SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
March 27, 1997
Delta Funding Corporation (as Seller and Servicer under a Pooling and Servicing
Agreement dated as of February 28, 1997 providing for the issuance of Home
Equity Loan Asset-Backed Certificates, Series 1997-1)
DELTA FUNDING CORPORATION
(Exact name of registrant as specified in charter)
New York 333-3418 11-2609517
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification)
incorporation) No.)
1000 Woodbury Road, Woodbury, New York 11797
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 364-8500
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
Delta Funding Corporation, as seller (the "Seller") and as servicer
(the "Servicer") registered issuances of up to $1,706,898,250 principal amount
of Home Equity Loan Asset-Backed Certificates on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"),
by a Registration Statement on Form S-3 (Registration File No. 333-3418) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
the Seller caused Delta Funding Home Equity Loan Trust 1997-1 to issue
$235,000,000 principal amount of Home Equity Loan Asset-Backed Certificates,
Series 1997-1 (the "Certificates"), on March 27, 1997 (the "Closing Date"). This
Current Report on Form 8-K is being filed to file a copy of the Pooling and
Servicing Agreement referred to below and the Certificate Guaranty Insurance
Policy issued by MBIA Insurance Corporation.
The Certificates were issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement"), dated as of February 28, 1997
(the "Initial Cut-Off Date"), Delta Funding Corporation, as Seller and as
Servicer and Bankers Tust Company of California, N.A., as trustee (the
"Trustee").
Capitalized terms not defined herein have the meanings assigned in the
Pooling and Servicing Agreement attached hereto as Exhibit 4.1.
<PAGE>
Item 7. Financial statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
Exhibit No.
4.1 Pooling and Servicing Agreement dated as of February 28, 1997
among the Seller, the Servicer and the Trustee.
99.1 Certificate Guaranty Insurance Policy issued by MBIA Insurance
Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
DELTA FUNDING CORPORATION
(Registrant)
By: /s/ Richard Blass
Name: Richard Blass
Title: Senior Vice President
Date: April 8, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
4.1 Pooling and Servicing Agreement dated as of February 28, 1997 among
the Seller, the Servicer and the Trustee.
99.1 Certificate Guaranty Insurance Policy issued by MBIA Insurance
Corporation
EXHIBIT 4.1
DELTA FUNDING CORPORATION,
as Seller and Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
_______________________
POOLING AND SERVICING AGREEMENT
Dated as of February 28, 1997
______________________
Home Equity Loan Asset-Backed Certificates
Series 1997-1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01 Definitions........................................1
Section 1.02 Interest Calculations.............................37
ARTICLE II
Conveyance of Initial Mortgage Loans;
Original Issuance of Certificate Tax Treatment
Section 2.01 Conveyance of Initial Mortgage Loans..............37
Section 2.02 Acceptance by Trustee.............................41
Section 2.03. Representations and Warranties
Regarding the Seller and the
Servicer..........................................44
Section 2.04. Representations and Warranties of
the Seller Regarding the Mortgage
Loans.............................................46
Section 2.05 Substitution of Mortgage Loans....................57
Section 2.06 Execution and Authentication of Certificates......58
Section 2.07 Designation of Interests in REMIC.................58
Section 2.08 Designation of Startup Day of REMIC...............60
Section 2.09 REMIC Certificate Maturity Date...................60
Section 2.10 Tax Returns and Reports to Certificateholders.....60
Section 2.11 Tax Matters Person................................61
Section 2.12 REMIC Related Covenants...........................61
Section 2.13 Subsequent Transfers..............................64
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01 The Servicer......................................68
Section 3.02 Collection of Certain Mortgage Loan Payments......72
Section 3.03 Withdrawals from the Collection Account...........73
Section 3.04. Maintenance of Hazard Insurance;
Property Protection Expenses......................75
Section 3.05. Maintenance of Mortgage Impairment
Insurance Policy..................................76
Section 3.06. Management and Realization Upon
Defaulted Mortgage Loans..........................76
Section 3.07 Trustee to Cooperate..............................78
Section 3.08. Servicing Compensation; Payment of
Certain Expenses by Servicer......................79
Section 3.09 Annual Statement as to Compliance.................80
Section 3.10 Annual Servicing..................................80
Section 3.11. Access to Certain Documentation and
Information Regarding the Mortgage
Loans.............................................80
Section 3.12. Maintenance of Certain Servicing
Insurance Policies................................81
Section 3.13 Reports to the Securities and Exchange
Commission........................................81
Section 3.14. Reports of Foreclosures and
Abandonments of Mortgaged
Properties, Returns Relating to
Mortgage Interest Received from
Individuals and Returns Relating to
Cancellation of Indebtedness......................81
Section 3.15 Advances by the Servicer..........................82
Section 3.16 Optional Purchase of Defaulted Mortgage Loans.....82
Section 3.17 Superior Liens....................................83
Section 3.18 Assumption Agreements.............................84
Section 3.19 Payment of Taxes, Insurance and Other Charges.....85
ARTICLE IV
Certificate Insurance Policy and Initial Interest
Coverage Account
Section 4.01 Certificate Insurance Policy......................85
Section 4.02. Initial Interest Coverage Account
and Funding Account...............................86
Section 4.03 Claims Upon the Certificate Insurance Policy......88
ARTICLE V
Payments and Statements to Certificateholders;
Rights of Certificateholders
Section 5.01 Distributions......................................88
Section 5.02 Compensating Interest..............................92
Section 5.03 Statements.........................................93
Section 5.04 Distribution Account...............................97
Section 5.05 Investment of Accounts.............................97
ARTICLE VI
The Certificates
Section 6.01 The Certificates..................................99
Section 6.02. Registration of Transfer and Exchange of
Certificates......................................99
Section 6.03 Mutilated, Destroyed, Lost or Stolen
Certificates......................................
Section 6.04 Persons Deemed Owners............................106
Section 6.05 Appointment of Paying Agent......................107
ARTICLE VII
The Seller and the Servicer
Section 7.01 Liability of the Seller and the Servicer.........107
Section 7.02. Merger or Consolidation of, or
Assumption of the Obligations of,
the Seller or the Servicer.......................107
Section 7.03 Limitation on Liability of the.Servicer and......
Others...........................................108
Section 7.04 Servicer Not to Resign...........................109
Section 7.05 Delegation of Duties.............................110
Section 7.06 Indemnification of the Trust by the Servicer.....110
Section 7.07 Inspection.......................................110
ARTICLE VIII
Default
Section 8.01 Events of Default................................111
Section 8.02 Trustee to Act; Appointment of Successor.........113
Section 8.03 Waiver of Defaults...............................115
Section 8.04. Rights of the Certificate Insurer to
Exercise Rights of Senior
Certificateholders...............................115
Section 8.05. Trustee to Act Solely with Consent of
the Certificate Insurer..........................116
Section 8.06. Mortgage Loans, Trust and Accounts Held
for Benefit of the Certificate Insurer...........117
Section 8.07 Certificate Insurer Default......................117
Section 8.08 Notification to Certificateholders...............118
ARTICLE IX
The Trustee
Section 9.01 Duties of Trustee................................118
Section 9.02 Certain Matters Affecting the Trustee............120
Section 9.03 Trustee Not Liable for Certificates
or Mortgage Loans................................126
Section 9.04 Trustee May Own Certificates.....................127
Section 9.05 Servicer to Pay Trustee Fees and Expenses........127
Section 9.06 Eligibility Requirements for Trustee.............128
Section 9.07 Resignation or Removal of Trustee................129
Section 9.08 Successor Trustee................................130
Section 9.09 Merger or Consolidation of Trustee...............130
Section 9.10 Appointment of Co-Trustee or Separate Trustee....131
Section 9.11 Limitation of Liability..........................133
Section 9.12 Trustee May Enforce Claims Without Possession
of Certificates; Inspection......................133
Section 9.13 Suits for Enforcement............................134
ARTICLE X
Termination
Section 10.01 Termination......................................134
Section 10.02 Additional Termination Requirements..............136
ARTICLE XI
Miscellaneous Provisions
Section 11.01 Amendment........................................137
Section 11.02 Recordation of Agreement.........................139
Section 11.03 Limitation on Rights of Certificateholders.......140
Section 11.04 Governing Law....................................141
Section 11.05 Notices..........................................141
Section 11.06 Severability of Provisions.......................143
Section 11.07 Assignment.......................................143
Section 11.08 Certificates Nonassessable and Fully Paid........143
Section 11.09. Third-Party Beneficiaries...................... .143
Section 11.10 Counterparts.....................................143
Section 11.11 Effect of Headings and Table of Contents.........144
Section 11.12 Insurance Agreement..............................144
Section 11.13 Claims Upon the Certificate Insurance Policy.....144
Section 11.14 Effect of Payments by the
Certificate Insurer; Subrogation.................144
Section 11.15 Notices to the Certificate Insurer...............145
EXHIBIT A - FORM OF CLASS A CERTIFICATE.................................. A-1
EXHIBIT B - FORM OF CLASS R CERTIFICATE.................................. B-1
EXHIBIT B-1- FORM OF CLASS S CERTIFICATE................................B-1-1
EXHIBIT C - MORTGAGE LOAN SCHEDULE....................................... C-1
EXHIBIT D - FORM OF SUBSEQUENT TRANSFER AGREEMENT........................ D-1
EXHIBIT E - FORM OF MORTGAGE NOTE........................................ E-1
EXHIBIT F - FORM OF MORTGAGES............................................ F-1
EXHIBIT G - TRANSFER AFFIDAVITS.......................................... G-1
EXHIBIT H - LETTER OF REPRESENTATIONS.................................... H-1
EXHIBIT I - FORM OF REQUEST FOR RELEASE.................................. I-1
EXHIBIT J - [RESERVED]
EXHIBIT K - SPECIMEN OF CERTIFICATE INSURANCE POLICY..................... K-1
EXHIBIT L - DELINQUENCY AND LOSS INFORMATION............................. L-1
EXHIBIT M - FORM OF TRANSFEROR CERTIFICATE ...............................M-1
EXHIBIT N-1- FORM OF INVESTMENT LETTER [NON-RULE 144A]..................N-1-1
EXHIBIT N-2- FORM OF RULE 144A LETTER ..................................N-2-1
EXHIBIT O - FORM OF INITIAL CERTIFICATION.................................O-1
EXHIBIT P - FORM OF TRUSTEE FINAL CERTIFICATION...........................P-1
<PAGE>
This Pooling and Servicing Agreement, dated as of February 28, 1997,
among Delta Funding Corporation, as Seller and Servicer (the "Seller" and the
"Servicer", respectively), and Bankers Trust Company of California, N.A., as
Trustee (the "Trustee").
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Accounts: Collectively, the Collection Account, the Initial Interest
Coverage Account, the Funding Account and the Distribution Account.
Addition Notice: The notice given pursuant to Section 2.13 with
respect to the transfer of Subsequent Mortgage Loans to the Trust pursuant to
such Section.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Aggregate Principal Balance: As of any date of determination, the sum
of all the Principal Balances of the Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Amount Available: As to any Distribution Date, the sum of the
Available Funds with respect to the Group 1 Certificates and the Group 2
Certificates.
Amortized Overcollateralized Amount Requirement: With respect to any
Distribution Date and Loan Group, the product of (x) 6.00% in the case of Loan
Group 1 and 5.50% in the case of Loan Group 2, and (y) the Aggregate Principal
Balance of the related Mortgage Loans at the end of the related Due Period.
Appraised Value: The appraised value of the Mortgaged Property based
upon the appraisal made by or for the originator at the time of the origination
of the related Mortgage Loan.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee.
Authorized Newspaper: A newspaper of general circulation in the
Borough of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
Available Funds: As to any Distribution Date and Certificate Group,
the sum of (A) the sum of all amounts described in clauses (i) through (vii)
inclusive, of Section 3.02(b) received by the Servicer in respect of the related
Loan Group, (including any amounts paid by the Servicer and the Seller and
excluding (a) any amounts not required to be deposited in the Collection Account
pursuant to Section 3.02(b), (b) any amounts paid to the Servicer pursuant to
Sections 3.03(ii), (iii), (iv), (v), (vi), (vii) and (viii) in respect of the
Mortgage Loans in the related Loan Group as of the related Determination Date
and (c) any amounts paid by the Seller pursuant to clause (iv) of the definition
of Purchase Price or clause (d) of the definition of Substitution Adjustment in
respect of the Mortgage Loans in the related Loan Group to the extent such
payment is in respect of amounts incurred by or imposed on the Trustee) during
the related Due Period and deposited into the Collection Account as of the
Determination Date; (B)any amounts deposited into the Distribution Account from
the Initial Interest Coverage Account pursuant to Section 4.02(c) for such
Certificate Group and (C) any amounts deposited into the Distribution Account
from the Funding Account pursuant to Section 4.02(c) for such Certificate Group.
No amount included in this definition by virtue of being described by any
component of the definition thereof shall be included twice by virtue of also
being described by any other component or otherwise.
Balloon Loan: Any Mortgage Loan that provided on the date of
origination for scheduled monthly payment in level amounts substantially lower
than the amount of the final scheduled payment.
BIF: The Bank Insurance Fund, as from time to time constituted,
created under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or, if at any time after the execution of this Agreement the Bank
Insurance Fund is not existing and performing duties now assigned to it, the
body performing such duties on such date.
Blanket Mortgage: The mortgage or mortgages encumbering a Cooperative
Property.
Book-Entry Certificate: Any Class A Certificate registered in the name
of the Depository or its nominee, ownership of which is reflected on the books
of the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Day: Any day other than a Saturday, a Sunday or a day on
which the Certificate Insurer or banking institutions in New York City or the
city in which the corporate trust office of the Trustee under this Agreement is
located are authorized or obligated by law or executive order to close.
Capitalized Interest Requirement: With respect to the Distribution
Date occurring in April 1997, the amount of interest accruing at the weighted
average Certificate Rate for the Senior Certificates on the amount by which the
sum of the Class Principal Balances of the Certificates as of the Closing Date
exceeds the aggregate Principal Balances of Mortgage Loans with a Due Date after
April 15, 1997.
Certificate: Any Senior Certificate or Residual Certificate.
Certificate Group: Either Certificate Group 1 or Certificate Group 2,
as the context requires.
Certificate Group 1: The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class S Certificates collectively.
Certificate Group 2: The Class A-7 Certificates.
Certificate Group Principal Balance: As to either Certificate Group
and any date of determination, the aggregate of the Class Principal Balances of
the Classes of Certificates in such Certificate Group.
Certificate Index: The rate for one month United States dollar
deposits quoted on Telerate Page 3750 as of 11:00 A.M., London time, on the
second LIBOR Business Day prior to the first day of any Interest Period relating
to the Variable Rate Certificates. "Telerate Page 3750" means the display
designated as page 3750 on the Telerate Service (or such other page as may
replace page 3750 on that service for the purpose of displaying London interbank
offered rates of major banks). If such rate does not appear on such page (or
such other page as may replace that page on that service, or if such service is
no longer offered, such other service for displaying LIBOR or comparable rates
as may be reasonably selected by the Trustee after consultation with the
Servicer), the rate will be the Reference Bank Rate. If no such quotations can
be obtained and no Reference Bank Rate is available, the Certificate Rate will
be the Certificate Rate applicable to the preceding Distribution Date. On the
second LIBOR Business Day immediately preceding each Distribution Date, the
Trustee shall determine the Certificate Rate for the Interest Period commencing
on such Distribution Date and inform the Servicer of such rate.
Certificate Insurance Policy: The Certificate Guaranty Insurance
Policy (No. 23488) with respect to the Senior Certificates, and all endorsements
thereto dated, the Closing Date, issued by the Certificate Insurer for the
benefit of the Holders of each Class of Senior Certificates, a copy of which is
attached hereto as Exhibit K.
Certificate Insurer: MBIA Insurance Corporation, a stock insurance
company organized and created under the laws of the State of New York, or any
successor thereto.
Certificate Insurer Default: The existence and continuance of any of
the following:
(a) the Certificate Insurer fails to make a payment
required under the Certificate Insurance Policy in accordance
with its terms; or
(b) the entry by a court having jurisdiction in the
premises of (i)a decree or order for relief in respect of the
Certificate Insurer in an involuntary case or proceeding
under any applicable United States federal or state
bankruptcy, insolvency, rehabilitation, reorganization or
other similar law or (ii)a decree or order adjudging the
Certificate Insurer a bankrupt or insolvent or approving as
properly filed a petition seeking reorganization,
rehabilitation, arrangement, adjustment or composition of or
in respect of the Certificate Insurer under any applicable
United States federal or state law, or appointing a
custodian, receiver, liquidator, rehabilitator, assignee,
trustee, sequestrator or other similar official of the
Certificate Insurer or of any substantial part of its
property, or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(c) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United
States federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the
consent by the Certificate Insurer to the entry of a decree
or order for relief in respect of the Certificate Insurer in
an involuntary case or proceeding under any applicable United
States federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against the
Certificate Insurer, or the filing by the Certificate Insurer
of a petition or answer or consent seeking reorganization or
relief under any applicable United States federal or state
law, or the consent by the Certificate Insurer to the filing
of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Certificate
Insurer or of any substantial part of its property, or the
making by the Certificate Insurer of an assignment for the
benefit of its creditors, or the failure by the Certificate
Insurer to pay debts generally as they become due, or the
admission by the Certificate Insurer in writing of its
inability to pay its debts generally as they become due, or
the taking of corporate action by the Certificate Insurer in
furtherance of any such action.
Certificate Owner: The Person who is the beneficial owner of a
Book-Entry Certificate.
Certificate Rate: As to any Class of Certificates, the respective per
annum rate set forth or described below:
Class Certificate Rate
A-1 6.60%
A-2 6.92%%
A-3 7.26%
A-4 7.46%
A-5 7.74%
A-6 7.21%
A-7 (1)
X (2)
S (3)
R-1 (2)
R-2 (2)
R-3 (2)
__________
(1) For the initial Distribution Date, 5.66875% per annum. For
each Distribution Date thereafter, the lesser of the Class A-7
Formula Rate and the Loan Group 2 Net Funds Cap.
(2) This Class has no Certificate Rate.
(3) The Weighted Average Strip Rate.
Certificate Register and Certificate Registrar: The register
maintained and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Class A Certificate registered in the name of the Seller or any Person known
to a Responsible Officer to be an Affiliate of the Seller and (y) any Class A
Certificate for which the Seller or any Person known to a Responsible Officer to
be an Affiliate of the Seller is the Certificate Owner or Holder shall be deemed
not to be outstanding (unless to the knowledge of a Responsible Officer (i) the
Seller or such Affiliate is acting as trustee or nominee for a Person who is not
an Affiliate of such Seller and who makes the voting decision with respect to
such Class A Certificates or (ii) the Seller or such Affiliate is the
Certificate Owner or Holder of all the Certificates of a Class, but only with
respect to the Class as to which the Seller or such Affiliate owns all the
Certificates) and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage Interests
necessary to effect any such consent, direction, waiver or request has been
obtained.
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 by which
(i)interest collectible on such Mortgage Loan during such Due Period is less
than (ii)one month's interest on the Principal Balance of such Mortgage Loan at
the Loan Rate for such Mortgage Loan before giving effect to the application of
the Civil Relief Act.
Class: All Certificates having the same designation.
Class A Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A and designated as a
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 or Class A-7
Certificate pursuant to Section 6.01.
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Monthly Principal Distributable Amount: With respect to any
Distribution Date and Certificate Group, the amount equal to the sum of the
following amounts (without duplication) with respect to the immediately
preceding Due Period: (i) that portion of all Monthly Payments allocable to
principal on Mortgage Loans in the related Loan Group, including all full and
partial principal prepayments received during the related Due Period, (ii)the
Principal Balance of all Mortgage Loans in the related Loan Group that became
Liquidated Mortgage Loans for the first time during the related Due Period,
(iii)the portion of the Purchase Price allocable to principal of all Mortgage
Loans in the related Loan Group that were repurchased during the related Due
Period, and any Substitution Adjustments for Mortgage Loans in the related Loan
Group, deposited to the Distribution Account pursuant to Section 2.06 on or
prior to the related Determination Date and not previously distributed, (iv)
with respect to the initial Distribution Date, the amount deposited from the
Funding Account into the Distribution Account in respect of such Certificate
Group pursuant to Section 4.02(b) and (v) Distributable Excess Spread for such
Certificate Group.
Class A Principal Distribution: With respect to any Distribution Date
(other than the Final Scheduled Distribution Date) and Certificate Group, the
excess of (A) the sum of the related Class A Monthly Principal Distributable
Amount for such Distribution Date and Class A Principal Shortfall Amount over
(B) the related O/C Reduction Amount for such Distribution Date; provided,
however, that the Class A Principal Distribution shall not exceed the related
Certificate Group Principal Balance. The "Class A Principal Distribution" for a
Certificate Group on the Final Scheduled Distribution Date for such Certificate
Group will equal the related Certificate Group Principal Balance for such
Certificate Group as of such Distribution Date.
Class A Principal Shortfall Amount: With respect to any Distribution
Date and Certificate Group, the amount, if any by which the related Certificate
Group Principal Balance, after giving effect to all distributions of the related
Class A Monthly Principal Distributable Amount (exclusive of Distributable
Excess Spread) and any draws under the Certificate Insurance Policy for such
Distribution Date and Certificate Group, exceeds the related Loan Group
Principal Balance as of the end of the related Due Period.
Class A-1 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-1 Certificate pursuant to Section 6.01.
Class A-2 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-2 Certificate pursuant to Section 6.01.
Class A-3 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-3 Certificate pursuant to Section 6.01.
Class A-4 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-4 Certificate pursuant to Section 6.01.
Class A-5 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-5 Certificate pursuant to Section 6.01.
Class A-6 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-6 Certificate pursuant to Section 6.01.
Class A-7 Basis Risk Carryover Amount: The sum of (i) for any
Distribution Date on which the Certificate Rate for the Class A-7 Certificates
is based on the Loan Group 2 Net Funds Cap, interest for the related Interest
Period on the Class Principal Balance of the Class A-7 Certificates immediately
prior to such Distribution Date at a rate equal to the excess of the applicable
Class A-7 Formula Rate over the applicable Loan Group 2 Net Funds Cap, (ii) the
excess of the amounts calculated pursuant to clause (i) for all prior
Distribution Dates over the amounts distributed in respect thereof pursuant to
Section 5.01(a)(vi)(5) hereof on such prior Distribution Dates, and (iii)
interest, to the extent lawful, on the sum of the amounts calculated pursuant to
clauses (i) and (ii) for the related Interest Period at the applicable Class A-7
Formula Rate.
Class A-7 Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-7 Certificate pursuant to Section 6.01.
Class A-7 Formula Rate: As to any Distribution Date, the sum of the
Certificate Index plus 0.20% (or 0.40% for each Distribution Date occurring
after the Optional Termination Date).
Class Interest Carryover Shortfall: With respect to any Class of
Senior Certificates and any Distribution Date, the amount by which the Class
Interest Distribution for such Class for each prior Distribution Date exceeded
the amount of interest actually distributed on such prior Distribution Dates.
Class Interest Distribution: With respect to any Distribution Date and
each Class of Senior Certificates, the sum of (i)the applicable Class Monthly
Interest Distributable Amount for such Class on such Distribution Date and
(ii)the applicable Outstanding Class Interest Carryover Shortfall for such Class
on such Distribution Date.
Class Monthly Interest Distributable Amount: As to any Distribution
Date and Class of Senior Certificates, interest accrued during the related
Interest Period at the applicable Certificate Rate on the related Class
Principal Balance or in the case of the Class S Certificates, the Notional
Balance immediately prior to such Distribution Date, reduced by an amount equal
to such Class' pro rata share (based on the amount of interest to which such
Class would have otherwise been entitled) of the related Civil Relief Act
Interest Shortfall, if any, for such Distribution Date.
Class Principal Balance: As of any date of determination and Class of
Certificates, the Original Class Certificate Principal Balance for such Class
reduced by the sum of all amounts previously distributed to the
Certificateholders of such Class in respect of principal on all previous
Distribution Dates.
Class R-1 Certificate: Any Certificate designated as such and executed
and authenticated by the Trustee substantially in the form set forth in Exhibit
B hereto.
Class R-2 Certificate: Any Certificate designated as such and executed
and authenticated by the Trustee substantially in the form attached hereto as
Exhibit B.
Class R Certificateholder: The Holder of a Residual Certificate.
Class S Certificate: Any Certificate designated as such and executed
and authenticated by the Trustee substantially in the form attached hereto as
Exhibit B-1.
Class S Component: Any of the components of the Class S Certificates
having the following characteristics:
Notional Balance Equals
Designation the Class Principal Balance of
S-1 Class A-1 Certificates
S-2 Class A-2 Certificates
S-3 Class A-3 Certificates
S-4 Class A-4 Certificates
S-5 Class A-5 Certificates
S-6 Class A-6 Certificates
Closing Date: March 27, 1997.
Code: The Internal Revenue Code of 1986, as the same may be amended
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts
created and maintained for the benefit of the Certificateholders
pursuant to Section 3.02(b). The Collection Account shall be an
Eligible Account.
Combined Loan-to-Value Ratio or CLTV: With respect to any Mortgage
Loan, the sum of the original principal balance of such Mortgage Loan and the
outstanding principal balance of the First Lien, if any, as of the date of
origination of the Mortgage Loan, divided by the Appraised Value.
Compensating Interest: As to any Distribution Date, the amount
calculated pursuant to Section 5.02.
Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements constituting
the Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.
Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and
a Proprietary Lease.
Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Cooperative Shares of the Cooperative Corporation.
Cooperative Shares: Shares issued by a Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
Property.
Corporate Trust Office: The principal office of the Trustee at which
at any particular time its corporate business shall be administered, which
office on the Closing Date is located at Three Park Plaza, Sixteenth Floor,
Irvine, California 92614, Attention: Delta-1997-1.
Corresponding Class: As indicated in Section 2.07 hereof.
Cumulative Net Losses: With respect to a Loan Group, the amount by
which the aggregate Principal Balance of, and accrued interest on, all related
Liquidated Mortgage Loans exceeds the Net Liquidation Proceeds for such Mortgage
Loans allocated to principal and accrued interest.
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 close of
business on February 28, 1997. With respect to the Subsequent Mortgage Loans,
the later of the date of origination of such Mortgage Loan and February 28,
1997.
Cut-Off Date Loan Group Principal Balance: $146,257,909.75, with
respect to Loan Group 1 and $26,775,810.04, with respect to Loan Group 2.
Cut-Off Date Pool Principal Balance: $173,033,719.79.
Cut-Off Date Principal Balance: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the Cut-Off Date (or as of the applicable
date of substitution with respect to an Eligible Substitute Mortgage Loan
pursuant to Section 2.02 or 2.04).
Defective Mortgage Loan: Any Mortgage Loan subject to repurchase or
substitution pursuant to Section 2.02 or 2.04.
Deficiency Amount: With respect to any Distribution Date, the excess,
if any, of (A) (i) the Class Monthly Interest Distributable Amount for each
Class of the Senior Certificates (net of any Civil Relief Act Interest
Shortfalls with respect to the related Loan Group) plus any Outstanding Class
Interest Carryover Shortfall for each Class of Senior Certificates and (ii) the
Guaranteed Principal Distribution Amount over (B) Available Funds with respect
to the related Loan Group (after giving effect to the cross-collateralization
provisions in Section 5.01(a)(iii) and without regard to any Insured Payments to
be made as of such Distribution Date).
Definitive Certificates: As defined in Section 6.02(c).
Delinquency Loss Factor: The sum of:
(a) the Principal Balance of all Mortgage Loans 30-59
days contractually delinquent multiplied by 10.75%;
(b) the Principal Balance of all Mortgage Loans 60-89
days contractually delinquent multiplied by 21.50%; and
(c) the Principal Balance of all Mortgage Loans 90 or
more days (including loans in foreclosure and REO)
contractually delinquent multiplied by 43.50%.
Delinquent: A Mortgage Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the close of business on the day the related Monthly
Payment is scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such
Monthly Payment has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
Monthly Payment was due, or, if there is not 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.
Delta: Delta Funding Corporation, a New York corporation, or any
successor thereto.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of the
Class A Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the fourth
Business Day prior to such Distribution Date.
Distributable Excess Spread: As to any Distribution Date and
Certificate Group, the excess, if any, of the related Specified O/C Amount for
such Distribution Date over the O/C Amount on such date.
Distribution Account: The account established by the Trustee pursuant
to Section 5.04. The Distribution Account shall be an Eligible Account.
Distribution Date: The twenty-fifth day of each month, or, if such day
is not a Business Day, then the next Business Day, beginning in April 1997.
Due Date: As to any Mortgage Loan, the day of the month on which the
Monthly Payment is due from the Mortgagor.
Due Period: With respect to (a) the first Determination Date (i) for
collections of principal, the period from and including March 1, 1997 through
and including April 15, 1997 and (ii) for collections of interest, the period
from and including March 16, 1997 through and including April 15, 1997 and (b)
with respect to each Determination Date thereafter, for collections of both
interest and principal, the period from and including the sixteenth day of the
month preceding the month of such Determination Date to and including the
fifteenth day of the month of such Determination Date.
Electronic Ledger: The electronic master record of home equity
mortgage loans maintained by the Servicer.
Eligible Account: A segregated account that is (i) maintained with a
depository institution whose short-term debt obligations and long-term debt
obligations at the time of any deposit therein and throughout the time the
interest is maintained are rated at least "P-1" by Moody's, "A-1" by Standard &
Poor's and "F-1" by Fitch and "A2" by Moody's and "A" by Standard & Poor's and
Fitch, respectively, and that the deposits in such account or accounts are fully
insured by either the BIF or the SAIF and which is any of (a) a federal savings
and loan association duly organized, validly existing and in good standing under
the applicable banking laws of any state, (b) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (c) a national banking association duly organized, validly existing and
in good standing under the federal banking laws or (d) a principal subsidiary of
a bank holding company, and in each case of (a)-(d), approved in writing by the
Certificate Insurer, (ii) a segregated trust account maintained with the
corporate trust department of a federal or state chartered depository or trust
company, having capital and surplus of not less than $50,000,000, acting in its
fiduciary capacity, or (iii) an account otherwise acceptable to each Rating
Agency and the Certificate Insurer as evidenced by a letter from each Rating
Agency and the Certificate Insurer to the Trustee, without reduction or
withdrawal of the then current ratings of the Certificates.
Eligible Investments: One or more of the following (excluding any
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality thereof,
provided that such obligations are backed by the full faith
and credit of the United States;
(ii) repurchase agreements on obligations specified in
clause (i) maturing not more than three months from the date
of acquisition thereof, provided that the short-term
unsecured debt obligations of the party agreeing to
repurchase such obligations are at the time rated by each
Rating Agency in its highest short-term rating category
(which is "A-1+" for Standard & Poor's and "P-1" for
Moody's);
(iii) certificates of deposit, time deposits and
bankers' acceptances (which, if Moody's is a Rating Agency,
shall each have an original maturity of not more than 90
days) of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state
thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the unsecured
short-term debt obligations of such depository institution or
trust company at the date of acquisition thereof have been
rated by each of Moody's and Standard & Poor's in its highest
unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of
not more than 90 days) of any corporation incorporated under
the laws of the United States or any state thereof which on
the date of acquisition has been rated by Standard & Poor's
and Moody's in their highest short-term rating categories;
(v) short term investment funds ("STIFS") sponsored by
any trust company or national banking association
incorporated under the laws of the United States or any state
thereof which on the date of acquisition has been rated by
Standard & Poor's and Moody's in their respective highest
rating category of long term unsecured debt;
(vi) interests in any money market fund which at the
date of acquisition of the interests in such fund and
throughout the time as the interest is held in such fund has
a rating of "Aaa" by Moody's and either "AAAm" or "AAAm-G" by
Standard & Poor's; and
(vii) other obligations or securities that are
acceptable to each Rating Agency and the Certificate Insurer
as an Eligible Investment hereunder and will not result in a
reduction in the then current rating of the Certificates
without regard to the Certificate Insurance Policy, as
evidenced by a letter to such effect from such Rating Agency
and the Certificate Insurer and with respect to which the
Servicer has received confirmation that, for tax purposes,
the investment complies with the last clause of this
definition;
provided that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations;
and provided, further, that no instrument described 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 its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i)have an outstanding Principal Balance after deducting all
scheduled principal payments due in the month of substitution (or in the case of
a substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not in excess of and not more than 5% less than
the Principal Balance of the Defective Mortgage Loan; (ii)have a Loan Rate not
less than the Loan Rate of the Defective Mortgage Loan and not more than 1% in
excess of the Loan Rate of such Defective Mortgage Loan; (iii)if such Defective
Mortgage Loan is in Loan Group 2, have a Loan Rate based on the same Loan Index
with adjustments to such Loan Rate made on the same interval between Interest
Rate Adjustment Dates as that of the Defective Mortgage Loan and have a Margin
that is not less than the Margin of the Defective Mortgage Loan and not more
than 100 base points higher than the Margin for the Defective Mortgage Loan;
(iv) have a Mortgage of the same or higher level of priority as the Mortgage
relating to the Defective Mortgage Loan at the time such Mortgage was
transferred to the Trust; (v) have a remaining term to maturity not more than
six months earlier and not later than the remaining term to maturity of the
Defective Mortgage Loan; (vi) comply with each representation and warranty set
forth in Section 2.04 (deemed to be made as of the date of substitution); (vii)
have an original Combined Loan-to-Value Ratio not greater than that of the
Defective Mortgage Loan; (viii) if such Defective Mortgage Loan is in Loan Group
2, have a Lifetime Rate Cap and a Periodic Rate Cap no lower than the Lifetime
Rate Cap and Periodic Rate Cap, respectively, applicable to such Defective
Mortgage Loan; and (ix)be of the same type of Mortgaged Property as the
Defective Mortgage Loan or a detached single family residence. More than one
Eligible Substitute Mortgage Loan may be substituted for a Defective Mortgage
Loan if such Eligible Substitute Mortgage Loans meet the foregoing attributes in
the aggregate and such substitution is approved in writing in advance by the
Certificate Insurer.
Event of Default: As defined in Section 8.01.
Excess O/C Amount: As to any Distribution Date and Certificate Group,
the amount by which (i) the related O/C Amount for such Distribution Date
exceeds (ii) the related Specified O/C Amount for such Distribution Date.
Excess Spread: With respect to any Distribution Date and Loan Group,
the excess, if any, of (x) Available Funds for the related Certificate Group for
such Distribution Date over (y) the sum of (a) the amount required to be
distributed pursuant to Section 5.01(a)(i)(1)-(4), with respect to the Group 1
Certificates, and Section 5.01(a)(ii)(1)-(4), with respect to the Group 2
Certificates, on such Distribution Date and (b) the portion of Available Funds
for such Certificate Group distributed pursuant to 5.01(a)(iii) on such
Distribution Date.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation.
Final Scheduled Distribution Date: With respect to the Group 1
Certificates and the Group 2 Certificates, the Distribution Date in April 2029.
First Lien: With respect to any Mortgage Loan which is a second
priority lien, the mortgage loan relating to the corresponding Mortgaged
Property having a first priority lien.
Fiscal Agent: As defined in the Certificate Insurance Policy.
Fixed Rate Certificates: Each Class of Class A Certificates other than
the Variable Rate Certificates.
FNMA: The Federal National Mortgage Association.
Foreclosure Profits: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid through
the date of receipt of the final Liquidation Proceeds) of such Liquidated
Mortgage Loan immediately prior to the final recovery of its Liquidation
Proceeds.
Funding Account: The Funding Account established pursuant to Section
4.02.
Group 1 Certificates: Each of the Class S, Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6 Certificates.
Group 2 Certificates: The Class A-7 Certificates.
Guaranteed Principal Distribution Amount: With respect to any
Distribution Date, (a) the amount, if any, by which the Certificate Group
Principal Balance of each Certificate Group exceeds the related Loan Group
Principal Balance at the end of the previous month (after giving effect to all
distributions of principal on the related Class A Certificates on such
Distribution Date) and (b) with respect to Certificate Group 1 and Certificate
Group 2 on the Final Scheduled Distribution Date (after giving effect to all
other distributions of principal on the Group 1 Certificates and the Group 2
Certificates, respectively), an amount equal to the applicable Certificate Group
Principal Balance.
Initial Interest Coverage Account: The Initial Interest Coverage
Account established pursuant to Section 4.02.
Initial Mortgage Loan Schedule: The schedule of Initial Mortgage Loans
included in the Trust as of the Cut-Off Date, specifying with respect to each
such Initial Mortgage Loan the information set forth on Exhibit C attached
hereto.
Initial Mortgage Loans: The Initial Mortgage Loans transferred to the
Trust pursuant to Section 2.01, as set forth in Exhibit C hereto.
Insurance Agreement: The Insurance Agreement dated as of February 28,
1997 among the Servicer, the Seller, the Trustee and the Certificate Insurer,
including any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the
Certificate Insurer) pursuant to any insurance policy covering a Mortgage Loan
or Mortgaged Property, or amounts required to be paid by the Servicer pursuant
to Section 3.05, net of any component thereof (i) covering any expenses incurred
by or on behalf of the Servicer in connection with obtaining such proceeds, (ii)
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Servicer's normal servicing
procedures or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.
Insured Payment: (i) With respect to any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
Interest Period: With respect to any Distribution Date and (i) the
Fixed Rate Certificates and the Class S Certificates, the period from the first
day of the calendar month preceding the month of such Distribution Date through
the last day of such calendar month and (ii) the Variable Rate Certificates, the
period from the Distribution Date in the month preceding the month of such
Distribution Date (or, in the case of the initial Distribution Date, from the
Closing Date) through the day before such Distribution Date.
Interest Rate Adjustment Date: With respect to each Mortgage Loan in
Loan Group 2, the date or dates on which the Loan Rate is subject to adjustment
in accordance with the related Mortgage Note.
Late Payment Rate: For any Distribution Date, the lesser of (i) the
rate of interest, as it is publicly announced by Citibank, N.A. at its principal
office in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank,
N.A.), plus 2% and (ii) the maximum rate permissible under any applicable law
limiting interest rates. The Late Payment Rate shall be computed on the basis of
a 365-day year and the actual number of days elapsed.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York or in the city
of London, England are required or authorized by law to be closed.
Lifetime Rate Cap: With respect to each Mortgage Loan in Loan Group 2,
the maximum Loan Rate permitted over the life of such Mortgage Loan, as provided
by the terms of the related Mortgage Note.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage
Loan in respect of which the Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Due Period,
that all Liquidation Proceeds which it expects to recover with respect to the
liquidation of the Mortgage Loan or disposition of the related REO Property have
been recovered.
Liquidation Loan Losses: For each Liquidated Mortgage Loan the amount,
if any, by which the Principal Balance thereof plus accrued and unpaid interest
thereon plus unreimbursed Servicing Advances is in excess of the Liquidation
Proceeds realized thereon.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Certificate Insurance Policy) received in
connection with the liquidation of any Mortgage Loan or related REO Property,
whether through trustee's sale, foreclosure sale or otherwise.
Loan Group Principal Balance: Either the Loan Group 1 Principal
Balance or the Loan Group 2 Principal Balance, as applicable.
Loan Group: Either Loan Group 1 or Loan Group 2, as the context
requires.
Loan Group 1: The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group 1.
Loan Group 1 Principal Balance: As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 1 as of such date.
Loan Group 2: The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group 2.
Loan Group 2 Net Funds Cap: As to any Distribution Date, the product
of (x) 360/365 and (y) the difference between (A) the weighted average of the
Loan Rates of the Loan Group 2 Mortgage Loans as of the first day of the related
Due Period, weighted on the basis of the related Principal Balances as of such
date and (B) the sum of (i) the Servicing Fee Rate, the rate at which the
Trustee Fee is calculated and the Premium Percentage and (ii) commencing with
the thirteenth Distribution Date, 0.50% per annum.
Loan Group 2 Principal Balance: As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 2 as of such date.
Loan Index: With respect to each Interest Rate Adjustment Date for
each Mortgage Loan in Loan Group 2 that is identified on the Mortgage Loan
Schedule as having a LIBOR Loan Index, the average of the interbank offered rate
for six-month U.S. dollar denominated deposits in the London Market, as
determined according to the terms of the related Note, and with respect to each
Mortgage Loan in Loan Group 2 that is identified on the Mortgage Loan Schedule
as having a one-year treasury Loan Index, the rate on one-year U.S. Treasury
Bills as determined according to the terms of the related Note.
Loan Losses: The aggregate of the Liquidation Loan Losses for all
Liquidated Mortgage Loans.
Loan Rate: With respect to any Mortgage Loan as of any day, the per
annum rate of interest applicable under the related Mortgage Note to the
calculation of interest for such day on the Principal Balance.
Loss Factor: With respect to a Loan Group, for the first 30
Distribution Dates, (i) if the related Cumulative Net Losses divided by the
related Maximum Collateral Amount is less than or equal to 0.0050, then the Loss
Factor for such Loan Group shall be equal to one and (ii) if the related
Cumulative Net Losses divided by the related Maximum Collateral Amount is
greater than 0.0050 the Loss Factor for such Loan Group shall be equal to two.
Thereafter, (i) if the related Cumulative Net Losses divided by the related
Maximum Collateral Amount is less than or equal to 0.0075 and the related
Cumulative Net Losses were not in excess of the product of 0.0050 and the
related Maximum Collateral Amount at the close of the period described in clause
(a) of the definition of Specified O/C Amount, then the Loss Factor for such
Loan Group shall be equal to one and (ii) if the related Cumulative Net Losses
divided by the related Maximum Collateral Amount is greater than 0.0075 the Loss
Factor for such Loan Group shall be equal to two; provided, however, that if the
Loss Factor pursuant to the first sentence of this definition was two on the
30th Distribution Date, the factor referred to above shall remain two.
Maintenance: With respect to any Cooperative Unit, the rent paid by
the Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.
Majority Certificateholder: The Holder or Holders of Certificates
evidencing Voting Rights in excess of 51% in the aggregate.
Margin: As to any Mortgage Loan in Loan Group 2, the percentage set
forth as the "Margin" for such Mortgage Loan on the Mortgage Loan Schedule.
Maximum Collateral Amount: With respect to each Certificate Group, the
Aggregate Principal Balance of the Mortgage Loans in the related Loan Group as
of the Cut-Off Date.
Monthly Advance: An advance made by the Servicer pursuant to Section
3.15.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by a Mortgagor on the related Mortgage Loan.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans constituting assets of the Trust, which list shall consist of the
Initial Mortgage Loan Schedule, together with the Subsequent Mortgage Loan
Schedule reflecting the Subsequent Mortgage Loans transferred to the Trust on
the Closing Date. The Initial Mortgage Loan Schedule is the schedule set forth
herein as Exhibit C, which schedule sets forth as to each Initial Mortgage Loan:
(i) the Cut-Off Date Principal Balance, (ii) the account number, (iii) the
original principal amount, (iv) the CLTV as of the date of the origination of
the related Initial Mortgage Loan, (v) the Due Date, (vi) the Loan Rate as of
the Cut- Off Date, (vii) the first date on which a Monthly Payment is or was due
under the Mortgage Note, (viii) the original stated maturity date of the
Mortgage Note and if the Mortgage Loan is a Balloon Loan, the amortization
terms, (ix) the remaining number of months to maturity as of the Cut-Off Date,
(x) the state in which the related Mortgaged Property is situated, (xi) the type
of property and (xii) the lien status, (xii) the applicable Loan Group and
(xiii) with respect to each Mortgage Loan in Loan Group 2, (a) the Periodic Rate
Cap, (b) the Margin, (c) the Lifetime Rate Cap and (d) the next Interest Rate
Adjustment Date after the Cut-Off Date. The Seller shall indicate to the Trustee
which Mortgage Loans are Cooperative Loans. The Mortgage Loan Schedule will be
amended from time to time to reflect the substitution of an Eligible Substitute
Mortgage Loan for a Defective Mortgage Loan from time to time hereunder.
Mortgage Loans: The mortgage loans that are transferred and assigned
to the Trustee pursuant to Sections 2.01, 2.06 and 2.13, together with the
Related Documents, exclusive of Mortgage Loans that are transferred to the
Servicer or the Seller, as the case may be, from time to time pursuant to
Section 2.02, 2.04 or 3.16, as from time to time are held as a part of the
Trust, such mortgage loans originally so held being identified in the Mortgage
Loan Schedule delivered on the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note pursuant to
which the related mortgagor agrees to pay the indebtedness evidenced thereby
which is secured by the related Mortgage.
Mortgaged Property: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan, which, with respect to a
Cooperative Loan, is the related Cooperative Shares and Proprietary Lease.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of unreimbursed Servicing Fees, Servicing
Advances and Monthly Advances with respect thereto.
Net Loan Rate: With respect to any Mortgage Loan as to any day, the
Loan Rate less the Servicing Fee Rate.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i)any
Servicing Advance or Monthly Advance previously made and not reimbursed pursuant
to Section 3.03(ii) or (ii) a Servicing Advance or Monthly Advance proposed to
be made in respect of a Mortgage Loan or REO Property which, in the good faith
business judgment of the Servicer, as evidenced by an Officer's Certificate
delivered to the Certificate Insurer, the Seller and the Trustee no later than
the Business Day following such determination, would not be ultimately
recoverable pursuant to Sections 3.03(ii) or (vi) or 5.01(a)(v)(3) or (4).
Notional Balance: As of any date of determination, and (i) with
respect to the Class S Certificates, the aggregate of the Notional Balances of
the Class S Components or (ii) with respect to any Class S Component, the amount
set forth in the definition thereof.
O/C Amount: As to any Distribution Date and Certificate Group, the
excess, if any, of (a)the related Loan Group Principal Balance as of the close
of business on the last day of the related Due Period over (b)the related
Certificate Group Principal Balance (after giving effect to amounts otherwise
available in respect of the Class A Monthly Principal Distributable Amount for
such Distribution Date).
O/C Reduction Amount: As to any Distribution Date and Certificate
Group, an amount equal to the lesser of (i) the related Excess O/C Amount for
such Distribution Date and (ii) with respect to the Group 1 Certificates,
Available Funds for such Certificate Group remaining after making the
distributions required to be made pursuant to Section 5.01(a)(i)(1) and (2) on
such Distribution Date and with respect to the Group 2 Certificates, Available
Funds for the related Certificate Group remaining after making the distributions
required to be made pursuant to Section 5.01(a)(ii)(1) and (2) on such
Distribution Date.
Officer's Certificate: A certificate signed by the President, an
Executive Vice President, a Senior Vice President, a First Vice President, a
Vice President, Assistant Vice President, the Treasurer, Assistant Treasurer,
Assistant Secretary, Controller or Assistant Controller of the Servicer and
delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel reasonably acceptable
to the Trustee, who may be in-house counsel for the Servicer or the Seller
(except that any opinion relating to the qualification of the Trust as a REMIC
or compliance with the REMIC Provisions must be an opinion of independent
outside counsel) and who, in the case of opinions delivered to each of the
Certificate Insurer and the Rating Agency, is reasonably acceptable to it.
Optional Termination Date: The Distribution Date following the Due
Period at the end of which the Pool Principal Balance is less than 10% of the
sum of the Aggregate Principal Balance as of the Cut-off Date and the amount
deposited in the Funding Account on the Closing Date.
Original Class Certificate Principal Balance: As to any Class, the
respective amount set forth below opposite such Class:
<TABLE>
<CAPTION>
Original Class Certificate
Class Principal Balance
<S> <C> <C>
A-1 $83,709,000
A-2 $54,267,000
A-3 $14,084,000
A-4 $10,374,000
A-5 $11,966,000
A-6 $23,600,000
A-7 $37,000,000
R-1 (1)
R-2 (1)
S (1)
</TABLE>
__________
(1) This Class has no Class Certificate Principal Balance.
Outstanding Class Interest Carryover Shortfall: As to any Class of
Senior Certificates and any Distribution Date, the amount of Class Interest
Carryover Shortfall for such Distribution Date plus one month's interest
thereon, at the related Certificate Rate, to the extent permitted by law.
Ownership Interest: As to any Certificate 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.
Paying Agent: Any paying agent appointed pursuant to Section 6.05.
Percentage Interest: With respect to any Class A Certificate, the
percentage obtained by dividing the principal denomination of such Certificate
by the aggregate of the principal denominations of all Class A Certificates of
the same Class. With respect to a Residual Certificate, the portion of the Class
evidenced thereby as stated on the face thereof, which shall be either
99.999999% or, but only with respect to the Tax Matters Person Residual Interest
held by the Tax Matters Person, 0.000001%. With respect to a Class S
Certificate, the portion of the Class evidenced thereby as stated on the face
thereof.
Periodic Rate Cap: With respect to each Mortgage Loan in Loan Group 2
with respect to which the related Mortgage Note provides for a periodic rate
cap, the maximum percentage increase or decrease in the Loan Rate permitted for
such Mortgage Loan over the Loan Rate in effect as of an Interest Rate
Adjustment Date, as set forth on the Mortgage Loan Schedule.
Permitted Transferee: Any Person other than (i) the United States or
any State or any political subdivision thereof or any agency or instrumentality
of any of the foregoing, (ii) a foreign government, international organization
or any agency or instrumentality of either of the foregoing, (iii) an
organization which is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by section 511 of the Code on unrelated business
taxable income) (except certain farmers' cooperatives describe in Code section
521) on any excess inclusions (as defined in Section 860E(c)(1)) with respect to
any Residual Certificate; (iv) rural electric and telephone cooperatives
described in Code section 1381(a)(2)(C); (v) a Person that is not (a) a citizen
or resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (c) an estate 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 (d) a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust; or (vi) any other Person so designated by the Trustee
based on an Opinion of Counsel to the effect that any transfer to such Person
may cause the Trust to fail to qualify as a REMIC at any time the Certificates
are outstanding. The terms "United States", "State" and "international
organization" shall have the meanings set forth in Code section 7701 or
successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof if all of its
activities are subject to tax, and, with the exception of the 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, unincorporated organization or
government or any agency or political subdivision thereof.
Pool Principal Balance: With respect to any date, the aggregate of the
Principal Balances of all Mortgage Loans as of such date.
Preference Amount: Any amount previously distributed to a Mortgagor on
a Mortgage Loan that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Preference Claim: As defined in Section 4.03.
Premium Amount: As to any Distribution Date and Certificate Group, the
product of the Premium Percentage and the Certificate Group Principal Balance of
such Certificate Group after giving effect to distributions to be made on such
Distribution Date.
Premium Percentage: As defined in the Insurance Agreement.
Prepayment Assumption: A conditional rate of prepayment equal to 4.0%
per annum in the first month of the life of the mortgage loans and an additional
1.455% (precisely 16/11 percent per annum) in each month thereafter until the
twelfth month; beginning in the twelfth month and in each month thereafter
during the life of the mortgage loans, a conditional prepayment rate of 20% per
annum each month is assumed.
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 in full an amount equal to the excess, if any, of (i) 30
days' interest on the Principal Balance of such Mortgage Loan at the Net Loan
Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant
to application of the Civil Relief Act) over (ii) the amount of interest
actually remitted by the Mortgagor in connection with such Principal Prepayment.
Principal Balance: As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related Cut-Off Date Principal Balance, minus all
collections credited against the Principal Balance of any such Mortgage Loan.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the related Mortgage
Loan immediately prior to the final recovery of related Liquidation Proceeds and
a Principal Balance of zero thereafter.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a Mortgage
Loan in full.
Priority Percentage: For any Distribution Date, the percentage
corresponding thereto as follows:
Distribution Dates Priority Percentage
April 1997- March 2000 0%
April 2000 - March 2002 45%
April 2002- March 2003 80%
April 2003 - March 2004 100%
April 2004 and thereafter 300%
Projected Monthly Excess Cashflow: As of any date of calculation and
Loan Group 1, five times the Excess Spread existing on the Distribution Date
immediately preceding such date of calculation and with respect Loan Group 2,
three times the Excess Spread existing on the Distribution Date immediately
preceding such date of calculation.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Cooperative Shares.
Pro-Rata Percentage: For any Distribution Date, the percentage
equivalent of a fraction, the numerator of which is the Class Principal Balance
of the Class A-6 Certificates, and the denominator of which is the Certificate
Group Principal Balance of Certificate Group 1, each determined immediately
prior to such Distribution Date.
Prospectus: The base prospectus of the Seller dated March 21, 1997.
Prospectus Supplement: The prospectus supplement dated March 21, 1997,
relating to the offering of the Class A Certificates.
Purchase Price: As to any Mortgage Loan repurchased on any date
pursuant to Section 2.02, 2.04 or 3.16, an amount equal to the sum of (i) the
unpaid Principal Balance thereof, (ii) the greater of (a) all unpaid accrued
interest thereon to the end of the Due Period preceding the Distribution Date on
which such Purchase Price is included in Available Funds and (b) 30 days'
interest thereon, computed at the applicable Loan Rate; provided, however, that
if at the time of repurchase the Seller is the Servicer, the amount described in
clause (ii) shall be computed at the Net Loan Rate, (iii) (x) if the Servicer is
not the Seller, any unreimbursed Servicing Advances with respect to such
Mortgage Loan and (y) expenses reasonably incurred or to be incurred by the
Servicer, the Trust or the Trustee in respect of the breach or defect giving
rise to the purchase obligation and (iv) the amount of any penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees
and expenses incurred by or imposed on the Trustee or the Trust or with respect
to which any of them are liable arising from a breach by the Seller of its
representations and warranties in Section 2.04.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Senior Certificates at the request of the Seller at the time of
the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Seller, notice of which
designation shall be given to the Trustee. References herein to the highest
short term unsecured rating category of a Rating Agency shall mean "A-1+" or
better in the case of Standard & Poor's and "P-1" or better in the case of
Moody's and in the case of any other Rating Agency shall mean such equivalent
ratings. References herein to the highest long-term rating category of a Rating
Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa" in the case
of Moody's and in the case of any other Rating Agency, such equivalent rating.
Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the Cooperative Corporation and the originator of such
Mortgage Loan, which establishes the rights of such originator in the
Cooperative Property.
Record Date: With respect to (i) the Fixed Rate Certificates and the
Class S Certificates, the last Business Day of the month immediately preceding
the month in which the related Distribution Date occurs and (ii) the Variable
Rate Certificates, the Business Day immediately preceding such Distribution
Date; provided, however, that if any Variable Rate Certificate becomes a
Definitive Certificate, the record date for such Variable Rate Certificate will
be the last Business Day of the month immediately preceding the month in which
the related Distribution Date occurs.
Reference Bank Rate: As to any Interest Period relating to the
Variable Rate Certificates as follows: the arithmetic mean (rounded upwards, if
necessary, to the nearest one sixteenth of a percent) of the offered rates for
United States dollar deposits for one month which are offered by the Reference
Banks as of 11:00 A.M., London time, on the second LIBOR Business Day prior to
the first day of such Interest Period to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the Class
Principal Balance of the Variable Rate Certificates; provided that at least two
such Reference Banks provide such rate. If fewer than two offered rates appear,
the Reference Bank Rate will be the arithmetic mean of the rates quoted by one
or more major banks in New York City, selected by the Trustee after consultation
with the Servicer, as of 11:00 A.M., New York City time, on such date for loans
in U.S. Dollars to leading European Banks for a period of one month in amounts
approximately equal to the Class Principal Balance of the Variable Rate
Certificates. If no such quotations can be obtained, the Reference Bank Rate
shall be the Reference Bank Rate applicable to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in the London
interbank market, selected by the Seller after consultation with the Trustee.
Regular Certificates: The Class A Certificates and the Class S
Components.
Reimbursement Amount: As of any Distribution Date, the sum of (x) (i)
Insured Payments previously received by the Trustee and not previously re-paid
to the Certificate Insurer pursuant to Sections 5.01(a)(i)(4), 5.01(a)(ii)(4)
and 5.01(a)(vi)(4) plus (ii) interest accrued on such Insured Payment not
previously repaid calculated at the Late Payment Rate from the date the Trustee
received such Insured Payment and (y) (i) the amount of any Premium Amount not
paid on the date due plus (ii) interest on such amount at the Late Payment Rate
and (z)(i) any other amounts then owing to the Certificate Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate.
The Certificate Insurer shall notify the Trustee and the Seller of the amount of
any Reimbursement Amount.
Related Documents: As defined in Section 2.01.
Released Mortgaged Property Proceeds: As to any Mortgage Loan,
proceeds received by the Servicer in connection with (a) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(b) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise, which are not
released to the Mortgagor in accordance with applicable law and mortgage
servicing standards the Servicer would use in servicing mortgage loans for its
own account and this Agreement.
REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
REMIC I: The segregated pool of assets consisting of the assets of the
Trust other than the REMIC I Interests, the Initial Interest Coverage Account
and the Funding Account.
REMIC I Interest: As defined in Section 2.07.
REMIC I Regular Interest: As defined in Section 2.07.
REMIC II: The segregated pool of assets consisting of the REMIC I
Regular Interests.
REMIC II Interest: As defined in Section 2.07
REMIC Certificate Maturity Date: The "latest possible
maturity date" as that term is defined in Section 2.10.
REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to either REMIC and the REMIC Provisions issued after
the Closing Date.
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 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
REO Property: A Mortgaged Property that is acquired by the Servicer on
behalf of the Trustee in foreclosure or by deed in lieu of foreclosure.
Residential Dwelling: A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development, a townhouse, a
unit in a Cooperative or a mobile home treated as real property under local law.
Residual Certificates: The Class R-1 and Class R-2 Certificates
collectively.
Responsible Officer: When used with respect to the Trustee, any
officer assigned to the corporate trust group (or any successor thereto),
including any vice president, assistant vice president, trust officer, any
assistant secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Agreement. When used with respect to the Seller or Servicer, the President
or any Vice President, Assistant Vice President or any Secretary or Assistant
Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or, if at any time after the execution of this
Agreement the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Security Agreement: With respect to any Cooperative Loan, the
agreement between the owner of the related Cooperative Shares and the originator
of the related Mortgage Note, which defines the terms of the security interest
in such Cooperative Shares and the related Proprietary Lease.
Seller: Delta Funding Corporation, a New York corporation, or any
successor thereto.
Senior Certificateholder: The Holder of a Senior Certificate.
Senior Certificates: The Class A and Class S Certificates.
Servicer: Delta Funding Corporation, a New York corporation, or any
successor thereto or any successor hereunder.
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 (i) the preservation,
restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (iv) compliance with the
obligations under Section 3.04, 3.06 or 3.19 and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 3.17, all of which reasonable
and customary out-of-pocket costs and expenses are reimbursable to the Servicer
to the extent provided in Sections 3.03(ii) and (vi), 3.06 and 5.01(a)(v).
Servicing Certificate: A certificate completed and executed by a
Servicing Officer on behalf of the Servicer.
Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 3.08.
Servicing Fee: As to each Distribution Date and each Mortgage Loan,
the annual fee payable to the Servicer, which subject to Section 3.02 is
calculated as an amount equal to the product of the Servicing Fee Rate and the
Principal Balance thereof at the beginning of the related Due Period.
Servicing Fee Rate: 0.50% 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 Trustee (with a copy to the Certificate Insurer) by the Servicer, as such
list may be amended from time to time.
Specified O/C Amount: (a) for any Distribution Date and Certificate
Group occurring during the period commencing on the Closing Date and ending on
the later of the date upon which principal in the amount of one-half the related
Maximum Collateral Amount has been received by the Class A Certificateholders of
such Certificate Group and the 30th Distribution Date following the Closing Day,
the greater of (i) an amount equal to 3.00% of the related Maximum Collateral
Amount in the case of Certificate Group 1 and 2.75% of the related Maximum
Collateral Amount in the case of Certificate Group 2 and (ii) the product of the
applicable Loss Factor and the excess of (A) one-half of the aggregate Principal
Balances of the sum of (x) all Mortgage Loans in the related Loan Group which
are 91 or more days Delinquent or for which foreclosure proceedings have
commenced and (y) Mortgage Loans in the related Loan Group with respect to which
the related Mortgaged Property is REO Property and which became REO Property
prior to the related Mortgage Loan becoming 91 days' Delinquent over (B) the
related Projected Monthly Excess Cash Flow as of such Distribution Date;
(b) for any Distribution Date occurring after the end
of the period in clause (a) above, the greatest of (i) an
amount equal to the lesser of (A) 3.00 of the related Maximum
Collateral Amount in the case of Certificate Group 1 and
2.75% of the related Maximum Collateral Amount in the case of
Certificate Group 2 and (B) the applicable Amortized
Overcollateralized Amount Requirement, (ii) the product of
the applicable Loss Factor and the excess of (A) one-half of
the aggregate Principal Balances of the sum of (x) all
Mortgage Loans in the related Loan Group which are 91 or more
days Delinquent or for which foreclosure proceedings have
commenced and (y) Mortgage Loans in the related Loan Group
with respect to which the related Mortgaged Property is REO
Property and which became REO Property prior to the related
Mortgage Loan becoming 91 days' Delinquent over (B) the
related Projected Monthly Excess Cashflow as of such date,
(iii) an amount equal to 0.50% of the Maximum Collateral
Amount and (iv) the sum of the three largest Principal
Balances; and
(c) notwithstanding anything to the contrary set forth
in clauses (a) and (b) above, on the earlier of (i) any
Distribution Date on which an Event of Default has occurred
and is continuing and (ii) any Distribution Date after which
there has been a draw on the Certificate Insurance Policy,
the Specified O/C Amount shall be the same as the Specified
O/C Amount which existed on the last Distribution Date on
which an event specified in clause (i) or (ii) as applicable
had not occurred and was not continuing;
provided, however, that the Certificate Insurer may, in its sole
discretion, or at the request of the Seller, modify clause (a) and/or clause (b)
above for the purpose of reducing or eliminating, in whole or in part, the
application of clause (a) and/or clause (b) above and the Trustee and the Rating
Agencies shall be notified in writing of such modification prior to the related
Distribution Date and such modification shall not result in a downgrading of the
then-current ratings of the Certificates.
Standard & Poor's: Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., or its successor in
interest.
Startup Day: The day designated as such pursuant to Section 2.08.
Stayed Funds: As defined in Section 8.02(b).
Strip Rate: As to each Class S Component, the respective per annum
rate set forth below:
Component Strip Rate
S-1 1.17%
S-2 0.85%
S-3 0.51%%
S-4 0.31%
S-5 0.03%
S-6 0.56%
Subsequent Mortgage Loan Schedule: As of any date of determination,
the schedule that is identified as the schedule of Subsequent Mortgage Loans and
is attached to the Subsequent Transfer Agreement.
Subsequent Mortgage Loans: The Mortgage Loans identified on the
Subsequent Mortgage Loan Schedule.
Subsequent Transfer Agreement: The Subsequent Transfer Agreement
entered into between the Seller and the Trustee, dated as of the Closing Date
and substantially in the form attached as Exhibit D.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies the requirements set forth in Section
3.01(b) in respect of the qualification of a Subservicer.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in Section 3.01(b), 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 Section 2.05, the sum of (a) the excess of (i)the aggregate
Principal Balances of all Defective Mortgage Loans to be replaced by Eligible
Substitute Mortgage Loans (after application of principal payments received on
or before the date of substitution of any Eligible Substitute Mortgage Loans as
of the date of substitution) over (ii)the Principal Balance of such Eligible
Substitute Mortgage Loans and (b) the greater of (x) accrued and unpaid interest
on such excess through the Due Period relating to the Distribution Date for
which such Substitution Adjustment will be included as part of Available Funds
and (y) 30 days' interest on such excess calculated on a 360-day year in each
case at the Loan Rate (or Net Loan Rate if the Seller is the Servicer) and (c)
if the Servicer is not the Seller, the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Defective Mortgage Loan and
(d) the amount referred to in clause (iv) of the definition of Purchase Price in
respect of such Defective Mortgage Loan.
Tax Matters Person: As defined in Section 2.11.
Tax Matters Person Residual Interest: A 0.000001% interest in each of
the Class R-1 and Class R-2 Certificates, which shall be issued to and held by
the Trustee.
Total Expected Losses: The sum of the (i) Cumulative Net Losses from
the Closing Date through and including the date of determination and (ii) the
Delinquency Loss Factor.
Trust: The trust created by this Agreement, the corpus of which
consists of the Mortgage Loans, such assets as shall from time to time be
deposited in the Collection Account, the Initial Interest Coverage Account, the
Funding Account and the Distribution Account in accordance with this Agreement,
property that secured a Mortgage Loan and that has become REO Property, the
Certificate Insurance Policy, certain hazard insurance policies maintained by
the Mortgagors or the Servicer in respect of the Mortgage Loans and all proceeds
of each of the foregoing.
Trustee: Bankers Trust Company of California, N.A., or any successor
Trustee appointed in accordance with this Agreement that has accepted such
appointment in accordance with this Agreement.
Trustee Fee: The fee owed to the Trustee pursuant to a letter
agreement between the Servicer and the Trustee.
Trustee Fee Rate: The per annum rate at which the Trustee
Fee is calculated.
Variable Rate Certificates: The Class A-7 Certificates.
Voting Rights: The right to vote evidenced by a Certificate as
follows: The Class A Certificates, in the aggregate, shall evidence 96% of all
Voting Rights and the Class S shall evidence 2%, and the Class R-1 and Class R-2
Certificates shall each evidence 1% in the aggregate, respectively, of all
Voting Rights. The Voting Rights allocated to the Class A Certificates shall be
allocated among the Classes thereof in proportion to their respective Class
Principal Balances. Voting Rights allocated to a Class of Certificates shall be
allocated among the Certificates of such Class in proportion to their respective
Percentage Interests. The Certificate Insurer shall be entitled to exercise all
Voting Rights of the Senior Certificates so long as no Certificate
Insurer Default has occurred and is continuing.
Weighted Average Strip Rate: As to any Distribution Date, the average
of the Strip Rates, weighted on the basis of the Notional Balances of the Class
S Components immediately prior to such Distribution Date.
Section 1.02. Interest Calculations. All calculations of interest that
are made in respect of the Principal Balance of a simple interest Mortgage Loan
shall be made on the basis of a 365-day year and the actual number of days
elapsed. All calculations of interest that are made in respect of the Principal
Balance of an actuarial Mortgage Loan shall be made on the basis of a 360-day
year consisting of twelve 30-day months. The Certificate Rate for the Variable
Rate Certificates shall be calculated on the basis of a 360-day year and the
actual number of days elapsed. The Certificate Rate for the Fixed Rate
Certificates and the Class S Certificates shall be calculated on the basis of a
360-day year consisting of twelve 30-day months. The calculation of the
Servicing Fee and the Trustee Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.
ARTICLE II
Conveyance of Initial Mortgage Loans
Original Issuance of Certificates
Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans (a) The Seller,
concurrently with the execution and delivery of this Agreement, does hereby
transfer, assign, set over and otherwise convey to the Trust without recourse
(subject to Sections 2.02 and 2.04) (i) all of its right, title and interest in
and to each Initial Mortgage Loan, including the Cut-Off Date Principal Balance
and all collections in respect of interest and principal received after the
Cut-Off Date (other than payments in respect of accrued interest due on or
before March 15, 1997); (ii) property which secured such Mortgage Loan and which
has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its
interest in any insurance policies in respect of the Initial Mortgage Loans;
(iv) such amounts as may be deposited into and held by the Trustee in the
Funding Account and the Initial Interest Coverage Account, together with all
investment earnings on such amounts; and (v) all proceeds of any of the
foregoing. In addition, on or prior to the Closing Date, the Seller shall cause
the Certificate Insurer to deliver the Certificate Insurance Policy to the
Trustee.
In connection with such transfer, assignment and conveyance the Seller
shall deliver to, and deposit with, the Trustee, on or before the Closing Date,
the following documents or instruments with respect to each Initial Mortgage
Loan (the "Related Documents") and the related Mortgage Loan Schedule in
computer readable format and the Seller, in connection with the Subsequent
Transfer, shall deliver to, and deposit with, the Trustee, on or before the
Closing Date, the Related Documents and the related Mortgage Loan Schedule in
computer readable format with respect to each Subsequent Mortgage Loan:
(i) 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 Bankers Trust
Company of California, N.A., as Trustee for Delta Funding
Home Equity Loan Trust 1997-1 without recourse" and signed,
by facsimile or manual signature, in the name of the Seller
by a Responsible Officer;
(ii) Any of: (1) the original Mortgage and related
power of attorney, if any, with evidence of recording
thereon, (2) 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
Seller by facsimile or manual signature or by the closing
attorney or by an officer of the title insurer or agent of
the title insurer that issued the related title insurance
policy, in each case, if the original has been transmitted
for recording until such time as the original is returned by
the public recording office or (3) a copy of the original
recorded Mortgage and related power of attorney, if any,
certified by the public recording office;
(iii) The original Assignment of Mortgage in recordable
form, from the Seller to "Bankers Trust Company of
California, N.A., as Trustee for Delta Funding Home Equity
Loan Trust 1997-1";
(iv) 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;
(v) All intervening assignments, if any, showing a
complete chain of assignments from the originator to the
Seller, including any recorded warehousing assignments, with
evidence of recording thereon, or a copy thereof certified by
a Responsible Officer of the Seller by facsimile or manual
signature, or by the closing attorney or by an officer of the
title insurer or agent of the title insurer that issued the
related title insurance policy, as a true copy of the
original of such intervening assignments if the original has
been transmitted for recording until such time as the
original is returned by the public recording office or a copy
of the original recorded intervening assignments certified by
the public recording office;
(vi) Originals of all assumption, written assurance,
substitution and modification agreements, if any; and
(vii) in the case of a Cooperative Loan, the originals
of the following documents or instruments:
(a) The Cooperative Shares, together with a stock
power in blank;
(b) The executed Security Agreement;
(c) The executed Proprietary Lease;
(d) The executed Recognition Agreement;
(e) The executed assignment of Recognition Agreement;
(f) The executed UCC-1 financing statement with
evidence of recording thereon which have been
filed in all places required to perfect the
Seller's interest in the Cooperative Shares and
the Proprietary Lease; and
(g) Executed UCC-3 financing statements or other
appropriate UCC financing statements required by
state law, evidencing a complete and unbroken line
from the mortgagee to the Trustee with evidence of
recording thereon (or in a form suitable for
recordation).
In instances where the original recorded Mortgage is not delivered as
provided above, and in instances where intervening assignments called for by
clause (v) above are unavailable, the Seller will deliver or cause to be
delivered the original recorded Mortgage and intervening assignments to the
Trustee promptly upon receipt thereof but in no event later than one year after
the Closing Date.
The Seller hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledger relating to the Mortgage Loans to be clearly
and unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the Trustee and constitute part of the Trust in accordance with the terms of
the trust created hereunder.
(b) The parties hereto intend that the transaction set forth herein be
a sale by the Seller to the Trust of all the Seller's right, title and interest
in and to the Mortgage Loans and other property described above. In the event
the transaction set forth herein is deemed not to be a sale, the Seller hereby
grants to the Trust a security interest in all of the Seller's right, title and
interest in, to and under the Mortgage Loans and other property described above;
and this Agreement shall constitute a security agreement under applicable law.
The Seller, the Servicer 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, 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 the Agreement.
Except as may otherwise expressly be provided herein, neither the
Seller, the Servicer nor the Trustee shall (and the Servicer shall ensure that
no Subservicer shall) assign, sell, dispose of or transfer any interest in the
Trust or any portion thereof, or permit the Trust or any portion thereof to be
subject to any lien, claim, mortgage, security interest, pledge or other
encumbrance of, any other Person.
In the event that the parties hereto have failed to transfer the
entire legal ownership in and to each Mortgage Loan to the Trust, the parties
hereto intend that this document operate to transfer the entire equitable
ownership interest in and to each Mortgage Loan to the Trust.
(c) Within 30 days of the Closing Date, the Seller, at its own
expense, shall prepare and send for recording the Assignments of Mortgage in
favor of the Trustee in the appropriate real property or other records. With
respect to any Assignment of Mortgage as to which the related recording
information is unavailable within 30 days following the Closing Date, such
Assignment of Mortgage shall be submitted for recording within 30 days after
receipt of such information but in no event later than one year after the
Closing Date. The Trustee shall be required to retain a copy of each Assignment
of Mortgage submitted for recording. In the event that any such Assignment of
Mortgage is lost or returned unrecorded because of a defect therein, the Seller
shall promptly prepare a substitute Assignment of Mortgage or cure such defect,
as the case may be, and thereafter the Seller shall be required to submit each
such Assignment of Mortgage for recording. Any failure of the Seller to comply
with this Section 2.01(c) shall result in the obligation of the Seller to
purchase or substitute for the related Mortgage Loans pursuant to the provisions
of Section 2.02.
(d) The Trustee shall have no responsibility for reviewing any
Mortgage File except as expressly provided in Section 2.02. Without limiting the
effect of the preceding sentence, in reviewing any Mortgage File pursuant to
such subsection, the Trustee shall have no responsibility for determining
whether any document is valid and binding, whether the text of any assignment or
endorsement is in proper or recordable form (except, if applicable, to determine
if the Trustee is the assignee or endorsee), whether any document has been
recorded in accordance with the requirements of any applicable jurisdiction, or
whether a blanket assignment is permitted in any applicable jurisdiction, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be, and, where applicable, that it purports
to be recorded, but shall not be required to determine whether any Person
executing any document is authorized to do so or whether any signature thereon
is genuine.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges
its receipt of the Certificate Insurance Policy and the sale and assignment of
the Mortgage Loans, and, subject to the review and period for delivery provided
for in Section 2.01, its receipt of the Mortgage Files, and declares that the
Trustee holds and will hold such documents and all amounts received by it
thereunder and hereunder in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders and the Certificate
Insurer. If the Seller is given notice under this Section 2.02 that a Mortgage
File is defective or incomplete and if the Seller does not correct or cure such
omission or defect within the 60-day period specified in Section 2.02, the
Seller shall purchase such Mortgage Loan from the Trustee (i)on the
Determination Date in the month following the month in which such 60-day period
expired at the Purchase Price of such Mortgage Loan or (ii)upon the expiration
of such 60-day period if the omission or defect would result in the related
Mortgage Loan not being a Qualified Mortgage Loan for purposes of Section
860G(a)(3) of the Code. The Purchase Price for the purchased Mortgage Loan shall
be deposited in the Collection Account no later than the applicable
Determination Date or the Business Day preceding the expiration of such 60-day
period, as the case may be; and, upon receipt by the Trustee of written
notification of such deposit signed by an officer of the Seller, the Trustee
shall release to the Seller the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in the Seller or its designee
any Mortgage Loan released pursuant hereto. It is understood and agreed that the
obligation of the Seller to purchase any Mortgage Loan as to which a material
defect in or omission of a constituent document exists shall constitute the sole
remedy against the Seller respecting such defect or omission available to the
Certificate Insurer, the Certificateholders or the Trustee on behalf of
Certificateholders. An Opinion of Counsel to the effect set forth in Section
2.05(d) shall be delivered to the Trustee and the Certificate Insurer in
connection with any such repurchase.
The Servicer, promptly following the transfer of (i) a Defective
Mortgage Loan from or (ii) an Eligible Substitute Mortgage Loan to the Trust
pursuant to this Section 2.02 or Section 2.05, as the case may be, shall amend
the Mortgage Loan Schedule, appropriately mark the Electronic Ledger and make
appropriate entries in its general account records to reflect such transfer and
the addition of any Eligible Substitute Mortgage Loan, if applicable.
No later than the 30th day following the Closing Date, the Trustee
shall certify to the Seller, the Certificate Insurer and the Servicer that it
has reviewed each Mortgage File and 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 the certification in the form annexed
hereto as Exhibit O as not covered by such certification), (i) all documents
constituting part of such Mortgage File required to be delivered to it pursuant
to paragraphs (i) - (v) of Section 2.01(a) are in its possession, (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule which
corresponds to items (ii), (iii), (v) and (vii) of the definition of "Mortgage
Loan Schedule" accurately reflects information set forth in the Mortgage File.
If within such 30-day period 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 said Mortgage Loan Schedule or, if in the
course of its review, the Trustee determines that such Mortgage File is
otherwise defective in any material respect, the Trustee shall promptly upon the
conclusion of its review notify the Seller and the Certificate Insurer, in the
form of an exception report and the Seller shall have a period of 60 days after
such notice within which to correct or cure any such defect.
On the 360th day following the Closing Date, the Trustee shall deliver
to the Seller, the Servicer and the Certificate Insurer an updated exception
report showing the documents outstanding pursuant to Section 2.01(a) along with
a final certification annexed hereto as Exhibit P from the previous
certification issued in the form of Exhibit O. The Trustee shall also maintain
records adequate to determine the date on which any document required to be
delivered to it after such 360th day following the Closing Date must be
delivered to it, and on each such date, the Trustee shall review the related
Mortgage File to determine whether such document has, in fact, been delivered.
After the delivery of the final certification, a form of which is attached
hereto as Exhibit P, (i) the Trustee shall provide to the Servicer, the Seller
and the Certificate Insurer, no less frequently than monthly, updated exception
reports showing the documents outstanding pursuant to Section 2.01(a) until all
such exceptions have been eliminated and (ii) the Seller shall provide to the
Certificate Insurer, the Trustee and the Servicer, no less frequently than
monthly, updated certifications indicating the then current status of exceptions
until all such exceptions have been eliminated; provided that the delivery of
the final certification shall not act as a waiver of any of the rights the
Certificate Insurer and the Certificateholders may have with respect to such
exceptions, and all rights are reserved with respect thereto.
The Trustee makes no representations as to and shall not be
responsible to verify (i) the validity, sufficiency, legality, due
authorization, recordation or genuineness of any document or (ii) the
collectibility, insurability or effectiveness of any of the Mortgage Loans.
Section 2.03. Representations and Warranties Regarding the Seller and
the Servicer. Each of the Seller and the Servicer represents and warrants as to
itself that, as of the Closing Date:
(i) Each of the Seller and the Servicer is a
corporation licensed as a mortgage banker duly organized,
validly existing and in good standing under the laws of the
state of its incorporation and has, and had at all relevant
times, full corporate power to originate the Mortgage Loans,
to own its property, to carry on its business as presently
conducted and to enter into and perform its obligations under
this Agreement;
(ii) The execution and delivery of this Agreement by
the Seller and the Servicer and the performance by each of
them of and compliance with the terms of this Agreement will
not violate the Seller's or the Servicer's articles of
incorporation or by-laws or constitute a default (or an event
which, with notice or lapse of time or both, would constitute
a default) under, or result in the breach or acceleration of,
any material contract, agreement or other instrument to which
the Seller or the Servicer is a party or which may be
applicable to the Seller or the Servicer or any of their
respective assets;
(iii) Each of the Seller and the Servicer has the full
power and authority to enter into and consummate all
transactions contemplated by this Agreement to be consummated
by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and
delivered this Agreement. This Agreement, assuming due
authorization, execution and delivery by the other parties
hereto, constitutes a valid, legal and binding obligation of
the Seller and the Servicer, enforceable against it in
accordance with the terms hereof, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization,
receivership, 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);
(iv) Neither the Seller nor the Servicer is in
violation of, and the execution and delivery of this
Agreement by the Seller and the Servicer and the performance
by each of them and compliance with the terms of this
Agreement will not constitute a violation with respect to,
any order or decree of any court or any order or regulation
of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or
operations of the Seller or the Servicer or any of their
respective properties or materially and adversely affect the
performance of any of their respective duties hereunder;
(v) There are no actions or proceedings against, or
investigations of, the Seller or the Servicer pending or, to
the knowledge of the Seller or the Servicer, threatened,
before any court, administrative agency or other tribunal (A)
that, if determined adversely, would prohibit its entering
into this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or
(C) that, if determined adversely, would prohibit or
materially and adversely affect the performance by the Seller
or the Servicer of any of their respective obligations under,
or the validity or enforceability of, this Agreement;
(vi) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
execution, delivery and performance by the Seller of, or
compliance by the Seller or the Servicer with, this
Agreement, or for the consummation of the transactions
contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been
obtained prior to the Closing Date;
(vii) The Seller did not sell the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its
creditors; and the Seller will not be rendered insolvent as a
result of the sale of the Mortgage Loans to the Trust;
(viii) The Seller acquired title to the Mortgage Loans in
good faith, without notice of any adverse claim;
(ix) The collection practices used by the Seller and
the Servicer with respect to the Mortgage Loans have been, in
all material respects, legal, proper, prudent and customary
in the non-conforming mortgage servicing business;
(x) No Officer's Certificate, statement, report or
other document prepared by the Seller or the Servicer and
furnished or to be furnished by it pursuant to this Agreement
or in connection with the transactions contemplated hereby
contains any untrue statement of material fact;
(xi) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to
this Agreement are not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable
jurisdiction;
(xii) The Servicer believes that the Servicing Fee Rate
provides a reasonable level of base compensation to the
Servicer for servicing the Mortgage Loans on the terms set
forth herein;
(xii) The transactions contemplated by this Agreement
are in the ordinary course of business of the Servicer; and
(xiv) The Servicer has caused or hereby agrees to cause
to be performed any and all acts required to be performed to
preserve the rights and remedies of the Trustee in any
insurance policies applicable to the Mortgage Loans,
including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee
rights in favor of the Trustee.
The representations and warranties set forth in this Section 2.03
shall survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially and
adversely affects the interests of the Certificateholders or the Certificate
Insurer, the Person discovering such breach shall give prompt written notice to
the other parties and to the Certificate Insurer. Within 60 days of its
discovery or its receipt of notice of such breach, or, with the prior written
consent of a Responsible Officer of the Trustee and the Certificate Insurer,
such longer period specified in such consent, the Seller or the Servicer, as the
case may be, shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding
the Mortgage Loans. (a) The Seller represents and warrants to the Trustee on
behalf of the Certificateholders as follows as of the Closing Date:
1. The information set forth on the Mortgage Loan Schedule
relating to the Initial Mortgage Loans is complete, true and correct
as of the Cut-Off Date and the information set forth on the Mortgage
Loan Schedule relating to the Subsequent Mortgage Loans is complete,
true and correct as of the related Cut-Off Date;
2. The Mortgage Notes and the Mortgages have not been assigned or
pledged by the Seller to any Person other than warehouse lenders, and
immediately prior to the transactions herein contemplated, the Seller
had good and marketable title thereto, and was the sole owner and
holder of the Mortgage Loans free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges,
charges or security interests of any nature (collectively, a "Lien"),
other than any such Lien released simultaneously with the sale
contemplated herein, and had full right and authority, subject to no
interest or participation of, or agreement with, any other party, to
sell and assign the same pursuant to this Agreement, and immediately
upon the transfer and assignment of each Mortgage Loan as contemplated
by this Agreement, the Trust will be the sole beneficial owner of,
each Mortgage Loan free and clear of any lien, claim, participation
interest, mortgage, security interest, pledge, charge or other
encumbrance or other interest of any nature;
3. With respect to any Mortgage Loan that is not a Cooperative
Loan, each Mortgage is a valid and existing lien on the property
therein described, and each Mortgaged Property is free and clear of
all encumbrances and liens having priority over the lien of the
Mortgage, except (i) liens for real estate taxes and special
assessments not yet due and payable, (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in
connection with the origination of the related Mortgage Loan, (iii)
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; (iv) in the case of a Mortgaged Property
that is a condominium or an individual unit in a planned unit
development, liens for common charges permitted by statute and (v) in
the case of a Mortgage Loan secured by a second lien on the related
Mortgaged Property, the related First Lien. Any security agreement,
chattel mortgage or equivalent document related to the Mortgage and
delivered to the Trustee establishes in the Seller a valid and
subsisting lien on the property described therein, and the Seller has
full right to sell and assign the same to the Trust;
4. The terms of each Mortgage Note and Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary to protect the
interests of the Trust, and which has been delivered to the Trustee.
The substance of any such alteration or modification is reflected on
the Mortgage Loan Schedule;
5. No instrument of release or waiver has been executed in
connection with any 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 primary mortgage guaranty insurer, if
any, and which has been delivered to the Trustee;
6. Except with respect to delinquencies described in clause (12)
hereof, no Mortgagor is in default in complying with the terms of its
Mortgage Note or Mortgage, and the Seller has not waived any default,
breach, violation or event of acceleration except that the Seller may
have accepted late payments, and all taxes, governmental assessments,
insurance premiums or water, sewer and municipal charges which
previously became due and owing have been paid, or an escrow of funds
has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet
due and payable. The Seller has 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, except for interest accruing from the
date of the Mortgage Note or date of disbursement of the Mortgage
proceeds, whichever is more recent, to the day which precedes by one
month the Due Date of the first installment of principal and interest;
7. There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a
proceeding currently occurring, and such property is undamaged by
waste, fire, earthquake or earth movement, windstorm, flood, tornado
or otherwise, so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the
premises were intended;
8. There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting any Mortgaged
Property which are, or may be, liens prior or equal to, or coordinate
with, the lien of the Mortgage except those that are stated in the
title insurance policy and for which related losses are affirmatively
insured against by such policy;
9. All of the improvements that were included for the purpose of
determining the Appraised Value of each Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon the
Mortgaged Property except those that are stated in the title insurance
policy and for which related losses are affirmatively insured against
by such policy;
10. No improvement located on or being part of any 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
and, with respect to the use and occupancy of the same, including, but
not limited to, certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities and the Mortgaged Property is lawfully occupied under
applicable law;
11. All parties that have had any interest in any Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (1)
in compliance with any and all licensing requirements of the United
States and of the laws of the state wherein the Mortgaged Property is
located that are applicable to such parties and (2)(A) organized under
the laws of such state or (B) qualified to do business in such state
or exempt from such qualification in a manner so as not to affect
adversely the enforceability of such Mortgage Loan or (C) federal
savings and loan associations or national banks having principal
offices in such state or (D) not doing business in such state;
12. With respect to the Initial Mortgage Loans, as of the Cut-Off
Date, (i) all payments required to be made on each Initial Mortgage
Loan under the terms of the related Mortgage Note have been made
except for 2.56% and 0.48% of the Initial Mortgage Loans in Loan Group
1 and Loan Group 2 respectively (by Cut-Off Date Loan Group Principal
Balance) are up to 60 days Delinquent and (ii) no payment required to
be made on any Initial Mortgage Loan has been more than 60 days
Delinquent more than once during the twelve month period immediately
preceding the Cut-Off Date;
13. Each of the documents and instruments included in a Mortgage
File is duly executed and in due and proper form and each such
document or instrument is in a form generally acceptable to prudent
institutional mortgage lenders that regularly originate or purchase
mortgage loans;
14. The Mortgage Notes and the related Mortgages 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,
receivership, 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). All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and the
Mortgage, and each Mortgage Note and Mortgage have been duly and
properly executed by such parties. The Mortgagor is a natural person
who is a party to the Mortgage Note and the Mortgage in an individual
capacity, and not in the capacity of a trustee or otherwise;
15. Any and all requirements of any federal, state or local law,
including, without limitation, usury, truth-in- lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws, applicable to the origination and
servicing of the Mortgage Loans or otherwise applicable to the
Mortgage Loans have been complied with, and the Seller has and shall
maintain in its possession, available for the Trustee's inspection,
and shall deliver to the Trustee upon demand, evidence of compliance
with all such requirements;
16. The proceeds of the Mortgage Loans have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making,
closing or recording the Mortgage Loan have been paid;
17. Each Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other form of policy acceptable to FNMA or
FHLMC, issued by and constituting the valid and binding obligation of
a title insurer generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market
that invest in mortgage loans such as the Mortgage Loans and qualified
to do business in the jurisdiction where the Mortgaged Property is
located, insuring the Seller, its successors and assigns, as to the
first priority lien of the Mortgage in the case of a Mortgage Loan
secured by a First Lien on the related Mortgaged Property and the
second priority lien of the Mortgage in the case of a Mortgage Loan
secured by a second lien on the related Mortgaged Property, in the
original principal amount of the Mortgage Loan. The Seller is the sole
named insured of such mortgage title insurance policy, the assignment
to the Purchaser or the Trustee as assignee of the Purchaser of the
Seller's interest in such mortgage title insurance policy does not
require the consent of or notification to the insurer or the same has
been obtained, and 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 Trustee upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and no prior holder of the related
Mortgage, including the Seller, has done, by act or omission, anything
that would impair the coverage of such mortgage title insurance
policy;
18. All improvements upon the Mortgaged Properties are insured by
a generally acceptable insurer 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 this Agreement. If a Mortgaged
Property was, at the time of origination of the related Mortgage Loan,
in an area identified on a Flood Hazard Boundary Map or Flood Hazard
Rate Map issued by the Federal Emergency Management Agency as having
special flood hazards (and if the flood insurance policy referenced
herein has been made available), a flood insurance policy is in effect
with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage described in this
Agreement. All individual insurance policies (collectively, the
"hazard insurance policy") are the valid and binding obligation of the
insurer and contain a standard mortgagee clause naming the Seller, its
successors and assigns, as mortgagee. All premiums thereon have been
paid. The Mortgage obligates the Mortgagor thereunder 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;
19. No Mortgage Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note or the
related Mortgage, or the exercise of any right thereunder in
accordance with the terms thereof, 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;
20. Each Mortgage Loan was originated or purchased and
reunderwritten by the Seller;
21. Except with respect to any Balloon Loan, each Mortgage Loan
is payable in equal monthly installments of principal and interest
which would be sufficient, in the absence of late payments, to fully
amortize such loan within the term thereof, beginning no later than 60
days after disbursement of the proceeds of the Mortgage Loan. Each
Mortgage Loan in Loan Group 1 bears a fixed interest rate for the term
of the Mortgage Loan. Each Balloon Loan has an original term of not
less than fifteen (15) years and provides for level monthly payments
based on a thirty (30) year amortization schedule and a final Monthly
Payment substantially greater than the preceding Monthly Payments.
Each Mortgage Loan in Loan Group 2 bears an adjustable interest rate
based on the related Loan Index;
22. Each Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the holder thereunder;
23. No Mortgage Loan is a construction loan;
24. The Mortgage Notes are not and have not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in clause 3 above;
25. Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of
the security, including (i) in the case of a Mortgage designated as a
deed of trust, by trustee's sale and (ii) otherwise by judicial or
nonjudicial fore-closure. There is no homestead or other exemption
available to the Mortgagor that would interfere with the right to sell
the Mortgaged Property at a trustee's sale or the right to foreclose
the Mortgage;
26. With respect to each Mortgage constituting 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, and no fees or expenses are or will become payable by the
Trustee or the Certificateholders to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the
Mortgagor, which fees and expenses shall constitute Servicing
Advances;
27. Each Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule. No residence or dwelling is a manufactured
dwelling. No Mortgaged Properties are held under a ground lease;
28. The Mortgage Loans were underwritten in accordance with the
Seller's underwriting guidelines described in the Prospectus under the
heading "The Seller and the Servicer-- Underwriting";
29. There exist no deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements
for repayment thereof have not been made, and no escrow deposits or
payments of other charges or payments due the Seller have been
capitalized under any Mortgage or the related Mortgage Note;
30. No Mortgage Loan was originated under a buy-down plan;
31. Other than as provided by this Agreement, there is no
obligation on the part of the Seller or any other party to make
payments in addition to those made by the Mortgagors;
32. With respect to each Mortgage Loan, the Seller is in
possession of a complete Mortgage File, except those documents
delivered to the Trustee, and there are no custodial agreements in
effect adversely affecting the right or ability of the Seller to make
the document deliveries required hereby;
33. No Mortgage Loan was selected for inclusion under this
Agreement on any basis which was intended to have a material adverse
effect on the Certificateholders or the Certificate Insurer;
34. No Mortgage Loan has a shared appreciation or other
contingent interest feature;
35. With respect to each Mortgage Loan secured by a second lien
on the related Mortgaged Property:
(a) if the Combined Loan-to-Value Ratio is higher than 80%,
either the related First Lien does not provide for a balloon
payment or, if the related First Lien does provide for a balloon
payment, the maturity date of the second lien is prior to the
maturity date of the First Lien;
(b) the related First Lien does not provide for negative
amortization;
(c) either no consent for the Mortgage Loan secured by a
second lien on the related Mortgaged Property is required by the
holder of the related First Lien or such consent has been
obtained and is contained in the Mortgage File; and
(d) except with respect to no more than 10% of the Initial
Mortgage Loans in Loan Group 1 which are Mortgage Loans secured
by a second lien on the related Mortgaged Property, measured by
outstanding Principal Balances as of the Cut-Off Date, the
related First Lien is not held by an individual;
36. Each Mortgage Loan conforms, and all the Mortgage Loans in
the aggregate conform, in all material respects to the description
thereof set forth in the Prospectus Supplement;
37. A full appraisal on forms approved by FNMA or FHLMC was
performed in connection with the origination of each Mortgage Loan.
Each appraisal meets guidelines that would be generally acceptable to
prudent mortgage lenders that regularly originate or purchase mortgage
loans comparable to the Mortgage Loans for sale to prudent investors
in the secondary market that invest in mortgage loans such as the
Mortgage Loans;
38. To the best of the Seller's knowledge, no Mortgaged Property
was, as of the related Cut-Off Date, located within a one-mile radius
of any site listed in the National Priorities List as defined under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or on any similar state list of hazardous
waste sites which are known to contain any hazardous substance or
hazardous waste;
39. None of the Mortgage Loans are subject to a bankruptcy
proceeding;
40. No more than 24.04% of the aggregate Principal Balance of all
the Initial Mortgage Loans as of Cut-Off Date relates to Mortgage
Loans originated or purchased under the Seller's limited documentation
program for self-employed borrowers;
41. Each Mortgage Loan constitutes a "qualified mortgage" within
the meaning of Section 860G(a)(3) of the Code;
42. Each Cooperative Loan is secured by a valid, subsisting and
enforceable perfected first lien and security interest in the related
Mortgaged Property, subject only to (i) the rights of the Cooperative
Corporation to collect Maintenance and assessments from the Mortgagor,
(ii) the lien of the Blanket Mortgage, if any, on the Cooperative
Property and of real property taxes, water and sewer charges, rents
and assessments on the Cooperative Property not yet due and payable,
and (iii) other matters to which like Cooperative Units are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by the Security Agreement or the use,
enjoyment, value or marketability of the Cooperative Unit. Each
original UCC financing statement, continuation statement or other
governmental filing or recordation necessary to create or preserve the
perfection and priority of the first priority lien and security
interest in the Cooperative Shares and Proprietary Lease has been
timely and properly made. Any security agreement, chattel mortgage or
equivalent document related to the Cooperative Loan and delivered to
the Seller or its designee establishes in the Seller a valid and
subsisting perfected first lien on and security interest in the
property described therein, and the Seller has full right to sell and
assign the same;
43. Each Cooperative Corporation qualifies as a "cooperative
housing corporation" as defined in Section 216 of the Code;
44. Each Mortgage Loan in Loan Group 2 is secured by a first
lien; and
45. Each Mortgage Loan in Loan Group 2 was originated by an
entity that satisfied at the time of origination the requirements of
Section 3(a)(41) of the Securities Exchange Act of 1934, as amended.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the
respective Mortgage Files to the Trustee and the termination of the rights and
obligations of the Servicer pursuant to Section 7.04 or 8.01. Upon discovery by
the Seller, the Servicer, the Certificate Insurer or a Responsible Officer of
the Trustee of a breach of any of the foregoing representations and warranties,
which materially and adversely affects the interests of the Trust or the
Certificateholders or the Certificate Insurer in the related Mortgage Loan, the
party discovering such breach shall give prompt written notice to the other
parties and the Certificate Insurer. Within 60 days of its discovery or its
receipt of notice of breach, the Seller shall use all reasonable efforts to cure
such breach in all material respects or shall purchase such Mortgage Loan from
the Trust or substitute an Eligible Substitute Mortgage Loan as provided in
Section 2.05 for such Mortgage Loan. Any such purchase by the Seller shall be at
the Purchase Price, and in each case shall be accomplished in the manner set
forth in Section 2.02. It is understood and agreed that the obligation of the
Seller to cure, substitute or purchase any Mortgage Loan as to which such a
breach has occurred and is continuing shall constitute the sole remedy against
the Seller respecting such breach available to Certificateholders or the Trustee
on behalf of Certificateholders. An Officer's Certificate and Opinion of Counsel
to the effect set forth in Section 2.05(d) shall be delivered to the Trustee in
connection with any such repurchase.
Section 2.05. Substitution of Mortgage Loans (a) On a Determination
Date within two years following the Closing Date and which is on or before the
date on which the Seller would otherwise be required to repurchase a Mortgage
Loan under Section 2.02 or 2.04, the Seller may deliver to the Trustee one or
more Eligible Substitute Mortgage Loans in substitution for any one or more of
the Defective Mortgage Loans which the Seller would otherwise be required to
repurchase pursuant to Section 2.02 or 2.04.
(b) The Seller shall notify the Servicer and the Trustee in writing
not less than five Business Days before the related Determination Date which is
on or before the date on which the Seller would otherwise be required to
repurchase such Mortgage Loan pursuant to Section 2.02 or 2.04 of its intention
to effect a substitution under this Section 2.05. On such Determination Date
(the "Substitution Date"), the Seller shall deliver to the Trustee (1) the
Eligible Substitute Mortgage Loans to be substituted for the Defective Mortgage
Loans, (2) a list of the Defective Mortgage Loans to be substituted for by such
Eligible Substitute Mortgage Loans, (3) an Officer's Certificate (A) stating
that no failure by the Servicer described in Section 8.01 shall have occurred
and be continuing, (B) stating that the aggregate Principal Balance of all
Eligible Substitute Mortgage Loans (determined with respect to each Eligible
Substitute Mortgage Loan as of the Determination Date on which it was
substituted) including the principal balance of Eligible Substitute Mortgage
Loans being substituted on such Determination Date does not exceed an amount
equal to 5% of the Aggregate Principal Balance as of the Closing Date, (C)
stating that all conditions precedent to such substitution specified in
subsection (a) have been satisfied and attaching as an exhibit a supplemental
Mortgage Loan schedule (the "Supplemental Mortgage Loan Schedule") setting forth
the same type of information as appears on the Mortgage Loan Schedule and
representing as to the accuracy thereof and (D) confirming that the
representations and warranties contained in Section 2.04 are true and correct in
all material respects with respect to the Substitute Mortgage Loans on and as of
such Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Sections 2.02, 2.04 and this Section
2.05, (4) an Opinion of Counsel to the effect set forth below and (5) a
certificate stating that cash in the amount of the related Substitution
Adjustment, if any, has been deposited to the Collection Account. Upon receipt
of the foregoing, the Trustee shall release such Defective Mortgage Loans to the
Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Sections 2.05(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.05(a), Exhibit C to this
Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.
(d) In connection with any Mortgage Loan that the Seller is required
to purchase or replace, the Seller shall deliver to the Trustee and the
Certificate Insurer an Opinion of Counsel to the effect that such purchase or
substitution will not cause (x) any federal tax to be imposed on the Trust,
including, without limitation, any Federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the start-up day" under Section 860G(d)(1) of the Code or (y) any portion of the
Trust to fail to qualify as a REMIC at any time that any Certificate is
outstanding. In the event that such opinion indicates that a repurchase or
substitution will result in the imposition of a prohibited transaction tax, give
rise to net taxable income or be deemed a contribution to a REMIC after its
Startup Day, the Seller shall not be required to repurchase or replace any such
Mortgage Loan unless and until the Servicer has determined there is an actual or
imminent default with respect thereto or that such defect or breach adversely
affects the enforceability of such Mortgage Loan.
Section 2.06. Execution and Authentication of Certificates. The
Trustee on behalf of the Trust shall cause to be executed, authenticated and
delivered on the Closing Date to or upon the order of the Seller, in exchange
for the Mortgage Loans, concurrently with the sale, assignment and conveyance to
the Trustee of the Mortgage Loans, each Class of Certificates in authorized
denominations or Percentage Interests, together evidencing the ownership of the
entire Trust.
Section 2.07 Designation of Interests in REMIC. (a) For Federal tax
purposes, the Trust will consist of REMIC I and REMIC II. REMIC I will be
evidenced by (x) uncertificated and non- transferable interests described below
(the "REMIC I Regular Interests") which are hereby designated as the "regular
interests" in REMIC I, and (y) the Class R-1 Certificates, which are hereby
designated as the single "residual interest" in REMIC I. The REMIC I Regular
Interests will have the following designations and pass-through rates, and
distributions of principal and interest thereon shall be allocated to the
corresponding Classes of Certificates (the "Corresponding Classes") in the
following manner:
<TABLE>
<CAPTION>
Corresponding Class of
Certificates(1)
---------------------------------
REMIC I Allocation Allocation
Regular Initial Pass-Through of of
Interests Balance Rate Principal Principal
<C> <C> <C> <C> <C>
1 $83,709,000 (2) A-1 A-1(3)
2 $54,267,000 (2) A-2 A-2(4)
3 $14,084,000 (2) A-3 A-3(5)
4 $10,374,000 (2) A-4 A-4(6)
5 $11,966,000 (2) A-5 A-5(7)
6 $23,600,000 (2) A-6 A-6(8)
</TABLE>
__________________
(1) Except as otherwise indicated, the amount of principal and interest
allocable from a REMIC I Regular Interest to its Corresponding Class of
Certificates on any Distribution Date shall be 100%.
(2) The pass-through rate on REMIC I Regular Interests 1 through 6 for any
Distribution Date shall equal the weighted average of the Loan Rates on
the Mortgage Loans in Loan Group 1 less the sum of the Servicing Fee
Rate, the Trustee Fee Rate and the Premium Percentage.
(3) Interest shall be allocated between this Class and the Class S-1
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(4) Interest shall be allocated between this Class and the Class S-2
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(5) Interest shall be allocated between this Class and the Class S-3
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(6) Interest shall be allocated between this Class and the Class S-4
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(7) Interest shall be allocated between this Class and the Class S-5
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(8) Interest shall be allocated between this Class and the Class S-6
Component in proportion to the Certificate Rate applicable to this Class
and the related Strip Rate.
(b) REMIC II will be evidenced by 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, the Class A-7
Certificates and the Class R-2 Certificates. The foregoing listed Certificates,
other than the Class R-2 Certificates, and each Class S Component are hereby
designated as the "regular interests," and the Class R-2 Certificates are hereby
designated as the single class of "residual interests," in REMIC II.
Section 2.08. Designation of Startup Day of REMIC. The Closing Date is
hereby designated as the "start-up day" of each REMIC within the meaning of
Section 860G(a)(9) of the Code.
Section 2.09. REMIC Certificate Maturity Date. Solely for purposes of
satisfying Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest
possible maturity date" of each REMIC is the Distribution Date in April 2029.
Section 2.10. Tax Returns and Reports to Certificateholders. (a) For
federal income tax purposes, the Trust shall have a calendar year and shall
maintain its books on the accrual method of accounting.
(b) The Trustee shall prepare, or cause to be prepared, execute and
deliver to the Servicer or Certificateholders, as applicable, any income tax
information returns for each taxable year with respect to the Trust containing
such information at the times and in the manner as may be required by the Code
or state or local tax laws, regulations or rules, and shall furnish or cause to
be furnished to the Trust and the Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby.
Within thirty (30) days of the Closing Date, the Tax Matters Person shall
furnish or cause to be furnished to the Internal Revenue Service, on Form 8811
or as otherwise required by the Code, the name, title, address and telephone
number of the person that Holders of the Certificates may contact for tax
information relating thereto, together with such additional information at the
time or times and in the manner required by the Code. Such federal, state or
local income tax or information returns shall be signed by the Trustee or such
other Person as may be required to sign such returns by the Code or state or
local tax laws, regulations or rules.
(c) In the first federal income tax return of the Trust for its short
taxable year ending December 31, 1997, a REMIC election shall be made with
respect to each of REMIC I and REMIC II for such taxable year and all succeeding
taxable years.
(d) The Trustee will maintain or cause to be maintained such records
relating to the Trust, including, but not limited to, the income, expenses,
assets and liabilities of the Trust, and the fair market value and adjusted
basis of the Trust property and assets determined at such intervals as may be
required by the Code, as may be necessary to prepare the foregoing returns,
schedules, statements or information.
(e) The Servicer, upon request, shall promptly furnish the Trustee
with all such information as may be required in connection with the Tax Matter
Person's REMIC reporting obligations pursuant to this Agreement.
Section 2.11. Tax Matters Person. The tax matters person with respect
to each REMIC (the "Tax Matters Person") may be the Trustee. The Tax Matters
Person shall at all times hold the Tax Matters Person Residual Interest and
shall have the same duties with respect to the Trust as those of a "tax matters
partner" under Subchapter C of Chapter 63 of Subtitle F of the Code. Each holder
of a Residual Certificate shall be deemed to have agreed, by acceptance thereof,
to be bound by this Section 2.11. If, at any time, the Seller appoints a Person
other than the Trustee to act as Tax matters Person, the Seller's appointed Tax
Matters Person shall perform its duties solely as the agent of the Seller.
Section 2.12. REMIC Related Covenants. For as long as the Trust shall
exist, the Trustee shall act in accordance herewith to assure continuing
treatment of each REMIC as a REMIC and avoid the imposition of tax on the Trust.
In particular:
(a) The Trustee shall not create, or permit the creation of, any
"interests" in either REMIC within the meaning of Code Section 860D(a)(2) other
than the interests represented by the Regular Certificates and the Residual
Certificates.
(b) Except as otherwise provided in the Code, the Seller shall not
grant and the Trustee shall not accept property unless (i) substantially all of
the property held in the Trust constitutes either "qualified mortgages" or
"permitted investments" as defined in Code Sections 860G(a)(3) and (5),
respectively, and (ii) no property shall be contributed to the Trust after the
Startup Day unless such grant would not subject any REMIC to the 100% tax on
contributions to a REMIC after its Startup Day imposed by Code Section 860G(d).
(c) The Trustee shall not accept on behalf of the Trust any fee or
other compensation for services (other than as otherwise provided herein) and
shall not accept on behalf of the Trust any income from assets other than those
permitted to be held by a REMIC.
(d) The Trustee shall not sell or permit the sale of all or any
portion of the Mortgage Loans (other than in accordance with Section 2.02, 2.04
or 3.16), unless such sale is pursuant to a "qualified liquidation" as defined
in Code Section 860F(a)(4)(A) and in accordance with Article VIII.
(e) The Trustee shall maintain books with respect to each REMIC on a
calendar year and on an accrual basis.
(f) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Residual Certificates the Form 1066 and each Form
1066Q for the applicable REMIC and shall respond promptly to written requests
made not more frequently than quarterly by any Holder of Residual Certificates
with respect to the following matters:
(i) The original projected principal and interest cash flows on
the Closing Date on each class of regular and residual interests
created hereunder and on the Mortgage Loans, based on the applicable
Prepayment Assumption;
(ii) The projected remaining principal and interest cash flows as
of the end of any calendar quarter with respect to each class of
regular and residual interests created hereunder and the Mortgage
Loans, based on the applicable Prepayment Assumption;
(iii) The Prepayment Assumption and any interest rate assumptions
used in determining the projected principal and interest cash flows
described above;
(iv) 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 each class of 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;
(v) 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 each REMIC
with respect to such regular interests or bad debt deductions claimed
with respect to the Mortgage Loans;
(vi) The amount and timing of any non-interest expenses of each
REMIC; and
(vii) Any taxes (including penalties and interest) imposed on
each REMIC, including, without limitation, taxes on "prohibited
transactions," "contributions" or "net income from foreclosure
property" or state or local income or franchise taxes.
In the event that any tax is imposed on "prohibited transactions" of
the Trust as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of a REMIC as defined in Section 860G(c) of the Code, on
any contribution to the Trust after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax (other than any minimum tax imposed by Section
23151(a) or 23153(a) of the California Revenue and Taxation Code) is imposed,
such tax shall be paid by (i) the Trustee, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Agreement,
(ii)the Servicer, if such tax arises out of or results from a breach by the
Servicer of any of its obligations under this Agreement or (iii) otherwise the
Holders of the applicable Residual Certificates in proportion to their
Percentage Interests. Notwithstanding the previous sentence, any tax imposed on
the Trust by Section 23151 or Section 23153 of the California Revenue and
Taxation Code shall be timely paid by the Trustee out of its own funds without
right of reimbursement therefor if such taxes arise solely from the Trustee's
presence in California, and otherwise by the Servicer. To the extent any tax is
chargeable against the Holders of the Residual Certificates, notwithstanding
anything to the contrary contained herein, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the applicable
Residual 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).
The Trustee shall not engage in a "prohibited transaction" (as defined
in Code Section 860F(a)(2)), except that, with the prior written consent of the
Seller , the Trustee may engage in the activities otherwise prohibited by the
foregoing clauses (b), (c) and (d), provided that the Seller shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
transaction will not result in the imposition of a contribution or prohibited
transaction tax on the Trust and will not disqualify any REMIC from treatment as
a REMIC; and provided that the Seller shall have demonstrated to the
satisfaction of the Trustee that such action will not adversely affect the
rights of the holders of the Certificates and the Trustee and that such action
will not adversely impact the rating of the Senior Certificates.
(g) Except as provided below, the Trustee shall pay out of its own
funds, without any right of reimbursement, any and all tax related expenses of
the Trust (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 that involve
the Internal Revenue Service or state tax authorities), other than the expense
of obtaining any Opinion of Counsel required pursuant to Sections 2.05, 3.07 and
10.02 and other than taxes except as specified herein. The Trustee shall be
entitled to be reimbursed for any professional fees or expenses related to
audits or any administrative or judicial proceedings that do not result from any
breach of the Trustee's duties hereunder.
Section 2.13. Subsequent Transfers. (a) Subject to the satisfaction of
the conditions set forth in Section 2.01 and paragraph (b) below and pursuant to
the terms of the Subsequent Transfer Agreement, in consideration of the
Trustee's delivery on the Closing Date to or upon the order of the Seller of all
or a portion of the purchase price therefor, the Seller shall on the Closing
Date sell, transfer, assign, set over and otherwise convey without recourse to
the Trustee, all right, title and interest of the Seller in and to each
Subsequent Mortgage Loan listed on the Subsequent Mortgage Loan Schedule
delivered by the Seller on the Closing Date, including (i) the related Cut-Off
Date Principal Balance; (ii) all collections in respect of interest and
principal received after the related Cut-Off Date (other than payments in
respect of accrued interest due on or before March 15, 1997); (iii) property
which secured such Subsequent Mortgage Loan and which has been acquired by
foreclosure or deed in lieu of foreclosure; (iv) its interest in any insurance
policies in respect of such Subsequent Mortgage Loan; and (v) all proceeds of
any of the foregoing. The transfer by the Seller of the Subsequent Mortgage
Loans set forth on the Subsequent Mortgage Loan Schedule to the Trustee shall be
absolute and shall be intended by the Seller and all parties hereto to be
treated as a sale by the Seller to the Trust. If the assignment and transfer of
the Mortgage Loans and the other property specified in this Section 2.13 from
the Seller to the Trustee pursuant to this Agreement is held or deemed not to be
a sale or is held or deemed to be a pledge of security for a loan, the Seller
intends that the rights and obligations of the parties shall be established
pursuant to the terms of this Agreement and that, in such event, (i) the Seller
shall be deemed to have granted and does hereby grant to the Trustee as of the
Closing Date a first priority security interest in the entire right, title and
interest of the Seller in and to the Subsequent Mortgage Loans and all other
property conveyed to the Trustee pursuant to this Section 2.13 and all proceeds
thereof and (ii) this Agreement shall constitute a security agreement under
applicable law. The purchase price shall be one hundred percent (100%) of the
Principal Balances of the Subsequent Mortgage Loans as of the related Cut-Off
Date.
(b) The Seller shall transfer and deliver to the Trustee the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above only upon the satisfaction of each of the
following conditions on or prior to the Closing Date:
(i) The Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with an Addition Notice, which
notice shall be given not less than two Business Days prior to the
Closing Date and shall designate the Subsequent Mortgage Loans to be
sold to the Trust and the aggregate Principal Balance of such Mortgage
Loans;
(ii) The Seller shall have delivered to the Trustee a duly
executed written assignment (including an acceptance by the Trustee)
in substantially the form of Exhibit D;
(iii) The Seller shall have deposited in the Collection Account
all principal collected and interest collected to the extent accrued
on or after the related Cut-Off Date (other than payments in respect
of accrued interest due on or before March 15, 1997);
(iv) As of the Closing Date, the Seller was not insolvent nor
will the Seller be made insolvent by such transfer nor is the Seller
aware of any pending insolvency;
(v) Such addition will not result in a material adverse tax
consequence to any REMIC or the Holders of the Certificates;
(vi) The Seller shall have provided the Rating Agencies and the
Certificate Insurer with an Opinion of Counsel relating to the sale
(i.e., "True Sale Opinion") of the Subsequent Mortgage Loans to the
Trustee, the enforceability of the Subsequent Transfer Agreement and
to the effect that the transfer of such Subsequent Mortgage Loans will
not adversely affect the status of any REMIC as a REMIC;
(vii) Following the purchase of such Subsequent Mortgage Loan by
the Trust on the Closing Date, the Loan Group 1 Mortgage Loans
(including such Subsequent Mortgage Loan) as of the related Cut-Off
Date: (a) will have a weighted average Loan Rate of at least 11.40%;
(b) will have a weighted average remaining term to stated maturity of
not less than 229 months; (c) will have a weighted average Combined
Loan- to-Value Ratio of not more than 71.00% and Mortgage Loans with a
Combined Loan-to-Value Ratio greater than 80% shall not comprise of
more than 15%; (d) will not have more than 44% by aggregate Principal
Balance Balloon Loans; (e) will have no Mortgage Loan with a principal
balance in excess of $380,000; (f) will have a state concentration not
in excess of 52% for any one state; (g) will have not more than 2.0%
by aggregate Principal Balance Mortgage Loans concentrated in any
single zip code; (h) will have not more than 15.2% by aggregate
Principal Balance Mortgage Loans relating to non- owner occupied
properties; (i) will not include Mortgage Loans in excess of 10.00% by
aggregate Principal Balance secured by Mortgaged Properties in second
lien positions; (j) will not have more than 1.20% by aggregate
Principal Balance Mortgage Loans secured by Mortgaged Properties which
are high rise condominiums; (k) will not have more than 4.25% by
aggregate Principal Balance of Mortgage Loans secured by Mortgaged
Properties which are multi-use homes; (l) will not have more than
4.25% by aggregate Principal Balance Mortgage Loans secured by
Mortgaged Properties which are multi family homes; (m) will not have
more than 21% and 6% by aggregate Principal Balance Mortgage Loans
with a loan class of C and D, respectively; (n) will have at least 43%
by aggregate Principal Balance Mortgage Loans with a loan class of A;
(o) will not be more than 59 days delinquent; (p) will not have more
than 40% by aggregate Principal Balance Mortgage Loans concentrated in
the New York counties of Kings, Queens, Nassau and Suffolk; and (q)
the Mortgage Loans must be a fully amortizing loan with level payments
over 15 or 30 years, or a loan with a 15-year balloon maturity.
(viii) Following the purchase of such Subsequent Mortgage Loan by
the Trust on the Closing Date, the Loan Group 2 Mortgage Loans
(including such Subsequent Mortgage Loan) as of the related Cut-Off
Date: (a) will have a weighted average Loan Rate of at least 10.70%;
(b) will have a weighted average remaining term to stated maturity of
not less than 358 months; (c) will have a weighted average Combined
Loan- to-Value Ratio of not more than 76% and Mortgage Loans with
Combined Loan-to-Value Ratios of more than 80% shall comprise of no
more than 21%; (d) will have no Mortgage Loan with a principal balance
in excess of $425,000; (f) will have a New York concentration not in
excess of 21.5%; (g) will have not more than 1.5% by aggregate
Principal Balance Mortgage Loans concentrated in any single zip code;
(h) will have not more than 11.00% by aggregate Principal Balance
Mortgage Loans relating to non-owner occupied properties; (i) will
include no Mortgage Loans secured by Mortgaged Properties in a junior
lien positions; (j) will be fully amortizing Mortgage Loans with level
payments over a maximum of 30 years; (k) will not have more than 2.7%
by aggregate Principal Balance of Mortgage Loans secured by Mortgaged
Properties which are high rise condominiums, multi-use or multi family
homes; (l) will not have more than 22.10% and 2.80% by aggregate
Principal Balance Mortgage Loans with a loan class of C and D,
respectively; (m) will have at least 46% by aggregate Principal
Balance Mortgage Loans with a loan class of A; (n) will not be more
than 59 days delinquent; and (o) will not have more than 14% by
aggregate Principal Balance Mortgage Loans concentrated in the New
York counties of Kings, Queens, Nassau and Suffolk.
(ix) Following the purchase of such Subsequent Mortgage Loan by
the Trust on the Closing Date, such Subsequent Mortgage Loans shall be
secured by a mortgage on property which, at the time of the
origination of such Subsequent Mortgage Loan, has an appraised value
of not more than $1,000,000; and the first payment on each such
Subsequent Mortgage Loan is due no later than the last day of the Due
Period in which the purchase occurs, unless there is deposited into
the Collection Account an amount equal to 30 days' interest on any
such Subsequent Mortgage Loans at the Loan Rate less the applicable
Servicing Fee Rate, then the first payment on such Subsequent Mortgage
Loan is due no later than the last day of the Due Period following the
Due Period in which the purchase occurs.
On the Closing Date, the parties to this Agreement shall, if
reasonably requested by the Certificate Insurer, if the Subsequent Mortgage
Loans, in the aggregate, do not comply in all material respects with the
conditions specified in Section 2.13, amend the definition of "Specified O/C
Amount" for the purpose of increasing the Specified O/C Amount or amend this
Agreement to provide for the establishment and funding of a reserve account;
provided, however, that any such amendment must comply with the provisions of
Section 11.01, including, without limitation, any requirement for
Certificateholder consent set forth therein. Notice of such change or amendment
shall be given to each Rating Agency.
<PAGE>
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Servicer. (a) It is intended that the Trust formed
hereunder shall constitute, and that the affairs of the Trust shall be conducted
so as to qualify each REMIC as, a "real estate mortgage investment conduit"
("REMIC") as defined in and in accordance with the REMIC Provisions. In
furtherance of such intentions, the Servicer covenants and agrees that it shall
not knowingly or intentionally take any action or omit to take any action that
would cause the termination of the REMIC status of either REMIC.
(b) The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. The Servicer may enter into Subservicing
Agreements for any servicing and administration of Mortgage Loans with any
institution which (i) is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and (ii)
(x) has been designated an approved Seller-Servicer by FHLMC or FNMA for first
and second mortgage loans or (y) is an affiliate of the Servicer and
satisfactory to the Certificate Insurer or (z) is otherwise approved by the
Certificate Insurer. The Servicer shall give notice to the Certificate Insurer
and the Trustee of the appointment of any Subservicer. Any such Subservicing
Agreement shall be consistent with and not violate the provisions of this
Agreement. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and either itself directly service the related Mortgage Loans or enter
into a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(c) Notwithstanding any Subservicing Agreement or any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. For purposes of this Agreement, the Servicer shall be deemed
to have received payments on Mortgage Loans when the Subservicer has received
such payments. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer by such Subservicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Trustee and Certificateholders
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Subservicer except as set
forth in Section 3.01(e). The Servicer shall be solely liable for all fees owed
by it to any Subservicer irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee approved by the Certificate Insurer shall thereupon assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the Trustee or designee approved by
the Certificate Insurer elects to terminate any Subservicing Agreement. Any fee
payable in connection with such a termination will be payable by the outgoing
Servicer. If the Trustee does not terminate the Subservicing Agreements, the
Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements with regard to events that occurred prior to the date
the Servicer ceased to be the Servicer hereunder. The Servicer, at its expense
and without right of reimbursement therefor, shall, upon the request of the
Trustee, deliver to the assuming party all documents and records relating to
each Subservicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's good faith determination such
waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Certificateholders and the Certificate Insurer, provided,
however, that (unless (x) the Mortgagor is in default with respect to the
Mortgage Loan, or such default is, in the judgment of the Servicer, imminent,
(y) with respect to any modification lowering the Loan Rate or effecting the
forgiveness of any amount owed under the Mortgage Note, or extending the final
maturity date on such Mortgage Loan, the Certificate Insurer has consented to
such modification and (z) such waiver, modification, postponement or indulgence
would not cause any REMIC to be disqualified or otherwise cause a tax to be
imposed on either REMIC) the Servicer may not permit any modification with
respect to any Mortgage Loan that would change the Loan Rate, defer or forgive
the payment of any principal or interest (unless in connection with the
liquidation of the related Mortgage Loan) or extend the final maturity date on
the Mortgage Loan. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Certificateholders, be added to the amount owing under the related Mortgage
Loan. Without limiting the generality of the foregoing, the Servicer shall
continue, and is hereby authorized and empowered to execute and deliver on
behalf of the Trustee and each Certificateholder, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments with respect to the Mortgage Loans and with respect
to the Mortgaged Properties. If reasonably required by the Servicer, 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 under this Agreement.
Notwithstanding anything to the contrary contained herein, the
Servicer, in servicing and administering the Mortgage Loans, shall employ or
cause to be employed procedures (including collection, foreclosure and REO
Property management procedures) and exercise the same care that it customarily
employs and exercises in servicing and administering mortgage loans for its own
account, in accordance with accepted mortgage servicing practices of prudent
lending institutions servicing mortgage loans similar to the Mortgage Loans and
giving due consideration to the Certificate Insurer's and the
Certificateholders' reliance on the Servicer.
(g) On and after such time as the Trustee receives the resignation of,
or notice of the removal of, the Servicer from its rights and obligations under
this Agreement, and with respect to resignation pursuant to Section 7.04, after
receipt by the Trustee and the Certificate Insurer of the Opinion of Counsel
required pursuant to Section 7.04, the Trustee or its designee approved by the
Certificate Insurer shall assume all of the rights and obligations of the
Servicer, subject to Section 8.02. The Servicer shall, upon request of the
Trustee but at the expense of the Servicer, deliver to the Trustee all documents
and records relating to the Mortgage Loans and an accounting of amounts
collected and held by the Servicer and otherwise use its best efforts to effect
the orderly and efficient transfer of servicing rights and obligations to the
assuming party.
(h) The Servicer shall deliver a list of Servicing Officers to the
Trustee and the Certificate Insurer on or before the Closing Date.
(i) Consistent with the terms of this Agreement, the Servicer may
consent to the placing of a lien senior to that of the Mortgage on the related
Mortgaged Property; provided that such senior lien secures a mortgage loan that
refinances a First Lien and the combined loan-to-value ratio of the related
Mortgage Loan immediately following the refinancing (based on the outstanding
principal balance of the Mortgage Loan and the original principal balance of
such refinanced mortgage loan) is not greater than the Combined Loan-to-Value
Ratio of such Mortgage Loan as of the related Cut-Off Date.
Section 3.02. Collection of Certain Mortgage Loan Payments. (a) The
Servicer shall make 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 such collection
procedures as it follows with respect to mortgage loans in its servicing
portfolio comparable to the Mortgage Loans. Consistent with the foregoing, and
without limiting the generality of the foregoing, the Servicer may in its
discretion (i) waive any prepayment penalty or late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided that such arrangement is
consistent with the Servicer's policies with respect to the mortgage loans it
owns or services; provided, further, that notwithstanding such arrangement such
Mortgage Loans will be included in the monthly information delivered by the
Servicer to the Trustee pursuant to Section 5.03.
(b) The Servicer shall establish and maintain a separate trust account
(the "Collection Account") titled "Bankers Trust Company of California, N.A., as
Trustee, in trust for the registered holders of Delta Funding Home Equity Loan
Asset Backed Certificates, Series 1997-1." The Collection Account shall be an
Eligible Account. The Servicer shall on the Closing Date deposit any amounts
representing payments on and any collections in respect of the Mortgage Loans
received after the related Cut-Off Date and prior to the Closing Date, and
thereafter shall use its best efforts to deposit within one Business Day, and
shall in any event deposit within two Business Days, following receipt thereof
the following payments and collections received or made by it (without
duplication):
(i) all payments received after the related Cut-Off Date on
account of principal on the Mortgage Loans and all Principal
Prepayments and Curtailments collected after the related Cut-Off Date;
(ii) all payments received after the related Cut-Off Date on
account of interest on the Mortgage Loans (exclusive of payments in
respect of interest on the Mortgage Loans which have accrued and were
due on or prior to March 15, 1997);
(iii) all Net Liquidation Proceeds net of Foreclosure Profits;
(iv) all Insurance Proceeds other than any portion thereof
constituting Net Liquidation Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant
to Sections 2.02, 2.04, 2.06 and 3.16; and
(vii) any amount required to be deposited in the Collection
Account pursuant to Sections 3.05, 3.06, 3.07, 5.02 or 5.05;
provided, however, that, with respect to each Due Period, the Servicer
shall be permitted to retain (x) from payments in respect of interest on a
Mortgage Loan, the Servicing Fee for such Mortgage Loan and (y) from payments
from Mortgagors, Liquidation Proceeds, Insurance Proceeds and Released Mortgaged
Property Proceeds, any unreimbursed Servicing Advances and Monthly Advances
related thereto. The foregoing requirements respecting deposits to the
Collection Account are exclusive, it being understood that, without limiting the
generality of the foregoing, the Servicer need not deposit in the Collection
Account amounts representing Servicing Compensation or amounts received by the
Servicer for the accounts of Mortgagors for application toward the payment of
taxes, insurance premiums, assessments and similar items.
The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Servicer or any of its Affiliates, if such
obligations otherwise qualify as Eligible Investments) pursuant to Section 5.05.
Section 3.03. Withdrawals from the Collection Account. The Servicer
shall withdraw or cause to be withdrawn funds from the Collection Account for
the following purposes:
(i) before 11:00 a.m. (New York city time) on the second Business
Day preceding each Distribution Date, to withdraw the portion of
Available Funds then in the Collection Account and remit such funds to
the Trustee for deposit to the Distribution Account;
(ii) to reimburse the Servicer for any accrued unpaid Servicing
Compensation which the Servicer would not have been required to
deposit in the Collection Account and for unreimbursed Monthly
Advances and Servicing Advances. The Servicer's right to reimbursement
for unpaid Servicing Fees and unreimbursed Servicing Advances shall be
limited to late collections on the related Mortgage Loan, including
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer
from the related Mortgagor or otherwise relating to the Mortgage Loan
in respect of which such reimbursed amounts are owed. The Servicer's
right to reimbursement for unreimbursed Monthly Advances shall be
limited to late collections of interest on any Mortgage Loan and to
Liquidation Proceeds, Released Mortgaged Property Proceeds and
Insurance Proceeds on related Mortgage Loans;
(iii) 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;
(iv) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein (such as Servicing
Compensation) or were deposited therein in error and to pay such funds
to the appropriate Person;
(v) to withdraw funds necessary for the conservation and
disposition of REO Property pursuant to Section 3.06 to the extent not
advanced by the Servicer;
(vi) to reimburse the Servicer for Nonrecoverable Advances that
are not, with respect to aggregate Servicing Advances on any single
Mortgage Loan or REO Property, in excess of the Principal Balance
thereof;
(vii) to pay to the Seller collections received in respect of
accrued interest on the Mortgage Loans due on or before March 15,
1997;
(viii) to pay to the Servicer, the Trustee or remit to the
Depositor the portion of any Purchase Price in respect of clause (iv)
of the definition thereof or of any Substitution Adjustment in respect
of clause (b) of the definition thereof to the extent paid in respect
of amounts incurred by or imposed on the Servicer or the Trustee, as
the case may be; and
(ix) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein
to the applicable Class R Certificate holders.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall cause to be maintained for each Mortgage Loan fire
and hazard insurance naming the Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (ii) the combined principal balance owing on such Mortgage Loan
and any mortgage loan senior to such Mortgage Loan and (iii) the minimum amount
required to compensate for damage or loss on a replacement cost basis. 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, (ii) the combined
principal balance owing on such Mortgage Loan and any mortgage loan senior to
such Mortgage Loan and (iii) the minimum amount required to compensate for
damage or loss on a replacement cost basis at the time of such foreclosure, fire
and or deed in lieu of foreclosure plus accrued interest and the good-faith
estimate of the Servicer of related Servicing Advances 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 called for by Section
3.02. In cases in which any Mortgaged Property is located in a federally
designated flood area, the hazard insurance to be maintained for the related
Mortgage Loan shall include flood insurance to the extent such flood insurance
is available and the Servicer has determined such insurance to be necessary in
accordance with accepted mortgage loan servicing standards for mortgage loans
similar to the Mortgage Loans. All such flood insurance shall be in amounts
equal to the least of (A) the amount in clause (i) above, (B) the amount in
clause (ii) above and (C) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended. The Servicer shall be under no
obligation to require that any Mortgagor maintain earthquake 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.
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy. In
the event that the Servicer shall obtain and maintain a blanket policy with an
insurer either (A) having a General Policy rating of A:VIII or better in Best's
Key Rating Guide or (B) approved by the Certificate Insurer, such approval not
to be unreasonable withheld, insuring against fire and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names the
Servicer as loss payee and provides coverage in an amount equal to the aggregate
unpaid principal balance on the Mortgage Loans without co-insurance, and
otherwise complies with the requirements of Section 3.04, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage under Section 3.04, it being understood and agreed
that such blanket policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property a policy complying with Section 3.04, and there shall
have been a loss which would have been covered by such policy, deposit in the
Collection Account the difference, if any, between the amount that would have
been payable under a policy complying with Section 3.04 and the amount paid
under such blanket policy. Upon the request of the Certificate Insurer or the
Trustee, the Servicer shall cause to be delivered to the Certificate Insurer or
the Trustee, as the case may be, a certified true copy of such policy. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Trustee, the Certificate Insurer and Certificateholders, claims under any such
policy in a timely fashion in accordance with the terms of such policy.
Section 3.06. Management and Realization Upon Defaulted Mortgage
Loans. The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders solely for the purpose of its prudent and
prompt disposition and sale. The Servicer shall, either itself or through an
agent selected by the Servicer, manage, conserve, protect and operate the REO
Property in the same manner that it manages, conserves, protects and operates
other foreclosed property for its own account, and in the same manner that
similar property in the same locality as the REO Property is managed. The
Servicer shall attempt to sell the same (and may temporarily rent the same) on
such terms and conditions as the Servicer deems to be in the best interest of
the Certificate Insurer and the Certificateholders.
The Servicer shall cause to be deposited, no later than two Business
Days after the receipt thereof, in the Collection Account, all revenues received
with respect to the related REO Property and shall retain, or cause the Trustee
to withdraw therefrom, funds necessary for the proper operation, management and
maintenance of the REO Property and the fees of any managing agent acting on
behalf of the Servicer.
The disposition of REO Property shall be carried out by the Servicer
for cash at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Certificateholders and, as soon as
practicable thereafter, the expenses of such sale shall be paid. The cash
proceeds of sale of the REO Property shall be promptly deposited in the
Collection Account, net of Foreclosure Profits and of any related unreimbursed
Servicing Advances, accrued and unpaid Servicing Fees and unreimbursed Monthly
Advances payable to the Servicer in accordance with Section 3.03, for
distribution to the Certificateholders in accordance with Section 5.01.
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 either when no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.02 subject to the
provisions contained in the last paragraph of this Section 3.06.
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
and the Certificate Insurer.
In the event any Mortgaged Property is acquired as aforesaid or
otherwise in connection with a default or imminent default on a Mortgage Loan,
the Servicer shall (i) dispose of such Mortgaged Property within two years after
its acquisition or (ii) prior to the expiration of any extension to such
two-year grace period which is requested on behalf of the Trust by the Servicer
(at the expense of the Trust) more than 60 days prior to the end of such
two-year grace period and granted by the Internal Revenue Service, unless the
Servicer shall have received an Opinion of Counsel to the effect that the
holding of such Mortgaged Property subsequent to two years after its acquisition
will not result in the imposition of taxes on "prohibited transactions" as
defined in Section 860F of the Code or cause any REMIC to fail to qualify as a
REMIC at any time that any Class A Certificates are outstanding. Notwithstanding
any other provision of this Agreement, (i) no Mortgaged Property acquired by the
Servicer pursuant to this Section 3.06 shall be rented (or allowed to continue
to be rented) or otherwise used for the production of income by or on behalf of
the Trust and (ii) no construction shall take place on such Mortgaged Property
in such a manner or pursuant to any terms, in either case, that would cause such
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the Trust
of any "net income from foreclosure property" which is subject to taxation
within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code. If a period
greater than two years is permitted under this Agreement and is necessary to
sell any REO Property, the Servicer shall give appropriate notice to the Trustee
and the Certificate Insurer and shall report monthly to the Trustee as to the
progress being made in selling such REO Property.
If the Servicer has actual knowledge that a Mortgaged Property which
the Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a one-mile radius of any site with environmental
or hazardous waste risks known to the Servicer, the Servicer will notify the
Certificate Insurer prior to acquiring the Mortgaged Property and shall not take
any action without prior written approval to the Certificate Insurer. Nothing in
this Section 3.06 shall affect the Servicer's right to deem certain advances
proposed to be made Nonrecoverable Advances. For the purpose of this Section
3.06, actual knowledge of the Servicer means actual knowledge of a Responsible
Officer of the Servicer involved in the servicing of the relevant Mortgage Loan.
Actual knowledge of the Servicer does not include knowledge imputable by virtue
of the availability of or accessibility to information relating to environmental
or hazardous waste sites or the locations thereof.
Section 3.07. Trustee to Cooperate. Upon any Principal Prepayment, the
Servicer is authorized to execute, pursuant to the authorization contained in
Section 3.01(f), if the related Assignment of Mortgage has been recorded as
required hereunder, 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
is understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or transfer shall be reimbursed from amounts
deposited in the Collection Account. If the Trustee is holding the Mortgage
Files, 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 Request for Release, in the form annexed hereto as Exhibit
I, signed by a Servicing Officer, release the related Mortgage File to the
Servicer, and the Trustee shall execute such documents, in the forms provided by
the Servicer, as shall be necessary for the prosecution of any such proceedings
or the taking of other servicing actions. Such Request for Release shall
obligate the Servicer to return the Mortgage File to the Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to that hereinabove specified, the Request for Release shall be released
by the Trustee to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the related Assignment
of Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Mortgage Loan for
the purpose of collection to the Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only) and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Mortgage Loan and deposit or credit the Net Liquidation Proceeds, exclusive
of Foreclosure Profits, received with respect thereto in the Collection Account.
In the event that all delinquent payments due under any such Mortgage Loan are
paid by the Mortgagor and any other defaults are cured then the assignee for
collection shall promptly reassign such Mortgage Loan to the Trustee and return
it to the place where the related Mortgage File was being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Servicer. Subject to Section 5.02, the Servicer shall be entitled to retain the
Servicing Fee in accordance with Section 3.02 as compensation for its services
in connection with servicing the Mortgage Loans. Moreover, additional servicing
compensation in the form of prepayment penalties or late payment charges or
other receipts not required to be deposited in the Collection Account,
including, without limitation, Foreclosure Profits and, subject to Section 5.05,
investment income on the Accounts (other than the Initial Interest Coverage
Account) 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 other fees and expenses not expressly stated hereunder
to be for the account of the Trust or the Certificateholders) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
Section 3.09. Annual Statement as to Compliance. (a) The Servicer will
deliver to the Trustee, the Certificate Insurer and the Rating Agencies, on or
before the last Business Day of the fifth month following the end of the
Servicer's fiscal year (December 31), beginning in 1998, an Officer's
Certificate stating that (i) a review of the activities of the Servicer during
the preceding fiscal year and of its performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its material
obligations under this Agreement throughout such fiscal year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. The Servicer
shall promptly notify the Certificate Insurer, , the Trustee, S&P and Moody's
upon any change in the basis on which its fiscal year is determined.
(b) The Servicer shall deliver to the Trustee, the Certificate Insurer
and each of the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice by means of an Officer's Certificate of any event which, with the giving
of notice or the lapse of time or both, would become an Event of Default.
Section 3.10. Annual Servicing. Not later than the last Business Day
of the fifth month following the end of the Servicer's fiscal year (December
31), beginning in 1998, the Servicer, at its expense, shall cause a firm of
independent public accountants reasonably acceptable to the Trustee and the
Certificate Insurer to furnish a letter or letters to the Certificate Insurer,
the Trustee, S&P and Moody's to the effect that such firm has, with respect to
the Servicer's overall servicing operations, examined such operations in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.
Section 3.11. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Servicer shall provide to the Trustee, the
Certificate Insurer, Certificateholders which are federally insured savings and
loan associations, the Office of Thrift Supervision, the FDIC and the
supervisory agents and examiners of the Office of Thrift Supervision access to
the documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision and the FDIC (acting as operator
of the SAIF or the BIF), such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer. Nothing in this Section 3.11 shall derogate from the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of the Servicer to provide access as
provided in this Section 3.11 as a result of such obligation shall not
constitute a breach of this Section 3.11.
Section 3.12. Maintenance of Certain Servicing Insurance Policies. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall, together, comply with the requirements from time to time of FNMA for
persons performing servicing for mortgage loans purchased by FNMA.
Section 3.13. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller and the Servicer shall cooperate with
the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section 3.13.
Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged
Properties, Returns Relating to Mortgage Interest Received from Individuals and
Returns Relating to Cancellation of Indebtedness. The Servicer shall make
reports of foreclosures and abandonments of any Mortgaged Property for each year
beginning in 1996. The Servicer shall file reports relating to each instance
occurring during the previous calendar year in which the Servicer (i) on behalf
of the Trustee acquires an interest in any Mortgaged Property through
foreclosure or other comparable conversion in full or partial satisfaction of a
Mortgage Loan or (ii) knows or has reason to know that any Mortgaged Property
has been abandoned. The reports from the Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Sections 6050J, 6050H
and 6050P of the Code.
Section 3.15. Advances by the Servicer. (a) Not later than 12:00 noon
California time on the Determination Date, the Servicer shall remit to the
Trustee for deposit in the Distribution Account an amount to be distributed on
the related Distribution Date pursuant to Section 5.01, equal to the interest
accrued on each Mortgage Loan through the related Due Date, but not received as
of the close of business on the last day of the related Due Period (net of the
Servicing Fee); such amount being defined herein as the "Monthly Advance." With
respect to any Balloon Loan that is delinquent on its maturity date, the
Servicer will continue to make Monthly Advances with respect to such Balloon
Loan in an amount equal to one month's interest on the unpaid principal balance
at the applicable Loan Rate (net of the Servicing Fee) according to the original
amortization schedule for such Mortgage Loan. The obligation to make Monthly
Advances with respect to each Mortgage Loan shall continue until such Mortgage
Loan becomes a Liquidated Mortgage Loan.
(b) Notwithstanding anything herein to the contrary, no Servicing
Advance or Monthly Advance shall be required to be made hereunder if the
Servicer determines that such Servicing Advance or Monthly Advance would, if
made, constitute a Nonrecoverable Advance.
Section 3.16. Optional Purchase of Defaulted Mortgage Loans. The
Servicer, in its sole discretion, shall have the right to elect (by written
notice sent to the Trustee and the Certificate Insurer) to purchase for its own
account from the Trust any Mortgage Loan which is 90 days or more Delinquent in
the manner and at the price specified in Section 2.02. 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 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 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, the Certificate Insurer or the
Certificateholders with respect thereto.
Notwithstanding the foregoing, unless the Certificate Insurer
consents, the Servicer may only exercise its option pursuant to this Section
3.16 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 Servicer 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 which the Servicer proposes to repurchase. If the Certificate
Insurer fails to respond to such request within 10 Business Days after receipt
thereof, the Servicer may repurchase the Mortgage Loan or Mortgage Loans
proposed to be repurchased without the consent of, or any further action by, the
Certificate Insurer.
Section 3.17. Superior Liens. The Servicer shall file (or cause to be
filed) a request for notice of any action by a superior lienholder under a First
Lien for the protection of the Trustee's interest, where permitted by local law
and whenever applicable state law does not require that a junior lienholder be
named as a party defendant in foreclosure proceedings in order to foreclose such
junior lienholder's equity of redemption.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the First Lien,
or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust, whatever actions are necessary to protect the interests of
the Certificateholders and the Certificate Insurer, and/or to preserve the
security of the related Mortgage Loan, subject to the application of the REMIC
Provisions in accordance with the terms of this Agreement. The Servicer shall
immediately notify the Trustee and the Certificate Insurer of any such action or
circumstances. The Servicer shall advance the necessary funds to cure the
default or reinstate the superior lien, if such advance is in the best interests
of the Certificate Insurer and the Certificateholders in accordance with the
servicing standards in Section 3.01. The Servicer shall not make such an advance
except to the extent that it determines in its reasonable good faith judgment
that the advance would be recoverable from Liquidation Proceeds on the related
Mortgage Loan and in no event in an amount that is greater than the Principal
Balance of the related Mortgage Loan, except with the consent of the Certificate
Insurer, which consent shall not be unreasonably withheld. The Servicer shall
thereafter take such action as is necessary to recover the amount so advanced.
Section 3.18. Assumption Agreements. When a Mortgaged Property has
been or is about to be conveyed by the Mortgagor, the Servicer shall, to the
extent it has knowledge of such conveyance or prospective conveyance, exercise
its right to accelerate the maturity of the related Mortgage Loan under any
"due-on-sale" clause contained in the related Mortgage or Mortgage Note;
provided, however, that the Servicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of the Servicer, is not
enforceable under applicable law. In such event, the Servicer shall enter into
an assumption and modification agreement with the person to whom such property
has been or is about to be conveyed, pursuant to which such person shall become
liable under the Mortgage Note and, unless prohibited by applicable law, the
Mortgagor shall remain liable thereon. The Servicer, in accordance with accepted
mortgage loan servicing standards for mortgage loans similar to the Mortgage
Loans, is also authorized to enter into a substitution of liability whereby such
person is substituted as mortgagor and becomes liable under the Mortgage Note.
The Servicer shall notify the Trustee and the Certificate Insurer that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original of such substitution or assumption agreement and a
duplicate thereof to the Certificate Insurer, which original shall be added by
the Trustee to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. In connection with any
assumption or substitution agreement entered into pursuant to this Section 3.18,
the Servicer shall not change the Loan Rate or the Monthly Payment, defer or
forgive the payment of principal or interest, reduce the outstanding principal
amount or extend the final maturity date on such Mortgage Loan.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 3.19. Payment of Taxes, Insurance and Other Charges. With
respect to each Mortgage Loan, the Servicer shall maintain accurate records
reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges which
are or may become a lien upon the Mortgaged Property and the status of primary
mortgage guaranty insurance premiums, if any, and fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such
charges (including renewal premiums) and shall effect payment thereof prior to
the applicable penalty or termination date and at a time appropriate for
securing maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in any escrow account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage. To the extent that a Mortgage does not provide for escrow
payments, the Servicer shall, if it has received notice of a default or
deficiency, monitor such payments to determine if they are made by the
Mortgagor.
<PAGE>
ARTICLE IV
Certificate Insurance Policy and
Initial Interest Coverage Account
Section 4.01. Certificate Insurance Policy. As soon as possible, and
in no event later than 3:00 p.m., New York time, on the third Business Day
immediately preceding each Distribution Date, the Trustee shall determine the
amount of Available Funds for such Distribution Date minus the amount of any
Premium Amount and any Trustee Fee to be paid on such Distribution Date.
If for any Distribution Date a Deficiency Amount exists, the Trustee
shall complete a notice in the form set forth as Exhibit A to the Certificate
Insurance Policy (the "Notice") and shall submit such Notice to the Fiscal Agent
no later than 12:00 noon, New York time, on the second Business Day preceding
such Distribution Date. The Notice shall constitute a claim for an Insured
Payment pursuant to the Certificate Insurance Policy for an amount equal to such
excess. Upon receipt of the Insured Payment, at or prior to the latest time
payments of the Insured Payment are to be made by the Certificate Insurer
pursuant to the Certificate Insurance Policy, on behalf of the Senior
Certificateholders, the Trustee shall deposit such Insured Payments in the
Distribution Account and shall distribute such Insured Payments only in
accordance with respect to the Group 1 Certificates, Sections 5.01(a)(i)(2) and
(3) and, with respect to the Group 2 Certificates, 5.01(a)(ii)(2) and (3).
The Trustee shall receive, as attorney-in-fact of each Holder of a
Senior Certificate, any Insured Payment from the Certificate Insurer and
disburse the same to each Holder of a Senior Certificate in accordance with the
provisions of Article V. Insured Payments disbursed by the Trustee from proceeds
of the Certificate Insurance Policy shall not be considered payment by the Trust
nor shall such payments discharge the obligation of the Trust with respect to
such Senior Certificate, and the Certificate Insurer shall become the owner of
such unpaid amounts due from the Trust in respect of such Insured Payments as
the deemed assignee of such Holder and shall be entitled to receive the
Reimbursement Amount pursuant to Sections 5.01(a)(i)(4), 5.01(a)(ii)(4) and
5.01(a)(vi)(4). The Trustee hereby agrees on behalf of each Holder of a Senior
Certificate for the benefit of the Certificate Insurer that it and they
recognize that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Senior
Certificateholders, the Certificate Insurer will be entitled to receive the
Reimbursement Amount pursuant to Sections 5.01(a)(i)(4), 5.01(a)(ii)(4) and
5.01(a)(vi)(4).
It is understood and agreed that the intention of the parties is that
the Certificate Insurer shall not be entitled to reimbursement on any
Distribution Date for amounts previously paid by it unless on such Distribution
Date the Senior Certificateholders shall also have received the full amount of
the Insured Payment for such Distribution Date.
Section 4.02. Initial Interest Coverage Account and Funding Account.
(a) The Trustee has heretofore established or caused to be established and shall
hereafter maintain or cause to be maintained a separate account denominated a
Initial Interest Coverage Account, which is and shall continue to be an Eligible
Account in the name of the Trustee and shall be designated "Bankers Trust
Company of California, N.A., as Trustee of the Delta Funding Home Equity Loan
Trust Series 1997-1 Initial Interest Coverage Account". The Initial Interest
Coverage Account shall be treated as an "outside reserve fund" under applicable
Treasury regulations and will not be part of any REMIC. Any investment earnings
on the Initial Interest Coverage Account will be treated as owned by the Seller
and will be taxable to the Seller. The amount on deposit in the Initial Interest
Coverage Account shall be invested in Eligible Investments in accordance with
the provisions of Section 5.05.
The Trustee has heretofore established or caused to be established and
shall hereafter maintain or cause to be maintained a separate account
denominated a Funding Account, which is and shall continue to be an Eligible
Account in the name of the Trustee and shall be designated "Bankers Trust
Company of California, N.A., as Trustee of the Delta Funding Home Equity Loan
Trust Series 1997-1 Funding Account". The Funding Account shall be treated as an
"outside reserve fund" under applicable Treasury regulations and will not be
part of any REMIC. Any investment earnings on the Funding Account will be
deposited into the Initial Interest Coverage Account on the first Distribution
Date and treated as owned by the Seller and will be taxable to the Seller. The
amount on deposit in the Funding Account shall be invested in Eligible
Investments in accordance with the provisions of Section 5.05.
(b) On the Closing Date, the Seller will cause to be deposited in the
Initial Interest Coverage Account the amount of $0 from the sale of the Class A
Certificates. On the Closing Date, the Seller will cause to be deposited in the
Funding Account the amount of $1,910.85 and $985.62 from the sale of the
Class A Certificates, in respect of Certificate Group 1 and Certificate Group 2,
respectively.
(c) On the Business Day prior to the initial Distribution Date, the
Trustee shall transfer from the Initial Interest Coverage Account to the
Distribution Account the Capitalized Interest Requirement, if any, for such
Distribution Date. On the Business Day prior to the initial Distribution Date,
the Trustee shall transfer from the Funding Account to the Distribution Account
the amounts on deposit therein (exclusive of if any, reinvestment earnings
thereon) for such Distribution Date.
(d) The Initial Interest Coverage Account and Funding Account shall be
closed on the initial Distribution Date after the transfer referred to in clause
(c) above. All amounts, if any, remaining in the Initial Interest Coverage
Account and Funding Account on such day after the transfer referred to in clause
(c) above shall be paid to the Seller.
Section 4.03. Claims Upon the Certificate Insurance Policy (a) The
Trustee shall comply with the provisions of the Certificate Insurance Policy
with respect to claims upon the Certificate Insurance Policy.
(b) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Senior 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 written notice to the Trustee.
(c) 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 the Bankruptcy Code (a "Preference Claim") of any distribution
made with respect to the Senior Certificates. Each Certificateholder of Senior
Certificates, by its purchase of Senior Certificates, the Servicer and the
Trustee hereby agree that the Certificate Insurer (so long as no Certificate
Insurer Default exists) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including, without limitation, (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal.
<PAGE>
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. (a) On each Distribution Date, the
Trustee shall withdraw from the Distribution Account the Amount Available and
make distributions thereof as described below:
(i) With respect to the Group 1 Certificates, the Available Funds
with respect to the Group 1 Certificates in the following order of
priority:
(1) to the Trustee, the Trustee Fee for Loan Group 1 for
such Distribution Date and to the Certificate Insurer, the
Premium Amount for the Group 1 Certificates for such Distribution
Date;
(2) concurrently to the Holders of the Class S, Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates, an amount equal to the respective Class Interest
Distribution for such Distribution Date;
(3) (A) to the Holders of the Class A-6 Certificates, the
product of (x) the applicable Priority Percentage and (y) the
Pro-Rata Percentage of the related Class A Principal Distribution
until the Class Principal Balance of such Class is reduced to
zero; and (B) sequentially, to the Holders of the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates, in that order, until the related Class Principal
Balance of each such Class is reduced to zero, the remaining
related Class A Principal Distribution; and
(4) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for
reimbursement for draws made on the Policy in respect of the
Group 1 Certificates.
(ii) With respect to the Group 2 Certificates, the Available
Funds with respect to the Group 2 Certificates in the following order
of priority:
(1) to the Trustee, the Trustee Fee for Loan Group 2 for
such Distribution Date and to the Certificate Insurer, the
Premium Amount for the Group 2 Certificates for such Distribution
Date;
(2) to the Holders of the Class A-7 Certificates, the Class
Interest Distribution for such Distribution Date;
(3) to the Holders of the Class A-7 Certificates, the
related Class A Principal Distribution, until the Class Principal
Balance thereof is reduced to zero; and
(4) to the Certificate Insurer, the amount owing to the
Certificate Insurer under the Insurance Agreement for
reimbursement for draws made on the Policy in respect of the
Group 2 Certificates;
(iii) To the extent Available Funds for a Certificate Group are
insufficient to make the distributions specified above pursuant to
(1)-(4) of the applicable subclause, Available Funds for the other
Certificate Group, if any, remaining after making the distributions
required to be made pursuant to (1)-(4) of the applicable subclause
for such other Certificate Group shall be distributed to the extent of
such insufficiency in accordance with the priorities for distribution
set forth above for the Certificate Group experiencing such
insufficiency.
(iv) To the extent of the related Available Funds remaining, the
related Distributable Excess Spread for such Distribution Date (A) to
the Holders of the Class A-6 Certificates, the product of (x) the
applicable Priority Percentage and (y) the Pro-Rata Percentage of such
related Distributable Excess Spread, until the Class Principal Balance
of such Class is reduced to zero; and (B) sequentially, to the Holders
of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class
A-6 Certificates, in that order, until the related Class Principal
Balance of each such Class is reduced to zero;
(v) To the Holders of the Class A-7 Certificates, to the extent
of the related Available Funds remaining, the related Distributable
Excess Spread for such Distribution Date, until the Class Principal
Balance thereof is reduced to zero.
(vi) After making the distributions referred to in
clauses (i) through (v) above, the Trustee shall make
distributions in the following order of priority, to the
extent of the balance of the Amount Available:
(1) (a) the excess of the related Distributable Excess
Spread for such Distribution Date over the amount distributed to
the Group 1 Certificateholders pursuant to subsection (iv) above
(a) (I) to the Holders of the Class A-6 Certificates the product
of (x) the applicable Priority Percentage and (y) the Pro- Rata
Percentage of such excess, until the Class Principal Balance of
such Class is reduced to zero; and (II) sequentially, to the
Holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5 and Class A- 6 Certificates, in that order, until the related
Class Principal Balance of each such Class is reduced to zero,
and (b) to the Class A-7 Certificateholders, until the Class
Principal Balance thereof is reduced to zero, the excess of the
related Distributable Excess Spread for such Distribution Date
over the amount distributed to the Class A-7 Certificateholders
pursuant to subsection (v) above;
(2) to the Servicer, the amount of any accrued
and unpaid Servicing Fee;
(3) to the Servicer, the amount of Nonrecoverable Advances
not previously reimbursed and any amounts reimbursable to the
Servicer pursuant to Section 7.03 hereof;
(4) to the Certificate Insurer, any Reimbursement Amount;
(5) to the Holders of the Class A-7 Certificates, any Class
A-7 Basis Risk Carryover Amount but only from and to the extent
of Excess Spread from Certificate Group 2; and
(6) to the Class R Certificateholders, the balance, if any.
On any Distribution Date as to which a Certificate Insurer Default has
occurred and is continuing the amount to be distributed on the Group 1
Certificates pursuant to clauses (a)(i)(3), (a)(iv) and (a)(vi)(1) above shall
be distributed pro rata on each such Class of Group 1 Certificates based on the
Class Principal Balance of each such Class immediately prior to such
Distribution Date.
(b) Distribution of Insured Payments. With respect to any Distribution
Date, in the event of an Insured Payment, the Trustee shall make such payments
from the amount drawn under the Certificate Insurance Policy for such
Distribution Date pursuant to Section 4.01. Any Insured Payment not required to
make distributions pursuant to clauses (i)(2), (i)(3), (ii)(2) and (ii)(3), of
Section 5.01(a) shall be returned to the Certificate Insurer.
(c) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.01 respecting the
final distribution), in the case of Class A Certificateholders, by check or
money order mailed to such Certificateholder at the address appearing in the
Certificate Register, or, upon written request by a Class A Certificateholder
delivered to the Trustee at least five Business Days prior to such Record Date,
by wire transfer (but only if such Class A Certificateholder is the Depository
or such Class A Certificateholder owns of record one or more Class A
Certificates aggregating at least $1,000,000 Original Class Certificate
Principal Balance), and, in the case of Holders of Class S or Residual
Certificates, by wire transfer. Distributions among Certificateholders shall be
made in proportion to the Percentage Interests evidenced by the Certificates
held by such Certificateholders.
(d) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners 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 Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor, the Servicer or the Seller shall have any responsibility therefor
except as otherwise provided by applicable law.
(e) Distributions from REMIC I and REMIC II. On each Distribution
Date, the funds available for distribution shall be applied to distributions on
the REMIC I Regular Interests in an amount sufficient to make the distributions
on the respective Corresponding Classes of Certificates on such Distribution
Date in accordance with the provisions of Section 2.07.
Section 5.02. Compensating Interest. Not later than the Determination
Date, the Servicer shall remit to the Trustee for deposit to the Collection
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 Servicing Fees
received in the related Due Period. The Servicer shall not have the right to
reimbursement for any amounts deposited to the Collection Account pursuant to
this Section 5.02.
Section 5.03. Statements. (a) Not later than 12:00 noon, California
time, on the fifth Business Day prior to each Distribution Date, the Servicer
shall deliver to the Trustee by electronic modem a computer file containing the
information called for by clauses (i) through (xxi) below as of the end of the
preceding Due Period and such other information as the Trustee shall reasonably
require. Not later than 12:00 noon, California time, on each Determination Date,
the Trustee shall deliver to the Servicer, the Depositor and to the Certificate
Insurer, by telecopy, with a hard copy thereof to be delivered on the succeeding
Distribution Date, a confirmation of the items in clause (i) below. Not later
than one Business Day prior to each Distribution Date the Trustee shall deliver
a statement (the "Trustee's Remittance Report") containing the information set
forth below with respect to such Distribution Date, which information shall be
based upon the information furnished by the Servicer upon which the Trustee
shall conclusively rely without independent verification or calculation thereof:
(i) The Available Funds for each Certificate Group and each
Class's Certificate Rate for the related Distribution Date;
(ii) The Class Principal Balance of each Class of Class A
Certificates and the Aggregate Class A Principal Balance for each
Certificate Group as reported in the prior Trustee's Remittance Report
pursuant to subclause (xi) below, or, in the case of the first
Determination Date, the Original Class Principal Balance of each Class
and the Cut-Off Date Pool Principal Balance;
(iii) The number and Principal Balances of all Mortgage Loans
that were the subject of Principal Prepayments during the Due Period;
(iv) The amount of all Curtailments that were received during the
Due Period;
(v) The principal portion of all Monthly Payments received during
the Due Period;
(vi) The interest portion of all Monthly Payments received on the
Mortgage Loans during the Due Period;
(vii) The amount of the Monthly Advances and the Compensating
Interest payment to be made on the Determination Date;
(viii) The Class A Principal Distribution, the portion
thereof to be distributed on each Class of Class A
Certificates then entitled to distributions of principal, and
the Class Interest Distribution to be distributed on each
Class of Senior Certificates.
(ix) The amount of the Insured Payments, if any, to be made on
the Distribution Date;
(x) The amount to be distributed to the Class R
Certificateholders for the Distribution Date;
(xi) The Class Principal Balance of each Class of Class A
Certificates and the Group Certificate Principal Balance for each
Certificate Group after giving effect to the distribution to be made
on the Distribution Date;
(xii) The weighted average remaining term to maturity of the
Mortgage Loans and the weighted average Loan Rate;
(xiii) The Servicing Fee and the Premium Amount and Reimbursement
Amount to be paid to the Certificate Insurer pursuant to Section 5.01;
(xiv) The amount of all payments or reimbursements to the
Servicer pursuant to Sections 3.03(ii) and (vi);
(xv) The O/C Amount and the Specified O/C Amount for such
Distribution Date;
(xvi) The amounts which are reimbursable to the Servicer or the
Seller, as appropriate, pursuant to Section 5.01(a)(vi)(3) and the
amount paid to Class R Certificateholders pursuant to Section
5.01(a)(vi)(7);
(xvii) The number of Mortgage Loans outstanding at the beginning
and at the end of the related Due Period;
(xviii) The amount of Liquidation Loan Losses experienced during
the preceding Due Period and the Loan Losses and the Cumulative Net
Losses as a percentage of the Cut-Off Date Pool Principal Balance;
(xix) As of the end of the preceding calendar month, the number
and Principal Balance of Mortgage Loans which are 30- 59 days
delinquent; the number and Principal Balance of Mortgage Loans which
are 60-89 days delinquent; the number and Principal Balance of
Mortgage Loans which are more than 90 days delinquent; the number and
Principal Balance of Mortgage Loans which are in foreclosure; and the
number and Principal Balance of Mortgage Loans which are REO Property;
(xx) The amount of Class A-7 Basis Risk Carryover Amount
distributed on such Distribution Date and any remaining Class A-7
Basis Risk Carryover Amount; and
(xxi) The Certificate Rates for the Class A-7 and Class S
Certificates for such Distribution Date and the Class A-7 Formula Rate
for the related and the following Interest Period.
The Trustee shall forward such report to the Servicer, the Depositor,
the Certificate Insurer, the Certificateholders, the Rating Agencies, Bloomberg
(at 499 Park Avenue, New York, New York 10022, Attention: Mike Geller) and Intex
Solutions (at 35 highland Circle, Needham, Massachusetts 02144, Attention:
Harold Brennman) on the Distribution Date; provided, however that the Trustee
shall remove the Premium Amount to be paid the Certificate Insurer from clause
(xiii) of such report prior to submission of the report to Bloomberg and Intex
Solutions. The Trustee may fully rely upon and shall have no liability with
respect to information provided by the Servicer. The Servicer shall calculate
all items in clauses (i) - (xxi) above.
To the extent that there are inconsistencies between the telecopy of
the Trustee's Remittance Report and the hard copy thereof, the Servicer may rely
upon the latter.
In the case of information furnished pursuant to subclauses (ii), (xi)
and (xvi) above, the amounts shall be expressed in a separate section of the
report as a dollar amount for each Class for each $1,000 original dollar amount
as of the related Cut-Off Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Senior Certificate, if requested in writing by
such Person, such information as is reasonably necessary to provide to such
Person a statement containing the information set forth in subclauses (vii) and
(xiii) above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished by the Trustee to
Certificateholders pursuant to any requirements of the Code as are in force from
time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class
R Certificateholders a copy of the reports forwarded to the Holders of the
Senior Certificates in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Class R Certificateholders on such
Distribution Date together with such other information as the Trustee deems
necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Class R Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class R Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
(e) The Servicer and the Trustee shall furnish to each
Certificateholder and to the Certificate Insurer (if requested in writing),
during the term of this Agreement, such periodic, special or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable or appropriate with respect to the Certificateholder or the
Certificate Insurer, as the case may be, or otherwise with respect to the
purposes of this Agreement, all such reports or information to be provided by
and in accordance with such applicable instructions and directions (if requested
in writing) as the Certificateholder or the Certificate Insurer, as the case may
be, may reasonably require; provided that the Servicer and the Trustee shall be
entitled to be reimbursed by such Certificateholder or the Certificate Insurer,
as the case may be, for their respective fees and actual expenses associated
with providing such reports, if such reports are not generally produced in the
ordinary course of their respective businesses or readily obtainable.
(f) Reports and computer diskettes or files furnished by the Servicer
pursuant to this Agreement shall be deemed confidential and of a proprietary
nature, and shall not be copied or distributed except to the extent required by
law or for the internal use of the Certificate Insurer and its counsel or to the
Rating Agencies, the Certificate Insurer's reinsurers, parent, regulators,
liquidity providers and auditors, provided that the Certificate Insurer shall
attempt in good faith to cause such additional Persons to acknowledge in writing
the foregoing restrictions, and in connection with the purposes and requirements
of this Agreement. No Person entitled to receive copies of such reports or
diskettes or files or lists of Certificateholders shall use the information
therein for the purpose of soliciting the customers of the Seller or for any
other purpose except as set forth in this Agreement.
Section 5.04. Distribution Account. The Trustee shall establish with
Bankers Trust Company of California, N.A., a separate trust account (the
"Distribution Account") titled "Bankers Trust Company of California, N.A., as
Trustee, in trust for the registered holders of Delta Funding Home Equity Loan
Asset-Backed Certificates, Series 1997-1." The Distribution Account shall be an
Eligible Account. The Trustee shall deposit any amounts representing payments on
and any collections in respect of the Mortgage Loans received by it immediately
following receipt thereof, including, without limitation, all amounts withdrawn
by the Servicer from the Collection Account pursuant to Section 3.03 for deposit
to the Distribution Account. Amounts on deposit in the Distribution Account may
be invested in Eligible Investments pursuant to Section 5.05.
Section 5.05. 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 held by the Trustee
shall be invested and reinvested by the Trustee, as directed in writing by the
Servicer, in one or more Eligible 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 Eligible Investments described in paragraph (vi) of the definition
of Eligible Investments. No such investment in any Account shall mature later
than the Business Day immediately preceding the next Distribution Date (except
that (i) if such Eligible Investment is an obligation of the Trustee, then such
Eligible Investment shall mature not later than such Distribution Date and (ii)
any other date may be approved by the Rating Agencies and the Certificate
Insurer).
(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
liable for any investment loss or other charge resulting therefrom unless the
Trustee's failure to perform in accordance with this Section 5.05 is the cause
of such loss or charge.
(c) Subject to Section 9.01, 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 Eligible 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 5.05).
(d) The Trustee shall invest and reinvest funds in the Accounts held
by the Trustee, to the fullest extent practicable, in such manner as the
Servicer shall from time to time direct as set forth in Section 5.05(a), but
only in one or more Eligible Investments.
(e) 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 the Collection Account and the Distribution
Account shall be for the benefit of the Servicer as servicing compensation (in
addition to the Servicing Fee), and shall be subject to withdrawal on or before
the first Business Day of the month following the month in which such income or
gain is received. The Servicer shall deposit in the Collection Account, the
Distribution Account or the Initial Interest Coverage Account, as the case may
be, the amount of any loss incurred in respect of any Eligible Investment held
therein which is in excess of the income and gain thereon immediately upon
realization of such loss, without any right to reimbursement therefore from its
own funds.
<PAGE>
ARTICLE VI
The Certificates
Section 6.01. The Certificates. Each of the Class A Certificates, the
Residual Certificates and Class S Certificates shall be substantially in the
forms set forth in Exhibits A, B and B-1, respectively, and shall, on original
issue, be executed, authenticated and delivered by the Trustee to or upon the
order of the Seller concurrently with the sale and assignment to the Trustee of
the Trust. Each Class of Class A Certificates shall be initially evidenced by
one or more certificates representing a fraction of the Original Class A
Certificate Principal Balance and shall be held in minimum dollar denominations
of $25,000 and integral multiples of $1,000 in excess thereof, except that one
of each of the Class A Certificate may be in a different denomination so that
the sum of the denominations of all outstanding Class A Certificates shall equal
the Original Class A Certificate Principal Balance. The Class S and Residual
Certificates shall be held in minimum Percentage Interests of 20%.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by a Responsible Officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust, notwithstanding that such individuals or any of them 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 such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to Section
6.02(c), the Class A Certificates shall be Book-Entry Certificates. The Class S
and Residual Certificates shall not be Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at the Corporate Trust
Office 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 Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, and, in the case of a Class S or Residual
Certificate, upon satisfaction of the conditions set forth below, the Trustee on
behalf of the Trust shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute and authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of transfer
or exchange shall (if so required by the Trustee or the Certificate Registrar)
be duly endorsed by, or be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by,
the Holder thereof or his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of such Certificates may not
be transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository as representative of the Certificate Owners of the Certificates for
purposes of exercising the rights of Holders under this Agreement, and requests
and directions for and votes of such representative shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall
be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificate Owners that it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures. The parties hereto
are hereby authorized to execute a Letter of Representations with the Depository
or take such other action as may be necessary or desirable to register a
Book-Entry Certificate to the Depository. In the event of any conflict between
the terms of any such Letter of Representation and this Agreement the terms of
this Agreement shall control.
(c) If (i)(x) the Depository or the Seller advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository and (y) the Trustee or the Seller is unable
to locate a qualified successor, (ii) the Seller, at its sole option, with the
consent of the Trustee, elects to terminate the book-entry system through the
Depository or (iii) after the occurrence of an Event of Default, the Certificate
Owners of each Class of Class A Certificates representing Percentage Interests
aggregating not less than 51% advises the Trustee and Depository through the
Financial Intermediaries and the Depository Participants in writing that the
continuation of a book-entry system through the Depository to the exclusion of
definitive, fully registered certificates (the "Definitive Certificates") to
Certificate Owners is no longer in the best interests of the Certificate Owners.
Upon surrender to the Certificate Registrar of each Class of Class A
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration, the Trustee shall at the Depositor's expense,
in the case of (i) and (ii) above, or the Seller's expense, in the case of (iii)
above, execute and authenticate the Definitive Certificates. Neither the Seller
nor the Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Certificates, the Trustee, the
Certificate Registrar, the Servicer, any Paying Agent and the Depositor shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
(d) Except with respect to the initial transfer of the Class S or
Residual Certificates by the Seller, no transfer, sale, pledge or other
disposition of any Class S or Residual Certificate shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any applicable state securities laws
or is made in accordance with the 1933 Act and laws. In the event of any such
transfer, other than the transfer of the Tax Matters Person Residual Interest to
the Trustee in reliance upon Rule 144A under the 1933 Act, the Trustee and the
Seller shall require either (i) a written Opinion of Counsel (which may be
in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Trustee and the Seller that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from the 1933 Act or is being made pursuant to the 1933 Act, which
Opinion of Counsel shall not be an expense of the Trustee or the Seller or (ii)
the Trustee shall require the transferor to execute a transferor certificate (in
substantially the form attached hereto as Exhibit M) and the transferee to
execute an investment letter (in substantially the form attached hereto as
Exhibit N-1 or N-2) acceptable to and in form and substance reasonably
satisfactory to the Seller and the Trustee certifying to the Seller and the
Trustee the facts surrounding such transfer, which investment letter shall not
be an expense of the Trustee or the Seller. The Holder of a Class S or Residual
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Depositor against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of a Class S or Residual Certificate shall be made unless
the Trustee shall have received either (i) a representation from the transferee
of such Certificate acceptable to and in form and substance satisfactory to the
Trustee, such requirement is satisfied only by the Trustee's receipt of a
representation letter from the transferee substantially in the form of Exhibit
N-1 or Exhibit N-2, as appropriate), to the effect that such transferee is not
an employee benefit plan or arrangement subject to Section 406 of ERISA or a
plan subject to Section 4975 of the Code, nor a person acting on behalf of any
such plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer or (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60") and that the purchase and holding of such
Certificates are covered under PTCE 95-60 or (iii) in the case of any such Class
S or Residual Certificate presented for registration in the name of an employee
benefit plan subject to ERISA or a plan or arrangement subject to Section 4975
of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan
or arrangement or using such plan's or arrangement's assets, an Opinion of
Counsel satisfactory to the Trustee, which Opinion of Counsel shall not be an
expense of either the Trustee or the Trust, addressed to the Trustee, to the
effect that the purchase or holding of such Class S or Residual Certificate will
not result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code and will
not subject the Trustee to any obligation in addition to those expressly
undertaken in this Agreement or to any liability. Notwithstanding anything else
to the contrary herein, any purported transfer of a Class S or Residual
Certificate to or on behalf of an employee benefit plan subject to ERISA or to
the Code without the delivery to the Trustee of an Opinion of Counsel
satisfactory to the Trustee as described above shall be void and of no effect.
Each Person who has or who acquires any Ownership Interest in a
Residual 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 Depositor or its designee as its attorney-in-fact
to negotiate the terms of any mandatory sale under clause (v) 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 Residual Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Residual
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Residual Certificate, the Trustee shall as a condition
to registration of the transfer, require delivery to it, in form and
substance satisfactory to it, of each of the following:
(A) an affidavit in the form of Exhibit G from the proposed
transferee to the effect that such transferee is a Permitted
Transferee and that it is not acquiring its Ownership Interest in
the Residual Certificate that is the subject of the proposed
transfer as a nominee, trustee or agent for any Person who is not
a Permitted Transferee; and
(B) a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Residual Certificates.
(iv) Any attempted or purported transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 6.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall,
in violation of the provisions of this Section 6.02, become a Holder
of a Residual Certificate, then the prior Holder of such Residual
Certificate that is a Permitted Transferee shall, upon discovery that
the registration of transfer of such Residual Certificate was not in
fact permitted by this Section 6.02, be restored to all rights as
Holder thereof retroactive to the date of registration of transfer of
such Residual Certificate. The Trustee shall be under no liability to
any Person for any registration of transfer of a Residual Certificate
that is in fact not permitted by this Section 6.02 or for making any
distributions due on such Residual Certificate to the Holder thereof
or taking any other action with respect to such Holder under the
provisions of the Agreement so long as the Trustee received the
documents specified in clause (iii). The Trustee shall be entitled to
recover from any Holder of a Residual Certificate that was in fact not
a Permitted Transferee at the time such distributions were made all
distributions made on such Residual Certificate. Any such
distributions so recovered by the Trustee shall be distributed and
delivered by the Trustee to the prior Holder of such Residual
Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee shall have the
right but not the obligation, without notice to the Holder of such
Residual Certificate or any other Person having an Ownership Interest
therein, to notify the Depositor to arrange for the sale of such
Residual Certificate. The proceeds of such sale, net of commissions
(which may include commissions payable to the Depositor or its
affiliates in connection with such sale), expenses and taxes due, if
any, will be remitted by the Trustee to the previous Holder of such
Residual Certificate that is a Permitted Transferee, except that in
the event that the Trustee determines that the Holder of such Residual
Certificate may be liable for any amount due under this Section 6.02
or any other provisions of this Agreement, the Trustee may withhold a
corresponding amount from such remittance as security for such claim.
The terms and conditions of any sale under this clause (v) shall be
determined in the sole discretion of the Trustee, and it shall not be
liable to any Person having an Ownership Interest in a Residual
Certificate as a result of its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee, based on
information provided to the Trustee by the Depositor will provide to
the Internal Revenue Service, and to the persons specified in Sections
860E(e)(3) and (6) of the Code, information needed to compute the tax
imposed under Section 860E(e)(5) of the Code on transfers of residual
interests to disqualified organizations.
The foregoing provisions of this Section 6.02(d) shall cease to apply
to transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee, (i)
written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in this Section 6.02 will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause any REMIC to fail to
qualify as a REMIC.
Each Tax Matters Person Residual Interest shall at all times be
registered in the name of the Trustee.
(e) No service charge shall be made for any registration of transfer
or exchange of Certificates of any Class, but 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.
All Certificates surrendered for registration of transfer or exchange
shall be canceled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate and (ii) there is delivered to the Trustee, the
Seller and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee or the Certificate Registrar 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.
Upon the issuance of any new Certificate under this Section 6.03, the 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 relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) in connection therewith. Any duplicate Certificate issued
pursuant to this Section 6.03, shall constitute complete and indefeasible
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 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Servicer, the Seller, the Trustee,
the Certificate Registrar, the Certificate Insurer, any Paying Agent and any
agent of the Servicer, the Seller, the Trustee, any Paying Agent or the
Certificate Registrar may treat the Person, including a Depository, in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 5.01 and for all other
purposes whatsoever, and none of the Servicer, the Seller, the Trustee, the
Certificate Registrar nor any agent of any of them shall be affected by notice
to the contrary; provided, however, that to the extent the Certificate Insurer
makes an Insured Payment with respect to a Certificate it shall be deemed to be
the owner of such Certificate to the extent provided in Section 4.01.
Section 6.05. Appointment of Paying Agent. (a)The Paying Agent shall
make distributions to Certificateholders from the Distribution Account pursuant
to Section 5.01 and shall report the amounts of such distributions to the
Trustee. The duties of the Paying Agent may include the obligation (i) to
withdraw funds from the Collection Account pursuant to Section 3.03 and for the
purpose of making the distributions referred to above and (ii) to distribute
statements and provide information to Certificateholders as required hereunder.
The Paying Agent hereunder shall at all times be a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
to act as Paying Agent, which appointment shall be reasonably satisfactory to
the Seller.
(b)The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders and shall agree that it shall comply with all
requirements of the Code regarding the withholding of payments in respect of
Federal income taxes due from Certificate Owners and otherwise comply with the
provisions of this Agreement applicable to it.
<PAGE>
ARTICLE VII
The Seller and the Servicer
Section 7.01. Liability of the Seller and the Servicer. The Seller and
the Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Seller or Servicer,
as the case may be, herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller or the Servicer. Any corporation into which the
Seller or the Servicer may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Seller or
the Servicer shall be a party, or any corporation succeeding to the business of
the Seller or the Servicer, shall be the successor of the Seller or the
Servicer, as the case may be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor
Servicer shall satisfy all the requirements of Section 8.02 with respect to the
qualifications of a successor Servicer.
Section 7.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the
performance of duties of the Servicer or by reason of its reckless disregard of
its obligations and duties of the Servicer hereunder; provided, further, that
this provision shall not be construed to entitle the Servicer to indemnity in
the event that amounts advanced by the Servicer to retire any senior lien exceed
Net Liquidation Proceeds realized with respect to the related Mortgage Loan. The
preceding sentence shall not limit the obligations of the Servicer pursuant to
Section 9.05. The Servicer and any director or officer or employee or agent of
the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer shall be indemnified by the Trust and held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
related to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of its reckless disregard of obligations and duties hereunder and such
amounts shall be payable only pursuant to Section 5.01(a)(vi)(3). The Servicer
may with the consent of the Certificate Insurer undertake any such action which
it may deem necessary or desirable in respect of this Agreement, and the rights
and duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, the reasonable legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust and the Servicer shall be entitled to be reimbursed therefor only
pursuant to Section 5.01(a)(vi)(3). The Servicer's right to indemnity or
reimbursement pursuant to this Section 7.03 shall survive any resignation or
termination of the Servicer pursuant to Section 7.04 or 8.01 with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination (or arising from events that occurred prior to such resignation or
termination). This paragraph shall apply to the Servicer solely in its capacity
as Servicer hereunder and in no other capacities.
Section 7.04. Servicer Not to Resign. Subject to the provisions of
Section 7.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement or (ii)upon satisfaction of each of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee in writing and such
proposed successor servicer is reasonably acceptable to the Trustee; (b) each
Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Senior Certificates without
regard to the Certificate Insurance Policy; and (c) such proposed successor
servicer is reasonably acceptable to the Certificate Insurer and consented to by
the Certificate Insurer, as evidenced by a letter to the Trustee; provided,
however, that no such resignation by the Servicer shall become effective until
such successor servicer or, in the case of (i) above, the Trustee shall have
assumed the Servicer's responsibilities and obligations hereunder or the Trustee
shall have designated a successor servicer in accordance with Section 8.02. Any
such resignation shall not relieve the Servicer of responsibility for any of the
obligations specified in Sections 8.01 and 8.02 as obligations that survive the
resignation or termination of the Servicer. Any such determination permitting
the resignation of the Servicer pursuant to clause (i) above shall be evidenced
by an Opinion of Counsel to such effect delivered to the Trustee and the
Certificate Insurer.
Section 7.05. Delegation of Duties. In the ordinary course of
business, the Servicer at any time may delegate any of its duties hereunder to
any Person, including any of its Affiliates, who agrees to conduct such duties
in accordance with standards comparable to those set forth in Section 3.01. Such
delegation shall not relieve the Servicer of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.04. The Servicer shall provide the
Certificate Insurer and the Trustee with written notice prior to the delegation
of any of its duties to any Person other than any of the Servicer's Affiliates
or their respective successors and assigns.
Section 7.06. Indemnification of the Trust by the Servicer. The
Servicer shall indemnify and hold harmless the Trust and the Trustee from and
against any loss, liability, expense, damage or injury suffered or sustained by
reason of the Servicer's willful misfeasance, bad faith or negligence in the
performance of its activities in servicing or administering the Mortgage Loans
pursuant to this Agreement, including, but not limited to, any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim related to the Servicer's misfeasance, bad faith or negligence. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this Section 7.06 shall survive the termination of this Agreement.
Section 7.07. Inspection. The Servicer shall (and shall require any
Subservicer in the related Subservicing Agreement to) afford the Certificate
Insurer, upon reasonable notice, during normal business hours, access to all
records maintained by the Servicer in respect of its rights and obligations
hereunder and access to officers of the Servicer and each Subservicer
responsible for such obligations. Upon request, the Servicer shall furnish to
the Certificate Insurer the Servicer's most recent publicly available financial
statements and each Sub- servicer's most recent financial statements (annual or
quarterly statements, as the case may be) and such other information relating to
their capacity to perform their obligations under this Agreement as the Servicer
or such Subservicer possesses.
<PAGE>
ARTICLE VIII
Default
Section 8.01. Events of Default (a) If any one of the following events
("Events of Default") shall occur and be continuing:
(i) (A) The failure by the Servicer to make any Monthly Advance;
or (B)any other failure by the Servicer to deposit in the Collection
Account or the Distribution Account any deposit required to be made
under the terms of this Agreement which continues unremedied for a
period of three Business Days after the date upon which payment was
required to have been made; or
(ii) The failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days, or
the failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of
the Servicer as set forth in this Agreement, 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 Holder with Certificates evidencing Voting Interests of
at least 25% or the Certificate Insurer; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 30 consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation, consent
to the appointment of a conservator or receiver or liquidator or
similar person in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its
property, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshaling 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, unbonded or unstayed for a
period of 30 days; or the Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations; or
(v) (A) On or prior to [January 25, 2002, the Total Expected
Losses exceed 5.00% of the Cut-Off Date Pool Principal Balance or (B)
after January 25, 2002, the Total Expected Losses exceed 7.75%] of the
Cut-Off Date Pool Principal Balance; or
(vi) Any failure by the Servicer to pay when due any amount
payable by it under the Insurance Agreement which results in a drawing
under the Certificate Insurance Policy; or
(vii) The stockholders' equity of the Servicer calculated in
accordance with generally accepted accounting principles is less than
$15,000,000;
(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)(A)
above, if such Monthly Advance is not made by 12:00 noon, New York time, on the
second Business Day preceding 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
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
8.02, shall immediately make such Monthly Advance and assume, pursuant to
Section 8.02, the duties of a successor Servicer and (y) in the case of (i)(B),
(ii), (iii), (iv), (v), (vi) and (vii) above, the Trustee shall, at the
direction of the Certificate Insurer or the Holders of each Class of Senior
Certificates evidencing Voting Rights aggregating not less than 51% (with the
consent of the Certificate Insurer so long as no Certificate Insurer Default
shall have occurred and be continuing, by notice then given in writing to the
Servicer (and to the Trustee if given by Holders of Certificates), terminate all
of the rights and obligations of the Servicer as servicer under this Agreement.
Any such notice to the Servicer shall also be given to each Rating Agency, the
Seller and the Certificate Insurer. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section 8.01; and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-
fact or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents, or otherwise. The
Servicer agrees to cooperate with the Trustee in effecting the termination of
the responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Trustee for the administration by it of all cash
amounts that shall at the time be held by the Servicer and to be deposited by it
in the Collection Account, or that have been deposited by the Servicer in the
Collection Account or thereafter received by the Servicer with respect to the
Mortgage Loans. All reasonable out-of-pocket costs and expenses (including
attorneys' fees) incurred in connection with transferring the Mortgage Files to
the successor Servicer and amending this Agreement to reflect such succession as
Servicer pursuant to this Section 8.01 shall be paid by the predecessor Servicer
(or if the predecessor Servicer is the Trustee, the initial Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Section 8.02. Trustee to Act; Appointment of Successor (a) On and
after the time the Servicer receives a notice of termination pursuant to Section
8.01 or 7.04, 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 and after its succession. As compensation therefor,
the Trustee shall be entitled to such compensation as the Servicer would have
been entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer or (ii) if the Trustee is legally unable so to act, the Trustee shall
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan or
home equity loan servicer having a net worth of not less than $25,000,000 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; provided that
any such successor Servicer shall be acceptable to the Certificate Insurer, as
evidenced by the Certificate Insurer's prior written consent which consent shall
not be unreasonably withheld and provided, further, that the appointment of any
such successor Servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Senior Certificates by the Rating
Agencies. Pending appointment of a successor to the Servicer hereunder, unless
the Trustee is prohibited by law from so acting, the Trustee shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the successor shall be entitled to receive compensation out of
payments on the Mortgage Loans in an amount equal to the compensation which the
Servicer would otherwise have received pursuant to Section 3.08 (or such lesser
compensation as the Trustee and such successor shall agree). The appointment of
a successor Servicer shall not affect any liability of the predecessor Servicer
which may have arisen under this Agreement prior to its termination as Servicer
to pay any deductible under an insurance policy pursuant to Section 3.05 or to
indemnify the Trustee pursuant to Section 7.06), nor shall any successor
Servicer be liable for any acts or omissions of the predecessor Servicer or for
any breach by such Servicer of any of its representations or warranties
contained herein or in any related document or agreement. The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer (i)continue to service and
administer the Mortgage Loans for the benefit of Certificateholders and the
Certificate Insurer, (ii)maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.12.
If an Event of Default of the type described in Section 8.01(a)(i)
(for purposes of this Section 8.02(b), such default shall be termed the failure
to make a "Remittance") occurs because the Servicer is the subject of a
proceeding under the Bankruptcy Code and the making of such Remittance is
prohibited by Section 362 of the Bankruptcy Code, the Trustee shall upon notice
of such prohibition, regardless of whether it has received or given a notice of
termination under Section 8.01, advance, the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Trustee, can reasonably be expected
to be ultimately recoverable from funds which are in the custody of the
Servicer, a trustee in bankruptcy or a federal bankruptcy court and should have
been the subject of such Remittance absent such prohibition (the "Stayed Funds")
and (ii) the Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trustee
or the deposit thereof in the Distribution Account by the Servicer, a trustee in
bankruptcy or a federal bankruptcy court, the Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; however, nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Servicer's own funds interest on any such
Stayed Funds. If the Trustee at any time makes an advance under this Subsection
which it later determines in its good faith judgment will not be ultimately
recoverable from the Stayed Funds with respect to which such advance was made,
the Trustee shall, upon certification of such nonrecoverability to the
Certificate Insurer, be entitled to reimburse itself (or direct the successor
Servicer to reimburse it) for such advance, without interest, by withdrawing an
amount equal to such advance from the Distribution Account.
Section 8.03. Waiver of Defaults. The Certificate Insurer or the
Majority Certificateholders with the consent of the Certificate Insurer may, on
behalf of all Certificateholders, waive any events permitting removal of the
Servicer as servicer pursuant to this Article VIII, 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.
Section 8.04. Rights of the Certificate Insurer to Exercise Rights of
Senior Certificateholders. By accepting its Certificate, each Senior
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 payment on the Certificates) and shall have
the right to exercise all rights of the Senior Certificateholders under this
Agreement and under each Class of Senior Certificates without any further
consent of the Senior Certificateholders, including, without limitation:
(a) the right to require the Seller to repurchase Mortgage Loans
pursuant to Section 2.02 or 2.04;
(b) the right to give notices of breach or to terminate the rights and
obligations of the Servicer as servicer pursuant to Section 8.01 and to consent
to or direct waivers of Servicer defaults pursuant to Section 8.03;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 8.01 and 8.02;
(d) the right to institute proceedings against the Servicer pursuant
to Section 8.01;
(e) the right to direct the Trustee to investigate certain matters
pursuant to Section 9.02;
(f) the right to remove the Trustee pursuant to Section 9.07;
(g) the right to direct foreclosures upon the failure of the Servicer
to do so in accordance with this Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that unless a Certificate
Insurer Default exists, the rights specifically enumerated in this Agreement may
be exercised by the Certificateholders only with the prior written consent of
the Certificate Insurer.
Section 8.05. 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 8.01;
(b) agree to any amendment pursuant to Article XI, provided, however,
that such consent shall not be unreasonably withheld; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole discretion
renounce all or any of its rights under Section 8.04, 8.05 or 8.06 or any
requirement for the Certificate Insurer's consent for any period of time.
Section 8.06. Mortgage Loans, Trust and Accounts Held for Benefit of
the Certificate Insurer. The Trustee shall hold the Trust and the Mortgage Files
for the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates "on behalf of" or 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.
The Servicer hereby acknowledges and agrees that it shall service the
Mortgage Loans for the benefit of the Certificateholders and for the benefit of
the Certificate Insurer, and all references in this Agreement to the benefit of
or actions on behalf of the Certificateholders shall be deemed to include the
Certificate Insurer.
Section 8.07. 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 its rights, the provisions of
this Article VIII 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 and perform its obligations hereunder solely for the
benefit of the Holders of the Certificates; provided, however, that the
Certificate Insurer's rights shall be immediately reinstated following the cure
of such Certificate Insurer Default. 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.
Section 8.08. Notification to Certificateholders. Upon any termination
or appointment of a successor to the Servicer pursuant to this Article VIII or
Section 7.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Certificate Insurer and each Rating Agency.
<PAGE>
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 (which has not been cured) of which a Responsible Officer has
knowledge, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
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 to the requirements of this Agreement. If any such instrument is found
not to be in the form specified in this Agreement, on its face, 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, provide notice thereof to the Certificate
Insurer and will, at the expense of the Servicer, which expense shall be
reasonable given the scope and nature of the required action, take such further
action as directed by the Certificate Insurer.
The Trustee may, in accordance with its duties hereunder, do all
things necessary and proper as may be required in connection with any secondary
mortgage licensing laws and similar requirements, including, but not limited to,
consenting to jurisdiction, and the appointment of agents for service of
process, in jurisdictions in which the Mortgaged Properties are located.
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 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 of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
(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 consent or direction of the Certificate Insurer
or in accordance with the direction of the Holders of Class A
Certificates evidencing Percentage Interests aggregating not less than
51% (subject to the Certificate Insurer's prior written consent)
relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising or omitting to
exercise any trust or power conferred upon the Trustee, under this
Agreement; and
(iv) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) and (ii) of Section 8.01 unless a
Responsible Officer of the Trustee at the Corporate Trust Office
obtains actual knowledge of such failure or the Trustee receives
written notice of such failure from the Servicer, the Certificate
Insurer or the Holders of Class A Certificates evidencing Percentage
Interests aggregating not less than 51%. This paragraph shall not be
construed to limit the effect of the first paragraph of this Section
9.01.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in 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.
Section 9.02. Certain Matters Affecting the Trustee. (a)Except as
otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be protected
in acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document reasonably 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 written advice
of such counsel or 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 advice or Opinion of Counsel;
(iii) the 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 hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or
the Certificate Insurer, pursuant to the provisions of this Agreement,
unless such Certificateholders or the Certificate Insurer shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby; 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 any such act; nothing
contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Default (which has not
been cured) of which a Responsible Officer has knowledge, to exercise
such of the rights and powers vested in it by this Agreement, and to
use the same degree of care and skill in their exercise as a prudent
man would exercise or use under the circumstances in the conduct of
his 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 and after the
curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper
or documents, unless requested in writing to do so by the Certificate
Insurer or by Holders of Certificates evidencing Percentage Interests
aggregating not less than 51% (subject to the Certificate Insurer's
prior written consent); provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to such proceeding. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by
the Trustee, shall be reimbursed by the Servicer upon demand. Nothing
in this clause (v) shall derogate from the obligation of the Servicer
to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Servicer until such time as the Trustee may be
required to act as Servicer pursuant to Section 8.02;
(vii) 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 or a custodian; and
(viii) 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.
(b) It is intended that each REMIC formed hereunder shall constitute,
and that the affairs of each REMIC shall be conducted so as to qualify it as, a
REMIC as defined in and in accordance with the REMIC Provisions. In furtherance
of such intention, the Trustee covenants and agrees that it shall act as agent
(and the Trustee is hereby appointed to act as agent) and as Tax Matters Person
on behalf of each REMIC, and that in such capacities, it shall:
(i) prepare, sign and file, or cause to be prepared and filed, in
a timely manner, a U.S. Real Estate Mortgage Investment Conduit Income
Tax Return (Form 1066) and any other Tax Return required to be filed
by each REMIC, using a calendar year as the taxable year for each
REMIC;
(ii) make, or cause to be made, an election, on behalf of each
REMIC, to be treated as a REMIC on the federal tax return of each
REMIC for its first taxable year;
(iii) prepare and forward, or cause to be prepared and forwarded,
to the Servicer, the Seller, 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 either REMIC are within
its control, conduct such affairs of each REMIC at all times that any
Certificates are outstanding so as to maintain the status of each
REMIC as a REMIC under the REMIC Provisions and any other applicable
federal, state and local laws, including, without limitation,
information reports relating to "original issue discount," as defined
in the Code, based upon 120% and 125% of the Prepayment Assumption
with respect to Certificate Group 1 and Certificate Group 2,
respectively 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 either REMIC;
(vi) pay the amount of any and all federal, state and local
taxes, including, without limitation, any minimum tax imposed by
Sections 23151(a) and 23153(a) of the California Revenue and Taxation
Code upon the Trustee or the Certificateholders in connection with the
Trust 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
6.02, imposed on the Trust 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 Section 2.12;
(vii) ensure that any such returns or reports filed on behalf of
the Trust by the Trustee are properly executed by the appropriate
person;
(viii) represent the Trust 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, enter into settlement agreements with any
government taxing agency, extend any statute of limitations relating
to any item of the Trust and otherwise act on behalf of the Trust in
relation to any tax matter involving the Trust;
(ix) as provided in Section 5.12, 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. Notwithstanding the foregoing, at
such time as the Trustee becomes the successor Servicer, the holder of
the largest percentage of each Class of Residual 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 Residual 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 Residual 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 Residual 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; and
(xi) pay out of its own funds, without any right of
reimbursement, any and all tax-related expenses of the Trust
(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
that involve the Internal Revenue Service or state tax authorities),
other than (A) the expense of obtaining any Opinion of Counsel
required pursuant to Sections 3.03, 5.10 and 11.02, (B) any expenses
for which the Trustee is otherwise indemnified pursuant to Section
9.05 and (C) taxes except as specified herein.
(xii) Upon filing with the Internal Revenue Service, the
Trustee shall furnish to the Holders of the Residual
Certificates the Form 1066 and each Form 1066Q for each REMIC
and shall respond promptly to written requests made not more
frequently than quarterly by any Holder of Residual
Certificates with respect to the following matters:
(1) The original projected principal and interest cash flows
on the Closing Date on each class of regular and residual
interests created hereunder and on the Mortgage Loans, based on
the applicable Prepayment Assumption;
(2) The projected remaining principal and interest cash
flows as of the end of any calendar quarter with respect to each
class of regular and residual interests created hereunder and the
Mortgage Loans, based on the applicable Prepayment Assumption;
(3) The Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(4) The original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or amortized
through the end of such calendar quarter with respect to each
class of regular or residual interests created hereunder and with
respect to the Mortgage Loans, together with each constant yield
to maturity used in computing the same;
(5) The treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of each REMIC with respect to such regular
interests or bad debt deductions claims with respect to the
Mortgage Loans;
(6) The amount and timing of any non-interest expenses of
each REMIC; and
(7) Any taxes (including penalties and interest) imposed on
each REMIC, including, without limitation, taxes on "prohibited
transactions," "contribution" or "net income from foreclosure
property" or state or local income or franchise taxes.
(xiii) Following the Closing Date, and except as otherwise
provided in this Agreement, the Trustee shall not knowingly accept any
contribution of assets to the Trust unless it shall have been provided
with an Opinion of Counsel at the expense of the party delivering such
assets acceptable to it and the Certificate Insurer to the effect that
the inclusion of such assets in any REMIC will not cause any REMIC to
fail to qualify as a REMIC at any time that any Certificates are
outstanding or subject the Trust to any tax under the REMIC Provisions
or other applicable provisions of federal, state and local law or
ordinances.
(xiv) The Trustee agrees to indemnify the Trust, the Certificate
Insurer, the Seller and the Servicer for any taxes and costs,
including, without limitation, any reasonable attorneys' fees imposed
on or incurred by the Trust, the Certificate Insurer, the Seller or
the Servicer, as a result of a breach of the Trustee's covenants set
forth in Section 9.02(xiii).
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Servicer or 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 at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Mortgage or any Mortgage Loan, or the
perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Servicer pursuant to Section 8.02); the validity of the assignment of any
Mortgage Loan to the Trustee or of any intervening assignment; the completeness
of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.02); the compliance by the Seller or the Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any non-compliance therewith or any breach
thereof; any investment of monies by or at the direction of the Servicer or any
loss resulting therefrom, it being understood that the Trustee shall remain
responsible for any Trust property that it may hold in its individual capacity;
the acts or omissions of any of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), any Subservicer or
any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02) or any Subservicer
taken in the name of the Trustee; the failure of the Servicer or any Subservicer
to act or perform any duties required of it as agent of the Trustee hereunder;
or any action by the Trustee taken at the instruction of the Servicer (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.02); provided, however, that the foregoing shall not relieve the Trustee of
its obligation to perform its duties under this Agreement, including, without
limitation, the Trustee's duty to review the Mortgage Files pursuant to Section
2.02. Until such time as the Trustee shall have become the Successor Servicer,
the Trustee shall have no responsibility to perfect or maintain the perfection
of any security interest or lien granted to it hereunder.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may transact
any banking and trust business with the Seller or the Servicer.
Section 9.05. Servicer to Pay Trustee Fees and Expenses. The Servicer
will pay or reimburse, except as provided in Section 2.12(g), the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Agreement
or the Insurance Agreement (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith or which is the responsibility of Certificateholders
hereunder. In addition, except as provided in Section 2.12(g), the Servicer
covenants and agrees to indemnify the Trustee and its officers, directors,
employees and agents from, and hold it harmless against, any and all losses,
liabilities, damages, claims or expenses (i) incurred in connection with or
relating to this Agreement, the Insurance Agreement or the Certificates, 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 or (ii) resulting from any error in any tax or information
return prepared by the Servicer. This Section 9.05 shall survive termination of
this Agreement or the resignation or removal of any Trustee hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000 and a minimum long-term debt rating
of "Baa3", and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 9.06, 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. The
principal office of the Trustee (other than the initial Trustee) shall be in a
state with respect to which an Opinion of Counsel has been delivered to such
Trustee at the time such Trustee is appointed Trustee to the effect that the
Trust will not be a taxable entity under the laws of such state. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 9.06, the Trustee shall resign immediately in the manner and with
the effect specified in Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Seller, the Servicer, the Certificate Insurer and
each Rating Agency. Upon receiving such notice of resignation, the Seller shall
promptly appoint a successor Trustee (approved in writing by the Certificate
Insurer and the Servicer, so long as such approval shall not unreasonably be
withheld) by written instrument, in duplicate, copies of which instrument shall
be delivered to the resigning Trustee, the Certificate Insurer and the Successor
Trustee; provided, however, that any such successor Trustee shall be subject to
the prior written approval of the Servicer. If no successor Trustee shall have
been so appointed and having accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Seller or the Certificate Insurer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a 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 Seller, the Servicer or the Certificate Insurer may remove
the Trustee. If the Seller, the Servicer or the Certificate Insurer removes the
Trustee under the authority of the immediately preceding sentence, the Seller
shall promptly appoint a successor Trustee (approved in writing by the
Certificate Insurer, so long as such approval is not unreasonably withheld) by
written instrument, in duplicate, copies of which instrument shall be delivered
to the Trustee so removed, the Certificate Insurer and to the successor Trustee.
The Holders of Certificates evidencing Voting Rights aggregating over
50% of all Voting Rights may, with the prior written consent of the Certificate
Insurer, at any time remove the Trustee by written instrument or instruments
delivered to the Servicer, the Seller and the Trustee; shall thereupon use its
best efforts to appoint a successor trustee in accordance with this Section
9.07.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Notwithstanding anything to the contrary contained herein, so long as
no Certificate Insurer Default exists, the Trustee may not be removed by the
Seller or the Certificateholders without the prior written consent of the
Certificate Insurer, which consent shall not be unreasonably withheld.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Seller,
the Servicer and to its predecessor Trustee and the Certificate Insurer 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 like effect as if originally named as Trustee. The Seller, the
Servicer and the predecessor 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 Trustee all such rights, powers, duties
and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 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 9.08, 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 each Rating Agency. If the Servicer fails to
mail such notice within 30 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.
Notwithstanding anything to the contrary contained herein, so long as
no Certificate Insurer Default exists, the appointment of any successor Trustee
pursuant to any provision of this Agreement will be subject to the prior written
consent of the Certificate Insurer, which consent shall not be unreasonably
withheld.
Section 9.09. Merger or Consolidation of Trustee. Any corporation into
which the 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 Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation 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 other than the prior written consent of
the Certificate Insurer, which consent shall not be unreasonably withheld.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Servicer
and the Trustee acting jointly and with the consent of the Certificate Insurer
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee and the Certificate Insurer to act
as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders and
the Certificate Insurer, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Servicer. If the Servicer shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, or, in the case an Event of Default shall have occurred and be continuing,
the Trustee alone and with the consent of the Certificate Insurer shall have the
power to make such appointment. Subject to the Certificate Insurer's written
approval, no co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 9.06 and no notice
to Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 9.08. The Servicer shall be responsible for the
fees of any co-trustee or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that 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 or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly and with the
consent of the Certificate Insurer may at any time accept the
resignation of or remove any separate trustee or co-trustee except
that following the occurrence of an Event of Default, the Trustee
acting with the consent of the Certificate Insurer may accept the
resignation or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this 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 and a copy thereof given to the
Depositor, the Certificate Insurer and the Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Limitation of Liability. The Certificates are executed
by the Trustee, not in its individual capacity but solely as Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it by
this Agreement. Each of the undertakings and agreements made on the part of the
Trustee in the Certificates is made and intended not as a personal undertaking
or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates; Inspection. (a) All rights of action and claims under this
Agreement or the Certificates may be prosecuted and enforced by the Trustee or
the Certificate Insurer without the possession of any of the Certificates or the
production thereof in any proceeding relating thereto, and such proceeding
instituted by the Trustee shall be brought in its own name or in its capacity as
Trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursement and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Certificateholders or the
Certificate Insurer in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Servicer, the Certificate
Insurer and each Certificateholder upon reasonable notice during normal business
hours, access to all records maintained by the Trustee in respect of its duties
hereunder and access to officers of the Trustee responsible for performing such
duties. Upon request, the Trustee shall furnish the Seller, the Servicer, the
Certificate Insurer and any requesting Certificateholder with its most recent
financial statements. The Trustee shall cooperate fully with the Seller, the
Servicer, the Certificate Insurer and such Certificateholder and shall make
available to the Seller, the Servicer, the Certificate Insurer and such
Certificateholder for review and copying such books, documents or records as may
be requested with respect to the Trustee's duties hereunder. The Seller, the
Servicer, the Certificate Insurer and the Certificateholders shall not have any
responsibility or liability for any action or failure to act by the Trustee and
are not obligated to supervise the performance of the Trustee under this
Agreement or otherwise.
Section 9.13. Suits for Enforcement. In case an Event of Default or
other default by the Servicer or the Seller hereunder shall occur and be
continuing, the Trustee may, with the consent of the Certificate Insurer and
shall at the direction of the Certificate Insurer, proceed to protect and
enforce its rights and the rights of the Certificateholders or the Certificate
Insurer under this Agreement by a suit, action or proceeding in equity or at law
or otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or in aid of the execution of any power granted in
this Agreement or for the enforcement of any other legal, equitable or other
remedy, as the Certificate Insurer, or if a Certificate Insurer Default shall
have occurred and be continuing, the Trustee, being advised by counsel, shall
deem most effectual to protect and enforce any of the rights of the Trustee or
the Certificate Insurer and the Certificateholders and the Certificate Insurer.
<PAGE>
ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
responsibilities of the Seller, the Servicer, and the Trustee created hereby
(other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of the
Servicer to send certain notices as hereinafter set forth) shall terminate upon
notice to the Trustee of the later of (x)the distribution to Certificateholders
of the final payment or collection with respect to the last Mortgage Loan (or
Monthly Advances of same by the Servicer), (y)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 and (z) the Distribution Date in April 2029.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
The Servicer may, at its option, terminate this Agreement on any
Distribution Date on or after the Optional Termination Date, by purchasing, on
the such Distribution Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (x) 100% of the aggregate Principal
Balance of the Mortgage Loans and REO Properties, plus (y) the greater of (i)
the aggregate amount of accrued and unpaid interest on the Mortgage Loans
through the related Due Period and (ii) 30 days' accrued interest thereon at a
rate equal to the Loan Rate, in each case net of the Servicing Fee plus (z) any
Reimbursement Amounts due to the Certificate Insurer and any other amounts due
to the Certificate Insurer under the Insurance Agreement (the "Termination
Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deposit in the Distribution Account all amounts
then on deposit in the Collection Account (less amounts permitted to be
withdrawn by the Servicer pursuant to Section 3.03), which deposit shall be
deemed to have occurred immediately preceding such purchase.
Any such purchase shall be accomplished by deposit into the
Distribution Account on the Determination Date before such Distribution Date of
the Termination Price.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee to the Certificate Insurer by letter to Certificateholders mailed not
earlier than the 15th day and not later than the 25th day of the month next
preceding the month of such final distribution specifying (i) the Distribution
Date upon which final distribution of the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein designated, (ii) the amount of any such final distribution and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.
(c) On the final Distribution Date, the Trustee will withdraw from the
Distribution Account and remit to the Certificate Insurer the lesser of (x)the
amount available for distribution on such final Distribution Date, net of any
portion thereof necessary to pay Senior Certificateholders pursuant to Sections
5.01(a)(i)(2) and (3) and (ii)(2) and (3) and (y) the unpaid amounts due and
owing to the Certificate Insurer pursuant to Section 5.01(a). Upon presentation
and surrender of the Certificates, the Trustee shall cause to be distributed to
the holders of Certificates on the Distribution Date for such final
distribution, in proportion to the Percentage Interests of their respective
Certificates and to the extent that funds are available for such purpose, an
amount equal to the amount required to be distributed to Certificateholders
pursuant to Section 5.01 for such Distribution Date.
(d) In the event that all of the Certificateholders shall not
surrender their Certificates for final payment and cancellation on or before
such final Distribution Date, the Trustee shall promptly following such date
cause all funds in the Distribution Account not distributed in final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining Certificateholders by depositing such funds in a separate escrow
account for the benefit of such Certificateholders and the Servicer (if the
Servicer has exercised its right to purchase the Mortgage Loans) or the Trustee
(in any other case) 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 one year after the second
notice all the Senior 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 on deposit in such escrow account.
Section 10.02. Additional Termination Requirements. (a) In the event
that the Servicer exercises its purchase option as provided in Section 10.01,
the Trust shall be terminated in accordance with the following additional
requirements, unless the Trustee and the Certificate Insurer have been furnished
with an Opinion of Counsel to the effect that the failure of the Trust to comply
with the requirements of this Section 10.02 will not (i) result in the
imposition of taxes on "prohibited transactions" of the Trust as defined in
Section 860F of the Code or (ii) cause any REMIC to fail to qualify as a REMIC
at any time that any Regular 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 for each REMIC 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 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 Trustee, as holder of the REMIC I
Regular Interests, the unpaid principal balance thereof plus accrued
interest thereon, (B) to each Class of Senior Certificateholders the
related Class Principal Balance in the case of the Senior
Certificates, plus one month's interest on such Class Principal
Balance or in the case of the Class S Certificates, the Notional
Balance at the applicable Certificate Rate, (C) to the Certificate
Insurer, all amounts owing to the Certificate Insurer under this
Agreement and the Insurance Agreement, (D) to Senior
Certificateholders, the remaining amounts payable pursuant to Section
5.01 and (E) to the Class R-1 Certificateholders, all cash on hand
after such payments
(b) By their acceptance of the Senior Certificates, the Holders
thereof hereby agree to appoint the Trustee 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.
<PAGE>
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Seller, the Servicer and the Trustee, in each case without the
consent of any of the Certificateholders, but only with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld), (i)to
cure any ambiguity, (ii)to correct any defective provisions or to correct or
supplement any provisions herein that may be inconsistent with any other
provisions herein or the expectations of Certificateholders, (iii) to add to the
duties of the Servicer, (iv)to add any other provisions with respect to matters
or questions arising under this Agreement or the Certificate Insurance Policy,
as the case may be, which shall not be inconsistent with the provisions of this
Agreement, (v)to add or amend any provisions of this Agreement as required by
any Rating Agency or any other nationally recognized statistical rating agency
in order to maintain or improve any rating of each Class of Senior Certificates,
without regard to the Certificate Insurance Policy (it being understood that,
after obtaining the ratings in effect on the Closing Date, neither the Trustee,
the Certificate Insurer, the Seller, nor the Servicer is obligated to obtain,
maintain or improve any such rating) or (vi)to add or amend any provisions of
this Agreement to such extent as shall be necessary to maintain the
qualification of either REMIC as a REMIC; provided, however, that (x) as
evidenced by an Opinion of Counsel (at the expense of the requesting party) in
each case such action shall not adversely affect in any material respect the
interest of any Certificateholder, (y) in each case, such action is necessary or
desirable to maintain the qualification of any REMIC as a REMIC or shall not
adversely affect such qualification and (z) if the opinion called for in clause
(x) cannot be delivered with regard to an amendment pursuant to clause (vi)
above, such amendment is necessary to maintain the qualification of any REMIC as
a REMIC; and provided, further, that the amendment shall not be deemed to
adversely affect in any material respect the interests of the Certificateholders
and no Opinion of Counsel to that effect shall be required if the Person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Senior Certificates without regard to
the Certificate Insurance Policy.
This Agreement also may be amended from time to time by the Seller,
the Servicer and the Trustee, and the Servicer and the Certificate Insurer, may
from time to time consent to the amendment of the Certificate Insurance Policy
with the consent of the Holders of each Class of Certificates which is affected
by such amendment, evidencing Voting Rights aggregating not less than 51% of
such Class (or in the case of an amendment which affects all classes, not less
than 51% of all of the Voting Rights in the Trust), and in the case of an
amendment to this Agreement, with the consent of the Certificate Insurer, 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 Certificateholders; provided, however, that no such amendment shall ()
reduce in any manner the amount of, or delay the timing of, payments on the
Certificates or distributions or payments under the Certificate Insurance Policy
which are required to be made on any Certificate without the consent of the
Holder of such Certificate or () reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the Holders of all
Certificates then outstanding.
Prior to the solicitation of consent of Certificateholders in
connection with any such amendment, the party seeking such amendment shall
furnish the Trustee and the Certificate Insurer with an Opinion of Counsel
stating whether such amendment would adversely affect the qualification of any
REMIC as a REMIC and notice of the conclusion expressed in such Opinion of
Counsel shall be included with any such solicitation. An amendment made with the
consent of all Certificateholders and the Certificate Insurer and executed in
accordance with this Section 11.01 shall be permitted or authorized by this
Agreement notwithstanding that such Opinion of Counsel may conclude that such
amendment would adversely affect the qualification of any REMIC as a REMIC.
Prior to the execution of any such amendment, the Trustee shall
furnish written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder and
fully executed original counterparts of the instruments effecting such amendment
to the Certificate Insurer.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 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 of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
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
Trustee, but only upon direction of Certificateholders or the Certificate
Insurer accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of Certificateholders or the
Certificate Insurer, as applicable. The Certificateholders or the Certificate
Insurer, as the case may be, requesting such recordation shall bear all costs
and expenses of such recordation. The Trustee shall have no obligation to
ascertain whether such recordation so affects the interests of the
Certificateholders or the Certificate Insurer.
Section 11.03. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any 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.
No Certificateholder shall have any right to vote (except as provided
in Sections 8.01, 9.01, 9.02 and 11.01) 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
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Senior Certificates evidencing Voting Rights aggregating not
less than 51% shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section 11.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (EXCLUDING PROVISIONS
REGARDING CONFLICTS OF LAWS) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.05. Notices. (a) All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) (b) in the case of the Trustee, at the Corporate Trust Office, (c) in the
case of the Certificate Insurer, MBIA Insurance Corporation, 113 King Street,
Armonk, New York 10504, Attention: Insured Portfolio Management C Structured
Finance (IPM-SF), (Delta Funding Home Equity Loan Trust 1997-1), Telecopy No.:
(914) 765-3810, Confirmation: (914)273-4545 (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 shall
be marked to indicate "URGENT MATERIAL ENCLOSED"), (d) in the case of Moody's,
Residential Mortgage Monitoring Group, 4th Floor, 99 Church Street, New York,
New York 10007, (e) in the case of Standard & Poor's, 26 Broadway, 15th Floor,
New York, New York 10004, Attention: Residential Mortgage Group, or (f) as to
each party, at such other address as shall be designated by such party in a
written notice to each other party. Any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder 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. Any notice or other document required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to delivery such notice or document
to any Rating Agency.
(b) Notice to S&P and Moody's. The Trustee and the Servicer shall each
be obligated to use its best efforts promptly to provide notice, at the expense
of the Servicer, to S&P and Moody's with respect to each of the following of
which a Responsible Officer of the Trustee or Servicer, as the case may be, has
actual knowledge:
(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Event of Default that has not been
cured or waived;
(iii) The resignation or termination of the Servicer or the
Trustee;
(iv) The final payment to Holders of the Certificates of any
Class;
(v) Any change in the location of any Account; and
(vi) Any event that would result in the inability of the Trustee
to make advances regarding Delinquent Mortgage Loans.
(c) In addition, (i)the Trustee shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual report to Certificateholders described in
Section 5.03; and
(B) Each Statement to Certificateholders described in
Section 5.03; and
(ii) The Servicer shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual statement as to compliance described in
Section 3.09;
(B) Each annual independent public accountants' servicing
report described in Section 3.10; and
(C) Each notice delivered pursuant to Section 8.01(b) which
relates to the fact that the Servicer has not made a Delinquency
Advance.
Any such notice pursuant to this Section 11.05 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to the
addresses specified above for each such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02, 7.04 and 7.05 (or 3.01),
this Agreement may not be assigned by the Depositor or the Servicer without the
prior written consent of the Certificate Insurer and Holders of the Certificates
evidencing Percentage Interests aggregating not less than 66%. The Servicer may
assign the right to reimbursement for Servicing Advances and Monthly Advances
without the consent of any Person but with prior notice thereof to the
Certificate Insurer and the Trustee.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for obligations
of the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 6.02 are
and shall be deemed fully paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders,
the Certificate Owners, the Certificate Insurer and their respective successors
and permitted assigns. The Certificate Insurer shall be a third-party
beneficiary of this Agreement, entitled to enforce the provisions hereof as if a
party hereto. Except as otherwise provided in this Agreement, no other person
will have any right or obligation hereunder.
Section 11.10. 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.
Section 11.11. 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 11.12. Insurance Agreement. The Trustee is authorized and
directed to execute and deliver the Insurance Agreement and to perform the
obligations of the Trustee thereunder.
Section 11.13. Claims Upon the Certificate Insurance Policy. (a) The
Trustee shall comply with the provisions of the Certificate Insurance Policy
with respect to claims upon the Certificate Insurance Policy.
(b) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Senior 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 written notice to the Trustee.
(c) 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 the Bankruptcy Code (a "Preference Claim") of any distribution
made with respect to the Senior Certificates. Each Certificateholder of Senior
Certificates, by its purchase of Senior Certificates, the Servicer, Depositor
and the Trustee hereby agree that the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal.
Section 11.14. 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 Senior Certificates which is made
with moneys received pursuant to the terms of the Certificate Insurance Policy
shall not be considered payment of the Senior Certificates from the Trust and
shall not result in the payment of or the provision for the payment of the
principal of or interest on the Senior Certificates within the meaning of
Section 5.01. The Seller, the Servicer and the Trustee acknowledge, and each
Holder by its acceptance of a Senior Certificate agrees, that without the need
for any further action on the part of the Certificate Insurer, the Seller, the
Servicer, the Trustee or the Certificate Registrar, to the extent the
Certificate Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Senior Certificates to the Holders of such
Certificates, (i) the Certificate Insurer will be fully subrogated to the rights
of such Holders to receive such principal and interest from the Trust and (ii)
the Certificate Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein for the payment of such principal
and interest.
The Trustee, the Seller and the Servicer shall cooperate in all
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
Section 11.15. Notices to the Certificate Insurer. All notices,
statements, reports, certificates or opinions required by this Agreement to be
sent to any other party hereto or to the Certificateholders shall also be sent
to the Certificate Insurer.
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers all as of
the day and year first above written.
DELTA FUNDING CORPORATION,
as Seller and Servicer
By/s/ Richard Blass
_______________________________
Title: Senior Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By/s/ Jennifer Cunningham
_______________________________
Title: Assistant Vice President
<PAGE>
State of New York )
) ss.:
County of New York )
On the 27th day of March, 1997 before me, a notary public in and for
the State of New York, personally appeared Richard Blass, known to me who, being
by me duly sworn, did depose and say that he is the Vice President of Delta
Funding Corporation, a New York corporation, one of the parties that executed
the foregoing instrument; that he knows the seal of said company; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said company; and that he signed his name
thereto by like order.
/s/ Holly Dormeyer
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York )
On the 27th day of March, 1997 before me, a notary public in and for
the State of New York, personally appeared Jennifer Cunningham, known to me who,
being by me duly sworn, did depose and say that she is the Assistant Vice
President of Bankers Trust Company of California, N.A., a national banking
association, one of the parties that executed the foregoing instrument; and that
she signed her name thereto by order of the Board of Directors of said
association.
/s/ Holly Dormeyer
_______________________________
Notary Public
[Notarial Seal]
EXHIBIT 99.1
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $235,000,000
POLICY NUMBER: 23488
Delta Funding Home Equity Loan Trust 1997-1
Home Equity Loan Asset-Backed Certificates
Series 1997-1
Class A-1, A-2, A-3, A-4, A-5, A-6 and A-7
and Class S (the
"Obligations")
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received by Bankers Trust Company of California, N.A. or its
successor, as trustee for the Owners (the "Trustee"), on behalf of the Owners
from the Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Trustee,
whether or not such funds are properly applied by the Trustee. Insured Payments
shall be made only at the time set forth in this Policy and no accelerated
Insured Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, either REMIC or
the Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability), any Civil Relief Act Interest Shortfalls, or any
Class A-7 Basis Risk Carryover Amount.
The Insurer will pay any Insured Payment that is a Preference Amount
on the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of a
preference payment, (ii) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (iii) an assignment in such form
as is reasonably required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (iv) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon New York City time on the later of the Distribution Date on which the
related Deficiency Amount is due or the second Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder it shall be deemed not to
have been received by the Fiscal Agent for purposes of this paragraph, and the
Insurer or the Fiscal Agent, as the case may be, shall promptly so advise the
Trustee and the Trustee may submit an amended Notice.
Insured Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Pooling and Servicing Agreement dated as of
February 28, 1997 among Delta Funding Corporation, as Seller and Servicer and
Bankers Trust Company of California, N.A. as Trustee, without regard to any
amendment or supplement thereto unless such amendment or modification has been
approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which the Insurer or banking institutions in New York City or in the city in
which the corporate trust office of the Trustee under the Agreement is located
are authorized or obligated by law or executive order to close.
"Deficiency Amount" means for any Distribution Date the excess, if
any, of (A) (i) the Class Monthly Interest Distributable Amount for each Class
of the Senior Certificates (net of any Civil Relief Act Interest Shortfalls with
respect to the related Loan Group) plus any Class Interest Carryover Shortfall
for each Class of Senior Certificates and (ii) the Guaranteed Principal Amount
over (B) Available Funds with respect to the related Loan Group (after giving
effect to the cross-collateralization provisions of section 5.01(a)(iii) of the
Agreement and without regard to any Insured Payments to be made as of such
Distribution Date).
"Guaranteed Principal Amount" means for any Distribution Date (a) the
amount, if any, by which the Certificate Group Principal Balance of each
Certificate Group exceeds the related Loan Group Principal Balance at the end of
the previous month (after giving effect to all distributions of principal on the
related Class A Certificates on such Distribution Date) and (b) with respect to
the Group 1 Certificates and the Group 2 Certificates, on the Distribution Date
in April 2029 (after giving effect to all other distributions of principal on
the Certificate Group l and the Certificate Group 2, respectively), an amount
equal to the applicable Certificate Group Principal Balance.
"Insured Payment" means (i) as of any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Payment which shall be
due and owing on the applicable Distribution Date.
"Owner" means each Holder (as defined in the Agreement) who, on the
applicable Distribution Date is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an
Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address as
the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 27th day of March, 1997.
MBIA INSURANCE CORPORATION
By /s/ Richard Weill
________________________________
President
Attest: By /s/
________________________________
Assistant Secretary
<PAGE>
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 23488
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 23488
State Street Bank and Trust Company, as Fiscal Agent
for MBIA Insurance Corporation
15th Floor, 61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency (16th Floor)
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of Bankers Trust Company of
California, N.A., as trustee (the "Trustee"), hereby certifies to State Street
Bank and Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation
(the "Insurer"), with reference to Certificate Guaranty Insurance Policy Number:
23488 of the Insurer in respect of the $235,000,000 Delta Funding Home Equity
Loan Trust 1997-1, Home Equity Loan Asset Backed Certificates, Series 1997-1,
Class A-1, A-2, A-3, A-4, A-5, A-6 and A-7 and Class S (the "Obligations"),
that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of February 28, 1997 (the "Agreement"), among Delta
Funding Corporation, as Seller and Servicer and the Trustee, as
trustee for the Owners;
(ii) the Class Monthly Interest Distributable Amount for the
Class A-l Certificates is $ [ ] (net of any Civil Relief Act Interest
Shortfalls) for the Distribution Date occurring in [ ] (the
"Applicable Distribution Date") and the Class Interest Carryover
Shortfall for the Class A-l Certificates for the Applicable
Distribution Date is [ ] $[ ];
(iii) the Class Monthly Interest Distributable Amount for the
Class A-2 Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class A-2 Certificates for the
Applicable Distribution Date is $[ ];
(iv) the Class Monthly Interest Distributable Amount for the
Class A-3 Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class A-3 Certificates for the
Applicable Distribution Date is $[ ];
(v) the Class Monthly Interest Distributable Amount for the Class
A-4 Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class A-4 Certificates for the
Applicable Distribution Date is $[ ];
(vi) the Class Monthly Interest Distributable Amount for the
Class A-5 Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class A-5 Certificates for the
Applicable Distribution Date is $[ ];
(vii) the Class Monthly Interest Distributable Amount for the
Class A-6 Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class A-6 Certificates for the
Applicable Distribution Date is $[ ];
(viii) the Class Monthly Interest Distributable Amount for the
Class S Certificates is $[ ] (net of any Civil Relief Act Interest
Shortfalls) for the Applicable Distribution Date and the Class
Interest Carryover Shortfall for the Class S Certificates for the
Applicable Distribution Date is $[ ];
(ix) the sum of the Class Monthly Interest Distributable Amount
(net of any Civil Relief Act Interest Shortfalls) for the Group 1
Certificates in (ii), (iii), (iv), (v), (vi), (vii) and (viii) for the
Applicable Distribution Date is $[ ];
(x) the sum of the Class Interest Carryover Shortfall for the
Group 1 Certificates in (ii), (iii), (iv), (v), (vi), (vii) and (viii)
for the Applicable Distribution Date is $[ ];
(xi) the amount, if any, by which the Certificate Group Principal
Balance for the Group 1 Certificates exceeds the Loan Group 1
Principal Balance at the end of the previous month (after giving
effect to all distributions of principal on the Group 1 Certificates
on such Distribution Date) is $[ ];
(xii) with respect to the Class A-6 Certificates, on the
Applicable Distribution Date in April 2029, an amount equal to the
related Certificate Group Principal Balance (after giving effect to
all other distributions of principal on the Group 1 Certificates) is
$[ ];
(xiii) the sum of (xi) and (xii) for the Applicable Distribution
Date is $[ ] (the "Guaranteed Principal Amount" for Group 1
Certificates).
(xiv) the sum of (ix), (x) and (xiii) for the Applicable
Distribution Date is $[ ];
(xv) the Available Funds with respect to Loan Group 1 (after
giving effect to the cross-collateralization provisions of Section
5.01(a)(iii) of the Agreement and without regard to any Insured
Payments to be made as of such Distribution Date) for the Applicable
Distribution Date is $[ ];
(xvi) the excess, if any, of the amount in (xiv) above over the
amount in (xv) above for the Applicable Distribution Date is $[ ];
(xvii) (a) the Class Monthly Interest Distributable Amount for
the Class A-7 Certificates is $[ ] (net of any Civil Relief Act
Interest Shortfalls) for the Applicable Distribution Date, (b) the
Class Interest Carryover Shortfall for the Class A-7 Certificates for
the Applicable Distribution Date is $[ ] and (c) the
total of the amounts in (a) and (b) of this (xvii) is
$[ ];
(xviii) the amount, if any, by which the Certificate Group
Principal Balance for the Group 2 Certificates exceeds the Loan Group
2 Principal Balance at the end of the previous month (after giving
effect to all distributions of principal on the Group 2 Certificates
on such Distribution Date) is $[ ];
(xix) with respect to the Class A-7 Certificates, on the
Applicable Distribution Date in April 2029, an amount equal to the
related Certificate Group Principal Balance (after giving effect to
all other distributions of principal on the Group 2 Certificates) is
$[ ];
(xx) the sum of (xviii) and (xix) for the Applicable Distribution
Date is $[ ] (the "Guaranteed Principal Amount" for
the Group 2 Certificates);
(xxi) the sum of (xvii)(c) and (xx) for the Applicable
Distribution Date is $[ ];
(xxiii) the Available Funds with respect to Loan Group 2 (after
giving effect to the cross-collateralization provisions of Section
5.01(a)(iii) of the Agreement and without regard to any Insured
Payments to be made as of such Distribution Date) for the Applicable
Distribution Date is $[ ];
(xxiii) the excess, if any, of the amount in (xxi) above over the
amount in (xxii) above for the Applicable Distribution Dale is $[ ];
(xxiv) the sum of (xvi) and (xxiii) is $[ ] (the "Deficiency
Amount");
(xxv) the Preference Amount for the Senior Certificates for the
Applicable Distribution Date is $[ ];
(xxvi) the sum of the amounts under clauses (xxiv) and (xxv) is
$[ ] (the "Insured Payment");
(xxvii) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Insured Payment set
forth in (xxv) above to be applied to the payment of the Deficiency
Amount for the Applicable Distribution Date in accordance with the
Agreement and for the dollar amount of the Insured Payment set forth
in (xxv) above to be applied to the payment of any Preference Amount;
and
(xviii) the Trustee directs that payment of the Insured Payment
be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the
Policy: [CERTIFICATE ACCOUNT].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the Yearling assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance
Company Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
For Each Such Violation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , 19[ ].
[TRUSTEE]
By______________________________
Title_____________________________
