discount Depositor(2) Moody's/S&P Maturity Date
_____ ____________________ ____________ ____________ _______________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
A-1 $___________________ ____% ____% $_____________ Aaa/AAA
A-2 $_____________ ____% ____% $____________ Aaa/AAA
____________________________ ___________ ____________ _______________ ___________ ______________
Total $_____________ $__________ $______ $____________
</TABLE>
(1) Plus accrued interest from _____________.
(2) Before deducting expenses estimated to be $_____________.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus supplement.
Any representation to the contrary is a criminal offense.
_______________________
The date of this prospectus supplement is ________
<PAGE>
Important notice about the information presented in this
prospectus supplement and the accompanying prospectus
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of certificates, and (2) this prospectus supplement, which describes
the specific terms of your series of certificates.
This prospectus supplement does not contain complete information about
the offering of the certificates. Additional information is contained in the
accompanying prospectus. You are urged to read both this prospectus supplement
and the accompanying prospectus in full. We cannot sell the certificates to you
unless you have received both this prospectus supplement and the accompanying
prospectus.
The accompanying prospectus contains information which may not be
applicable your series of certificates. This information describes the possible
characteristics of different series of securities, and is not intended to be
contradictory to the information contained in this prospectus supplement. If the
terms of your series of certificates vary between this prospectus supplement and
the accompanying prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further information concerning a particular topic. The following table of
contents provides the pages on which these captions are located.
TABLE OF CONTENTS
SUMMARY...............................................1
The Certificates.................................1
Distributions....................................1
Credit Enhancement...............................2
The Mortgage Loans...............................2
Servicing of the Mortgage Loans..................2
ERISA Considerations.............................2
Federal Income Tax Status........................3
Ratings..........................................3
RISK FACTORS..........................................4
TRANSACTION OVERVIEW..................................9
Parties..........................................9
The Transaction..................................9
THE MORTGAGE LOAN POOLS..............................10
General.........................................10
The Pool I Mortgage Loans.......................11
The Pool II Mortgage Loans......................15
Conveyance of subsequent mortgage loans.........18
THE ORIGINATORS, THE DEPOSITOR AND THE SERVICER......19
Underwriting Guidelines.........................19
The Servicer....................................19
Delinquency and Loan Loss Experience............19
THE TRUSTEE..........................................20
THE COLLATERAL AGENT.................................20
DESCRIPTION OF THE CERTIFICATES......................20
Book-Entry Registration.........................21
Definitive Certificates.........................25
Assignment and Pledge of Initial Mortgage
Loans.........................................25
Assignment and Pledge of Subsequent Mortgage
Loans ........................................25
Delivery of Mortgage Loan Documents.............26
Representations and Warranties of the
Depositor ....................................27
Payments on the Mortgage Loans..................29
Over-collateralization Provisions...............30
Cross-collateralization Provisions..............32
Flow of Funds...................................32
Reports to Certificateholders...................33
Amendment.......................................33
SERVICING OF THE MORTGAGE LOANS......................34
The Servicer....................................34
Servicing Fees and Other Compensation
and Payment of Expenses ......................34
Periodic Advances and Servicer Advances.........34
Prepayment Interest Shortfalls..................35
Civil Relief Act Interest Shortfalls............35
S-ii
<PAGE>
Optional Purchase of Defaulted Mortgage
Loans ........................................35
Servicer Reports................................36
Collection and Other Servicing Procedures.......36
Hazard Insurance................................37
Realization Upon Defaulted Mortgage Loans.......38
Removal and Resignation of the Servicer.........38
Termination; Purchase of Mortgage Loans.........40
THE CERTIFICATE INSURANCE POLICY.....................40
THE CERTIFICATE INSURER..............................44
The Certificate Insurer.........................44
Reinsurance.....................................44
Ratings.........................................44
Capitalization..................................45
Insurance Regulation............................45
PREPAYMENT AND YIELD CONSIDERATIONS..................45
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............48
ERISA CONSIDERATIONS.................................49
LEGAL INVESTMENT.....................................51
PLAN OF DISTRIBUTION.................................51
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE....52
ADDITIONAL INFORMATION...............................52
EXPERTS..............................................53
LEGAL MATTERS........................................53
RATINGS..............................................53
GLOSSARY.............................................54
S-ii
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
o This summary highlights selected information from this prospectus supplement
and does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of the
offering of the certificates, carefully read this entire prospectus
supplement and the accompanying prospectus. o This summary provides an
overview of calculations, cash flows and other information to aid your
understanding and is qualified by the full description of these calculations,
cash flows and other information in this prospectus supplement and the
accompanying prospectus. _____________________________
THE CERTIFICATES
The ___________ will issue two classes of mortgage backed certificates, series
_____, the class A-1 certificates and the class A-2 certificates. The class A
certificates are being offered to you by this prospectus supplement.
The trust will also issue one class of residual certificates, the class R
certificates, for each class of class A certificates. The class R certificates
are not offered by this prospectus supplement.
The class A certificates and the matching class R certificates together
represent the entire beneficial ownership interest in a portion of the trust
represented by one of the pools of mortgage loans. The class A-1 certificates
will represent the mortgage loans in the first pool and the class A-2
certificates will represent the mortgage loans in the second pool. Each pool
will constitute a separate sub-trust of the trust.
The class A certificates will accrue interest at an interest rate, have an
original principal balance and final stated maturity date, as follows:
Original
Certificate Certificate Final Stated
Class Rate(1) Principal Balance Maturity Date
- ----- ------- ----------------- -------------
A-1 ____% $__________
A-2 ____% $__________
One class of class R certificates will represent an ownership interest in the
sub-trust of the trust consisting of the mortgage loans in pool I. The other
class of class R certificates will represent an ownership interest in the
sub-trust of the trust consisting of the mortgage loans in pool II. The holder
of a class R certificates is entitled to receive specified payments consisting
of excess interest from its pool of mortgage loans, but only to the extent all
payments have been made on each distribution date to the class A
certificateholders.
o Excess Interest. Generally, because more interest is anticipated to be paid
by the mortgage loan borrowers than is necessary to pay the interest which
accrues on the class A certificates, there is expected to be excess interest
each month. Excess interest may be used to cover shortfalls of interest, to
create over-collateralization, for cross-collateralization or to pay amounts
due the certificate insurer. After all distributions are made on each
distribution date-- including amounts owing for over-collateralization,
cross-collateralization or payment to the certificate insurer-- any remaining
excess interest from a pool will be distributed to the holder of the class R
certificate for that pool.
DISTRIBUTIONS
Distributions on the certificates will be made on each distribution date to the
holders of record on the record date. Distributions to a holder will be made in
an amount equal to the holder's percentage interest of the total amount
distributed to the holder's class of certificates on that distribution date.
o Distribution Date. Distributions on the certificates will be made on the ____
day of each month, or, if that ____ day is not a business day, on the next
succeeding business day, beginning on _________.
o Record Date. The record date for the certificates will be the last business
day of
- --------------------------------------------------------------------------------
S-1
<PAGE>
- --------------------------------------------------------------------------------
the month preceding the distribution date, or, in the case of the _______
distribution date, the closing date.
Distributions of Interest
On each distribution date, each class of certificates is entitled to receive its
current interest.
o Current Interest. The current interest for a distribution date is the
interest which accrues on a class of certificates at that class's certificate
rate on the outstanding principal balance of the class during the accrual
period.
o Accrual Period. The accrual period for the certificates is the calendar month
preceding the distribution date.
All computations of interest accrued on the certificates will be made on the
basis of a 360-day year consisting of twelve 30-day months.
Distributions of Principal
The holders of each class of certificates are entitled to receive distributions
of principal on each distribution date which generally reflect collections of
principal during the preceding calendar month on the mortgage loans in the pool
relating to their class.
In addition, in accordance with the over-collateralization features of the
transaction, holders may also receive extra distributions of principal from the
excess interest on that distribution date
CREDIT ENHANCEMENT
The credit enhancement provided for the benefit of the holders of the
certificates consists solely of:
o over-collateralization,
o cross-collateralization and
o the certificate insurance policy.
THE MORTGAGE LOANS
The mortgage loans to be included in the trust estate will be primarily
fixed-rate, closed-end, monthly pay, business and consumer purpose home equity
loans secured by first, second or multiple mortgages or deeds of trust on
residential or commercial real properties.
On the closing date, the trust will purchase the mortgage loans. The aggregate
principal balance of the pool I mortgage loans will be approximately
$_____________ and the aggregate principal balance of the pool II mortgage loans
will be approximately $_____________.
The aggregate principal balance of the mortgage loans purchased by the trust on
the closing date will be less than the amount required to be held by the trust.
The amount of the difference will be taken from the proceeds of the sale of the
certificates, placed in the pre-funding accounts and used for the purchase of
mortgage loans by the trust after the closing date.
SERVICING OF THE MORTGAGE LOANS
__________________ will act as servicer and will be obligated to service and
administer the mortgage loans on behalf of the trust, for the benefit of the
certificate insurer and the holders of the certificates.
The servicer is entitled to a servicing fee of ___% per annum of the outstanding
principal balance of each mortgage loan, calculated and payable monthly from the
interest portion of scheduled monthly payments, liquidation proceeds and other
proceeds.
Option of the Servicer to Terminate the Trust
The servicer may, at its option, terminate the trust on the distribution date on
which the aggregate outstanding principal balance of all mortgage loans is less
than 10% of the sum of the aggregate original principal balance of the mortgage
loans purchased on the closing date and the amount on deposit in the pre-funding
accounts on the closing date.
ERISA CONSIDERATIONS
Subject to the conditions described under "ERISA Considerations" in this
prospectus supplement, the certificates may be purchased by any employee benefit
plan or other retirement arrangement subject to ERISA or the Internal Revenue
Code.
- --------------------------------------------------------------------------------
S-2
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX STATUS
An election will be made to treat the trust fund as a REMIC. The class A
certificates will be designated as "regular interest" and the class R
certificates will be designated as "residual interests" in the REMIC.
The class A certificates will be treated as newly originated debt instruments
and the beneficial owners will be required to report income thereon in
accordance with the accrual method of accounting.
RATINGS
In order to be issued, the certificates must be rated "AAA" by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. and "Aaa" by
Moody's Investors Service, Inc., taking into account the certificate insurance
policy issued for the certificates.
- --------------------------------------------------------------------------------
S-3
<PAGE>
RISK FACTORS
Investors should consider, among other things, the following factors --
as well as the factors enumerated under "Risk Factors" in the accompanying
prospectus -- before deciding to invest in the certificates.
If the funds on deposit in the pre-funding accounts are not used to purchase
additional mortgage loans, those funds will be distributed as a prepayment of
principal, which may adversely affect the yield on your certificate.
If the principal balance of the eligible mortgage loans
available for purchase by the trust on _____________ is less
than the amount on deposit in either pre-funding account on
that date, the remaining amount will be applied as a
prepayment of principal on the following distribution date to
the holders of the class of certificates relating to that
pre-funding account. Although no assurances can be given, it
is anticipated that the aggregate principal balance of the
mortgage loans sold to the trust after the closing date will
require the application of substantially all amounts on
deposit in the pre-funding accounts and that there will be no
material principal prepayment to the holders of the
certificates. In addition, any purchase of additional mortgage
loans by the trust using funds on deposit in the pre-funding
accounts is subject to the following conditions, among others:
o each additional mortgage loan must satisfy specified
statistical criteria and representations and warranties;
o additional mortgage loans will not be selected in a
manner that is believed to be adverse to the interests
of the holders of the certificates and the certificate
insurer; and
o opinions of counsel will be delivered with concerning
the validity of the conveyance of additional mortgage
loans.
Each additional mortgage loan purchased after the closing date
must satisfy the eligibility criteria referred to above at the
time of its addition. However, these mortgage loans may have
been originated using credit criteria different from those
which were applied to the mortgage loans purchased on the
closing date, and may be of a different credit quality.
Therefore, following the transfer of the additional mortgage
loans to the trust, the aggregate characteristics of the
mortgage loans then held in the trust may vary from those of
the mortgage loans included in the trust on the closing date.
Less stringent underwriting standards and the resultant potential for
delinquencies on the mortgage loans could lead to losses on your securities.
The mortgage loans were made, in part, to borrowers who, for
one reason or another, are not able, or do not wish, to obtain
financing from traditional sources such as commercial banks.
These mortgage loans may be considered to be of a riskier
nature than mortgage loans made by traditional sources of
financing, so that the holders of the certificates may be
deemed to be at greater risk than if the mortgage loans were
made to other types of borrowers.
The underwriting standards used in the origination of the
mortgage loans held by the trust are generally less stringent
than those of Fannie Mae or Freddie Mac concerning a
borrower's credit history and in certain other respects.
Borrowers
S-4
<PAGE>
on the mortgage loans may have an impaired or
unsubstantiated credit history. As a result of this less
stringent approach to underwriting, the mortgage loans
purchased by the trust may experience higher rates of
delinquencies, defaults and foreclosures than mortgage loans
underwritten in a manner which is more similar to the Fannie
Mae and Freddie Mac guidelines.
Geographic concentration of the mortgage loans in particular jurisdictions may
result in greater losses if those jurisdictions experience economic downturns.
Some geographic regions of the United States from time to time
will experience weaker regional economic conditions and
housing markets, and, consequently, will experience higher
rates of loss and delinquency on mortgage loans generally. Any
concentration of the mortgage loans in such a region may
present risk considerations in addition to those generally
present for similar mortgage-backed securities without this
concentration. The mortgaged properties underlying the
mortgage loans are located primarily on the eastern seaboard
of the United States. This may subject the mortgage loans held
by the trust to the risk that a downturn in the economy in
this area of the country would more greatly affect the pool
than if the pool were more diversified.
In particular, the states listed below had the following
percentages of mortgage loans in pool I and pool II, measured
as of _______, ______, which are secured by mortgaged
properties located in the their states:
_____ _____ _____ _____ _____
Pool I % % % % %
Pool II % % % % %
Because of the relative geographic concentration of the
mortgage loans within the States of _____________,
_____________, _____________, _____________ and _____________,
losses on the mortgage loans may be higher than would be the
case if the mortgage loans were more geographically
diversified. For example, some of the mortgaged properties may
be more susceptible to particular types of special hazards,
such as earthquakes and other natural disasters and major
civil disturbances, than residential or commercial properties
located in other parts of the country. In addition, the
economies of _____________, _____________, _____________,
_____________ and _____________ may be adversely affected to a
greater degree than the economies of other areas of the
country by regional developments. If the _____________,
_____________, _____________, _____________ and _____________
residential or commercial real estate markets experience an
overall decline in property values after the dates of
origination of the respective mortgage loans, then the rates
of delinquencies, foreclosures and losses on the mortgage
loans may be expected to increase and this increase may be
substantial.
A portion of the mortgage loans require large balloon payments at maturity;
these balloon loans may involve a greater risk of default due to these large
payments, which could lead to losses on your securities.
Approximately ____% of the mortgage loans in pool I, measured
as of _____, ____, and ____% of the mortgage loans in pool II,
measured as of ____, ____, are not fully amortized over their
terms and instead require substantial balloon payments on
their maturity dates. Because the principal balances of these
balloon loans do not fully amortize over their term, these
balloon loans may
S-5
<PAGE>
involve greater risks of default than mortgage loans whose
principal balance is fully amortized over the term of the
mortgage loan. The borrower's ability to pay the balloon
amount due at maturity of his or her balloon loan will depend
on the borrower's ability to obtain adequate refinancing or
funds from other sources to repay the balloon loan.
The originators believe that the mortgage loans are or will be
adequately collateralized. In light of the collateralization
and the relatively small average size of the mortgage loans,
they believe the borrowers are likely to have the ability to
obtain adequate refinancing or secure funds from other
sources. However, the originators have only limited historical
default data concerning their balloon loans and they do not
believe that their data is sufficient to predict the default
experience of the balloon loans.
Even assuming that the mortgaged properties provide adequate
security for the balloon loans, substantial delays could be
encountered in connection with the liquidation of defaulted
mortgage loans and corresponding delays in the receipt of
proceeds by the holders of the certificates could occur.
A portion of the mortgage loans are secured by subordinate mortgages; in the
event of a default, these mortgage loans are more likely to experience losses.
General economic conditions have an impact on the ability of
borrowers to repay loans. Loss of earnings, illness and other
similar factors may lead to an increase in delinquencies and
bankruptcy filings by borrowers. In the event of a bankruptcy
of a mortgagor, it is possible that the trust could experience
a loss on the mortgagor's mortgage loan. In conjunction with a
mortgagor's bankruptcy, a bankruptcy court may suspend or
reduce the payments of principal and interest to be paid on
the mortgage loan or permanently reduce the principal balance
of the mortgage loan, thus either delaying or permanently
limiting the amount received by the trust on the mortgage
loan. Moreover, in the event a bankruptcy court rejects the
transfer of the mortgaged property to the trust, any remaining
balance on the mortgage loan may not be recoverable.
Approximately _____% of the mortgage loans in pool I, measured
as of ____, _____, and ____% of the mortgage loans in pool II,
measured as of ____, ____, are secured by subordinate or
junior mortgages which are subordinate to the rights of the
holder of the senior mortgages. As a result, the proceeds from
any liquidation, insurance or condemnation proceedings will be
available to satisfy the principal balance of such a mortgage
loan only to the extent that the claims, if any, of each
senior mortgagee are satisfied in full, including any
foreclosure costs. In addition, a holder of a junior mortgage
may not foreclose on the mortgaged property securing the
mortgage unless it forecloses subject to the related senior
mortgages, in which case it must either pay the entire amount
of the senior mortgages to the mortgagees at or prior to the
foreclosure sale or undertake the obligation to make payments
on each senior mortgage in the event of default thereunder. In
servicing business and consumer purpose home equity loans in
its portfolio, it is the servicer's practice to satisfy or
reinstate each such first mortgage at or prior to the
foreclosure sale only to the extent that it determines any
amount so paid will be recoverable from future payments and
collections on the mortgage loans or otherwise. The trust will
have no source of funds to satisfy any senior mortgage or make
payments due to any senior mortgagee.
S-6
<PAGE>
An overall decline in the residential or commercial real
estate markets could adversely affect the values of the
mortgaged properties such that the outstanding principal
balances of the mortgage loans, together with the primary
senior financing thereon, equals or exceeds the value of the
mortgaged properties. Such a decline would adversely affect
the position of a second mortgagee before having such an
effect on that of the first mortgagee. A rise in interest
rates over a period of time and the general condition of the
mortgaged property as well as other factors may have the
effect of reducing the value of the mortgaged property from
the appraised value at the time the mortgage loan was
originated. If there is a reduction in value of the mortgaged
property, the ratio of the amount of the mortgage loan to the
value of the mortgaged property may increase over what it was
at the time the mortgage loan was originated. Such an increase
may reduce the likelihood of liquidation or other proceeds
being sufficient to satisfy the mortgage loan after
satisfaction of any first liens.
Prepayments on the mortgage loans could lead to shortfalls in the payment of
interest on your certificate.
The scheduled monthly payment dates for the mortgage loans
occur throughout a month. When a principal prepayment in full
is made on a mortgage loan, the mortgagor is charged interest
only up to the date of the prepayment, instead of for a full
month. However, the principal receipts will only be passed
through to the holders of the certificates once a month, on
the distribution date which follows the calendar month in
which the prepayment was received by the servicer. The
servicer is obligated to pay, without any right of
reimbursement, those shortfalls in interest collections
payable on the certificates that are attributable to the
difference between the interest paid by a mortgagor in
connection with a prepayment in full and thirty (30) days'
interest on the mortgage loan, but only to the extent of the
servicing fee for that calendar month.
If the servicer fails to make these payments or the shortfall
exceeds the servicing fee, there will be less funds available
for the payment of interest on the related class of
certificates. These shortfalls of interest, if they result in
the inability of the trust to pay the full amount of the
current interest on the related class of certificates, are not
covered by the certificate insurance policy.
Year 2000 issues could lead to delays in payment or losses on your certificate.
There is a significant uncertainty regarding the effect of the
Year 2000 problem because computer systems that do not
properly recognize date sensitive information when the year
changes to 2000 could generate erroneous data or altogether
fail. The servicer and its affiliates have assessed their
internal systems, programs and data processing applications as
well as those provided to them by third-party vendors
concerning Year 2000 data processing issues. The servicer and
its affiliates believe that the computer equipment and
software used by them will function properly for dates in the
Year 2000 and thereafter. The servicer and its affiliates have
not incurred significant expense to date, and do not
anticipate incurring significant future expense, to address
Year 2000 issues although there can be no assurance that the
servicer and its affiliates will not incur significant future
expenses. However, third parties that have relationships with
them, including vendors and borrowers, may experience
significant Year 2000 issues. These issues may have a serious
adverse effect on the operations of these third parties,
including a shut-down of operations for a period
S-7
<PAGE>
of time, which may, in turn, have a material adverse effect on
their business, financial condition and results of operations.
If DTC experiences year 2000 problems, you could experience delays in payment or
losses on your certificate.
The management of DTC is aware that some computer
applications, systems and the like for processing data that
are dependant upon calendar dates, including dates before, on
and after January 1, 2000, may encounter year 2000 issues. DTC
has informed its participants and members of the financial
community that it has developed and is implementing a program
so that its systems, as the same relate to the timely payment
of distributions, including principal and interest payments,
to securityholders, book-entry deliveries, and settlement of
trades within DTC continue to function appropriately on and
after January 1, 2000. This program includes a technical
assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is
expected to be completed within appropriate time frames.
However, DTC's ability to properly perform its services is
also dependent upon other parties, including, but not limited
to, issuers, their agents and its participating organizations
as well as third party vendors on whom DTC relies for
information or the provision of services, including
telecommunication and electrical utility service providers
among others. DTC has informed the financial community that it
is contacting, and will continue to contact, third party
vendors from whom DTC acquires services to: (i) impress upon
them the importance of these services being Year 2000
compliant and (ii) determine the extent of their efforts for
Year 2000 remediation and, as appropriate, testing of their
services. In addition, DTC has stated that it is in the
process of developing contingency plans as it deems
appropriate.
If problems associated with the year 2000 issue were to occur
with respect to DTC and the services described above,
distributions to the beneficial owners of certificates could
be delayed or otherwise adversely affected.
According to DTC, the foregoing information concerning DTC has
been provided to the financial community for information
purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
S-8
<PAGE>
Some of the terms used in this prospectus supplement are capitalized.
These capitalized terms have specified definitions, which are included at the
end of this prospectus supplement under the heading "Glossary."
TRANSACTION OVERVIEW
Parties
The Sponsor. Prudential Securities Secured Financing Corporation, a
Delaware corporation. The principal executive office of the sponsor is located
at One New York Plaza, 14th Floor, New York, New York 10292, and its telephone
number is (212) 778-1000.
The Depositor. ________________, a __________ corporation, which is
owned by the originators. The principal executive office of the depositor is at
___________________________, and its telephone number is _____________.
The Originators. _____________, a _____________ corporation, and
_____________, a _____________ corporation, originated or purchased the mortgage
loans. For a description of the business of the originators, see "The
Originators, the Depositor and the Servicer" in this prospectus supplement.
The Servicer and the Subservicers. _____________ will act as servicer
of the mortgage loans, and _____________ and _____________ will act as
subservicers for different portions of the mortgage loans. For a description of
the business of the servicer, see "The Originators, the Depositor and the
Servicer" in this prospectus supplement.
The Trustee. _____________, a _____________ banking corporation. The
corporate trust office of the trustee is located at _____________, and its
telephone number is _____________. For a description of the trustee and its
responsibilities with respect to the certificates, see "The Trustee" in this
prospectus supplement.
The Collateral Agent. _________________________, a national banking
association. The corporate trust office of the collateral agent is located at
________________________, and its telephone number is ______________.
The Certificate Insurer. ___________________________, a _____________
financial guaranty insurance company. The certificate insurer will issue a
financial guaranty insurance policy for the benefit of the holders of the
certificates. For a description of the business and selected financial
information of the certificate insurer, see "The Certificate Insurance Policy"
and "The Certificate Insurer" in this prospectus supplement.
The Rating Agencies. [Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, Inc.] and [Moody's Investors Service, Inc.] will
issue ratings for each class of certificates.
The Transaction
Formation of the Trust and Issuance of the Certificates. The trust will
be formed pursuant to the terms of a Pooling and Servicing Agreement, dated as
of _____________, between the trustee, the collateral agent, the servicer and
the depositor. Under the Pooling and Servicing Agreement, the trust will also
issue the certificates to the depositor, together evidencing the entire
beneficial ownership interest in the sub-trust of the trust consisting of a pool
of mortgage loans.
S-9
<PAGE>
Sale and Servicing of the Mortgage Loans. The mortgage loans have been
originated or purchased by the originators pursuant to their respective
underwriting guidelines, as described under "The Originators, the Depositor and
the Servicer." The originators will sell the mortgage loans to the depositor,
pursuant to Loan Sale Agreement, dated as of _____________, among the
originators and the depositor. The depositor will deposit the mortgage loans in
the trust pursuant to the Pooling and Servicing Agreement. The servicer will
service the mortgage loans pursuant to the terms of the Pooling and Servicing
Agreement.
Issuance of the Certificate Insurance Policy. The certificate insurer
will issue the certificate insurance policy pursuant to the terms of an
Insurance and Indemnity Agreement, dated as of _____________, among the
certificate insurer, the trust, the depositor, the originators and the servicer.
THE MORTGAGE LOAN POOLS
General
Difference between Statistical Calculation Date and Closing Date Pools.
The statistical information presented in this prospectus supplement concerning
the mortgage loans is based on the pools of mortgage loans that existed on a
statistical calculation date, in this case _______, ____. Pool I aggregated
$_____________ as of the statistical calculation date and pool II aggregated
$_____________ as of the statistical calculation date. The depositor expects
that the actual pools on the closing date will represent approximately
$_____________ in aggregate principal balance of mortgage loans in pool I, as of
the Cut-Off Date and approximately $_____________ in aggregate principal balance
of mortgage loans in pool II, as of the Cut-Off Date. The additional mortgage
loans will represent mortgage loans acquired or to be acquired by the trust on
or prior to the closing date. In addition, with respect to the pools as of the
statistical calculation date as to which statistical information is presented in
this prospectus supplement, some amortization will occur prior to the closing
date. Moreover, some mortgage loans included in the pools as of the statistical
calculation date may prepay in full, or may be determined not to meet the
eligibility requirements for the final pools, and may not be included in the
final pools. As a result of the foregoing, the statistical distribution of
characteristics as of the closing date for the final mortgage loan pools will
vary somewhat from the statistical distribution of the characteristics as of the
statistical calculation date as presented in this prospectus supplement,
although this variance should not be material. In the event that the depositor
does not, as of the closing date, have the full amount of mortgage loans which
the depositor expects to sell to the trust on this date, the depositor will
increase the size of the pre-funding accounts and the capitalized interest
accounts, as applicable.
Additional mortgage loans are intended to be purchased by the trust
from time to time on or before _____________ from funds on deposit in the
pre-funding accounts. These subsequent mortgage loans to be purchased by the
trust, if available, will be originated or purchased by the originators, sold by
the originators to the depositor and then sold by the depositor to the trust.
The Pooling and Servicing Agreement will provide that the mortgage loans,
following the conveyance of the subsequent mortgage loans, must in the aggregate
conform to specified characteristics described below under " -- Conveyance of
subsequent mortgage loans."
Unless otherwise noted, all statistical percentages in this prospectus
supplement are approximate and are measured by the aggregate principal balance
of the applicable mortgage loans in relation to the aggregate principal balance
of the mortgage loans in the applicable pool, in each case, as of the
statistical calculation date.
The mortgage loans will be predominantly business or consumer purpose
residential home equity loans used to refinance an existing mortgage loan, to
consolidate debt, or to obtain cash proceeds by
S-10
<PAGE>
borrowing against the mortgagor's equity in the mortgaged property in order to
provide funds for, working capital for business, business expansion, equipment
acquisition, or personal acquisitions. The mortgaged properties securing the
mortgage loans consist primarily of single-family residences -- which may be
detached, part of a multi-family dwelling, a condominium unit, a townhouse, a
mobile home or a unit in a planned unit development -- and commercial or mixed
use property. The mortgaged properties may be owner-occupied properties, which
includes second and vacation homes, non-owner occupied investment properties or
business purpose properties.
The majority of the mortgage loans have a prepayment fee clause. These
prepayment fee clauses generally provide that the mortgagor pay, upon
prepayment, one or more of the following:
o a fee equal to a percentage, negotiated at origination, of the
outstanding principal balance of the mortgage loan,
o a fee which is designed to allow the holder of the mortgage
note to earn interest on the mortgage loan as if the mortgage
loan remained outstanding until a designated point in time, or
o a fee equal to the amount of interest on the outstanding
principal balance of the mortgage loan calculated pursuant to
a rule of 78's calculation, which has the effect of requiring
the mortgagor to pay a greater amount of interest than would
be required to be paid if the actuarial method of calculating
interest was utilized.
The Pool I Mortgage Loans
As of the statistical calculation date, each of the mortgage loans in
pool I had a remaining term to maturity of no greater than 360 months and had a
mortgage interest rate of at least ____% per annum.
The combined loan-to-value ratios or CLTV's described in this
prospectus supplement were calculated based upon the appraised values of the
mortgaged properties at the time of origination. No assurance can be given that
the appraised values of the mortgaged properties have remained or will remain at
the levels that existed on the dates of origination of the mortgage loans. If
property values decline such that the outstanding principal balances of the
mortgage loans, together with the outstanding principal balances of any first
liens, become equal to or greater than the value of the mortgaged properties,
the actual rates of delinquencies, foreclosures and losses could be higher than
those historically experienced by the servicer, as desscribed below under "The
Originators, the Depositor and the Servicer -- Delinquency and Loan Loss
Experience," and in the mortgage lending industry generally.
As of the statistical calculation date, the mortgage loans in pool I
had the following characteristics:
o there were ___ mortgage loans under which the mortgaged
properties are located in __ states,
o the aggregate principal balance, after application of all
payments due on or before the statistical calculation date,
was $_____________,
o the minimum principal balance was $_____________, the maximum
principal balance was $_____________, and the average
principal balance was $_____________,
o the mortgage interest rates ranged from _____% to ____% per
annum, and the weighted average mortgage interest rate was
approximately ____% per annum,
o the original term to stated maturity ranged from ___ months to
360 months,
S-11
<PAGE>
o the remaining term to stated maturity ranged from __ months to
____ months, the weighted average original term to stated
maturity was approximately ___ months and the weighted average
remaining term to stated maturity was approximately ____
months,
o no mortgage loan had a maturity later than _________,
o approximately _______% of the aggregate principal balance of
the mortgage loans require monthly payments of principal that
will fully amortize these mortgage loans by their respective
maturity dates, and approximately ____% of the aggregate
principal balance of the mortgage loans are balloon loans,
o the weighted average CLTV was approximately _____%,
o approximately _____% of mortgage loans are secured by first
liens, and approximately _____% of mortgage loans are secured
by second liens, and
o approximately _____%, _____%, ____%, _____% and ____% of the
mortgage loans are secured by mortgaged properties located in
the States of _____________, _____________, _____________,
_____________ and _____________, respectively.
On or prior to _____________, the trust is expected to purchase,
subject to availability, subsequent mortgage loans to be added to pool I. The
maximum aggregate principal balance of subsequent mortgage loans that may be
purchased is expected to be approximately $_____________.
The following tables present statistical information on the mortgage
loans in pool I. Due to rounding, the percentages shown may not precisely total
100.00%.
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
State Mortgage Loans Principal Balance Balance
----- -------------- ----------------- --------------------
TOTAL
S-12
<PAGE>
DISTRIBUTION OF CLTV RATIOS
Pool I
% of Statistical
Calculation Date
Original Number of Aggregate Unpaid Aggregate Principal
CLTV Range Mortgage Loans Principal Balance Balance
---------- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF GROSS MORTGAGE INTEREST RATES
Pool I
% of Statistical
Gross Calculation Date
Mortgage Interest Number of Aggregate Unpaid Aggregate Principal
Rate Range Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL TERMS TO MATURITY
(in months)
Pool I
% of Statistical
Range of Calculation Date
Original Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF REMAINING TERMS TO MATURITY
(in months)
Pool I
% of Statistical
Range of Calculation Date
Remaining Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES
Pool I
Range of % of Statistical
Original Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-13
<PAGE>
DISTRIBUTION OF CURRENT PRINCIPAL BALANCES
Pool I
Range of % of Statistical
Current Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY LIEN STATUS
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Lien Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY AMORTIZATION TYPE
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Amortization Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY OCCUPANCY STATUS
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Occupancy Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY PROPERTY TYPE
Pool I
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Property Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-14
<PAGE>
The Pool II Mortgage Loans
As of the statistical calculation date, each of the mortgage loans in
pool II had a remaining term to maturity of no greater than 360 months and had a
mortgage interest rate of at least _____% per annum.
The CLTVs described in this prospectus supplement were calculated based
upon the appraised values of the mortgaged properties at the time of
origination. No assurance can be given that the appraised values of the
mortgaged properties have remained or will remain at the levels that existed on
the dates of origination of the mortgage loans. If property values decline such
that the outstanding principal balances of the mortgage loans, together with the
outstanding principal balances of any first liens, become equal to or greater
than the value of the mortgaged properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those historically experienced by
the servicer, as described below under "The Originators, the Depositor and the
Servicer -- Delinquency and Loan Loss Experience," and in the mortgage lending
industry.
As of the statistical calculation date, the mortgage loans in pool II
had the following characteristics:
o there were ___ mortgage loans under which the mortgaged
properties are located in ___ states,
o the aggregate principal balance, after application of all
payments due on or before the statistical calculation date,
was $_____________,
o the minimum principal balance was $_____________, the maximum
principal balance was $_____________, and the average
principal balance was $_____________,
o the mortgage interest rates ranged from ____% to ___% per
annum, and the weighted average mortgage interest rate was
approximately ___% per annum,
o the original term to stated maturity ranged from __ months to
360 months,
o the remaining term to stated maturity ranged from __ months to
___ months, the weighted average original term to stated
maturity was approximately ___ months and the weighted average
remaining term to stated maturity was approximately ___
months,
o no mortgage loan had a maturity later than _____________,
o approximately ____% of the aggregate principal balance of the
mortgage loans require monthly payments of principal that will
fully amortize these mortgage loans by their respective
maturity dates, and approximately ____% of the aggregate
principal balance of the mortgage loans are balloon loans,
o the weighted average CLTV was approximately ____%,
o approximately ____% of mortgage loans are secured by first
liens, and approximately ____% of mortgage loans are secured
by second liens, and
o approximately ___%, ___%, ____%, ____% and ____% of the
mortgage loans are secured by mortgaged properties located in
the States of _____________, _____________, _____________,
_____________ and _____________, respectively.
On or prior to _____________, the trust is expected to purchase,
subject to availability, subsequent mortgage loans to be added to pool II. The
maximum aggregate principal balance of subsequent mortgage loans that may be
purchased is expected to be approximately $_____________.
S-15
<PAGE>
The following tables present statistical information on the mortgage
loans in pool II. Due to rounding, the percentages shown may not precisely total
100.00%.
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
State Mortgage Loans Principal Balance Balance
----- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF CLTV RATIOS
Pool II
% of Statistical
Calculation Date
Original Number of Aggregate Unpaid Aggregate Principal
CLTV Range Mortgage Loans Principal Balance Balance
---------- -------------- ----------------- --------------------
TOTAL
DISTRIBUTION OF GROSS MORTGAGE INTEREST RATES
Pool II
% of Statistical
Gross Calculation Date
Mortgage Interest Number of Aggregate Unpaid Aggregate Principal
Rate Range Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF ORIGINAL TERMS TO MATURITY
(in months)
Pool II
% of Statistical
Range of Calculation Date
Original Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF REMAINING TERMS TO MATURITY
(in months)
Pool II
% of Statistical
Range of Calculation Date
Remaining Terms Number of Aggregate Unpaid Aggregate Principal
(in months) Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-16
<PAGE>
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES
Pool II
Range of % of Statistical
Original Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION OF CURRENT PRINCIPAL BALANCES
Pool II
Range of % of Statistical
Current Mortgage Calculation Date
Loan Principal Number of Aggregate Unpaid Aggregate Principal
Balances Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY LIEN STATUS
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Lien Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY AMORTIZATION TYPE
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Amortization Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY OCCUPANCY STATUS
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Occupancy Status Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
DISTRIBUTION BY PROPERTY TYPE
Pool II
% of Statistical
Calculation Date
Number of Aggregate Unpaid Aggregate Principal
Property Type Mortgage Loans Principal Balance Balance
- ----------------- -------------- ----------------- --------------------
TOTAL
======= ============== ==========
S-17
<PAGE>
Conveyance of subsequent mortgage loans
The Pooling and Servicing Agreement permits the trust to acquire
subsequent mortgage loans with the funds on deposit in the pre-funding accounts.
It is expected that the amount on deposit in the pre-funding accounts on the
closing date will be approximately $_____________ for pool I and $_____________
for pool II. Accordingly, the statistical characteristics of the mortgage loans
in pool I and pool II will vary as of any subsequent cut-off date upon the
acquisition of subsequent mortgage loans.
The obligation of the trust to purchase the subsequent mortgage loans
on any subsequent transfer date during the Pre-Funding Period is subject to the
following requirements:
o the subsequent mortgage loan may not be 30 or more days
contractually delinquent as of a subsequent cut-off date which
is the close of business on the last day of the calendar month
preceding the month in which the subsequent mortgage loan was
purchased by the trust;
o the original term to maturity of the subsequent mortgage loan
may not exceed 360 months for pool I and 360 months for pool
II;
o the subsequent mortgage loan must have a mortgage interest
rate of at least ____% for pool I and ____% for pool II;
o the purchase of the subsequent mortgage loans is consented to
by the certificate insurer and the rating agencies,
notwithstanding the fact that the subsequent mortgage loans
meet the parameters stated in this prospectus supplement;
o the principal balance of any subsequent mortgage loan may not
exceed $_____________ for pool I and $_____________ for pool
II;
o no more than _____% for pool I and ____% for pool II of the
aggregate principal balance of the subsequent mortgage loans
may be second liens;
o no such subsequent mortgage loan shall have a CLTV of more
than (a) for consumer purpose loans, ___% for pool I and ____%
for pool II, and (b) for business purpose loans, ___% for pool
I and ___% for pool II;
o no more than ____% for pool I and ___% for pool II of the
subsequent mortgage loans may be balloon loans;
o no more than ____% for pool I and ____% for pool II of the
subsequent mortgage loans may be secured by mixed-use
properties, commercial properties, or five or more unit
multifamily properties; and
o following the purchase of the subsequent mortgage loans by the
trust, the mortgage loans, including the subsequent mortgage
loans, (a) will have a weighted average mortgage interest
rate, (I) for consumer purpose loans, of at least ____% for
pool I and ____% for pool II and (II) for business purpose
loans, of at least ____% for pool I and ____% for pool II; and
(b) will have a weighted average CLTV of not more than (I) for
consumer purpose loans, ____% for pool I and ____% for pool
II, and (II) for business purpose loans, ____% for pool I and
____% for pool II.
The Pooling and Servicing Agreement will provide that any of these
requirements may be waived or modified in any respect upon prior written consent
of the certificate insurer, with the exception of the requirements concerning
maximum principal balance.
S-18
<PAGE>
THE ORIGINATORS, THE DEPOSITOR AND THE SERVICER
[Corporate description]
[To be supplied by originators, depositor and servicer]
Underwriting Guidelines
[To be supplied by originators]
The Servicer
[To be supplied by servicer]
Delinquency and Loan Loss Experience
The following tables present information relating to the delinquency
and loan loss experience on the mortgage loans included in originators servicing
portfolio for the periods shown. The delinquency and loan loss experience
represents the historical experience of the originators, and there can be no
assurance that the future experience on the mortgage loans in the trust will be
the same as, or more favorable than, that of the mortgage loans in the
originators' overall servicing portfolio.
Delinquency and Foreclosure Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
At At At
------------------ ------------------- -------------------
% of % of % of
Amount Amount Amount Amount Amount Amount
Serviced Serviced Serviced Serviced Serviced Serviced
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Servicing portfolio..............
Past due loans(1):
60-89 days...................
90 days or more .............
-------- -------- -------- -------- -------- --------
Total past due loans(2)..........
REO Properties(3)................
-------- -------- -------- -------- -------- --------
Total past due loans,
foreclosures pending and REO
Properties(3)....................
</TABLE>
(1) The past due period is based on the actual number of days that a payment
is contractually past due. A loan as to which a monthly payment was due
60-89 days prior to the reporting period is considered 60-89 days past
due, etc.
(2) Includes pending foreclosures.
(3) An "REO property" is a property acquired and held as a result of
foreclosure or deed in lieu of foreclosure.
S-19
<PAGE>
Loan Charge-Off Experience
(Dollars in Thousands)
At At At
--------- -------- -------
Servicing portfolio at period end......
Average outstanding(1).................
Gross losses(2)......................
Loan recoveries......................
Net loan charge-offs.................
Net loan charge-offs as a percentage
of servicing portfolio at period end.
Net loan charge-offs as a percentage
of average outstanding...............
(1) "Average outstanding" presented is the arithmetic average of the principal
balances of the loans in the originators' servicing portfolio outstanding
at the opening and closing of business for this period.
(2) "Gross losses" means the outstanding principal balance plus accrued but
unpaid interest on liquidated mortgage loans.
While the above delinquency and foreclosure and loan charge-off
experiences are typical of the originators' experiences at the dates for the
periods indicated, there can be no assurance that the delinquency and
foreclosure and loan charge-off experiences on the mortgage loans will be
similar. Accordingly, the information should not be considered to reflect the
credit quality of the mortgage loans included in the trust, or as a basis of
assessing the likelihood, amount or severity of losses on the mortgage loans.
The statistical data in the tables is based on all of the mortgage loans in the
originators' servicing portfolio. The mortgage loans, in general, may have
characteristics which distinguish them from the majority of the loans in the
originators' servicing portfolio.
THE TRUSTEE
________________________, a ____________ banking corporation, has an
office at ________________________. The trustee will act as initial
authenticating agent, paying agent and certificate registrar pursuant to the
terms of the Pooling and Servicing Agreement.
THE COLLATERAL AGENT
________________________, a national banking association, has its
corporate trust office at ________________________. The collateral agent's
duties are limited solely to its express obligations under the Pooling and
Servicing Agreement.
DESCRIPTION OF THE CERTIFICATES
On the closing date, the trust will issue the class A-1 certificates,
the class A-2 certificates and both classes of class R certificates pursuant to
the Pooling and Servicing Agreement. Each class A-1 certificate represents a
beneficial ownership interest in the portion of the trust estate consisting of
the pool I mortgage loans and, to the extent provided in this prospectus
supplement, the pool II mortgage loans. Each class A-2 certificate represents a
beneficial ownership interest in the portion of the trust estate consisting of
the pool II mortgage loans and, to the extent provided in this prospectus
supplement, the pool I mortgage loans. Pursuant to the Pooling and Servicing
Agreement, the trust will also issue two class R certificates, one relating to
the class A-1 certificates and the other relating to the class A-2
S-20
<PAGE>
certificates. Together the class A certificate and the related class R
certificate represent the entire beneficial ownership interest in the portion of
the trust consisting of the related pool of mortgage loans. None of the class R
certificates may be transferred without the consent of the certificate insurer
and compliance with the transfer provisions of the Pooling and Servicing
Agreement.
The trust estate consists of
o the mortgage loans, together with the mortgage files relating
thereto and all collections thereon and proceeds thereof
collected after the Cut-Off Date,
o the assets as from time to time are identified as REO property
and collections thereon and proceeds thereof,
o assets that are deposited in the accounts relating to the
trust, including amounts on deposit in the Accounts and
invested in accordance with the Pooling and Servicing
Agreement,
o the trustee's rights with respect to the mortgage loans under
all insurance policies required to be maintained pursuant to
the Pooling and Servicing Agreement and any insurance
proceeds,
o Liquidation Proceeds and
o released mortgaged property proceeds. In addition, the
depositor will cause the certificate insurer to issue the
certificate insurance policy under which it will guarantee
payments to the holders of the certificates as described in
this prospectus supplement.
The class A certificates will be issued only in book-entry form, in
denominations of $1,000 initial principal balance and integral multiples of
$1,000 in excess thereof, except that one certificate of each class may be
issued in a different amount.
Book-Entry Registration
The certificates are sometimes referred to in this prospectus
supplement as "book-entry certificates." No person acquiring an interest in the
book-entry certificates will be entitled to receive a definitive certificate
representing an obligation of the trust, except under the limited circumstances
described in this prospectus supplement. beneficial owners may elect to hold
their interests through DTC, in the United States, or Cedelbank or the Euroclear
System, in Europe. Transfers within DTC, Cedelbank or Euroclear, as the case may
be, will be in accordance with the usual rules and operating procedures of the
relevant system. So long as the certificates are book-entry certificates, these
certificates will be evidenced by one or more certificates registered in the
name of Cede & Co., which will be the "holder" of these certificates, as the
nominee of DTC or one of the relevant depositaries. Cross-market transfers
between persons holding directly or indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through Cedelbank or Euroclear, on
the other, will be effected in DTC through The Chase Manhattan Bank, the
relevant depositories of Cedelbank or Euroclear, respectively, and each a
participating member of DTC. The certificates will initially be registered in
the name of Cede & Co.. The interests of the holders of these certificates will
be represented by book-entries on the records of DTC and participating members
thereof. All references in this prospectus supplement to any certificates
reflect the rights of beneficial owners only as these rights may be exercised
through DTC and its participating organizations for so long as these
certificates are held by DTC.
The beneficial owners of certificates may elect to hold their
certificates through DTC in the United States, or Cedelbank or Euroclear if they
are participants in these systems, or indirectly through organizations which are
participants in these systems. The book-entry certificates will be issued in one
or more certificates per class of certificates which in the aggregate equal the
outstanding principal balance of the related class of certificates and will
initially be registered in the name of Cede & Co., the nominee of DTC. Cedelbank
and Euroclear will hold omnibus positions on behalf of their participants
through
S-21
<PAGE>
customers' securities accounts in Cedelbank's and Euroclear's names on
the books of their respective depositaries which in turn will hold such
positions in customers' securities accounts in the depositaries' names on the
books of DTC. Chase will act as depositary for Cedelbank and Morgan Guaranty
Trust Company of New York will act as depositary for Euroclear. Investors may
hold their beneficial interests in the book-entry certificates in minimum
denominations representing principal amounts of $1,000. Except as described
below, no beneficial owner will be entitled to receive a physical or definitive
certificate representing this certificate. Unless and until definitive
certificates are issued, it is anticipated that the only "holder" of these
certificates will be Cede & Co., as nominee of DTC. beneficial owners will not
be "holders" or "certificateholders" as those terms are used in the Pooling and
Servicing Agreement. Beneficial owners are only permitted to exercise their
rights indirectly through participants and DTC.
The beneficial owner's ownership of a book-entry certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains the beneficial owner's account for such
purpose. In turn, the financial intermediary's ownership of the book-entry
certificate will be recorded on the records of DTC or on the records of a
participating firm that acts as agent for the financial intermediary, whose
interest will in turn be recorded on the records of DTC, if the beneficial
owner's financial intermediary is not a DTC participant and on the records of
Cedelbank or Euroclear, as appropriate.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. participants
include securities brokers and dealers, including the underwriter, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly through "indirect participants".
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers of book-entry
certificates, such as the certificates, among participants on whose behalf it
acts for the book-entry certificates and to receive and transmit distributions
of principal of and interest on the book-entry certificates. Participants and
indirect participants with which beneficial owners have accounts with respect to
the book-entry certificates similarly are required to make book-entry transfers
and receive and transmit these payments on behalf of their respective beneficial
owners.
Beneficial owners that are not participants or indirect participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, book-entry certificates may do so only through participants and
indirect participants. In addition, beneficial owners will receive all
distributions of principal and interest from the trustee, or a paying agent on
behalf of the trustee, through DTC participants. DTC will forward these
distributions to its participants, which thereafter will forward them to
indirect participants or beneficial owners. beneficial owners will not be
recognized by the trustee, the servicer or any paying agent as holders of the
certificates, and beneficial owners will be permitted to exercise the rights of
the holders of the certificates only indirectly through DTC and its
participants.
Because of time zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. These credits or any transactions in the
securities settled during this processing will be reported to the relevant
Euroclear or Cedelbank
S-22
<PAGE>
participants on that business day. Cash received in Cedelbank or Euroclear as a
result of sales of securities by or through a Cedelbank participant or Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Cedelbank or Euroclear
cash account only as of the business day following settlement in DTC. For
information concerning tax documentation procedures relating to the
certificates, see "Certain Federal Income Tax Consequences -- REMIC Securities"
in the accompanying prospectus.
Transfers between participants will occur in accordance with DTC rules.
Transfers between Cedelbank participants and Euroclear participants will occur
in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
participants or Euroclear participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the relevant depositary; however, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in this system in accordance
with its rules and procedures and within its established deadlines. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to the relevant depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same day funds settlement applicable to DTC. Cedelbank
participants and Euroclear participants may not deliver instructions directly to
the European Depositaries.
Cedelbank is incorporated under the laws of Luxembourg as a
professional depository. Cedelbank holds securities for its participant
organizations and facilitates the clearance and settlement of securities
transactions between Cedelbank participants through electronic book-entry
changes in accounts of Cedelbank participants, thereby eliminating the need for
physical movement of certificates. Transactions may be settled in Cedelbank in
any of 28 currencies, including United States dollars. Cedelbank provides to its
Cedelbank participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedelbank interfaces with domestic markets
in several countries. As a professional depository, Cedelbank is subject to
regulation by the Luxembourg Monetary Institute. Cedelbank participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to Cedelbank is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedelbank participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 31 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear Operator,
and all Euroclear Securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not Euroclear Clearance. Euroclear
Clearance establishes policy for Euroclear on behalf of Euroclear participants.
Euroclear participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries. Indirect
access to
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Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the Operating Procedures of the Euroclear System and applicable Belgian law. The
Terms and Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments on
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear operator acts under the Terms and Conditions
only on behalf of Euroclear participants, and has no record of or relationship
with persons holding through Euroclear participants.
Distributions on the book-entry certificates will be made on each
distribution date by the trustee to Cede & Co., as nominee of DTC. DTC will be
responsible for crediting the amount of these payments to the accounts of the
applicable DTC participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing this payment to the beneficial
owners of the book-entry certificates that it represents and to each financial
intermediary for which it acts as agent. Each financial intermediary will be
responsible for disbursing funds to the beneficial owners of the book-entry
certificates that it represents.
Under a book-entry format, beneficial owners of the book-entry
certificates may experience some delay in their receipt of payments, since these
payments will be forwarded by the trustee to Cede & Co., as nominee of DTC.
Distributions on certificates held through Cedelbank or Euroclear will be
credited to the cash accounts of Cedelbank participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by the relevant depositary. These distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. Because DTC can only act on behalf of financial intermediaries, the
ability of a beneficial owner to pledge book-entry certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of the book-entry certificates, may be limited due to the lack of
physical certificates for the book-entry certificates. In addition, issuance of
the book-entry certificates in book-entry form may reduce the liquidity of the
certificates in the secondary market since some potential investors may be
unwilling to purchase certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the trust provided by the trustee to Cede
& Co., as nominee of DTC, may be made available to beneficial owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting DTC, and to the financial intermediaries to whose DTC accounts the
book-entry certificates of the beneficial owners are credited.
DTC has advised the depositor and the servicer that it will take any
action permitted to be taken by a holder of the certificates under the Pooling
and Servicing Agreement only at the direction of one or more participants to
whose accounts with DTC the book-entry certificates are credited. Additionally,
DTC has advised the depositor that it will take these actions concerning
specified percentages of voting rights only at the direction of and on behalf of
participants whose holdings of book-entry certificates evidence the specified
percentages of voting rights. DTC may take conflicting actions with respect to
percentages of voting rights to the extent that participants whose holdings of
book-entry certificates evidence the percentages of voting rights authorize
divergent action.
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None of the trust, the depositor, the servicer, the certificate insurer
or the trustee will have any responsibility for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
book-entry certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of certificates among participants
of DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform these procedures and these procedures may be discontinued at
any time.
Definitive Certificates
The certificates, which will be issued initially as book-entry
certificates, will be converted to definitive certificates and reissued to
beneficial owners or their nominees, rather than to DTC or its nominee, only if
(a) DTC or the servicer advises the trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository of the
book-entry certificates and DTC or the servicer is unable to locate a qualified
successor or (b) the trustee, at its option, elects to terminate the book-entry
system through DTC.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC will be required to notify all participants of the availability
through DTC of definitive certificates. Upon delivery of definitive
certificates, the trustee will reissue the book-entry certificates as definitive
certificates to beneficial owners. Distributions of principal of, and interest
on, the book-entry certificates will thereafter be made by the trustee, or a
paying agent on behalf of the trustee, directly to holders of definitive
certificates in accordance with the procedures set forth in the Pooling and
Servicing Agreement.
Definitive certificates will be transferable and exchangeable at the
offices of the trustee or the certificate registrar. No service charge will be
imposed for any registration of transfer or exchange, but the trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
Assignment and Pledge of Initial Mortgage Loans
Pursuant to the Loan Sale Agreement, the originators will sell,
transfer, assign, set over and otherwise convey the mortgage loans, without
recourse, to the depositor on the closing date. Pursuant to the Pooling and
Servicing Agreement, the depositor will sell, transfer, assign, set over and
otherwise convey without recourse to the trustee, on behalf of the trust, all
right, title and interest in and to each mortgage loan, including all principal
outstanding as of, and interest due after, the Cut-Off Date. Each transfer will
convey all right, title and interest in and to (a) principal outstanding as of
the Cut-Off Date, and (b) interest due on each mortgage loan after the Cut-Off
Date; provided, however, that the originators will not convey, and the
originators reserve and retain all their respective right, title and interest in
and to, (i) principal, including principal prepayments in full and curtailments
(i.e., partial prepayments), received on each mortgage loan on or prior to the
Cut-Off Date and (ii) interest due on each mortgage loan on or prior to the
Cut-Off Date.
Assignment and Pledge of Subsequent Mortgage Loans
The trust may acquire subsequent mortgage loans with the funds on
deposit in either pre-funding account at any time during the period from the
closing date until the earliest of (i) the date on which the amount on deposit
in pre-funding account is less than $100,000, (ii) the date on which an event of
default occurs under the terms of the Pooling and Servicing Agreement, or (iii)
the close of business on ____________. The amount on deposit in the pre-funding
accounts will be reduced during the this period by the amount thereof used to
purchase subsequent mortgage loans in accordance with the terms of the
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Pooling and Servicing Agreement. The depositor expects that the amount on
deposit in each of the pre-funding accounts will be reduced to less than
$100,000 by ____________. To the extent funds in the pre-funding accounts are
not used to purchase subsequent mortgage loans by ____________, these funds will
be used to prepay the principal of the related class of certificates on the
following distribution date. Subsequent mortgage loans will be transferred by
the originators to the depositor and transferred by the depositor to the trust.
The trust will then pledge the subsequent mortgage loans to the trustee, on
behalf of the holders of the certificates and the certificate insurer.
Delivery of Mortgage Loan Documents
In connection with the sale, transfer, assignment or pledge of the
mortgage loans to the trust, the trust will cause to be delivered to the
collateral agent, on behalf of the trustee, on the closing date, the following
documents concerning each mortgage loan which constitute the mortgage file:
(a) the original mortgage note, endorsed without recourse in blank
by the originator, including all intervening endorsements
showing a complete chain of endorsement;
(b) the original mortgage with evidence of recording indicated
thereon or, in limited circumstances, a copy thereof certified
by the applicable recording office;
(c) the recorded mortgage assignment(s), or copies thereof
certified by the applicable recording office, if any, showing
a complete chain of assignment from the originator of the
mortgage loan to the originator -- which assignment may, at
the originator's option, be combined with the assignment
referred to in clause (d) below;
(d) a mortgage assignment in recordable form, which, if acceptable
for recording in the relevant jurisdiction, may be included in
a blanket assignment or assignments, of each mortgage from the
originator to the trustee;
(e) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of
a mortgage or mortgage note have been modified or the mortgage
or mortgage note has been assumed; and
(f) an original title insurance policy or (A) a copy of the title
insurance policy, or (B) a binder thereof or copy of the
binder together with a certificate from the originator that
the original mortgage has been delivered to the title
insurance company that issued the binder for recordation.
Pursuant to the Pooling and Servicing Agreement, the collateral agent,
on behalf of the trustee, agrees to execute and deliver on or prior to the
closing date, or, for subsequent mortgage loans, on or prior to the subsequent
transfer date, an acknowledgment of receipt of the original mortgage note, item
(a) above, for each of the mortgage loans, with any exceptions noted. The
collateral agent, on behalf of the trustee, agrees, for the benefit of the
holders of the certificates and the certificate insurer, to review, or cause to
be reviewed, each mortgage file within thirty (30) days after the closing date
or the subsequent transfer date, as applicable -- or, for any Qualified
Substitute Mortgage Loan, within thirty (30) days after the receipt by the
collateral agent thereof -- and to deliver a certification generally to the
effect that, as to each mortgage loan listed in the schedule of mortgage loans,
(a) all documents required to be delivered to it pursuant to the Pooling and
Servicing Agreement are in its possession, (b) each of these documents has been
reviewed by it and has not been mutilated, damaged, torn or otherwise physically
altered, appears regular on its face and relates to the mortgage loan, and (c)
based on its examination and only as to the foregoing documents, specified
information included on the schedule of mortgage loans accurately reflects the
information included in the mortgage file delivered on that date.
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If the collateral agent, during the process of reviewing the mortgage
files, finds any document constituting a part of an mortgage file which is not
executed, has not been received or is unrelated to the mortgage loans, or that
any mortgage loan does not conform to the requirements above or to the
description thereof as included in the schedule of mortgage loans, the
collateral agent shall promptly so notify the trustee, the servicer, the
depositor and the certificate insurer in writing with details thereof. The
depositor agrees to use reasonable efforts to cause to be remedied a material
defect in a document constituting part of an mortgage file of which it is so
notified by the collateral agent. If, however, within sixty (60) days after the
collateral agent's notice of the defect, the depositor has not caused the defect
to be remedied and the defect materially and adversely affects the interest of
the holders of the certificates or the interests of the certificate insurer in
the mortgage loan, the depositor or the originator will either (a) substitute in
lieu of the mortgage loan a Qualified Substitute Mortgage Loan and, if the then
outstanding principal balance of the Qualified Substitute Mortgage Loan is less
than the principal balance of the mortgage loan as of the date of the
substitution plus accrued and unpaid interest thereon, deliver to the servicer a
substitution adjustment equal to the amount of any such shortfall or (b)
purchase the mortgage loan at a price equal to the outstanding principal balance
of the mortgage loan as of the date of purchase, plus the greater of (i) all
accrued and unpaid interest thereon and (ii) thirty (30) days' interest thereon,
computed at the mortgage interest rate, net of the servicing fee if the servicer
is effecting the repurchase, plus the amount of any unreimbursed servicing
advances made by the servicer, which purchase price shall be deposited in the
Distribution Account on the next succeeding servicer remittance date after
deducting therefrom any amounts received in respect of the repurchased mortgage
loan or Loans and being held in the Distribution Account for future distribution
to the extent these amounts have not yet been applied to principal or interest
on the mortgage loan. In addition, the depositor and the originators shall be
obligated to indemnify the trustee, the collateral agent, the holders of the
certificates and the certificate insurer for any third-party claims arising out
of a breach by the depositor or the originators of representations or warranties
regarding the mortgage loans. The obligation of the depositor and the
originators to cure a breach or to substitute or purchase any mortgage loan and
to indemnify constitute the sole remedies respecting a material breach of any
representation or warranty to the holders of the certificates, the trustee, the
collateral agent and the certificate insurer.
Representations and Warranties of the Depositor
The depositor will represent, among other things, for each mortgage
loan, as of the closing date or the subsequent transfer date, as applicable, the
following:
1. the information included in the schedule of mortgage loans
for each mortgage loan is true and correct;
2. all of the original or certified documentation constituting
the mortgage files, including all material documents related thereto,
has been or will be delivered to the collateral agent, on behalf of the
trustee, on the closing date or the subsequent transfer date, as
applicable;
3. the mortgaged property consists of a single parcel of real
property separately assessed for tax purposes, upon which is erected a
detached or an attached one-family residence or a detached two- to
six-family dwelling, or an individual condominium unit in a low-rise
condominium, or a mobile home unit, or an individual unit in a planned
unit development, or a commercial property, or a mixed use or multiple
purpose property. The residence, dwelling or unit is not,
o a unit in a cooperative apartment,
o a property constituting part of a syndication,
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o a time share unit,
o a property held in trust,
o a manufactured dwelling,
o a log-constructed home, or
o a recreational vehicle;
4. each mortgage is a valid first or second lien on a fee
simple, or its equivalent under applicable state law, estate in the
real property securing the amount owed by the mortgagor under the
mortgage note subject only to,
o the lien of current real property taxes and
assessments which are not delinquent,
o any first mortgage loan on the property,
o covenants, conditions and restrictions, rights of
way, easements and other matters of public record as
of the date of recording of the mortgage, the
exceptions appearing of record being acceptable to
mortgage lending institutions generally in the area
wherein the property subject to the mortgage is
located or specifically reflected in the appraisal
obtained in connection with the origination of the
mortgage loan obtained by the depositor, and
o other matters to which like properties are commonly
subject which do not materially interfere with the
benefits of the security intended to be provided by
the mortgage;
5. immediately prior to the transfer and assignment by the
depositor to the depositor, the depositor had good title to, and was
the sole owner of each mortgage loan, free of any interest of any other
person, and the depositor has transferred all right, title and interest
in each mortgage loan to the depositor;
6. each mortgage loan conforms, and all the mortgage loans in
the aggregate conform, to the description thereof in this prospectus
supplement; and
7. all of the mortgage loans were originated in accordance
with the underwriting criteria described in this prospectus supplement.
Pursuant to the Pooling and Servicing Agreement, upon the discovery by
any of the holder of the certificates, the depositor, the servicer, any
subservicer, the certificate insurer, the collateral agent or the trustee that
any of the representations and warranties contained in the Pooling and Servicing
Agreement have been breached in any material respect as of the closing date or
the subsequent transfer date, as applicable, with the result that the interests
of the holders of the certificates in the mortgage loan or the interests of the
certificate insurer were materially and adversely affected, notwithstanding that
any representation and warranty was made to the depositor's or the originator's
best knowledge and the depositor or the originator lacked knowledge of the
breach, the party discovering the breach is required to give prompt written
notice to the other parties. Subject to specified provisions of the Pooling and
Servicing Agreement, within sixty (60) days of the earlier to occur of the
depositor's or an originator's discovery or its receipt of notice of any breach,
the depositor or the originators will (a) promptly cure the breach in all
material respects, (b) remove each mortgage loan which has given rise to the
requirement for action by the depositor or the originators, substitute one or
more Qualified Substitute Mortgage Loans
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and, if the outstanding principal balance of the Qualified Substitute Mortgage
Loans as of the date of the substitution is less than the outstanding principal
balance, plus accrued and unpaid interest thereon, of the replaced mortgage
loans as of the date of substitution, deliver to the trust as part of the
amounts remitted by the servicer on the distribution date the amount of the
shortfall, or (c) purchase the mortgage loan at a price equal to the principal
balance of the mortgage loan as of the date of purchase plus the greater of (i)
all accrued and unpaid interest thereon and (ii) thirty (30) days' interest
thereon computed at the mortgage interest rate, net of the servicing fee if
____________ is the servicer, plus the amount of any unreimbursed servicing
advances made by the servicer, and deposit the purchase price into the
Distribution Account on the next succeeding servicer remittance date after
deducting therefrom any amounts received in respect of this repurchased mortgage
loan or mortgage loans and being held in the Distribution Account for future
distribution to the extent these amounts have not yet been applied to principal
or interest on the mortgage loan. In addition, the depositor and the originators
shall be obligated to indemnify the trust, the trustee, the collateral agent,
the holders of the certificates and the certificate insurer for any third-party
claims arising out of a breach by the depositor or the originators of
representations or warranties regarding the mortgage loans. The obligation of
the depositor and the originators to cure any breach or to substitute or
purchase any mortgage loan and to indemnify constitute the sole remedies
respecting a material breach of any representation or warranty to the holders of
the certificates, the trustee, the collateral agent and the certificate insurer.
Payments on the Mortgage Loans
The Pooling and Servicing Agreement provides that the servicer, for the
benefit of the holders of the certificates, shall establish and maintain the
Collection Account, which will generally be (i) an account maintained with a
depository institution or trust company whose long term unsecured debt
obligations are rated by each rating agency in one of its two highest rating
categories at the time of any deposit therein or (ii) trust accounts maintained
with a depository institution acceptable to each rating agency and the
certificate insurer. The Pooling and Servicing Agreement permits the servicer to
direct any depository institution maintaining the Collection Account to invest
the funds in the Collection Account in one or more eligible investments that
mature, unless payable on demand, no later than the business day preceding the
date on which the servicer is required to transfer the servicer remittance
amount from the Collection Account to the Distribution Account, as described
below.
The servicer is obligated to deposit or cause to be deposited in the
Collection Account on a daily basis, amounts representing the following payments
received and collections made by it after the Cut-Off Date, other than in
respect of monthly payments on the mortgage loans due on each mortgage loan up
to and including any due date occurring on or prior to the Cut-Off Date:
o all payments on account of principal, including prepayments of
principal;
o all payments on account of interest on the mortgage loans;
o all Liquidation Proceeds and all Insurance Proceeds to the
extent the proceeds are not to be applied to the restoration
of the mortgaged property or released to the borrower in
accordance with the express requirements of law or in
accordance with prudent and customary servicing practices;
o all Net REO Proceeds;
o all other amounts required to be deposited in the Collection
Account pursuant to the Pooling and Servicing Agreement; and
o any amounts required to be deposited in connection with net
losses realized on investments of funds in the Collection
Account.
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The trustee will be obligated to set up an account for each class of
certificates a distribution account into which the servicer will deposit or
cause to be deposited the servicer remittance amount on the _____ day of each
month.
The servicer remittance amount" for a servicer remittance date is equal
to the sum, without duplication, of (i) all collections of principal and
interest on the mortgage loans, including principal prepayments, Net REO
Proceeds and Liquidation Proceeds, if any, collected by the servicer during the
prior calendar month, (ii) all Periodic Advances made by the servicer with
respect to payments due to be received on the mortgage loans on the due date and
(iii) any other amounts required to be placed in the Collection Account by the
servicer pursuant to the Pooling and Servicing Agreement, but excluding the
following:
(a) amounts received on particular mortgage loans, for which the
servicer has previously made an unreimbursed Periodic Advance,
as late payments of interest, or as Net Liquidation Proceeds,
to the extent of the unreimbursed Periodic Advance;
(b) amounts received on a particular mortgage loan for which the
servicer has previously made an unreimbursed servicing
advance, to the extent of the unreimbursed servicing advance;
(c) for the servicer remittance date, the aggregate servicing fee;
(d) all net income from eligible investment that is held in the
Collection Account for the account of the servicer;
(e) all amounts actually recovered from the servicer in respect of
late fees, assumption fees, prepayment fees and similar fees;
(f) Net Foreclosure Profits; and
(g) other amounts which are reimbursable to the servicer, as
provided in the Pooling and Servicing Agreement.
The amounts described in clauses (a) through (g) above may be withdrawn
by the servicer from the Collection Account on or prior to each servicer
remittance date.
Over-collateralization Provisions
Over-collateralization Resulting from Cash Flow Structure. The Pooling
and Servicing Agreement requires that, starting with the second distribution
date, the Excess Interest for a pool of mortgage loans, if any, that is not used
to make cross-collateralization payments will be applied on each distribution
date as an accelerated payment of principal on the related class of
certificates, but only to the limited extent hereafter described. The
application of Excess Interest as a payment of principal has the effect of
accelerating the amortization of a class of certificates relative to the
amortization of the related pool of mortgage loans. The Excess Interest from a
pool of mortgage loans will be used
o to reimburse the certificate insurer for any amounts due to
it,
o as needed to pay Net Mortgage Loan Interest Shortfalls
relating to that class,
o as needed to make cross-collateralization payments in respect
of the other pool of mortgage loans,
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<PAGE>
o as a payment of principal to the related class of certificates
until the distribution date on which the amount of
over-collateralization has reached the required level, and
o as needed to fund the Cross-collateralization Reserve Account
relating to the other pool of mortgage loans.
Notwithstanding the foregoing, in the event specified tests enumerated in the
Pooling and Servicing Agreement are violated, all available Excess Interest will
be used as a payment of principal to the related class of certificates to
accelerate the amortization of the certificates.
The Pooling and Servicing Agreement requires that, starting with the
second distribution date, Excess Interest from a pool of mortgage loans that is
not used to make cross-collateralization payments will be applied as an
accelerated payment of principal on the related class of certificates until the
Over-collateralized Amount has increased to the level required by the Pooling
and Servicing Agreement. After this time, if it is necessary to re-establish the
required level of over-collateralization, Excess Interest from each pool of
mortgage loans that is not used to make cross-collateralization payments will
again be applied as an accelerated payment of principal on the related class of
certificates. Notwithstanding the foregoing, in the event specified tests
enumerated in the Pooling and Servicing Agreement are violated, all available
Excess Interest from each pool of mortgage loans will be used as a payment of
principal to accelerate the amortization of the related class of certificates.
Initially, the Over-collateralized Amount of each pool of mortgage loans will be
an amount equal to approximately 0.50% of the sum of (x) the aggregate principal
balance of the mortgage loans in each pool on the closing date and (y) the
original amount on deposit in the related pre-funding account on the closing
date.
In the event that the required level of the Specified
Over-collateralized Amount for a pool of mortgage loans is permitted to decrease
or "step down" on a distribution date in the future, the Pooling and Servicing
Agreement provides that a portion of the principal which would otherwise be
distributed to the holders of the related class of certificates on the
distribution date shall instead be distributed in the priority described in this
prospectus supplement under "--Flow of Funds." This has the effect of
decelerating the amortization of the related class of certificates relative to
the amortization of that pool of mortgage loans, and of reducing the
Over-collateralized Amount. If, on any distribution date, the Excess
Over-collateralized Amount is, or, after taking into account all other
distributions to be made on the distribution date would be, greater than zero --
i.e., the Over-collateralized Amount is or would be greater than the related
Specified Over-collateralized Amount -- then any amounts relating to principal
which would otherwise be distributed to the holders of the related class of
certificates on this distribution date shall instead be distributed in the
priority described in this prospectus supplement under "--Flow of Funds", in an
amount equal to the Over-collateralization Reduction Amount.
The Pooling and Servicing Agreement provides that, on any distribution
date, all amounts collected on account of principal -- other than any such
amount applied to the payment of an Over-collateralization Reduction Amount --
for each pool of mortgage loans during the a due period of the prior calendar
month will be distributed to the holders of the related class of certificates on
the distribution date. In addition, the Pooling and Servicing Agreement provides
that the principal balance of any mortgage loan which becomes a Liquidated
Mortgage Loan shall then equal zero. The Pooling and Servicing Agreement does
not contain any rule which requires that the amount of any Liquidated Loan Loss
be distributed to the holders of the related class of certificates on the
distribution date which immediately follows the event of loss; i.e., the Pooling
and Servicing Agreement does not require the current recovery of losses.
However, the occurrence of a Liquidated Loan Loss will reduce the
Over-collateralized Amount for that pool of mortgage loans, which, to the extent
that the reduction causes the Over-collateralized Amount to be less than the
Specified Over-collateralized Amount applicable to the related distribution
date, will require the payment of an Over-collateralization Increase Amount on
that distribution date, or, if insufficient funds are available on that
distribution date, on subsequent distribution
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dates, until the Over-collateralized Amount equals the related Specified
Over-collateralized Amount. The effect of the foregoing is to allocate losses to
the holders of the related class R certificates by reducing, or eliminating
entirely, payments of Excess Interest and Over-collateralization Reduction
Amounts which the holders would otherwise receive.
Over-collateralization and the Certificate Insurance Policy. The
Pooling and Servicing Agreement requires the trustee to make a claim for an
Insured Payment under the certificate insurance policy not later than the third
business day prior to any distribution date as to which the trustee has
determined that an Over-collateralization Deficit will occur for the purpose of
applying the proceeds of the Insured Payment as a payment of principal to the
holders of the related class of certificates on that distribution date. The
certificate insurer has the option on any distribution date to make a payment of
principal, including in respect of Liquidated Loan Losses, up to the amount that
would have been payable to the holders of the certificates if sufficient funds
were available thereof. Additionally, under the terms of the Pooling and
Servicing Agreement, the certificate insurer will have the option to cause
Excess Interest to be applied without regard to any limitation upon the
occurrence of particular trigger events, or in the event of an "event of
default" under the Insurance Agreement. However, investors in the certificates
should realize that, under extreme loss or delinquency scenarios, they may
temporarily receive no distributions of principal.
Cross-collateralization Provisions
Cross-collateralization Payments. On each distribution date, available
Excess Interest from a pool of mortgage loans, if any, will be paid to the
holders of the class of certificates relating to the other pool of mortgage
loans to the extent of the Shortfall Amount for the other pool. The
cross-collateralization provisions of the transaction are limited to the payment
of specified credit losses, certain interest shortfalls and any amounts due the
certificate insurer. Excess Interest from one pool of mortgage loans will not be
used to build over-collateralization for the other pool of mortgage loans.
Cross-collateralization Reserve Account. Each class of certificates
will have the benefit of a Cross-collateralization Reserve Account. On each
distribution date, available Excess Interest from a pool of mortgage loans, if
any, will be paid into the Cross-collateralization Reserve Account relating to
the other pool of mortgage loans, until the amount of funds on deposit therein
equals the Specified Reserve Amount for the other pool. If the amount on deposit
in the Cross-collateralization Reserve Account for a pool of mortgage loans on
any distribution date exceeds the Specified Reserve Amount for the pool and the
distribution date, the amount of this excess shall be distributed in the
priority described in this prospectus supplement under "--Flow of Funds."
Funds on deposit in a Cross-collateralization Reserve Account will be
used on any distribution date to make payments in respect of the Shortfall
Amount for either pool, to the extent that there is no Excess Interest available
therefor on that distribution date.
Flow of Funds
On each distribution date, the trustee, based solely on the information
received from the servicer in the servicer remittance report prior to the
distribution date, shall make payments in respect of each pool of mortgage loans
to the holders of the related class of certificates and reimbursement to the
certificate insurer under the Insurance Agreement, to the extent of funds,
including any Insured Payments, on deposit in the related Distribution Account,
as follows:
(a) to the trustee, an amount equal to the fees then due to it for
the related class of certificates;
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(b) from amounts then on deposit in the related Distribution
Account, excluding any Insured Payments, to the certificate
insurer the Reimbursement Amount as of that distribution date;
(c) from amounts then on deposit in the related Distribution
Account, the Interest Distribution Amount for the related
class of certificates;
(d) from amounts then on deposit in the related Distribution
Account, the Principal Distribution Amount for the related
class of certificates, until the principal balance of the
class of certificates is reduced to zero;
(e) from amounts then on deposit in the related Distribution
Account the amount of any Net Mortgage Loan Interest
Shortfalls for the related class of certificates;
(f) from amounts then on deposit in the related Distribution
Account, to the holders of the other class of certificates,
the Shortfall Amount for the other class;
(g) from amounts then on deposit in the related Distribution
Account, to the Cross-collateralization Reserve Account
relating to the other class of certificates, the amount
necessary for the balance of the account to equal the
Specified Reserve Amount; and
(h) following the making by the trustee of all allocations,
transfers and disbursements described above, to the holders of
the related class R certificates, the amount remaining on the
distribution date in the related Distribution Account, if any.
Reports to Certificateholders
Pursuant to the Pooling and Servicing Agreement, on each distribution
date the trustee will deliver to the servicer, the certificate insurer, the
depositor and each holder of a certificate or a class R certificate a written
remittance report containing information including, without limitation, the
amount of the distribution on the distribution date, the amount of the
distribution allocable to principal and allocable to interest, the aggregate
outstanding principal balance of the certificates as of the distribution date,
the amount of any Insured Payment included in the distributions on the
distribution date and any other information as required by the Pooling and
Servicing Agreement.
Amendment
The Pooling and Servicing Agreement may be amended from time to time by
the trust and the trustee by written agreement, upon the prior written consent
of the certificate insurer, without notice to, or consent of, the holder of the
certificates, to cure any ambiguity, to correct or supplement any provisions in
this prospectus supplement, to comply with any changes in the Code, or to make
any other provisions concerning matters or questions arising under the Pooling
and Servicing Agreement which shall not be inconsistent with the provisions of
the Pooling and Servicing Agreement; provided, that this action shall not, as
evidenced by an opinion of counsel delivered to, but not obtained at the expense
of, the trustee, adversely affect in any material respect the interests of any
holder of the certificates; 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 the certificate, or change the rights or
obligations of any other party to the Pooling and Servicing Agreement without
the consent of that party.
The Pooling and Servicing Agreement may be amended from time to time by
the trust and the trustee with the consent of the certificate insurer, and the
holders of the majority of the percentage interest
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of the certificates and class R certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders; provided, however, 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 the certificate or reduce the percentage for each class
whose holders are required to consent to any such amendment without the consent
of the holders of 100% of each class of certificates affected thereby.
The Loan Sale Agreement contains substantially similar restrictions
regarding amendment.
SERVICING OF THE MORTGAGE LOANS
The Servicer
____________ will act as the servicer of the mortgage loan pools.
____________ and ____________ will act as subservicers for a portion of the
mortgage loans. See "The Originators, the Depositor, the Servicer and the
Subservicer" in this prospectus supplement. The servicer and the subservicers
will be required to use the same care as they customarily employ in servicing
and administering mortgage loans for their own account, in accordance with
accepted mortgage servicing practices of prudent lending institutions, and
giving due consideration to the reliance of the certificate insurer and the
holders of the certificates on them.
Servicing Fees and Other Compensation and Payment of Expenses
As compensation for its activities as servicer under the Pooling and
Servicing Agreement, the servicer shall be entitled to a servicing fee for each
mortgage loan, which shall be payable monthly from amounts on deposit in the
Collection Account. The servicing fee shall be an amount equal to interest at
one-twelfth of the servicing fee rate for the mortgage loan on the outstanding
principal balance of the mortgage loan. The servicing fee rate for each mortgage
loan will be 0.50% per annum. In addition, the servicer shall be entitled to
receive, as additional servicing compensation, to the extent permitted by
applicable law and the mortgage notes, any late payment charges, assumption
fees, prepayment fees or similar items. The servicer shall also be entitled to
withdraw from the Collection Account any net interest or other income earned on
deposits therein. The servicer shall pay all expenses incurred by it in
connection with its servicing activities under the Pooling and Servicing
Agreement and shall not be entitled to reimbursement therefor except as
specifically provided in the Pooling and Servicing Agreement.
Periodic Advances and Servicer Advances
Periodic Advances. Subject to the servicer's determination that the
action would not constitute a nonrecoverable advance, the servicer is required
to make Periodic Advances on each servicer remittance date. This Periodic
Advances by the servicer are reimbursable to the servicer subject to a number of
conditions and restrictions, and are intended to provide both sufficient funds
for the payment of interest to the holders of the certificates, plus an
additional amount intended to maintain a specified level of
over-collateralization and to pay the trustee's fees, and the premium due the
certificate insurer. Notwithstanding the servicer's good faith determination
that a Periodic Advance was recoverable when made, if the Periodic Advance
becomes a nonrecoverable advance, the servicer will be entitled to reimbursement
therefor from the trust estate. See "Description of the Certificates -- Payments
on the Mortgage Loans" in this prospectus supplement.
Servicing Advances. Subject to the servicer's determination that the
action would not constitute a nonrecoverable advance and that a prudent mortgage
lender would make a like advance if it or an affiliate
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owned the mortgage loan, the servicer is required to advance amounts on the
mortgage loans constituting "out-of-pocket" costs and expenses relating to
o the preservation and restoration of the mortgaged property,
o enforcement proceedings, including foreclosures,
o expenditures relating to the purchase or maintenance of a
first lien not included in the trust estate on the mortgaged
property, and
o other customary amounts described in the Pooling and Servicing
Agreement.
These servicing advances by the servicer are reimbursable to the
servicer subject to a number of conditions and restrictions. In the event that,
notwithstanding the servicer's good faith determination at the time the
servicing advance was made, that it would not be a nonrecoverable advance, the
servicing advance becomes a nonrecoverable advance, the servicer will be
entitled to reimbursement therefor from the trust estate.
Recovery of Advances. The servicer may recover Periodic Advances and
servicing advances to the extent permitted by the Pooling and Servicing
Agreement or, if not recovered from the mortgagor on whose behalf the servicing
advance or Periodic Advance was made, from late collections on the mortgage
loan, including Liquidation Proceeds, Insurance Proceeds and any other amounts
as may be collected by the servicer from the mortgagor or otherwise relating to
the mortgage loan. In the event a Periodic Advance or a servicing advance
becomes a nonrecoverable advance, the servicer may be reimbursed for the advance
from the Distribution Account.
The servicer shall not be required to make any Periodic Advance or
servicing advance which it determines would be a nonrecoverable Periodic Advance
or nonrecoverable servicing advance. A Periodic Advance or servicing advance is
"nonrecoverable" if in the good faith judgment of the servicer, the Periodic
Advance or servicing advance would not ultimately be recoverable.
Prepayment Interest Shortfalls
Not later than the close of business on the _____ day of each month,
the servicer is required to remit to the trustee a payment of Compensating
Interest in respect of Prepayment Interest Shortfalls and shall not have the
right to reimbursement therefor. Insured Payments do not cover Prepayment
Interest Shortfalls.
Civil Relief Act Interest Shortfalls
The reduction, if any, in interest payable on the mortgage loans in the
applicable pool attributable to the application of the Civil Relief Act will not
reduce the amount of Current Interest due to the holders of the class A-1
certificates or class A-2 certificates, respectively. However, in the event the
full amount of Current Interest is not available on any distribution date due to
Civil Relief Act interest shortfalls in the applicable pool, the amount of this
shortfall will not be covered by the certificate insurance policy. These
shortfalls in Current Interest will be paid from the Excess Interest, if any,
otherwise payable in respect of over-collateralization, cross-collateralization
or to the holder of the class R certificate relating to the applicable pool. See
"Risk Factors -- Legal Considerations" in this prospectus supplement.
Optional Purchase of Defaulted Mortgage Loans
The depositor, or any affiliate of the depositor, has the option, but
is not obligated, to purchase from the trust any mortgage loan ninety (90) days
or more delinquent at a purchase price equal to the outstanding principal
balance thereof as of the date of purchase, plus all accrued and unpaid interest
on the principal balance, computed at the mortgage interest rate -- net of the
servicing fee, if ________ is
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the servicer -- plus the amount of any unreimbursed Periodic Advances and
servicing advances made by the servicer for the mortgage loan in accordance with
the provisions specified in the Pooling and Servicing Agreement.
Servicer Reports
On each servicer remittance date, the servicer is required to deliver
to the certificate insurer, the trustee, and the collateral agent, a servicer
remittance report setting forth the information necessary for the trustee to
make the distributions described under "--Flow of Funds" in this prospectus
supplement and containing the information to be included in the trustee's
remittance report for that distribution date.
The servicer is required to deliver to the certificate insurer, the
trustee, the collateral agent, S&P and Moody's, not later than April 30th of
each year an officer's certificate stating that (i) the servicer has fully
complied with the servicing provisions of the Pooling and Servicing Agreement,
(ii) a review of the activities of the servicer during the preceding calendar
year and of performance under the Pooling and Servicing Agreement has been made
under the officer's supervision, and (iii) to the best of the officer's
knowledge, based on that review, the servicer has fulfilled all its obligations
under the Pooling and Servicing Agreement for that year, or, if there has been a
default in the fulfillment of any obligation, specifying each default known to
that officer and the nature and status thereof including the steps being taken
by the servicer to remedy the default. The first such officer's certificate
shall be delivered by the servicer in ______.
Not later than April 30th of each year, the servicer, at its expense,
is required to cause to be delivered to the certificate insurer, the trustee,
the collateral agent, S&P and Moody's from a firm of independent certified
public accountants, who may also render other services to the servicer, a
statement to the effect that the firm has examined certain documents and records
relating to the servicing of the mortgage loans during the preceding calendar
year, or any longer period from the closing date to the end of the following
calendar year, and that, on the basis of the examination conducted substantially
in compliance with generally accepted auditing standards and the requirements of
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for Freddie Mac, the servicing has been conducted in
compliance with the Pooling and Servicing Agreement except for any significant
exceptions or errors in records that, in the opinion of the firm, generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for Freddie Mac
require it to report, in which case the exceptions and errors shall be so
reported.
Collection and Other Servicing Procedures
The servicer will be responsible for making reasonable efforts to
collect all payments called for under the mortgage loans and will, consistent
with the Pooling and Servicing Agreement, follow the collection procedures as it
follows for loans held for its own account which are comparable to the mortgage
loans. Consistent with the above, the servicer may, in its discretion, (i) waive
any late payment charge and (ii) arrange with a mortgagor a schedule for the
liquidation of delinquencies, subject to the provisions of the Pooling and
Servicing Agreement.
If a mortgaged property has been or is about to be conveyed by the
mortgagor, the servicer will be obligated to accelerate the maturity of the
mortgage loan, unless it reasonably believes it is unable to enforce that
mortgage loan's "due-on-sale" clause under applicable law. If it reasonably
believes it may be restricted for any reason from enforcing any "due-on-sale"
clause, the servicer may enter into an assumption and modification agreement
with the person to whom the property has been or is about to be conveyed,
pursuant to which that person becomes liable under the mortgage note.
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Any fee collected by the servicer for entering into an assumption
agreement will be retained by the servicer as additional servicing compensation.
In connection with any assumption, the mortgage interest rate borne by the
mortgage note relating to each mortgage loan may not be decreased. For a
description of circumstances in which the servicer may be unable to enforce
"due-on-sale" clauses, see "Certain Legal Aspects of the Mortgage Loans and
Contracts -- The Mortgage Loans -- 'Due-on-Sale' Clauses" in the accompanying
prospectus.
Hazard Insurance
The servicer is required to cause to be maintained for each mortgaged
property a hazard insurance policy with coverage which contains a standard
mortgagee's clause in an amount equal to the lesser of (a) the maximum insurable
value of the mortgaged property or (b) the principal balance of the mortgage
loan plus the outstanding balance of any mortgage loan senior to the mortgage
loan, but in no event may this amount be less than is necessary to prevent the
borrower from becoming a coinsurer thereunder. As stated above, all amounts
collected by the servicer under any hazard policy, except for amounts to be
applied to the restoration or repair of the mortgaged property or released to
the borrower in accordance with the servicer's normal servicing procedures, to
the extent they constitute Net Liquidation Proceeds or Insurance Proceeds, will
ultimately be deposited in the related Distribution Account. The ability of the
servicer to assure that hazard insurance proceeds are appropriately applied may
be dependent on its being named as an additional insured under any hazard
insurance policy, or upon the extent to which information in this regard is
furnished to the servicer by a borrower. The Pooling and Servicing Agreement
provides that the servicer may satisfy its obligation to cause hazard policies
to be maintained by maintaining a blanket policy issued by an insurer acceptable
to the rating agencies insuring against losses on the mortgage loans. If this
blanket policy contains a deductible clause, the servicer is obligated to
deposit in the related Distribution Account the sums which would have been
deposited therein but for that clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the mortgage loans will be
underwritten by different insurers under different state laws in accordance with
different applicable state forms and therefore will not contain identical terms
and conditions, the terms thereof are dictated by respective state laws, and
most of these policies typically do not cover any physical damage resulting from
the following: war, revolution, governmental actions, floods and other
weather-related causes, earth movement, including earthquakes, landslides and
mudflows, nuclear reactions, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in some cases, vandalism. The foregoing list is
merely indicative of the types of uninsured risks and is not intended to be
all-inclusive.
The hazard insurance policies covering the mortgaged properties
typically contain a co-insurance clause which in effect requires the insured at
all times to carry insurance of a specified percentage, generally 80% to 90%, of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, that clause generally provides that the
insurer's liability in the event of partial loss does not exceed the greater of
(i) the replacement cost of the improvements less physical depreciation or (ii)
this proportion of the loss as the amount of insurance carried bears to the
specified percentage of the full replacement cost of these improvements.
Since residential and commercial properties, generally, have
historically appreciated in value over time, if the amount of hazard insurance
maintained on the improvements securing the mortgage loans
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were to decline as the principal balances owing thereon decreased, hazard
insurance proceeds could be insufficient to restore fully the damaged property
in the event of a partial loss.
Realization Upon Defaulted Mortgage Loans
The servicer will foreclose upon, or otherwise comparably convert to
ownership, mortgaged properties securing such of the mortgage loans as come into
default when, in the opinion of the servicer, no satisfactory arrangements can
be made for the collection of delinquent payments. In connection with the
foreclosure or other conversion, the servicer will follow the practices as it
deems necessary or advisable and as are in keeping with the servicer's general
loan servicing activities and the Pooling and Servicing Agreement; provided,
that the servicer will not expend its own funds in connection with foreclosure
or other conversion, correction of a default on a senior mortgage or restoration
of any property unless the foreclosure, correction or restoration is determined
to increase Net Liquidation Proceeds.
Removal and Resignation of the Servicer
The certificate insurer may, pursuant to the Pooling and Servicing
Agreement, remove the servicer upon the occurrence and continuation beyond the
applicable cure period of an event described in clauses (g), (h) or (i) below
and the trustee, only at the direction of the certificate insurer or the
majority holders of certificates, with the consent of the certificate insurer,
in the case of any direction of the majority holders, may remove the servicer
upon the occurrence and continuation beyond the applicable cure period of an
event described in clause (a), (b), (c), (d), (e) or (f) below. Each of the
following constitutes a servicer event of default:
(a) any failure by the servicer to remit to the trustee any
payment required to be made by the servicer under the terms of
the Pooling and Servicing Agreement, other than servicing
advances covered by clause (b) below, which continues
unremedied for one (1) business day after the date upon which
written notice of any failure, requiring the same to be
remedied, shall have been given to the servicer and the
certificate insurer by the trustee or to the servicer and the
trustee by the certificate insurer or the holders of
certificates evidencing percentage interests of at least 25%;
(b) the failure by the servicer to make any required servicing
advance which failure continues unremedied for a period of
thirty (30) days after the date on which written notice of any
failure, requiring the same to be remedied, shall have been
given to the servicer by the trustee or to the servicer and
the trustee by any holder of a certificate or the certificate
insurer;
(c) 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 the
Pooling and Servicing Agreement, or the failure of any
representation and warranty enumerated in the Pooling and
Servicing Agreement, which continues unremedied for a period
of thirty (30) days after the date on which written notice of
any failure, requiring the same to be remedied, shall have
been given to the servicer by the trustee, or to the servicer
and the trustee by any holder of a certificate or the
certificate insurer;
(d) 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
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against the servicer and this decree or order shall have
remained in force, undischarged or unstayed for a period of
sixty (60) days;
(e) 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;
(f) the servicer shall admit in writing its inability generally to
pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations;
(g) the delinquency or loss experience of the mortgage loans
exceeds levels specified in the Pooling and Servicing
Agreement; or
(h) the certificate insurer shall notify the trustee of any "event
of default" under the Insurance Agreement.
The servicer may not assign its obligations under the Pooling and
Servicing Agreement nor resign from the obligations and duties thereby imposed
on it except by mutual consent of the servicer, ABC, if ABC is not the servicer,
the certificate insurer, the collateral agent and the trustee, or upon the
determination that the servicer's duties thereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the servicer without
the incurrence, in the reasonable judgment of the certificate insurer, of
unreasonable expense. No such resignation shall become effective until a
successor has assumed the servicer's responsibilities and obligations in
accordance with the Pooling and Servicing Agreement.
Upon removal or resignation of the servicer, the trustee will be the
successor servicer. The trustee, as successor servicer, will be obligated to
make Periodic Advances and servicing advances and other advances unless it
determines reasonably and in good faith that the advances would not be
recoverable. If, however, the trustee is unwilling or unable to act as successor
servicer, or if the majority holders, with the consent of the certificate
insurer, or the certificate insurer so requests, the trustee shall appoint, or
petition a court of competent jurisdiction to appoint, in accordance with the
provisions of the Pooling and Servicing Agreement and subject to the approval of
the certificate insurer, any established mortgage loan servicing institution
acceptable to the certificate insurer having a net worth of not less than
$____________ as the successor servicer in the assumption of all or any part of
the responsibilities, duties or liabilities of the servicer.
Pursuant to the Pooling and Servicing Agreement, the servicer covenants
and agrees to act as the servicer for an initial term from the closing date to
____________, which term will be extendable by the certificate insurer by notice
to the trustee for successive terms of three (3) calendar months each, until the
termination of the trust estate. The servicer will, upon its receipt of each
notice of extension, become bound for the duration of the term covered by the
extension notice to continue as the servicer subject to and in accordance with
the other provisions of the Pooling and Servicing Agreement. If as of the
fifteenth (15th) day prior to the last day of any term of the servicer the
trustee shall not have received any extension notice from the certificate
insurer, the trustee will, within five (5) days thereafter, give written notice
of non-receipt to the certificate insurer and the servicer. The certificate
insurer has agreed to extend each three (3) month term of the servicer, in the
absence of a servicer event of default under the Pooling and Servicing
Agreement.
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The trustee and any other successor servicer in that capacity is
entitled to the same reimbursement for advances and no more than the same
servicing compensation as the servicer. See "--Servicing and Other Compensation
and Payment of Expenses" in this prospectus supplement.
Termination; Purchase of Mortgage Loans
The Pooling and Servicing Agreement will terminate upon notice to the
trustee of either: (a) the later of the distribution to certificateholders of
the final payment or collection on the last mortgage loan, or Periodic Advances
of same by the servicer, or the disposition of all funds from the last mortgage
loan and the remittance of all funds due under the Pooling and Servicing
Agreement and the payment of all amounts due and payable to the certificate
insurer, the collateral agent and the trustee or (b) mutual consent of the
servicer, the certificate insurer and all holders in writing; provided, however,
that in no event will the trust terminate later than twenty-one (21) years after
the death of the last surviving lineal descendant of the person named in the
Trust Agreement.
Subject to provisions in the Pooling and Servicing Agreement concerning
adopting a plan of complete liquidation, the servicer may, at its option and at
its sole cost and expense, terminate the Pooling and Servicing Agreement on any
date on which the aggregate principal balance of the mortgage loans is less than
10% of the sum of (x) the aggregate original principal balance of the mortgage
loans purchased on the closing date and (y) the original amount on deposit in
the pre-funding accounts, by purchasing, on the next succeeding distribution
date, all of the outstanding mortgage loans and REO Properties at a price equal
to the sum of
o 100% of the principal balance of each outstanding mortgage
loan and each REO property,
o the greater of (i) the aggregate amount of accrued and unpaid
interest on the mortgage loans through the due period and (ii)
thirty (30) days' accrued interest thereon computed at a rate
equal to the mortgage interest rate, in each case net of the
servicing fee,
o any unreimbursed amounts due to the certificate insurer under
the Pooling and Servicing Agreement, the Insurance Agreement
and, without duplication, accrued and unpaid Insured Payments,
and
o the trustee's fees.
Any such purchase shall be accomplished by depositing into each
Distribution Account the portion of the purchase price specified above which
relates to the class of certificates. No such termination is permitted without
the prior written consent of the certificate insurer if it would result in a
draw on the certificate insurance policy.
THE CERTIFICATE INSURANCE POLICY
The following summary of the terms of the certificate insurance policy
does not purport to be complete and is qualified in its entirety by reference to
the certificate insurance policy. A form of the certificate insurance policy may
be obtained, upon request, from the depositor.
Simultaneously with the issuance of the certificates, the certificate
insurer will deliver the certificate insurance policy to the trustee, for the
benefit of the holders of the certificates. Under the certificate insurance
policy, the certificate insurer will irrevocably and unconditionally guarantee
payment on each distribution date to the trustee, for the benefit of the holders
of the certificates, of the Insured Distribution Amounts for the related class
of certificates calculated in accordance with the original terms
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of the certificates when issued and without regard to any amendment or
modification of the certificates or the Pooling and Servicing Agreement except
amendments or modifications to which the certificate insurer has given its prior
written consent. In addition, for any distribution date occurring on a date when
an event of default under the Insurance Agreement, as described below, has
occurred and is continuing or a date on or after the first date on which a claim
is made under the certificate insurance policy, the certificate insurer at its
sole option, may pay any or all of the outstanding principal balance of the
certificates. Mortgage Loan Interest Shortfalls will not be covered by payments
under the certificate insurance policy.
Payment of claims under the certificate insurance policy will be made
by the certificate insurer following Receipt by the certificate insurer of the
appropriate notice for payment on the later to occur of (a) 12:00 noon, New York
City time, on the second business day following Receipt of notice for payment,
and (b) 12:00 noon, New York City time, on the relevant distribution date.
If any payment of an amount guaranteed by the certificate insurer
pursuant to the certificate insurance policy is avoided as a preference payment
under applicable bankruptcy, insolvency, receivership or similar law the
certificate insurer will pay the amount out of the funds of the certificate
insurer on the later of
o the date when due to be paid pursuant to the bankruptcy order
referred to below or
o the first to occur of
o the fourth business day following Receipt by the
certificate insurer from the trustee of (A) a
certified copy of the order of the court or other
governmental body which exercised jurisdiction to the
effect that a holder is required to return principal
or interest distributed on a certificate during the
term of the certificate insurance policy because
these distributions were avoidable preferences under
applicable bankruptcy law, (B) a certificate of the
holder(s) that the bankruptcy order has been entered
and is not subject to any stay, and (C) an assignment
duly executed and delivered by the holder(s), in such
form as is reasonably required by the certificate
insurer and provided to the holder(s) by the
certificate insurer, irrevocably assigning to the
certificate insurer all rights and claims of the
holder(s) relating to or arising under the
certificates against the debtor which made the
preference payment or otherwise concerning the
preference payment, or
o the date of Receipt by the certificate insurer from
the trustee of the items referred to in clauses (A),
(B) and (C) above if, at least four (4) business days
prior to the date of Receipt, the certificate insurer
shall have Received written notice from the trustee
that these items were to be delivered on that date
and that date was specified in the notice.
This payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the bankruptcy order and
not to the trustee or any holder directly -- unless a holder has previously paid
the amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the bankruptcy order, in which case the payment shall be
disbursed to the trustee for distribution to the holder upon proof of the
payment reasonably satisfactory to the certificate insurer.
The terms "Receipt" and "Received," with respect to the certificate
insurance policy, means actual delivery to the certificate insurer and to its
fiscal agent appointed by the certificate insurer at its option, if any, prior
to 12:00 p.m., New York City time, on a business day; delivery either on a day
that is not a
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<PAGE>
business day or after 12:00 p.m., New York City time, shall be deemed to be
Receipt on the next succeeding business day. If any notice or certificate given
under the certificate insurance policy by the trustee is not in proper form or
is not properly completed, executed or delivered, it shall be deemed not to have
been Received, and the certificate insurer or the fiscal agent shall promptly so
advise the trustee and the trustee may submit an amended notice.
Under the certificate insurance policy, "business day" means any day
other than (i) a Saturday or Sunday or (ii) a day on which banking institutions
in the City of New York, New York or the State of New York, are authorized or
obligated by law or executive order to be closed. The certificate insurer's
obligations under the certificate insurance policy to make Insured Payments
shall be discharged to the extent funds are transferred to the trustee as
provided in the certificate insurance policy, whether or not the funds are
properly applied by the trustee.
The certificate insurer shall be subrogated to the rights of each
holder to receive payments of principal and interest, as applicable, with
respect to distributions on the certificates to the extent of any payment by the
certificate insurer under the certificate insurance policy. To the extent the
certificate insurer makes Insured Payments, either directly or indirectly, as by
paying through the trustee, to the holders of certificates, the certificate
insurer will be subrogated to the rights of the holders, as applicable, with
respect to this Insured Payment and shall be deemed to the extent of the
payments so made to be a registered holder for purposes of payment.
Claims under the certificate insurance policy will rank equally with
any other unsecured debt and unsubordinated obligations of the certificate
insurer except for particular obligations in respect of tax and other payments
to which preference is or may become afforded by statute. Claims against the
certificate insurer under the certificate insurance policy constitute pari passu
claims against the general assets of the certificate insurer. The terms of the
certificate insurance policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
trust. The certificate insurance policy is governed by the laws of the State of
New York. The certificate insurance policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
To the fullest extent permitted by applicable law, the certificate
insurer agrees under the certificate insurance policy not to assert, and waives,
for the benefit of each holder, all its rights, whether by counterclaim, setoff
or otherwise, and defenses, including, without limitation, the defense of fraud,
whether acquired by subrogation, assignment or otherwise, to the extent that
these rights and defenses may be available to the certificate insurer to avoid
payment of its obligations under the certificate insurance policy in accordance
with the express provisions of the certificate insurance policy.
Pursuant to the terms of the Pooling and Servicing Agreement, unless a
certificate insurer default exists, the certificate insurer shall be deemed to
be the holder of the certificates for all purposes, other than for payment on
the certificates, will be entitled to exercise all rights of the holders
thereunder, without the consent of the holders, and the holders may exercise
these rights only with the prior written consent of the certificate insurer. In
addition, the certificate insurer will, as a third-party beneficiary to the
Pooling and Servicing Agreement and the Loan Sale Agreement, have, among others,
the following rights:
o the right to give notices of breach or to terminate the rights
and obligations of the servicer under the Pooling and
Servicing Agreement in the event of a servicer event of
default and to institute proceedings against the servicer;
o the right to consent to or direct any waivers of defaults by
the servicer;
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<PAGE>
o the right to remove the trustee pursuant to the Pooling and
Servicing Agreement;
o the right to direct the actions of the trustee during the
continuation of a servicer default;
o the right to require the depositor to repurchase mortgage
loans for breach of representation and warranty or defect in
documentation;
o the right to direct foreclosures upon the failure of the
servicer to do so in accordance with the Pooling and Servicing
Agreement;
o the right to direct all matters relating to a bankruptcy or
other insolvency proceeding involving the depositor; and
o the right to direct the trustee to investigate specified
matters.
The certificate insurer's consent will be required prior to, among other things,
(x) the removal of the trustee, (y) the appointment of any successor trustee or
servicer or (z) any amendment to the Pooling and Servicing Agreement.
The trust, the depositor, the servicer, the originators and the
certificate insurer will enter into the Insurance Agreement pursuant to which
the trust, the depositor, the servicer and the originators will agree to
reimburse, with interest, the certificate insurer for amounts paid pursuant to
claims under the certificate insurance policy; provided, the payment obligations
shall be non-recourse obligations of the depositor, the originators, the trust
and the servicer and shall be payable only from monies available for the payment
in accordance with the provisions of the Pooling and Servicing Agreement. The
servicer will further agree to pay the certificate insurer all reasonable
charges and expenses which the certificate insurer may pay or incur relative to
any amounts paid under the certificate insurance policy or otherwise in
connection with the transaction and to indemnify the certificate insurer against
specified liabilities. Except to the extent provided therein, amounts owing
under the Insurance Agreement will be payable solely from the trust estate. An
"event of default" under the Insurance Agreement will constitute an event of
default under the Pooling and Servicing Agreement and a servicer event of
default under the Pooling and Servicing Agreement and allow the certificate
insurer, among other things, to direct the trustee to terminate the servicer. An
"event of default" under the Insurance Agreement includes:
o the originators', the depositor's or the servicer's failure to
pay when due any amount owed under the Insurance Agreement or
other documents,
o the inaccuracy or incompleteness in any material respect of
any representation or warranty of the originators, the
depositor or the servicer in the Insurance Agreement, the
Pooling and Servicing Agreement or other documents,
o the originators', the depositor's or the servicer's failure to
perform or to comply with any covenant or agreement in the
Insurance Agreement, the Pooling and Servicing Agreement and
other documents,
o a finding or ruling by a governmental authority or agency that
the Insurance Agreement, the Pooling and Servicing Agreement
or other documents are not binding on the originators, the
depositor or the servicer,
o the originators', the depositor's or the servicer's failure to
pay its debts in general or the occurrence of specified events
of insolvency or bankruptcy with respect to the depositor or
the servicer, and
o the occurrence of specified "performance test violations"
designed to measure the performance of the mortgage loans.
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<PAGE>
THE CERTIFICATE INSURER
The following information has been obtained from
________________________ and has not been verified by the originators, the
servicer, the depositor or the underwriter. No representation or warranty is
made by the depositor, the originators, the servicer, the depositor or the
underwriter with respect thereto.
The Certificate Insurer
____________ is a monoline insurance company incorporated in ______
under the laws of the State of ____________. ________________________ is
licensed to engage in the financial guaranty insurance business in all 50
states, the District of Columbia and Puerto Rico.
___________ and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's securities --
thereby enhancing the credit rating of those securities -- in consideration for
the payment of a premium to the insurer. ____________ and its subsidiaries
principally insure asset-backed, collateralized and municipal securities.
Asset-backed securities are generally supported by residential or commercial
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
____________ insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy ____________
underwriting criteria.
The principal executive offices of ____________ are located at
________________________, and its telephone number at that location is
____________.
Reinsurance
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by ____________ or
any of its domestic operating insurance company subsidiaries are generally
reinsured among these companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, ____________ reinsures a
portion of its liabilities under some of its financial guaranty insurance
policies with other reinsurers under various treaties and on a
transaction-by-transaction basis. This reinsurance is utilized by ____________
as a risk management device and to comply with statutory and rating agency
requirements; it does not alter or limit ____________ obligations under any
financial guaranty insurance policy.
Ratings
____________ insurance financial strength is rated "Aaa" by Moody's and
____________ insurer financial strength is rated "AAA" by Standard & Poor's and
Standard & Poor's (Australia) Pty. Ltd. ____________ claims-paying ability is
rated "AAA" by Fitch IBCA, Inc. and Japan Rating and Investment Information,
Inc. These ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to revision
or withdrawal at any time by the rating agencies.
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<PAGE>
Capitalization
The following table sets forth the capitalization of ____________ and
its wholly owned subsidiaries on ____________ the basis of generally accepted
accounting principles as of ____________:
[Certificate insurer to provide]
For further information concerning ____________, see the Consolidated
Financial Statements of ____________, and the certificates thereto, incorporated
by reference in this prospectus supplement. ____________ financial statements
are included as exhibits to the annual report on Form 10-K and Quarterly Reports
on Form 10-Q filed with the Commission by ____________ and may be reviewed at
the EDGAR website maintained by the Commission. Copies of the statutory
quarterly and annual statements filed with the State of ____________ Insurance
Department by ____________ are available upon request to the State of
____________ Insurance Department.
Insurance Regulation
____________ is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of ____________, its
state of domicile. In addition, ____________ and its insurance subsidiaries are
subject to regulation by insurance laws of the various other jurisdictions in
which they are licensed to do business. As a financial guaranty insurance
corporation licensed to do business in the State of ____________, ____________
is subject to Article __ of the ____________ Insurance Law which, among other
things, limits the business of each such insurer to financial guaranty insurance
and related lines, requires that each such insurer maintain a minimum surplus to
policyholders, establishes contingency, loss and unearned premium reserve
requirements for each such insurer, and limits the size of individual
transactions -- "single risks" -- and the volume of transactions -- "aggregate
risks" -- that may be underwritten by each such insurer. Other provisions of the
____________ Insurance Law, applicable to non-life insurance companies such as
____________, regulate, among other things, permitted investments, payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liability for borrowings.
PREPAYMENT AND YIELD CONSIDERATIONS
The weighted average life of, and, if purchased at other than par, the
yield to maturity on, a certificate will be directly related to the rate of
payment of principal of the mortgage loans, including for this purpose voluntary
payment in full of mortgage loans prior to stated maturity, liquidations due to
defaults, casualties and condemnations, and repurchases of or substitutions for
mortgage loans by ____________ or an affiliate of ____________ as required or
permitted under the Pooling and Servicing Agreement or the Loan Sale Agreement.
The actual rate of principal prepayments on pools of mortgage loans is
influenced by a variety of economic, tax, geographic, demographic, social, legal
and other factors and has fluctuated considerably in recent years. In addition,
the rate of principal prepayments may differ among pools of mortgage loans at
any time because of specific factors relating to the mortgage loans in the
particular pool, including, among other things, the age of the mortgage loans,
the geographic locations of the properties securing the loans and the extent of
the mortgagors' equity in these properties, and changes in the mortgagors'
housing needs, job transfers and unemployment.
The rate of prepayments on conventional mortgage loans has fluctuated
significantly in recent years. In general, if prevailing interest rates fall
significantly below the interest rates of some mortgage loans at the time of
origination, these mortgage loans may be subject to higher prepayment rates than
if
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<PAGE>
prevailing rates remain at or above those at the time these mortgage loans were
originated. Conversely, if prevailing interest rates rise appreciably above the
interest rates of some mortgage loans at the time of origination, these mortgage
loans may experience a lower prepayment rate than if prevailing rates remain at
or below those at the time these mortgage loans were originated. However, there
can be no assurance that the mortgage loans will conform to the prepayment
experience of conventional mortgage loans or to any past prepayment experience
or any published prepayment forecast. No assurance can be given as to the level
of prepayments on mortgage loans that the trust estate will experience.
As indicated above, if purchased at other than par, the yield to
maturity on a certificate will be affected by the rate of the payment of
principal on the mortgage loans. If the actual rate of payments on the mortgage
loans is slower than the rate anticipated by an investor who purchases a
certificate at a discount, the actual yield to the investor will be lower than
the investor's anticipated yield. If the actual rate of payments on the mortgage
loans is faster than the rate anticipated by an investor who purchases a
certificate at a premium, the actual yield to the investor will be lower than
the investor's anticipated yield.
The final stated maturity date is expected to be ____________ for the
class A-1 certificates and the class A-2 certificates. Each final stated
maturity date was calculated using the assumption that the final stated maturity
date is thirteen (13) months after the final stated maturity date of the
mortgage loan having the latest maturity date in each pool and assuming a
subsequent mortgage loan having a final stated maturity date of ____________ is
purchased by the trust and included in each pool. The weighted average life of
the certificates is likely to be shorter than would be the case if payments
actually made on the mortgage loans conformed to the foregoing assumptions, and
the final distribution date for any class of the certificates could occur
significantly earlier than the final stated maturity date because:
o prepayments, including, for this purpose, prepayments
attributable to foreclosure, liquidation, repurchase and the
like, on mortgage loans are likely to occur,
o thirteen (13) months have been added to obtain the final
stated maturity date above,
o the over-collateralization provisions of the transaction
result in the application of Excess Interest to the payment of
principal;
o the servicer may cause a liquidation of the trust estate when
the aggregate outstanding principal amount of the mortgage
loans is less than 10% of the sum of (a) the aggregate
principal balance of the mortgage loans purchased on the
closing date and (b) the original amount on deposit in the
pre-funding accounts; and
o the servicer may, at its option, call the class A-1
certificates or the class A-2 certificates, separately, when
the aggregate outstanding principal balance of the class A-1
certificates or the class A-2 certificates, respectively, is
equal to or less than 10% of the aggregate original principal
balance of the class A-1 certificates or the class A-2
certificates, respectively.
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal of
the security is scheduled to be repaid to an investor. The weighted average life
of the certificates will be influenced by the rate at which principal of the
mortgage loans is paid, which may be in the form of scheduled amortization or
prepayments -- for this purpose, the term "prepayment" includes liquidations due
to default.
Prepayments on mortgage loans are commonly measured relative to a
prepayment model or standard. The model used in this prospectus supplement, Home
Equity Prepayment or HEP, is a prepayment assumption which represents an assumed
rate of prepayment each month relative to the then outstanding principal balance
of a pool of mortgage loans for the life of the mortgage loans. For example, 25%
HEP assumes a constant prepayment rate of 2.5% per annum of the then outstanding
principal balance of the mortgage loans in the first month of the life of the
mortgage loans and an additional 2.5%
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<PAGE>
per annum in each month thereafter up to and including the tenth month.
Beginning in the eleventh month and in each month thereafter during the life of
the mortgage loans, 25% HEP assumes a constant prepayment rate of 25% per annum.
As used in the table below, 0% prepayment assumption assumes prepayment rates
equal to 0% of the prepayment assumption, i.e., no prepayments on the mortgage
loans having the characteristics described below. The prepayment assumption does
not purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of mortgage loans,
including the mortgage loans.
The following table has been prepared on the basis of the following
modeling assumptions:
o The mortgage loans prepay at the indicated percentage of the
prepayment assumption,
o distributions on the certificates are received in cash on the
____ day of each month commencing in ____________,
o no defaults or delinquencies in, or modifications, waivers or
amendments respecting the payment by the mortgagors of
principal and interest on the mortgage loans occur,
o scheduled payments are assumed to be received on the last day
of each month commencing in ____________, or as presented in
the following table, and prepayments represent payments in
full of individual mortgage loans and are assumed to be
received on the last day of each month, commencing in
____________, or as presented in the following table, and
include thirty (30) days' interest thereon,
o the certificates are purchased on ____________,
o the Specified Over-collateralized Amount is as enumerated in
the Pooling and Servicing Agreement,
o on each distribution date, all Excess Interest for each pool
is applied to build up over-collateralization necessary to
satisfy the Specified Over-Collateralized Amount for each
pool, except for the first distribution date, on which the
amount of Excess Interest applied to build up
over-collateralization is zero,
o the mortgage loans in pool I consist of ____________ mortgage
loans having the following characteristics:
<TABLE>
<CAPTION>
Principal Mortgage Net Mortgage Original Amortizing Remaining Amortizing Remaining Term to
Balance($) Interest Rate(%) Interest Rate(%) Term (in months) Term (in months) Maturity (in months)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
o The mortgage loans in pool II consists of ____________
mortgage loans having the following characteristics:
<TABLE>
<CAPTION>
Principal Mortgage Net Mortgage Original Amortizing Remaining Amortizing Remaining Term to
Balance($) Interest Rate(%) Interest Rate(%) Term (in months) Term (in months) Maturity (in months)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
The foregoing modeling assumptions are assumptions and are not
necessarily indicative of actual performance.
Based upon the foregoing modeling assumptions, the tables below
indicate the weighted average life and earliest retirement date of the
certificates assuming that the mortgage loans prepay according to the indicated
percentages of the prepayment assumption.
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<PAGE>
Weighted Average Lives
Class A-1 Certificates
Prepayment Weighted Average Earliest
Assumption (HEP) Life in Years(1)(2) Retirement Date(2)
---------------- ------------------- ------------------
Class A-2 Certificates
Prepayment Weighted Average Earliest
Assumption (HEP) Life in Years(1)(2) Retirement Date(2)
---------------- ------------------- ------------------
35%
(1) The weighted average life of each class of certificates is determined
by (a) multiplying the amount of each principal payment used to retire
the related class of certificates by the number of years from the
closing date to the final distribution date when the related class of
certificates is fully retired; (b) adding the results; and (c) dividing
the sum by the original principal balance of that class.
(2) Determined assuming the call of the class A-1 certificates or the class
A-2 certificates, respectively, occurs as stated herein.
----------------
There is no assurance that prepayments will occur or, if they do occur,
that they will occur at any percentage of HEP.
The Pooling and Servicing Agreement provides that none of the
certificate insurer, the trust, the trustee, the depositor, the depositor, the
originators or the servicer will be liable to any holder for any loss or damage
incurred by the holder as a result of any difference in the rate of return
received by the holder as compared to the applicable Certificate Rate, with
respect to any holder of certificates upon reinvestment of the funds received in
connection with any premature repayment of principal on the certificates,
including any such repayment resulting from any prepayment by the mortgagor, any
liquidation of the mortgage loan, or any repurchase of or substitution for any
mortgage loan by the depositor or the servicer.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain material federal income tax
consequences of the purchase, ownership and disposition of the certificates is
to be considered only in connection with "Certain Federal Income Tax
Consequences" in the accompanying prospectus. The discussion in this prospectus
supplement and in the accompanying prospectus is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change. The
discussion below and in the accompanying prospectus does not purport to deal
with all federal tax consequences applicable to all categories of investors,
some of which may be subject to special rules. Investors should consult their
own tax advisors in determining the federal, state, local and any other tax
consequences to them of the purchase, ownership and disposition of the
certificates.
An election will be made to treat the trust as a REMIC for federal
income tax purposes. __________, special tax counsel, will deliver its opinion
that, assuming compliance with the Pooling and Servicing Agreement, the trust
will be treated as a REMIC for federal income tax purposes. The class A
certificates will be designated as "regular interests" in the REMIC, and the
class R certificates will be designated as the sole "residual interest" in the
REMIC. The class R certificates are "REMIC Residual Certificates" for purposes
of the Prospectus.
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<PAGE>
The certificates possess certain special tax attributes by virtue of
the REMIC provisions of the Code. See "Certain Federal Income Tax Consequences
- -- REMIC Securities" in the Prospectus.
The class A certificates generally will be treated as debt instruments
for federal income tax purposes. Beneficial owners, or registered holders, in
the case of definitive certificates, of the class A certificates will be
required to report income on such certificates in accordance with the accrual
method of accounting. It is not anticipated that the class A certificates will
be issued with original issue discount. See "Certain Federal Income Tax
Consequences -- Original Issue Discount" in the Prospectus. The prepayment
assumption for calculating original issue discount is 100% of the Prepayment
Assumption. See "Prepayment and Yield Considerations" herein.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974 and the Code impose
certain restrictions on (a) employee benefit plans (as defined in Section 3(3)
of ERISA), (b) plans described in section 4975(e)(1) of the Code, including
individual retirement accounts or Keogh plans, (c) any entities whose underlying
assets include plan assets by reason of a plan's investment in such entities and
(d) persons who have certain specified relationships to such Plans --
"Parties-in-Interest" under ERISA and "Disqualified Persons" under the Code.
Section 406 of ERISA prohibits plans from engaging in certain transactions
involving the assets of such plans with Parties-in-Interest with respect to such
plans, unless a statutory or administrative exemption is applicable to the
transaction. Excise taxes under Section 4975 of the Code, penalties under
Section 502 of ERISA and other penalties may be imposed on plan fiduciaries and
Parties-in-Interest or Disqualified Persons that engage in "prohibited
transactions" involving assets of a plan. Individual retirement arrangements and
other plans that are not subject to ERISA, but are subject to Section 4975 of
the Code, and Disqualified Persons with respect to such arrangements and plans,
also may be subject to excise taxes and other penalties if they engage in
prohibited transactions. Moreover, based on the reasoning of the United States
Supreme Court in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114
S. Ct. 517 (1993), an insurance company's general account may be deemed to
include assets of the Plans investing in the general account -- e.g., through
the purchase of an annuity contract. ERISA also imposes certain duties on
persons who are fiduciaries of plans subject to ERISA.
The Department of Labor has issued a regulation describing what
constitutes the assets of a lan when the plan acquires an equity interest in
another entity. This plan asset regulation states that, unless an exemption
described in the regulation is applicable, the underlying assets of an entity in
which a plan makes an equity investment will be considered, for purposes of
ERISA, to be the assets of the investing plan. Pursuant to the plan asset
regulation, if the assets of the trust were deemed to be plan assets by reason
of a plan's investment in any class A certificates, such plan assets would
include an undivided interest in any assets held in such trust. Therefore, in
the absence of an exemption, the purchase, sale or holding of any class A
certificate by a plan subject to Section 406 of ERISA or Section 4975 of the
Code might result in prohibited transactions and the imposition of excise taxes
and civil penalties.
On _______, the Department of Labor issued to ____________________ an
individual administrative exemption, Prohibited Transaction Exemption ____, from
certain of the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by a plan of certificates in
pass-through trusts that meet the conditions and requirements of this exemption.
Among the conditions that must be satisfied for this exemption to apply are the
following:
(a) The acquisition of the class A certificates by a plan is
on terms, including the price for the class A certificates, that are at
least as favorable to the plan as they would be in an arm's length
transaction with an unrelated party;
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<PAGE>
(b) The rights and interests evidenced by the class A
certificates acquired by the plan are not subordinated to the rights
and interests evidenced by other certificates of the trust fund;
(c) The class A certificates acquired by the plan have
received a rating at the time of such acquisition that is in one of the
three highest generic rating categories from any of Standard & Poor's,
Moody's, Fitch IBCA, or Duff & Phelps Credit Rating Co.;
(d) The sum of all payments made to the underwriter in
connection with the distribution of the class A certificates represents
not more than reasonable compensation for underwriting the class A
certificates. The sum of all payments made to and retained by the
servicer represents not more than reasonable compensation for the
servicer's services under the Pooling and Servicing Agreement and
reimbursement of the servicer's reasonable expenses in connection
therewith;
(e) The trustee is not an affiliate of any other member of the
restricted group; and
(f) The plan investing in the class A certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the Securities and Exchange Commission under the Securities Act of
1933.
The trust fund also must meet the following requirements:
a. The corpus of the trust fund must consist solely of assets
of the type which have been included in other investment pools;
b. certificates in such other investment pools must have been
rated in one of the three highest rating categories of Standard &
Poor's, Moody's, Duff & Phelps or Fitch IBCA for at least one year
prior to the plan's acquisition of certificates; and
c. certificates evidencing interests in such other investment
pools must have been purchased by investors other than plans for at
least one year prior to any plan's acquisition of class A certificates.
In order for the exemption to apply to certain self-dealing/conflict of
interest prohibited transactions that may occur when a plan fiduciary causes the
plan to acquire class A certificates, the Exemption requires, among other
matters, that:
o in the case of an acquisition in connection with the initial
issuance of certificates, at least fifty percent of each class
of certificates in which plans have invested is acquired by
persons independent of the restricted group and at least fifty
percent of the aggregate interest in the trust fund is
acquired by persons independent of the restricted group;
o such fiduciary, or its affiliate, is an obligor with respect
to 5 percent or less of the fair market value of the
obligations contained in the trust fund;
o the plan's investment in class A certificates does not exceed
twenty-five percent (25%) of all of the certificates
outstanding at the time of the acquisition and
o immediately after the acquisition, no more than twenty-five
percent (25%) of the assets of the plan are invested in
certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
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<PAGE>
The exemption does not apply to certain prohibited transactions in the
case of plans sponsored by the underwriter, the trustee, the servicer, any
obligor with respect to more than 5% of the fair market value of the mortgage
loans included in the trust fund, any entity deemed to be a "sponsor" of the
trust fund as such term is defined in the exemption, or any affiliate of any
such party.
The exemption may be available for the purchase of the certificates by
plans following the expiration of the Pre-Funding Period. Before purchasing a
class A certificate, a fiduciary of an ERISA plan should make its own
determination as to the availability of the exemptive relief provided in the
exemption and whether the conditions of such exemption will be applicable to the
class A certificates. Any fiduciary of an ERISA plan considering whether to
purchase a class A certificate should also carefully review with its own legal
advisors the applicability of the fiduciary duty and prohibited transaction
provisions of ERISA and the Code to such investment. The exemption will not
apply with respect to the certificates until such time that the balance of the
Pre-Funding Account for that class is reduced to zero. Accordingly, until such
time, the certificates may not be purchased by any entity using the assets of a
plan.
A governmental plan as defined in Section 3(32) of ERISA is not subject
to ERISA, or Code Section 4975. However, such a governmental plan may be subject
to a federal, state, or local law, which is, to a material extent, similar to
the provisions of ERISA or Code Section 4975. A fiduciary of a governmental plan
should make its own determination as to the need for and the availability of any
exemptive relief under similar law.
The sale of certificates to a plan is in no respect a representation by
the depositor or the underwriter that this investment meets all relevant legal
requirements with respect to investments by plans generally or any particular
plan, or that this investment is appropriate for lans generally or any
particular ERISA plan.
LEGAL INVESTMENT
The certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement dated
____________ between the depositor and ____________, as underwriter, the
depositor has agreed to sell to the underwriter and the underwriter has agreed
to purchase from the depositor the certificates. The depositor is obligated to
sell, and the underwriter is obligated to purchase, all of the certificates
offered hereby if any are purchased.
The underwriter has advised the depositor that it proposes to offer the
certificates purchased by the underwriter for sale from time to time in one or
more negotiated transactions or otherwise, at market prices prevailing at the
time of sale, at prices related to such market prices or at negotiated prices.
The underwriter may effect these transactions by selling these certificates to
or through dealers, and these dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the underwriter or
purchasers of the certificates for whom they may act as agent. Any dealers that
participate with the underwriter in the distribution of the certificates
purchased by the underwriter may be deemed to be underwriters, and any discounts
or commissions received by them or the underwriter and any profit on the resale
of certificates by them or the underwriter may be deemed to be underwriting
discounts or commissions under the Securities Act of 1933.
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In connection with the offering of the certificates, the underwriter
and its affiliates may engage in transactions that stabilize, maintain or
otherwise affect the market price of the certificates. These transactions may
include stabilization transactions effected in accordance with Rule 104 of
Regulation M, pursuant to which that person may bid for or purchase the
certificates for the purpose of stabilizing its market price. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the certificates at a level above that which might otherwise prevail in
the open market. None of the transactions described in this paragraph is
required, and, if they are taken, may be discontinued at any time without
notice.
For further information regarding any offer or sale of the certificates
pursuant to this prospectus supplement and the accompanying prospectus, see
"Plan of Distribution" in the accompanying prospectus.
The Underwriting Agreement provides that the depositor will indemnify
the underwriter or contribute to losses arising out of specified liabilities,
including liabilities under the Securities Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" certain information already on file with it. This means that we can
disclose important information to you by referring you to those documents. This
information is considered part of this prospectus supplement, and later
information that is filed will automatically update and supersede this
information. We incorporate by reference all of the documents listed in the
accompanying prospectus under the heading "Incorporation of Certain Information
by Reference" and the financial statements of ________________________ included
in, or as exhibits to, the following documents:
o the Annual Report on Form 10-K for the year ended
____________; and
o the Quarterly Report on Form 10-Q for the quarter ended
____________.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
cover page of this prospectus supplement or the accompanying prospectus.
ADDITIONAL INFORMATION
Prudential Securities Secured Financing Corporation has filed with the
Securities and Exchange Commission a registration statement (Registration No.
____________) under the Securities Act of 1933, for the certificates offered
pursuant to this prospectus supplement. This prospectus supplement and the
accompanying prospectus, which form a part of the registration statement, omit
certain information contained in such registration statement pursuant to the
rules and regulations of the Securities and Exchange Commission. You may read
and copy the registration statement at the Public Reference Room at the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. and at the Securities and Exchange Commission's regional
offices at Seven World Trade Center, 13th Floor, New York, New York, 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the Public Reference Rooms. In
addition, the Securities and Exchange Commission maintains a site on the World
Wide Web containing reports, proxy materials, information statements and other
items. The address is http://www.sec.gov.
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EXPERTS
The consolidated balance sheets of ____________ and subsidiaries as of
____________ and the related consolidated statements of income, changes in
shareholder's equity, and cash flows for each of the three years in the period
ended ________________________, incorporated by reference in this prospectus
supplement, have been incorporated in this prospectus supplement in reliance on
the report of ____________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the certificates will be
passed upon for the originators, the depositor and the servicer by ____________,
____________, for the trust by ____________, ____________, and for the depositor
and the underwriter by ____________, ____________.
RATINGS
It is a condition to the original issuance of the certificates that
they will receive ratings of "AAA" by S&P and "Aaa" by Moody's. The ratings
assigned to the certificates will take into account the claims-paying ability of
the certificate insurer. Explanations of the significance of these ratings may
be obtained from Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10007 and Standard & Poor's Rating Services, 25 Broadway, New York, New
York 10004. These ratings will be the views only of the rating agencies. There
is no assurance that any such ratings will continue for any period of time or
that these ratings will not be revised or withdrawn. Any such revision or
withdrawal of these ratings may have an adverse effect on the market price of
the certificates.
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GLOSSARY
The following terms have the meanings given below when used in this
prospectus supplement.
Available Amount means, for any pool of mortgage loans and any
distribution date, the amount on deposit in the related Distribution Account,
exclusive of the amount of any Insured Payment and the Servicing Fee, on that
distribution date.
Certificate Rate means the Class A-1 Certificate Rate or the Class A-2
Certificate Rate, as applicable.
Class A-1 Interest Distribution Amount means, for any distribution
date, an amount equal to the sum of the Current Interest for the class A-1
certificates on that distribution date, less the amount of any Class A-1
Mortgage Loan Interest Shortfalls relating to that distribution date.
Class A-1 Mortgage Loan Interest Shortfalls means, for any distribution
date, the aggregate of the Mortgage Loan Interest Shortfalls in pool I, if any,
for that distribution date, to the extent any Mortgage Loan Interest Shortfalls
are not paid by the servicer as Compensating Interest.
Class A-1 Certificate Rate means, with respect to any distribution
date, the per annum rate equal to ____%.
Class A-2 Interest Distribution Amount for any distribution date will
be an amount equal to the sum of the Current Interest for the class A-2
certificates on that distribution date, less the amount of any Class A-2
Mortgage Loan Interest Shortfalls relating to that distribution date.
Class A-2 Mortgage Loan Interest Shortfalls for any distribution date
will be the aggregate of the Mortgage Loan Interest Shortfalls in pool II, if
any, for that distribution date, to the extent any Mortgage Loan Interest
Shortfalls are not paid by the servicer as Compensating Interest.
Class A-2 Certificate Rate means, for any distribution date, the per
annum rate equal to _____%.
Compensating Interest means an amount equal to the lesser of (a) the
aggregate of the Prepayment Interest Shortfalls for the related distribution
date resulting from principal prepayments in full during the related due period
and (b) its aggregate servicing fees received in the related due period
Current Interest for any pool of mortgage loans and any distribution
date is the interest that will accrue on the related class of certificates at
the applicable Certificate Rate on the aggregate outstanding principal balance
of such class during the accrual period.
Cut-Off Date means the close of business on ____________.
Excess Interest for any pool of mortgage loans and any distribution
date is equal to the excess of (x) the Available Amount for that pool and that
distribution date over (y) the sum of
o the Interest Distribution Amount for that pool and that
distribution date,
o Principal Distribution Amount for that pool and that
distribution date -- calculated for this purpose without
regard to any Over-collateralization Increase Amount or
portion thereof included therein,
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o any Reimbursement Amount or other amount owed to the
certificate insurer relating to that pool and
o the trustee's fees for that pool and that distribution date.
Excess Over-collateralized Amount means, for each pool of mortgage
loans and a distribution date, the difference, if any, between (a) the
Over-collateralized Amount that would apply on that distribution date after
taking into account all distributions to be made on that distribution date,
except for any distributions of related Over-collateralization Reduction
Amounts, and (b) the Specified Over-collateralized Amount.
Foreclosure Profits as to any servicer remittance date, are 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 that servicer remittance date over (ii) the sum of the unpaid principal
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest
on the unpaid principal balance from the due date to which interest was last
paid by the mortgagor.
Insurance Proceeds are proceeds paid by any insurer pursuant to any
insurance policy covering a mortgage loan to the extent these proceeds are not
applied to the restoration of the mortgaged property or released to the
mortgagor. "Insurance Proceeds" do not include "Insured Payments."
Insured Distribution Amount for any pool of mortgage loans and any
distribution date, is the sum of:
o the Interest Distribution Amount for that pool and that
distribution date,
o the amount of the Over-collateralization Deficit applicable to
that pool and that distribution date, if any, and
o on the distribution date which is a final stated maturity
date, the aggregate outstanding principal balance for the
related class of certificates.
Insured Payment for any pool of mortgage loans and any distribution
date will equal the amount by which the Insured Distribution Amount for that
pool and that distribution date exceeds the Available Amount less the trustee's
fees for that pool and that distribution date.
Interest Distribution Amount means the Class A-1 Interest Distribution
Amount or the Class A-2 Interest Distribution Amount, as applicable.
Liquidation Expenses as to any Liquidated Mortgage Loan are all
expenses incurred by the servicer in connection with the liquidation of the
mortgage loan, including, without duplication, unreimbursed expenses for real
property taxes and unreimbursed servicing advances. In no event may Liquidation
Expenses on a Liquidated Mortgage Loan exceed the Liquidation Proceeds.
Liquidated Loan Loss as to any Liquidated Mortgage Loan is the excess,
if any, of (i) the unpaid principal balance of that Liquidated Mortgage Loan
plus accrued and unpaid interest on the unpaid principal balance from the due
date to which interest was last paid by the Mortgagor over (ii) the sum of the
Net Liquidation Proceeds and the amount of any previously unreimbursed Periodic
Advances in respect of the mortgage loan.
Liquidation Proceeds are amounts, other than Insurance Proceeds,
received by the servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted mortgage loan through a sale, foreclosure
sale, REO Disposition or otherwise.
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Mortgage Loan Interest Shortfalls means Civil Relief Act interest
shortfalls and Prepayment Interest Shortfalls.
Net Foreclosure Profits as to any servicer remittance date, are the
excess, if any, of (i) the aggregate Foreclosure Profits on that servicer
remittance date over (ii) Liquidated Loan Losses on that servicer remittance
date.
Net Liquidation Proceeds as to any Liquidated Mortgage Loan, are
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the servicer.
Net Mortgage Loan Interest Shortfalls means the Class A-1 Mortgage Loan
Interest Shortfalls or the Class A-2 Mortgage Loan Interest Shortfalls, as
applicable.
Net REO Proceeds as to any REO property, are REO Proceeds net of any
expenses of the servicer.
Over-collateralized Amount means, for any distribution date and a pool
of mortgage loans, the excess, if any, of (x) the sum of (i) the aggregate
principal balances of the mortgage loans in that pool as of the close of
business on the last day of the preceding calendar month and (ii) the amounts,
if any, on deposit in the pre-funding accounts, over (y) the aggregate principal
balance of the related class of certificates as of that distribution date
- --following the making of all distributions on that distribution date, other
than any Over-collateralization Increase Amount for that distribution date.
Over-collateralization Deficit for any distribution date, is the amount
by which the aggregate outstanding principal balance of the certificates exceeds
the sum of
o the aggregate principal balance of the mortgage loans,
o any amount on deposit in the pre-funding accounts on that
distribution date, and
o any amounts on deposit in the Cross-collateralization Reserve
Accounts on that distribution date, after application of all
amounts due on that distribution date.
Over-collateralization Increase Amount for any pool of mortgage loans
and any distribution date is the amount of Excess Interest to be applied as an
accelerated payment of principal on the related class of certificates until the
over-collateralization for that pool reaches the Specified Over-collateralized
Amount. This payment is limited to the extent of the Available Amount as
described in the definition of "Principal Distribution Amount.
Over-collateralization Reduction Amount for any pool of mortgage loans
and any distribution date, is the difference, if any, between (a) the
Over-collateralized Amount for that pool that would apply on that distribution
date after taking into account all distributions to be made on that distribution
date -- except for any distributions of related Over-collateralization Reduction
Amounts -- and (b) the Specified Over-collateralized Amount for that pool and
that distribution date to the extent of principal available for distribution.
Periodic Advances means advances made by the servicer on each
distribution date for delinquent payments of interest on the mortgage loans, at
a rate equal to the interest rate on the mortgage note, less the servicing fee
rate.
Prepayment Interest Shortfall means, for any distribution date, an
amount equal to the excess, if any, of (a) thirty (30) days' interest on the
outstanding principal balance of these mortgage loans at a per annum rate equal
to the mortgage interest rate -- or at any lower rate as may be in effect for
these
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mortgage loan because of application of the Civil Relief Act, any reduction as a
result of a bankruptcy proceeding and/or any reduction by a court of the monthly
payment due on these mortgage loan -- minus the rate at which the servicing fee
is calculated, over (b) the amount of interest actually remitted by the
mortgagor in connection with the principal prepayment in full, less the
servicing fee for such mortgage loan in such month.
Principal Distribution Amount for any pool of mortgage loans and any
distribution date will be the lesser of:
(a) the excess of (i) the sum, as of that distribution date,
of (A) the Available Amount for that pool and (B) any Insured Payment
on the related class of certificates over (ii) the sum of Interest
Distribution Amount for that pool, the trustee's fees, and the
Reimbursement Amount allocable to the related class of certificates;
and
(b) the sum, without duplication, of:
(i) all principal in respect of the mortgage
loans in that pool actually collected during
the related due period;
(ii) the principal balance of each mortgage loan
that either was repurchased by the depositor
or purchased by the servicer on the servicer
remittance date from that pool, to the
extent the principal balance is actually
received by the trustee;
(iii) any substitution adjustments delivered by
the depositor on the servicer remittance
date in connection with a substitution of a
mortgage loan in that pool, to the extent
the substitution adjustments are actually
received by the trustee;
(iv) the Net Liquidation Proceeds actually
collected by the servicer of all mortgage
loans in that pool during the prior calendar
month, to the extent the Net Liquidation
Proceeds relate to principal;
(v) on the ____________ or ____________
distribution dates, moneys released from the
related pre-funding account, if any;
(vi) the proceeds received by the trustee upon
the exercise by the servicer of its option
to call the related class of certificates,
to the extent those proceeds relate to
principal;
(vii) the amount of any Over-collateralization
Deficit for that pool for that distribution
date;
(viii) the proceeds received by the trustee on any
termination of the trust, to the extent
those proceeds relate to principal,
allocable to that pool;
(ix) the amount of any Over-collateralization
Increase Amount for that pool for that
distribution date, to the extent of any
Excess Interest for that pool available for
that purpose, exclusive of the amount of
Excess Interest for that pool necessary to
make the payment of (A) any Net Mortgage
Loan
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Interest Shortfalls for that pool and that
distribution date and (B) the Shortfall
Amount for the other pool and that
distribution date;
(x) if the certificate insurer shall so elect,
an amount of principal, including Liquidated
Loan Losses, that would have been payable
pursuant to clauses (i) through (ix) above
if sufficient funds were available therefor;
minus
(xi) the amount of any Over-collateralization
Reduction Amount for that pool for that
distribution date.
In no event will the Principal Distribution Amount for a pool for any
distribution date be (x) less than zero or (y) greater than the then outstanding
aggregate principal balance for the certificates.
Qualified Substitute Mortgage Loan means any mortgage loan or mortgage
loans substituted for a deleted mortgage loan and which, among other things,
o relates or relate to a detached one-family residence or to the
same type of residential dwelling or commercial property as
the deleted mortgage loan and, has or have the same or a
better lien priority as the deleted mortgage loan and has or
have the same occupancy status as the deleted mortgage loan or
is or are owner-occupied mortgaged property or properties,
o matures or mature no later than, and not more than one year
earlier than, the deleted mortgage loan,
o has or have a LTV or LTV at the time of the substitution no
higher than the LTV of the deleted mortgage loan,
o has or have a CLTV or CLTVs at the time of the substitution no
higher than the CLTV of the deleted mortgage loan,
o 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
principal balance of the deleted mortgage loan as of that
date,
o has or have a mortgage interest rate of at least the same
interest rate as the deleted mortgage loan and
o complies or comply, as of the date of substitution, with each
representation and warranty enumerated in the Loan Sale
Agreement.
Reimbursement Amount means, for each pool of mortgage loans and each
distribution date, the lesser of (x) the excess of (i) the amount then on
deposit in the Distribution Account over (ii) the Insured Distribution Amounts
for that pool and that distribution date and (y) the amount of all Insured
Payments and other amounts due to the certificate insurer for that pool pursuant
to the Insurance Agreement, including the premium amount, which have not been
previously paid.
REO Proceeds are monies received from any REO property, including,
without limitation, proceeds from the rental of the mortgaged property.
Shortfall Amount means, for a pool of mortgage loans and any
distribution date, the sum of
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o any shortfall in the amount of the Interest Distribution
Amount for that pool actually distributed to the holders of
the related class of certificates,
o any shortfall in the amount of the Net Mortgage Loan Interest
Shortfalls for that pool actually distributed to the holders
of the related class of certificates,
o the amount of any Over-collateralization Deficit for that pool
and that distribution date and
o any shortfall in the payment of any amounts owed the
certificate insurer.
Specified Over-collateralized Amount for a pool of mortgage loans and
any distribution date will be the amount of Over-collateralization which the
certificate insurer requires for that pool and that distribution date.
Specified Reserve Amount means, for each pool of mortgage loans and any
distribution date, the difference between (x) the Specified Over-collateralized
Amount for that pool and that distribution date and (y) the Over-collateralized
Amount for that pool on that distribution date.
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No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this prospectus supplement and
the prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the depositor or by the
underwriter. This prospectus supplement and the prospectus do not constitute an
offer to sell, or a solicitation of an offer to buy, the securities offered
hereby by anyone in any jurisdiction in which such an offer or solicitation is
not authorized or in which the person making the offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make any such offer or
solicitation. Neither the delivery of this prospectus supplement and the
prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that information in this prospectus supplement or in the prospectus
is correct as of any time since the date of this prospectus supplement or the
prospectus.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Table of Contents..........................................................S-__
Summary....................................................................S-__
Risk Factors...............................................................S-__
Transaction Overview.......................................................S-__
The Mortgage Loan Pools....................................................S-__
The Originators, the Depositor, the Servicer and the
Subservicer............................................................S-__
The Trustee................................................................S-__
The Collateral Agent.......................................................S-__
Description of the Certificates............................................S-__
Servicing of the Mortgage Loans............................................S-__
The Certificate Insurance Policy...........................................S-__
The Certificate Insurer....................................................S-__
Prepayment and Yield Considerations........................................S-__
Certain Federal Income Tax Considerations..................................S-__
ERISA Considerations.......................................................S-__
Legal Investment...........................................................S-__
Plan of Distribution.......................................................S-__
Experts....................................................................S-__
Ratings....................................................................S-__
Legal Matters..............................................................S-__
Glossary...................................................................S-__
PROSPECTUS
Summary of Prospectus........................................................__
Risk Factors.................................................................__
The Sponsor..................................................................__
Use of Proceeds..............................................................__
The Trustee..................................................................__
The Trust Funds..............................................................__
Description of the Securities................................................__
Credit Enhancement...........................................................__
Prepayment and Yield Considerations..........................................__
Servicing of the Loans.......................................................__
Certain Legal Aspects of the Loans...........................................__
Certain Federal Income Tax Consequences......................................__
State Tax Considerations.....................................................__
ERISA Considerations.........................................................__
Legal Investment.............................................................__
Plan of Distribution.........................................................__
Incorporation of Certain Information by Reference............................__
Additional Information.......................................................__
Legal Matters................................................................__
Rating.......................................................................__
Glossary.....................................................................__
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$_______________
______________________
Issuer
_________________________
Servicer
Prudential Securities
Secured Financing Corporation
Sponsor
$__________
Class A-1 Certificates
$__________
Class A-2 Certificates
Mortgage-Backed Certificates,
Series _______
__________________
PROSPECTUS SUPPLEMENT
__________________
___________________
__________
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