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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) July 8, 1997
Delta Funding Corporation
(Exact name of registrant as specified in its charter)
New York 333-3418 11-2609517
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
1000 Woodbury Road, Woodbury, New York 11797
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (516) 364-8500
N/A
(Former name or former address, if changed since last report)
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Item 5. Other Events.
This Current Report on Form 8-K is being filed to file a copy
of the Pooling and Servicing Agreement in connection with the issuance by Delta
Funding Home Equity Loan Trust 1997-2 of Home Equity Loan Asset-Backed
Certificates, Series 1997-2.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1 Pooling and Servicing Agreement.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DELTA FUNDING CORPORATION
By: /s/ Richard Blass
--------------------------
Name: Richard Blass
Title: Senior Vice President
Dated: July 8, 1997
3
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EXHIBIT INDEX
Exhibit Page
4.1 Pooling and Servicing Agreement
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EXHIBIT 4.1
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EXECUTION COPY
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DELTA FUNDING CORPORATION,
as Seller and Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of May 31, 1997
----------------------
Home Equity Loan Asset-Backed Certificates
Series 1997-2
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions
Section 1.01. Definitions............................................................................1
Section 1.02. Interest Calculations.................................................................32
ARTICLE II
Conveyance of Initial Mortgage Loans;
Original Issuance of Certificate Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans..................................................33
Section 2.02. Acceptance by Trustee.................................................................37
Section 2.03. Representations and Warranties Regarding the Seller and the Servicer..................39
Section 2.04. Representations and Warranties of the Seller Regarding the Mortgage Loans.............41
Section 2.05. Substitution of Mortgage Loans........................................................51
Section 2.06. Execution and Authentication of Certificates..........................................52
Section 2.07. Designation of Interests in REMIC.....................................................52
Section 2.08. Designation of Startup Day of REMIC...................................................54
Section 2.09. REMIC Certificate Maturity Date.......................................................54
Section 2.10. Tax Returns and Reports to Certificateholders.........................................54
Section 2.11. Tax Matters Person....................................................................55
Section 2.12. REMIC Related Covenants...............................................................55
Section 2.13. Subsequent Transfers..................................................................58
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Servicer..........................................................................59
Section 3.02. Collection of Certain Mortgage Loan Payments..........................................63
Section 3.03. Withdrawals from the Collection Account...............................................64
Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses.........................66
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Section 3.05. Maintenance of Mortgage Impairment Insurance Policy...................................66
Section 3.06. Management and Realization Upon Defaulted Mortgage Loans..............................67
Section 3.07. Trustee to Cooperate..................................................................69
Section 3.08. Servicing Compensation; Payment of Certain Expenses by Servicer.......................70
Section 3.09. Annual Statement as to Compliance.....................................................70
Section 3.10. Annual Servicing Review...............................................................70
Section 3.11. Access to Certain Documentation and Information Regarding the Mortgage Loans..........71
Section 3.12. Maintenance of Certain Servicing Insurance Policies...................................71
Section 3.13. Reports to the Securities and Exchange Commission.....................................71
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..........................................................................72
Section 3.15. Advances by the Servicer..............................................................72
Section 3.16. Optional Purchase of Defaulted Mortgage Loans.........................................72
Section 3.17. Superior Liens........................................................................73
Section 3.18. Assumption Agreements.................................................................73
Section 3.19. Payment of Taxes, Insurance and Other Charges.........................................74
ARTICLE IV
Initial Interest Coverage Account
Section 4.01. [RESERVED]
Section 4.02. Initial Interest Coverage Account and Funding Account.................................75
ARTICLE V
Payments and Statements to Certificateholders;
Rights of Certificateholders
Section 5.01. Distributions.........................................................................76
Section 5.02. Compensating Interest.................................................................79
Section 5.03. Statements............................................................................79
Section 5.04. Distribution Account..................................................................83
Section 5.05. Investment of Accounts................................................................83
ARTICLE VI
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The Certificates
Section 6.01. The Certificates......................................................................85
Section 6.02. Registration of Transfer and Exchange of Certificates.................................85
Section 6.03. Mutilated, Destroyed, Lost or Stolen
Certificates............................................................................
Section 6.04. Persons Deemed Owners.................................................................92
Section 6.05. Appointment of Paying Agent...........................................................92
ARTICLE VII
The Seller and the Servicer
Section 7.01. Liability of the Seller and the Servicer..............................................93
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, the Seller or the
Servicer..............................................................................93
Section 7.03. Limitation on Liability of the Servicer and
Others................................................................................93
Section 7.04. Servicer Not to Resign................................................................94
Section 7.05. Delegation of Duties..................................................................95
Section 7.06. Indemnification of the Trust by the Servicer..........................................95
Section 7.07. Inspection..................................................Error! Bookmark not defined.
ARTICLE VIII
Default
Section 8.01. Events of Default.....................................................................95
Section 8.02. Trustee to Act; Appointment of Successor..............................................98
Section 8.03. Waiver of Defaults....................................................................99
Section 8.04. Notification to Certificateholders...................................................100
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee....................................................................100
Section 9.02. Certain Matters Affecting the Trustee................................................102
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans................................107
Section 9.04. Trustee May Own Certificates.........................................................108
Section 9.05. Servicer to Pay Trustee Fees and Expenses............................................108
Section 9.06. Eligibility Requirements for Trustee.................................................109
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Section 9.07. Resignation or Removal of Trustee....................................................109
Section 9.08. Successor Trustee....................................................................110
Section 9.09. Merger or Consolidation of Trustee...................................................111
Section 9.10. Appointment of Co-Trustee or Separate Trustee........................................111
Section 9.11. Limitation of Liability..............................................................113
Section 9.12. Trustee May Enforce Claims Without Possession
of Certificates; Inspection..........................................................113
Section 9.13. Suits for Enforcement................................................................113
ARTICLE X
Termination
Section 10.01. Termination..........................................................................114
Section 10.02. Additional Termination Requirements..................................................116
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment............................................................................117
Section 11.02. Recordation of Agreement.............................................................118
Section 11.03. Limitation on Rights of Certificateholders...........................................118
Section 11.04. Governing Law........................................................................119
Section 11.05. Notices..............................................................................120
Section 11.06. Severability of Provisions...........................................................121
Section 11.07. Assignment...........................................................................121
Section 11.08. Certificates Nonassessable and Fully Paid............................................122
Section 11.09. Third-Party Beneficiaries............................................................122
Section 11.10. Counterparts.........................................................................122
Section 11.11. Effect of Headings and Table of Contents.............................................122
</TABLE>
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EXHIBIT A - FORM OF CLASS A CERTIFICATE........................................................................ A-1
EXHIBIT B - FORM OF CLASS M CERTIFICATE........................................................................ B-1
EXHIBIT B-1- FORM OF CLASS B CERTIFICATE.......................................................................B-1-1
EXHIBIT B-2- FORM OF CLASS R CERTIFICATE.......................................................................B-2-1
EXHIBIT B-3- FORM OF CLASS A-IO CERTIFICATE....................................................................B-3-1
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 MORTGAGE................................................................................... 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]
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EXHIBIT K - [RESERVED]
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
</TABLE>
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This Pooling and Servicing Agreement, dated as of May 31, 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.
Adjusted Senior Principal Distribution Amount: As to any
Distribution Date, the excess of (i) the Senior Principal Distribution
Amount for such Distribution Date over (ii) the Class A-7 Principal
Distribution for such Distribution Date.
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 Amount: As to any Distribution Date, the sum of
the Basic Principal Amount for each Loan Group.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Applied Realized Loss Amounts: As to any Distribution, an amount
equal to the excess, if any, of (i) the aggregate of the Class Principal
Balances of the Offered Certificates, after giving
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effect to all distributions on such Distribution Date over (ii) the Pool Balance
as of the last day of the relate 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 either Loan Group and any Distribution
Date, the sum, without duplication of the following amounts with respect to
the Mortgage Loans in such Loan Group: (i) scheduled and unscheduled
payments of principal and interest on the Mortgage Loans received by the
Servicer (net of amounts representing the Servicing Fee with respect to
each Mortgage Loan and reimbursement for related Monthly Advances and
Servicing Advances); (ii) Net Liquidation Proceeds and Insurance Proceeds
with respect to the Mortgage Loans (net of amounts applied to the
restoration or repair of a Mortgaged Property); (iii) the Purchase Price
for repurchased Defective Mortgage Loans with respect to the Mortgage Loans
and any related Substitution Adjustment Amounts; (iv) payments from the
Servicer in connection with (a) Monthly Advances, (b) Compensating Interest
and (c) the termination of the Trust with respect to the Mortgage Loans as
provided in the Agreement; and (v) on the initial Distribution Date, (a)
amounts from the Initial Interest Coverage Account for the payment of
interest on the related Classes of Offered Certificate; and (b) any related
Excess Funding Amount.
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.
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Basic Principal Amount: As to either Loan Group and any
Distribution Date, an amount equal to the sum of the following amounts
(without duplication) with respect to the Mortgage Loans in such Loan Group
and the immediately preceding Due Period: (i) each payment of principal on
a Mortgage Loan received by the Servicer during such Due Period, including
all full and partial principal prepayments; (ii) the Net Liquidation
Proceeds in respect of principal received during the immediately preceding
Due Period; (iii) the portion of the Purchase Price allocable to principal
of all repurchased Defective Mortgage Loans with respect to such Due
Period; and (iv) any Substitution Adjustment Amounts received on or prior
to the previous Determination Date and not yet distributed.
Blanket Mortgage: The mortgage or mortgages encumbering a Cooperative
Property.
Book-Entry Certificate: Any Regular 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 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 July 1997, the amount of interest accruing at the
weighted average Certificate Rate for the Regular Certificates on the
amount by which the sum of the Class Principal Balances of the Offered
Certificates as of the Closing Date exceeds the aggregate Principal
Balances of Mortgage Loans with a Due Date after July 1, 1997.
Certificate: Any Offered Certificate or Residual Certificate.
Certificate Group: Either Certificate Group A or Certificate Group B,
as the context requires.
Certificate Group A: The Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6, Class A-IO, Class M-1, Class M-2 and Class B-3
Certificates collectively.
Certificate Group B: The Class A-7 Certificates.
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Certificate Group 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 Floating 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 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 6.62%
A-2 6.64%
A-3 6.77%
A-4 7.03%
A-5 7.37%(1)
A-6 7.04%(1)
A-IO (2)
A-7 (3)
M-1 7.24%(1)
M-2 7.49%(1)
B-3 7.80%(1)
R-1 (4)
R-2 (4)
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(1) For any Distribution Date prior to the Target Date, 6.5% per annum. For
any Distribution Date on or after the Target Date, 0%.
(2) On any Distribution Date, the lesser of this rate and the Group A Net
Funds Cap
(3) For the initial Distribution Date, 5.8975% per annum. For each
Distribution Date thereafter, the lesser of the Class A-7 Formula Rate and
the Group B Available Funds Cap.
(4) This Class has no Certificate 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 Offered 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 Offered 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 Offered 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.
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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-6 Percentage: As to any Distribution Date, the applicable
percentage set forth below:
Distribution Dates Percentages
July 1997-June 2000 0%
July 2000 - June 2002 45%
July 2002 - June 2003 80%
July 2003- June 2004 100%
July 2004 and thereafter 300%
Class A-6 Principal Distribution: As to any Distribution Date, the
lesser of (A) the product of (i) the applicable Class A-6 Percentage and
(ii) the product of (x) the Adjusted Senior Principal Distribution Amount
and (y) a fraction, the numerator of which is the Class Principal Balance
of the Class A-6 Certificates immediately prior to such Distribution Date,
and the denominator of which is the aggregate Class Principal Balance of
the Senior
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Certificates immediately prior to such Distribution Date and (B)
the Adjusted Senior Principal Distribution Amount.
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 0.21% (or 0.42% for each Distribution Date occurring
after the Optional Termination Date).
Class A-7 Principal Distribution: As to any Distribution Date, the
lesser of (A) the greater of (i) the product of (x) the Senior Principal
Distribution Amount for such Distribution Date and (y) a fraction, the
numerator of which is the Class Principal Balance of the Class A-7
Certificates immediately prior to such Distribution Date, and the
denominator of which is the aggregate Class Principal Balance of all of the
Senior Certificates immediately prior to such Distribution Date, and (ii)
the excess, if any, of (x) the Class Principal Balance of the Class A-7
Certificates immediately prior to such Distribution Date over (y) the Loan
Group Balance of Loan Group B as of the last day of the related Due Period
and (B) the Senior Principal Distribution Amount.
Class A-IO Certificate: Any Certificate executed and authenticated
by the Trustee substantially in the form attached hereto as Exhibit A and
designated as a Class A-IO Certificate pursuant to Section 6.01.
Class Interest Carryover Shortfall: As to any Class of Regular
Certificates and any Distribution Date, an amount equal to the sum of (i)
the excess of the related Class Monthly Interest Amount for the preceding
Distribution Date and any outstanding Class Interest Carryover Shortfall
with respect to such Class on such preceding Distribution Date, over the
amount in respect of interest that is actually distributed to the Holders
of such Class on such preceding Distribution Date plus (ii) one month's
interest on such excess, to the extent permitted by law, at the related
Certificate Rate.
Class Interest Distribution: As to any Class of Regular
Certificates and Distribution Date, an amount equal to the sum of (a) the
related Class Monthly Interest Amount and (b) any Class Interest Carryover
Shortfall for such Class of Certificates for such Distribution Date.
Class Monthly Interest Amount: As to any Distribution Date and
Class of Regular Certificates, interest for the related
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Interest Period at the related Certificate Rate on the related Class Principal
Balance or Notional Amount.
Class Principal Balance: As of any date of determination and Class
of Certificates, the Original Class 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 and, in the case of any Class of Subordinate
Certificate, reduced by any Applied Realized Loss Amounts allocated to such
Class on prior Distribution Dates.
Class Principal Distribution Amount: As to any Class of
Subordinate Certificates and (a) any Distribution Date prior to the
Stepdown Date, zero, and 9b) any Distribution Date on or after the Stepdown
Date, the excess of (i) an amount equal to the sum of (x) the Class
Principal Balance (after giving effect to distributions of the Principal
Distribution Amount on such Distribution Date) of each Class of
Certificates with a higher payment priority and (y) the Class Principal
Balance of such Class of Certificates immediately prior to such
Distribution Date over (ii) the applicable Pro Rata Principal Distribution
Amount for such Distribution Date.
Class Principal Carryover Shortfall: As to any Class of
Subordinate Certificates and any Distribution Date, the excess, if any, of
(i) sum of (x) the amount of the reduction in the Class Principal Balance
of such Class of Subordinate Certificates on such Distribution Date and (y)
the amount of such allocations on prior Distribution Dates over (ii) the
amount distributed in respect thereof on prior 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.
Closing Date: June 26, 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
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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-1997-2.
Corresponding Class: As indicated in Section 2.07 hereof.
Cumulative Loss Event: For any Distribution Date in the applicable
period below, Cumulative Net Losses exceed the applicable percentage of the
aggregate Original Class Principal Balances of the Offered Certificates:
Number of Distribution Dates Percentage
---------------------------- ----------
0-24 0.75%
25-36 1.50%
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37-48 2.00%
49-60 2.70%
61-72 3.25%
73 and thereafter 3.40%
Cumulative Net Losses: As of any date of determination, the
aggregate of the Liquidation Loan Losses incurred from the Cut-Off Date
through the end of the calendar month preceding such date of determination.
Current Interest Shortfall: As to any Distribution Date and the
Class A-7 Certificates, the excess, if any, of (i) the Class Interest
Distribution for the Class A-7 Certificates for such Distribution Date,
over (ii) the Interest Remittance Amount less the Trustee Fee, in each case
for Loan Group B for such Distribution Date.
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 May 31, 1997. With respect to the Subsequent Mortgage
Loans, the later of the date of origination of such Mortgage Loan and May
31, 1997.
Cut-Off Date Pool Principal Balance: $187,420,924.86.
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.
Definitive Certificates: As defined in Section 6.02(c).
Delinquency Amount: As of any date of determination, the sum of
(i) 50% of the aggregate Principal Balance of the Mortgage Loans that are
60-89 days delinquent, (ii) 75% of the aggregate Principal Balance of the
Mortgage Loans that are 90 or more days Delinquent (excluding Mortgage
Loans in foreclosure and REO Properties) and (iii) 100% of the aggregate
Principal Balance of the Mortgage Loans in foreclosure and REO Properties,
in each case, as of the end of the calendar month preceding such date of
determination.
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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 Regular 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.
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 July 1997.
Distribution Percentage: As to the Senior Certificates the lesser
of (i) the Stepped Up Percentage and (ii) 100% minus the sum of (x) two
times the applicable Original Credit Support Percentage and (y) the
Required OC Percentage. As to any Class of Subordinate Certificates, 100%
minus the sum of (x) two times the applicable Original Credit Support
Percentage and (y) the Required OC Percentage.
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 the first Determination Date (i) for
collections of principal the period from and including June 1, 1997 through
and including July 1, 1997 and (ii) for collections of interest the period
from and including June 2, 1997 through and including July 1, 1997. With
respect to each Distribution Date thereafter for collections of both
interest and principal, the period from and including the second day of the
month preceding the month of such Distribution Date to and including the
first day of the month of such Distribution Date.
Electronic Ledger: The electronic master record of home equity
mortgage loans maintained by the Servicer.
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<PAGE>
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 " "A-1" by Standard & Poor's
and "F-1" by Fitch 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, (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 as evidenced
by a letter from each Rating Agency 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 if rated by Fitch, F-1+ for Fitch);
(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
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rated by Standard & Poor's and, if rated by Fitch, in Fitch'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 if rated by
Fitch, Fitch'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 if
rated by Fitch, Fitch'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 either
"AAAm" or "AAAm-G" by Standard & Poor's; and, if rated by Fitch,
"AAA" by Fitch and
(vii) other obligations or securities that are acceptable
to each Rating Agency as an Eligible Investment hereunder and will
not result in a reduction in the then current rating of the
Certificates, as evidenced by a letter to such effect from such
Rating Agency 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
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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 B, 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 basis 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
B, 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.
ERISA Restricted Certificate: Each Subordinate Certificate and each
Residual Certificate.
Excess Funding Amount: As to Loan Group A, $57,836,458.42, and as to
Loan Group B, $14,742,616.72.
Event of Default: As defined in Section 8.01.
Excess Interest: As to any Distribution Date, the excess, if any,
of (x) the Interest Remittance Amount for both Loan Groups over (y) the sum
of (i) the Class Interest Distributions for the Senior Certificates, (ii)
the Class Monthly Interest Amounts for the Subordinate Certificates and
(iii) the Trustee Fee for both Loan Groups.
Excess Overcollateralization Amount: As to any Distribution Date,
the lesser of (i) the Aggregate Principal Amount for such Distribution Date
and (ii) the excess, if any, of (x) the Overcollateralization Amount
(assuming 100% of the Aggregate
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Principal Amount is distributed on the Offered Certificates) over (y) the
Required Overcollateralization Amount.
Expense Fee Rate: 0.50625% per annum.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation.
Final Scheduled Distribution Date: As to any Class of Certificates,
the Distribution Date occurring in the respective month set forth below:
Class Month
----- -----
A-1 May 2012
A-2 June 2012
A-3 November 2019
A-4 August 2024
A-5 June 2027
A-6 June 2027
A-7 June 2027
M-1 June 2027
M-2 June 2027
B-3 June 2027
R-1 June 2027
R-2 June 2027
A-IO June 2000
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.
Fitch: Fitch Investors Service, L.P., or its successor in interest.
Fixed Rate Certificates: Each Class of Certificate Group A
Certificates.
Floating Rate Certificates: The Certificate Group B 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
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<PAGE>
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 A Net Funds Cap: As to any Distribution Date, the weighted
Net Loan Rate of the Mortgage Loans in Loan Group A minus the product of
6.50% and a fraction, the numerator of which is the Notional Amount of the
Class A-IO Certificates and the denominator of which is the Loan Group
Balance of Loan Group A as of the first day of the related Due Period.
Group B Available Funds Cap: As to any Distribution Date, the per
annum rate equal to the excess of (i) the weighted average Loan Rate of the
Mortgage Loans in Loan Group B as of the beginning of the related Due
Period over (ii) the Expense Fee Rate.
Initial Interest Coverage Account: The Initial Interest
Coverage Account established pursuant to Section 4.02.
Initial Interest Deposit: $162,110.64.
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 Proceeds: Proceeds paid by any 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.
Interest Period: For any Distribution Date and (a) the Group A
Certificates, the calendar month preceding the month of such Distribution
Date, calculated on the basis of a 360-day year comprised of twelve 30-day
months and (b) the Group B Certificates, the period from the prior
Distribution Date (or in
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<PAGE>
the case of the first Distribution Date, from the Closing Date) through the day
preceding the current Distribution Date, calculated on the basis of a 360-day
year and the actual number of days elapsed; provided, however, that interest
accrued on the Group B Certificates at the Group B Available Funds Cap shall be
calculated on the basis of a 360-day year comprised of twelve 30-day months.
Interest Rate Adjustment Date: With respect to each Mortgage Loan
in Loan Group B, the date or dates on which the Loan Rate is subject to
adjustment in accordance with the related Mortgage Note.
Interest Remittance Amount: As to either Loan Group and any
Distribution Date, the portion of the Available Funds for such Loan Group
that constitutes amounts in respect of interest.
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 B, 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, a Mortgage
Loan with respect to which the Servicer has determined, in accordance with
the servicing procedures specified herein as of the end of the preceding
Due Period, that all Liquidation Proceeds which it expects to recover with
respect to such Mortgage Loan (including the disposition of the related REO
Property) have been received.
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 Net Liquidation Proceeds realized thereon.
Liquidation Proceeds: Proceeds (including Insurance Proceeds)
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 Balance: Either the Loan Group A Balance or the Loan Group
B Balance, as applicable.
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<PAGE>
Loan Group: Either Loan Group A or Loan Group B, as the context
requires.
Loan Group A: The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group A.
Loan Group A Balance: As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group A as of such date.
Loan Group B: The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group B.
Loan Group B Balance: As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group B as of such date.
Loan Index: With respect to each Interest Rate Adjustment Date for
each Mortgage Loan in Loan Group B 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.
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.
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 B, 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.
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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 B, (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, if any, 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
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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 Expense 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 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 Amount: As to any Distribution Date prior to the Target
Date, an amount equal to 120% of the Class Principal Balance of the Class A-6
Certificates.
OC Floor: An amount equal to 0.50% of the aggregate Original Class
Principal Balance of the Offered Certificates as of the Closing Date (i.e.,
$1, 300,000).
Offered Certificates: All Certificates other than the Class A-IO,
Class R-1 and Class R-2 Certificates.
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,
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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 the Rating Agencies, is reasonably acceptable to it.
Optional Termination Date: The Distribution Date following the Due
Period at the end of which the Pool Balance is less than 10% of the sum of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-Off
Date and the amount deposited in the Funding Account on the Closing Date.
Original Class Principal Balance: As to any Class, the respective
amount set forth below opposite such Class:
Original Class
Class Principal Balance
A-1 $71,000,000
A-2 $24,000,000
A-3 $30,000,000
A-4 $18,375,000
A-5 $16,625,000
A-6 $17,500,000
A-7 $50,000,000
M-1 $13,650,000
M-2 $ 7,150,000
B-3 $11,700,000
R-1 (1)
R-2 (1)
A-IO (1)
- ----------
(1) This Class has no Class Certificate Principal Balance.
Original Credit Support Percentage: As to any Class of Senior
or Subordinate Certificates, the applicable percentage set forth below:
Senior 12.5%
Class M-1 7.25%
Class M-2 4.50%
Class B-3 0%
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Outstanding Class Interest Carryover Shortfall: As to any Class of
Certificates and any Distribution Date, the amount of Class Interest Carryover
Shortfall for such Distribution Date.
Overcollateralization Amount: As to any Distribution Date, the
excess, if any, of (i) the sum of (x) the Pool Balance as of the end of the
related Due Period and (y) the aggregate Excess Funding Amount in the
Funding Account over (ii) the aggregate Class Principal Balance of the
Certificates after giving effect to the distribution of the Aggregate
Principal Amount on such Distribution Date.
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 Offered Certificate, the
percentage obtained by dividing the denomination of such Certificate by the
aggregate of the denominations of all 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%.
Periodic Rate Cap: With respect to each Mortgage Loan in Loan
Group B 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
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<PAGE>
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 Balance: With respect to any date, the aggregate of the
Principal Balances of all Mortgage Loans as of such date.
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
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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 Distribution Amount: As to any Distribution Date, the
sum of (i) the Aggregate Principal Amount minus the Excess Overcollateralization
Amount and (ii) the Subordination Increase Amount.
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.
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 Principal Distribution Amount: As to any Distribution
Date and the Senior Certificates or any Class of Subordinate Certificates,
the lesser of (i) the product of (x) the applicable Distribution Percentage
and (y) the Pool Balance as of the last day of the related Due Period and
(ii) the excess, if any, of (x) the Pool Balance as of the last day of the
related Due Period over (y) the OC Floor.
Prospectus: The base prospectus of the Seller dated June 23, 1997.
Prospectus Supplement: The prospectus supplement dated June 23,
1997, relating to the offering of the Offered 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
Loan Rate net of the Servicing Fee 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
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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 "F-1+ or better in the case of Fitch 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 Fitch 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, the
last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs and (ii) the Floating Rate Certificates,
the Business Day immediately preceding such Distribution Date; provided,
however, that if any Floating Rate Certificate becomes a Definitive
Certificate, the record date for such Floating 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
Floating 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 Floating 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
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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 Floating 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 Offered Certificates and the Class A-IO
Certificates
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.
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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.
Required OC Percentage: As of any date of determination, the
percentage then applicable (taking into account the proviso) in clause
(c)(i) of the definition of Required Overcollateralization Amount (other
than the percentage used to calculate the OC Floor).
Required Overcollateralization Amount: As to any Distribution Date
(a) prior to the Target Date, the product of 1.35% and the aggregate
Original Class Principal Balances of the Offered Certificates as of the
Closing Date; (b) on or after the Target Date but prior to the Stepdown
Date, the product of 1.00% and the aggregate Original Class Principal
Balances of the Offered Certificates as of the Closing Date; (c) on and
after the Stepdown Date, the greater of (i) the product of 2.00% and the
Pool Balance as of the end of the related Due Period and (ii) the OC Floor;
provided, however, that on each Distribution Date during the continuance of
a Cumulative Loss Event, the percentages specified in clause (a), (b) and
(c) above will increase to 2.00%, 1.65% and 3.30%, respectively, and
provided further, that on each Distribution Date during the continuance of
a Trigger Event, the Required Overcollateralization Amount will equal the
Required Overcollateralization Amount in effect as of the Distribution Date
immediately preceding the date on which the Trigger Event first occurred.
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
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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 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,
Class A-7 or Class A-IO Certificate pursuant to Section 6.01.
Senior Certificateholder: The Holder of a Senior Certificate.
Senior Principal Distribution Amount: As to (a) any Distribution
Date prior to the Stepdown Date, 100% of the Principal Distribution Amount
and (b) any other Distribution Date, an amount equal to the excess, if any,
of (i) the aggregate Class Principal Balance of the Senior Certificates
immediately prior to such Distribution Date over (ii) the applicable Pro
Rata Principal Distribution Amount.
Servicer: Delta Funding Corporation, a New York corporation, or
any successor thereto or any successor hereunder.
Servicer Termination Test: The Servicer Termination Test is
failed if Cumulative Net Losses exceed 5.14% of the aggregate Original Class
Principal Balance.
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
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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 by the Servicer, as such list may be amended from
time to time.
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).
Stepdown Date: The later to occur of (x) the Distribution Date in
July 2000, and (y) the first Distribution Date on which the Subordinate
Percentage (assuming 100% of the Aggregate Principal Amount is distributed
on the Offered Certificates) is at least equal to the sum of (i) two times
the Original Credit Support Percentage for the Senior Certificates and (ii)
the Required OC Percentage.
Stepped Up Percentage: 100% minus the percentage equivalent of a
fraction, the numerator of which is two times the Delinquency Amount and
the denominator of which is the Pool Balance as of the
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last day of the related Due Period; provided that the Stepped Up Percentage
shall not be less than 0.
Subordinate Certificates: The Class M-1, Class M-2 and Class B-3
Certificates.
Subordinate Percentage: As to any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the sum of
(i) the aggregate Class Principal Balance of the Subordinate Certificates
and (ii) the Overcollateralization Amount in each case after giving effect
to the distribution of the Principal Distribution Amount on such
Distribution Date, and the denominator of which is the Pool Balance as of
the last day of the related Due Period.
Subordination Deficiency: As to any Distribution Date, the excess,
if any, of (i) the Required Overcollateralization Amount for such
Distribution Date over (ii) the Overcollateralization Amount for such
Distribution Date after giving effect to the distribution of the Aggregate
Principal Amount on such Distribution Date.
Subordination Increase Amount: As to any Distribution Date, the
lesser of (i) the Subordination Deficiency and (ii) the Excess Interest.
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.
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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 the Loan Rate net of the Servicing Fee 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.
Target Date: The 37th Distribution Date.
Trigger Event: A Trigger Event shall have occurred and be
continuing, if at any time, (x) the percentage equivalent of a fraction,
the numerator of which is the Delinquency Amount and the denominator of
which is the Pool Balance as of the last day of the related Due Period
exceeds (y) 50% of the Subordinate Percentage.
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 Tax Matters Person.
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, 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.
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Trustee Fee Rate: The per annum rate at which the Trustee Fee is
calculated.
Voting Rights: The right to vote evidenced by a Certificate as
follows: the Residual Certificates, in the aggregate, shall evidence Voting
Rights equal to the percentage equivalent of a fraction, the numerator of
which is the Required Overcollateralization Amount and the denominator of
which is the Pool Balance; the Offered Certificates, in the aggregate,
shall evidence Voting Rights equal to 100% minus the Voting Rights
evidenced by the Residual Certificates. The Voting Rights allocated to the
Offered 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.
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 Floating
Rate Certificates shall be calculated on the basis of a 360-day year and the
actual number of days elapsed except that if the Group B Available Funds Cap is
used to calculate the Certificate Rate for the Floating Rate Certificates,
interest thereon shall be calculated on the basis of a 360-day year consisting
of twelve 30 day months. The Certificate Rate for the Fixed Rate 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.
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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 June 1, 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 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 1997-2
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
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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 1997-2";
(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;
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(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.
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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
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is authorized to do so or whether any signature thereon is genuine.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges
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. 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 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 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.
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No later than the 30th day following the Closing Date, the Trustee
shall certify to the Seller 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 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 and the Servicer 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 and the Seller, 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 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
Certificateholders may have with respect to such exceptions, and all rights
are reserved with respect thereto.
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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
collectability, 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);
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(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
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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,
the Person discovering such breach shall give prompt written notice to the
other parties. 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, 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
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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
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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;
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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 2.71% and 1.10% of the Initial Mortgage Loans
in Loan Group A and Loan Group B respectively (by Cut-Off Date
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
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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
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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
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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 A
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 B 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;
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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;
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:
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(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
9.12% of the Initial Mortgage Loans in Loan Group A 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;
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40. No more than 21.2% 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; and
44. Each Mortgage Loan in Loan Group B is secured by a
first lien.
(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 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
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Certificateholders in the related Mortgage Loan, the party discovering such
breach shall give prompt written notice to the other parties. 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
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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 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
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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) certificated 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 Basic Principal
Amount from Loan Group A will be used to pay principal on the class 1 described
below in an amount equal to 120% of the amount distributed to the Class A-6
Certificates pursuant to Section 5.01(b) herein and any remaining Basic
Principal Amount from Loan Group A will be used to pay principal on the class 2
described below. The Basic Principal Amount from Loan Group B will be used to
pay principal on the class 3 described below. The Interest Remittance Amount for
Loan Group A will be used (1) to pay principal on the class 1 in amount equal to
120% of the amount allocated to the Class A-6 pursuant to Section 5.01(a)(C)(ii)
(the "A-6 Turbo"), (2) to pay interest to class 1 and (3) to pay interest to
class 2. The amount of the A-6 Turbo will be added to the principal balance of
class 2. The Interest Remittance Amount from Loan Group B will be used to pay
interest on the class 3. All Realized Losses on Loan Group A will be allocated
to class 2 and all Realized Losses on Loan Group B will be allocated to class 3
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)
-----------------------------------------------
Allocation Allocation
REMIC I Initial Pass-Through of of
Regular Interests Balance Rate Principal Interest
- -------------------- ---------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
1 $ 21,000,000 (2) (3) (4)
2 $189,000,000 (2) (3) (5)
3 $ 50,000,000 (6) (3) (5)
</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%.
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(2) The pass-through rate on this REMIC I Regular Interest for any
Distribution Date shall equal the weighted average of the Loan
Rates on the Mortgage Loans in Loan Group A less the sum of the
Servicing Fee Rate and the Trustee Fee Rate.
(3) Principal will be allocated to the Certificate Group A and Certificate
Group B as described in Article 5.
(4) 650 basis points of the interest on this class will be allocated
to the Class A-IO Certificate and interest in excess of 650 basis
points will be allocated to the Certificate Group A (other than
the Class A-IO) and Certificate Group B as described in Article 5.
(5) Interest will be allocated to the Certificate Group A and Certificate
Group B as described in Article 5.
(6) The pass-through rate on this REMIC I Regular Interest for any
Distribution Date shall equal the weighted average of the Loan
Rates on the Mortgage Loans in Loan Group B less the sum of the
Servicing Fee Rate and the Trustee Fee Rate.
(b) REMIC II will be evidenced by the Certificates, other
than the Class R-1 Certificates. The Offered Certificates and the Class
A-IO Certificates 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
June 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
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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") shall be the Seller. 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.
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:
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<PAGE>
(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;
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(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
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<PAGE>
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 June 15, 1997);
(iii) property which secured such Subsequent Mortgage Loan and which has
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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 and the
Rating Agencies 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 June 1, 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;
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(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
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;
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. The Servicer shall give notice to 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
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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 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 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
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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, 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, and (y) 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
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similar to the Mortgage Loans and giving due consideration to 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 of the Opinion of Counsel
required pursuant to Section 7.04, the Trustee 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 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.
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(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 1997-2." 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 (other than interest accrued and due prior to June 15, 1997)
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 June 1, 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
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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
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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;
(vii) to pay to the Seller collections received in respect of
accrued interest on the Mortgage Loans due on or before June 1, 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 Certificateholders.
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
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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 having a General Policy rating of A:VIII or better in Best's Key
Rating Guide 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 Trustee, the Servicer shall cause to be delivered
to the Trustee, 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
and Certificateholders, claims under any such policy in a timely fashion in
accordance with the terms of such policy.
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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 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.
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
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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 Regular 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 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 Trustee prior to acquiring the Mortgaged Property. 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
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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,
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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 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 Trustee and each
Rating Agency upon any change in the basis on which its fiscal year is
determined.
(b) The Servicer shall deliver to the Trustee 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 which is a member of the American Institute
of Certified Public Accountants to furnish a letter or letters to the
Trustee and each Rating Agency 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
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Trustee, 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 Section 3.14.rest 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 1997. The Servicer shall file reports relating to each
instance occurring during the previous
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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) 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
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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 or the
Certificateholders with respect thereto.
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/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 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 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. 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,
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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 that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the original of
such substitution or assumption agreement 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
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received notice of a default or deficiency, monitor such payments to determine
if they are made by the Mortgagor.
ARTICLE IV
Initial Interest Coverage Account
Section 4.01. [Reserved.]
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 1997-2 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 1997-2 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.
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(b) On the Closing Date, the Seller will cause to be deposited the
Initial Interest Deposit in the Initial Interest Coverage Account from the
sale of the Offered Certificates. On the Closing Date, the Seller will
cause to be deposited each Excess Funding Amount in the Funding Account
from the sale of the Offered Certificates.
(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.
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. (a) On each Distribution Date,
the Trustee shall withdraw the Interest Remittance Amount for each
Loan Group from the Distribution Account and apply such amounts in the
following order of priority, in each case, to the extent of the funds
remaining therefor:
A. Loan Group A:
(i) to the Trustee, the Trustee Fee for such Loan Group
and Distribution Date;
(ii) to the Class A-IO Certificates, the applicable
Class Interest Distribution for such Distribution Date;
(iii) concurrently, to the remaining Classes of Senior
Certificates in Certificate Group A, the related Class Interest
Distribution for such Distribution
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Date;
(iv) to the Class A-7 Certificates, up to the amount of
any Current Interest Shortfall; and
(v) the remainder pursuant to clause C. below.
B. Loan Group B:
(i) to the Trustee, the Trustee Fee for such Loan Group
and Distribution Date;
(ii) to the Class A-7 Certificates, the Class Interest
Distribution for such Distribution Date; and
(iii) the remainder pursuant to clause C. below.
C. The Total Remaining Interest:
(i) sequentially, to the Class M-1, Class M-2 and
Class B-3 Certificates, in that order, the related Class Monthly
Interest Amount; and
(ii) an amount up to the amount of the Subordination
Increase Amount for such Distribution Date, as part of the
Principal Distribution Amount.
D. Remaining Interest and Excess Overcollateralization Amount:
(i) sequentially, to the Class M-1, Class M-2 and
Class B-3 Certificates, in that order, an amount equal to the sum
of (a) the related Class Interest Carryover Shortfall and (b) the
related Class Principal Carryover Shortfall; and
(ii) to the Residual Certificates, any remaining interest.
On each Distribution Date, the Class Interest Distribution for
each Class of Senior Certificates in Certificate Group A will be
distributed on an equal priority and any shortfall in the amount required
to be distributed as interest thereon to each such Class will be allocated
between such Classes pro rata based on the amount that would have been
distributed on each such Class in the absence of such shortfall.
(b) On each Distribution Date, the Trustee shall withdraw the
Aggregate Principal Amount and each Excess Funding Amount from the
Distribution Account and shall apply such amount together with the amount,
if any, included in the Principal Distribution Amount pursuant to Section
5.01(a)C.(i) hereof in the following order of priority, in each case, to
the extent of the funds remaining therefor:
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A. Up to the Principal Distribution Amount and the Excess Funding
Amount as follows:
(i) concurrently, (x) to the Class A-7 Certificates, the
Class A-7 Principal Distribution plus, on the initial Distribution
Date, the Excess Funding Amount for Certificate Group B, until
the Class Principal Balance thereof has been reduced to zero, and
(y) to the Senior Certificates in Certificate Group A, the
Adjusted Senior Principal Distribution Amount plus, on the initial
Distribution Date, the xcess Funding Amount for Certificate Group A,
allocated in the following order of priority:
(a) to the Class A-6 Certificates, the
Class A-6 Principal Distribution, until the Class Principal
Balance thereof has been reduced to zero; and
(b) sequentially, to 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 respective Class
Principal Balances thereof have been reduced to zero;
(ii) sequentially, to the Class M-1, Class M-2 and Class B-3
Certificates, in that order, (a) prior to the Stepdown Date, until the
respective Class Principal Balances thereof have been reduced to
zero, and (b) on or after the Stepdown Date, the related Class
Principal Distribution Amount until the respective Class Principal
Balances thereof have been reduced to zero;
B. To the Residual Certificates, any remaining principal.
Notwithstanding the priority set forth in clause A. (i) above, if
the aggregate Class Principal Balance of the Subordinate Certificates is
reduced to zero, the Senior Principal Distribution Amount shall be
distributed concurrently to each Class of Senior Certificates on a pro rata
basis in accordance with their respective Class Principal Balances.
(d) 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 Holders of Offered Certificates, by
check or money order mailed to such Certificateholder at the address
appearing in the Certificate Register, or, upon written request by a Holder
of an Offered Certificate delivered to the Trustee at least five
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Business Days prior to such Record Date, by wire transfer (but only if such
Certificateholder is the Depository or such Certificateholder owns of record one
or more Offered Certificates aggregating at least $1,000,000 Original Class
Certificate Principal Balance), and, in the case of Holders of Class A-IO 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.
(e) 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.
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 Fee 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
and the Seller by telecopy, with a hard copy thereof to be delivered on the
succeeding Distribution Date, a confirmation of the items in
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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 aggregate amount of the distribution to each Class of
Certificates on such Distribution Date;
(iii) the amount of the distribution set forth in paragraph (i)
above in respect of interest and the amount thereof in respect of
any Class Interest Carryover Shortfall, and the amount of any
Class Interest Carryover Shortfall remaining;
(iv) the amount of the distribution set forth in paragraph (i)
above in respect of principal and the amount thereof in respect of
the Class Principal Carryover Shortfall, and any remaining Class
Principal Carryover Shortfall;
(v) the amount of Excess Interest for each Loan Group paid as
principal;
(vi) the Servicing Fee;
(vii) the Loan Group Balance of each Loan Group and the Pool
Balance, in each case as of the close of business on the last day
of the preceding Due Period;
(viii) the Class Principal Balance of each Class of Certificates
after giving effect to payments allocated to principal above;
(ix) the Overcollateralization Amount and the Required
Overcollateralization Amount as of the close of business on the
Distribution Date, after giving effect to distributions of principal
on such Distribution Date;
(x) whether a Trigger Event has occurred and is continuing;
(xi) The number and Principal Balances of all Mortgage Loans
that were the subject of Principal Prepayments during the Due Period;
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(xii) The amount of all Curtailments that were received during
the Due Period;
(xiii) The principal portion of all Monthly Payments received
during the Due Period;
(xiv) The interest portion of all Monthly Payments received on
the Mortgage Loans during the Due Period;
(xv) The amount of the Monthly Advances and the Compensating
Interest payment to be made on the Determination Date;
(xvi) The amount to be distributed to the Class R
Certificateholders for the Distribution Date;
(xvii) The weighted average remaining term to maturity of the
Mortgage Loans and the weighted average Loan Rate;
(xviii) The amount of all payments or reimbursements to the
Servicer pursuant to Sections 3.03(ii) and (vi);
(xix) The number of Mortgage Loans outstanding at the beginning
and at the end of the related Due Period;
(xx) 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 Balance;
(xxi) 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; and
(xxii) the calculation of the Cumulative Loss Event and the
Servicer Termination Test.
The Trustee shall forward such report to the Servicer, the Seller,
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. The Trustee may fully rely upon and
shall have no liability with
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respect to information provided by the Servicer. The Servicer shall calculate
all items in clauses (i) - (xxiii) 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),
(iii), (iv) and (vi) 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 Regular 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 (iii) and (iv) 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 Regular 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.
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(e) The Servicer and the Trustee shall furnish to each
Certificateholder (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 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 may
reasonably require; provided that the Servicer and the Trustee shall be
entitled to be reimbursed by such Certificateholder 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 to the Rating Agencies. 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 1997-2." 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
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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).
(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.
Section 5.06. Allocation of Losses. On each Distribution Date, the
Servicer shall determine the total of the Applied Realized Loss Amounts for
such Distribution Date. The Applied
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Realized Loss Amount for any Distribution Date shall be applied by reducing the
Class Principal Balance of each Class of Subordinate Certificates beginning with
the Class of Subordinate Certificates then outstanding with the highest
numerical Class designation, in each case until the respective Class Principal
Balance thereof is reduced to zero. Any Applied Realized Loss Amount allocated
to a Class of Certificates shall be allocated among the Certificates of such
Class in proportion to their respective Percentage Interests.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. Each of the Senior Certificates and the
Residual Certificates shall be substantially in the forms set forth in Exhibits
A and B 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 Offered
Certificates and the Class A-IO Certificates shall be initially evidenced by one
or more certificates representing a fraction of the applicable Original Class
Principal Balance or Notional Amount, as applicable, 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 Class of the Offered Certificate may be
in a different denomination so that the sum of the denominations of all
outstanding Offered Certificates shall equal the aggregate Original Class
Principal Balance or Notional Amount, as applicable. The 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 Offered Certificates and the Class A-IO
Certificates
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shall be Book-Entry Certificates. The 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
A-IO 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
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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 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 Offered 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 Offered Certificates by the
Depository, accompanied by registration instructions from the Depository
for registration, the Trustee shall at the Seller's expense, 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
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Servicer, any Paying Agent and the Seller shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
(d) Except with respect to the initial transfer of the Class A-I0
or Residual Certificates by the Seller, no transfer, sale, pledge or other
disposition of any Class A-I0 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 A-IO or
Residual Certificate desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trustee and the Seller 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. Each Certificate Owner of a
Class A-IO Certificate will be deemed to have represented, by virtue of the
acquisition of such Certificate Owner's Class A-IO Certificate that such
Certificate Owner is a "qualified institutional buyer" as defined in Rule
144A.
No transfer of an ERISA Restricted 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, Exhibit N-2 or N-3, 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
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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 ERISA
Restricted 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 ERISA Restricted 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, (i) the representation required by clause (i) or (ii)
above with respect to any ERISA-Restricted Certificate that is a Book-Entry
Certificate shall be deemed to have made by the Certificate Owner by virtue of
such Certificate Owner's acquisition of such Certificate and (ii) any purported
transfer of an ERISA Restricted 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.
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(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.
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(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
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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, 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.
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
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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.
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 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
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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. The Servicer may 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.
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
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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; and (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 ratings of the Offered Certificates; 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.
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 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.
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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.
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%;
(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
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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) the Servicer Termination Test is failed;
(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 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) and (v), above, the
Trustee shall, at the direction of the Holders of each Class of Offered
Certificates evidencing Voting Rights aggregating not less than 51% 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 and the Seller. On or
after the receipt by the Servicer of such written
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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 the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to
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the Offered 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 (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
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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 Seller,
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 Majority Certificateholders 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. 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 and to each Rating Agency.
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
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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 Holders 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 Majority Certificateholders
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
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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 Holders of
Offered Certificates evidencing Percentage Interests
aggregating not less than 51% 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, or the
Holders of Offered 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;
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(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 pursuant to the provisions of this Agreement,
unless such Certificateholders 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 Holders of Certificates evidencing Percentage
Interests aggregating not less than 51%; 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,
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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;
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(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 100% and 125% of the
Prepayment Assumption with respect to Certificate Group A and
Certificate Group B, 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
residual interests to transferees that
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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
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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 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.
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(xiv) The Trustee agrees to indemnify the Trust, 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 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
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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 (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 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
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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 and each Rating Agency.
Upon receiving such notice of resignation, the Seller shall promptly
appoint a successor Trustee (approved in writing by 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 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 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 or the Servicer may remove the
Trustee. If the Seller or the Servicer removes the Trustee under the
authority of the immediately preceding sentence, the Seller shall promptly
appoint a successor Trustee by written instrument,
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in duplicate, copies of which instrument shall be delivered to the Trustee so
removed and to the successor Trustee.
The Holders of Certificates evidencing Voting Rights aggregating
over 50% of all Voting Rights may at any time remove the Trustee by written
instrument or instruments delivered to the Servicer, the Seller and the
Trustee; and the Seller 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.
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 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.
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
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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.
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 shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved
by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of
the Trust, and to vest in such Person or Persons, in such capacity and for
the benefit of the Certificateholders 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 shall have
the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 9.06 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
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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 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 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
Seller 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
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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
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 in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Servicer, 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 and any requesting Certificateholder with its most recent
financial statements. The Trustee shall cooperate fully with the Seller,
the Servicer and such Certificateholder and shall make available to the
Seller, the Servicer, 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 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 proceed to protect and enforce its rights and
the rights of the Certificateholders 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 Trustee,
being advised by counsel, shall deem most effectual to protect and enforce
any of the rights of the Trustee and the Certificateholders.
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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) and
(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 Trustee. Notwithstanding the foregoing, in
no event shall the trust created hereby continue beyond the expiration of
21 years from the death of the last surviving descendant 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 plus (y) the lesser of (A) the
appraised value of any REO Property as determined by the higher of two
appraisals completed by two independent appraisers selected by the Servicer
and at the Servicer's expense and (B) the Principal Balance of the Mortgage
loan related to such REO Property plus (z) in each case, 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
(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.
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(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 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) 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
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option as provided in Section 10.01, the Trust shall be terminated in accordance
with the following additional requirements, unless the Trustee shall 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 Certificates
the amounts payable pursuant to Section 5.01 and (C) to the Class
R-1 Certificateholders, all cash on hand after such payments
(b) By their acceptance of the 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 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.
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, (i)to cure any ambiguity, (ii)to
correct any defective provisions or to correct or supplement any provisions
herein that may be inconsistent with
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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 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 Offered Certificates (it being understood that,
after obtaining the ratings in effect on the Closing Date, neither the Trustee,
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 Offered
Certificates.
This Agreement also may be amended from time to time by the
Seller, the Servicer and the Trustee, 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), 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 (i)
reduce in any manner the amount of, or delay the timing of, payments on the
Certificates which are required to be made on any Certificate without the
consent of the Holder of such Certificate or (ii) 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
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amendment shall furnish the Trustee 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 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.
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
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of Certificateholders.
The Certificateholders 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.
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
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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 Offered Certificates evidencing
Voting Rights aggregating not less than 51% of all the Voting Interests
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.
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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) Delta Financial Corporation, 1000 Woodbury Road, Suite
200 Woodbury, NY 11797, (b) in the case of the Trustee, at the Corporate
Trust Office, (c) in the case of Fitch Investors Service, L.P., One State
Street Plaza, New York, New York 10004 (d) in the case of Standard &
Poor's, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Residential Mortgage Group, or (e) 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 Fitch. 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 Fitch 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
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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 Seller or the Servicer
without the prior written consent of the 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 Trustee.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be
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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, and their respective successors and permitted assigns.
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.
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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/
-----------------------------
Title: Senior Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By/s/
--------------------------------
Title: Assistant Vice President
<PAGE>
State of New York )
) ss.:
County of New York )
On the 26th day of June, 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 Senior
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.
-----------------------
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York)
On the 26th day of June, 1997 before me, a notary public
in and for the State of New York, personally appeared Michelle Roos, known
to me who, being by me duly sworn, did depose and say that she is the
____________________ 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.
----------------------------
Notary Public
[Notarial Seal]
