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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) March 31, 1998
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Delta Funding Corporation
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(Exact name of registrant as specified in its charter)
New York 333-3418 11-2609517
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
1000 Woodbury Road, Woodbury, New York 11797
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (516) 364-8500
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N/A
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(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 (i) a
copy of the Pooling and Servicing Agreement in connection with the issuance by
Delta Funding Home Equity Loan Trust 1998-1 of Home Equity Loan Asset-Backed
Certificates, Series 1998-1, and (ii) to file a copy of the Computational
Materials (as defined below) prepared by Lehman Brothers Inc., as an
underwriter, in connection with the issuance by Delta Funding Home Equity Loan
Trust 1998-1 of Home Equity Loan Asset-Backed Certificates, Series 1998-1. The
term "Computational Materials" shall have the meaning given in the No-Action
Letter of May 20, 1994 issued by the Securities and Exchange Commission (the
"SEC") to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co.
Incorporated and Kidder Structured Asset Corporation, as made applicable to
other issuers and underwriters by the Commission in response to the request of
the Public Securities Association dated May 24, 1994, and the supplemented in
the No-Action Letter of February 17, 1995 issued by the SEC to the Public
Securities Association.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1 Pooling and Servicing Agreement.
99.1 Computational Materials.
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
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Name: Richard Blass
Title: Senior Vice President
Dated: April 14, 1998
3
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EXHIBIT INDEX
Exhibit Page
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4.1 Pooling and Servicing Agreement
99.1 Computational Materials
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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
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of February 28, 1998
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Home Equity Loan Asset-Backed Certificates
Series 1998-1
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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..........................................36
ARTICLE II
Conveyance of Initial Mortgage Loans; Original Issuance of
Certificate Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans...........................37
Section 2.02. Acceptance by Trustee..........................................41
Section 2.03. Representations and Warranties Regarding the Seller
and the Servicer.............................................43
Section 2.04. Representations and Warranties of the Seller
Regarding the Mortgage Loans.................................46
Section 2.05. Substitution of Mortgage Loans.................................55
Section 2.06. Execution and Authentication of Certificates...................57
Section 2.07 Designation of Interests in REMIC..............................57
Section 2.08. Designation of Startup Day of REMIC............................59
Section 2.09. REMIC Certificate Maturity Date................................59
Section 2.10. Tax Returns and Reports to Certificateholders..................59
Section 2.11. Tax Matters Person.............................................60
Section 2.12. REMIC Related Covenants........................................60
Section 2.13. Subsequent Transfers...........................................65
Section 2.14. The Custodian..................................................67
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Servicer...................................................68
Section 3.02. Collection of Certain Mortgage Loan Payments...................71
Section 3.03. Withdrawals from the Collection Account........................73
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses.....................................................74
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy............75
Section 3.06. Management and Realization Upon Defaulted Mortgage
Loans........................................................75
Section 3.07. Trustee to Cooperate...........................................77
Section 3.08. Servicing Compensation; Payment of Certain Expenses
by Servicer..................................................78
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Page
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Section 3.09. Annual Statement as to Compliance..............................79
Section 3.10. Annual Servicing...............................................79
Section 3.11. Access to Certain Documentation and Information
Regarding the Mortgage Loans.................................79
Section 3.12. Maintenance of Certain Servicing Insurance Policies............79
Section 3.13. Reports to the Securities and Exchange Commission..............80
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..............................80
Section 3.15. Advances by the Servicer.......................................80
Section 3.16. Optional Purchase of Defaulted Mortgage Loans..................81
Section 3.17. Superior Liens.................................................81
Section 3.18. Assumption Agreements..........................................82
Section 3.19. Payment of Taxes, Insurance and Other Charges..................82
ARTICLE IV
Initial Interest Coverage Account
Section 4.01. [Reserved].....................................................83
Section 4.02. Initial Interest Coverage Account and Pre-Funding
Account......................................................83
ARTICLE V
Payments and Statements to Certificateholders; Rights of
Certificateholders
Section 5.01. Distributions..................................................85
Section 5.02. Compensating Interest..........................................90
Section 5.03. Statements.....................................................90
Section 5.04. Distribution Account...........................................94
Section 5.05. Investment of Accounts.........................................95
Section 5.06. Allocation of Losses...........................................96
Section 5.07 LIBOR Carryover Reserve Fund...................................96
ARTICLE VI
The Certificates
Section 6.01. The Certificates...............................................97
Section 6.02. Registration of Transfer and Exchange of
Certificates.................................................99
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.............104
Section 6.04. Persons Deemed Owners.........................................104
Section 6.05. Appointment of Paying Agent...................................104
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Page
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ARTICLE VII
The Seller and the Servicer
Section 7.01. Liability of the Seller and the Servicer......................105
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller or the Servicer..................105
Section 7.03. Limitation on Liability of the Servicer and Others............105
Section 7.04. Servicer Not to Resign........................................106
Section 7.05. Delegation of Duties..........................................107
Section 7.06. Indemnification of the Trust by the Servicer..................107
ARTICLE VIII
Default
Section 8.01. Events of Default.............................................108
Section 8.02. Trustee to Act; Appointment of Successor......................110
Section 8.03. Waiver of Defaults............................................111
Section 8.08. Notification to Certificateholders............................111
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee.............................................111
Section 9.02. Certain Matters Affecting the Trustee.........................113
Section 9.03. Trustee Not Liable for Certificates or Mortgage
Loans.......................................................115
Section 9.04. Trustee May Own Certificates..................................116
Section 9.05. Servicer to Pay Trustee Fees and Expenses.....................116
Section 9.06. Eligibility Requirements for Trustee..........................117
Section 9.07. Resignation or Removal of Trustee.............................117
Section 9.08. Successor Trustee.............................................118
Section 9.09. Merger or Consolidation of Trustee............................119
Section 9.10. Appointment of Co-Trustee or Separate Trustee.................119
Section 9.11. Limitation of Liability.......................................120
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates; Inspection....................................121
Section 9.13. Suits for Enforcement.........................................121
ARTICLE X
Termination
Section 10.01. Termination..................................................122
Section 10.02. Additional Termination Requirements..........................123
ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment....................................................124
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Page
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Section 11.02. Recordation of Agreement.....................................126
Section 11.03. Limitation on Rights of Certificateholders...................126
Section 11.04. Governing Law................................................127
Section 11.05. Notices......................................................128
Section 11.06. Severability of Provisions...................................129
Section 11.07. Assignment...................................................129
Section 11.08. Certificates Nonassessable and Fully Paid....................129
Section 11.09. Third-Party Beneficiaries....................................130
Section 11.10. Counterparts.................................................130
Section 11.11. Effect of Headings and Table of Contents.....................130
EXHIBIT A - FORM OF FIXED RATE CERTIFICATES..............................A-1
EXHIBIT A-1- FORM OF CLASS A CERTIFICATES...............................A-1-1
EXHIBIT A-2- FORM OF CLASS M CERTIFICATES...............................A-2-1
EXHIBIT A-3- FORM OF CLASS B CERTIFICATES...............................A-3-1
EXHIBIT A-4- FORM OF NOTIONAL AMOUNT CERTIFICATES.......................A-4-1
EXHIBIT B - FORM OF ADJUSTABLE RATE CERTIFICATES.........................B-1
EXHIBIT B-1- FORM OF CLASS A CERTIFICATES...............................B-1-1
EXHIBIT B-2- FORM OF CLASS M CERTIFICATES...............................B-2-1
EXHIBIT B-3- FORM OF CLASS B CERTIFICATES ..............................B-3-1
EXHIBIT B-4- FORM OF CLASS R CERTIFICATE................................B-4-1
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]
EXHIBIT K - FORM OF CUSTODIAL AGREEMENT..................................K-1
EXHIBIT L - DELINQUENCY AND LOSS INFORMATION............................ L-1
EXHIBIT M - FORM OF TRANSFEROR CERTIFICATE ..............................M-1
EXHIBIT N-1- FORM OF INVESTMENT LETTER [NON-RULE 144A]..................N-1-1
EXHIBIT N-2- FORM OF RULE 144A LETTER ..................................N-2-1
EXHIBIT O - FORM OF INITIAL CERTIFICATION................................O-1
EXHIBIT P - FORM OF TRUSTEE FINAL CERTIFICATION..........................P-1
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<PAGE>
This Pooling and Servicing Agreement, dated as of February 28,
1998, among Delta Funding Corporation, as Seller and Servicer (the
"Seller" and the "Servicer", respectively), and The First National Bank
of Chicago, 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 Pre-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.
Adjustable Rate Certificates: Class A-1F, Class M-1F, Class
M-2F, Class B-1F, Class A-2A, Class M-1A, Class M-2A and Class B-1A
Certificates.
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.
Agreement: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
Allocated Pre-Funded Amount: As to either Certificate Group and
any date of determination, the portion, if any, of the Pre-Funded Amount
allocable to such Certificate Group and on deposit in the Pre-Funding
Account.
Applicable Multiplier: As to Certificate Group F, 2; and as to
Certificate Group A, 2.5.
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Applied Realized Loss Amounts: As to any Distribution Date and
Certificate Group, an amount equal to the excess, if any, of (i) the
aggregate of the Class Principal Balances of the Offered Certificates in
such Certificate Group, after giving effect to all distributions on such
Distribution Date over (ii) the related Loan Group Balance as of the last
day of the related Due Period.
Appraised Value: The appraised value of the Mortgaged Property
based upon the appraisal made by or for the originator at the time of the
origination of the related Mortgage Loan.
Assignment of Mortgage: With respect to any Mortgage, an
assignment, notice of transfer or equivalent instrument, in recordable
form, sufficient under the laws of the jurisdiction in which the related
Mortgaged Property is located to reflect the sale of the Mortgage to the
Trustee.
Authorized Newspaper: A newspaper of general circulation in the
Borough of Manhattan, The City of New York, printed in the English
language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
Available Funds: As to 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; (v) on the Distribution
Dates during and immediately following the Funding Period, amounts from
the Initial Interest Coverage Account in respect of the Capitalized
Interest Requirement for the related Classes of Offered Certificate; and
(vi) on the Distribution Date at or immediately following the end of the
Funding Period, any related Excess Funding Amount.
Available Funds Cap. As to either Loan Group and any
Distribution Date, a rate equal to the lesser of (A) the applicable
Maximum Rate and (B) the rate equal to (i) the weighted average Net Loan
Rate of the Mortgage Loans in the applicable Loan Group minus (ii) the
product of (x) the Certificate Rate on the
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Class of Notional Amount Certificates related to such Loan Group and (y) a
fraction, the numerator of which is the Notional Amount of such Class of
Notional Amount Certificates immediately prior to such Distribution Date, and
the denominator of which is the Loan Group Balance of the related Loan Group as
of the first day of the related Due Period.
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.
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.
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Capitalized Interest Requirement: With respect to each Pre-Funding
Distribution Date and either Certificate Group, (A) the sum of (i) the amount
of interest accruing during the related Interest Period for the Classes of
Offered Certificates in such Certificate Group (other than the related Notional
Amount Certificates) at the weighted average Certificate Rate thereof on the
related Allocated Pre-Funded Amount as of the first day of the related Due
Period; and (ii) interest at the Certificate Rate for the applicable Class of
Notional Amount Certificates on an amount equal to the product of (x) the
applicable Allocated Pre-Funded Amount and (y) a fraction the numerator of
which is the Notional Amount of such Class of Notional Amount Certificates and
the denominator of which is the Loan Group Balance of the related Loan Group as
of the first day of the relate Due Period minus (B) 30 days' interest on each
Subsequent Mortgage Loan with a Due Date on or before May 1, 1998.
Certificate: Any Offered Certificate or Residual Certificate.
Certificate Group: Either Certificate Group A or Certificate Group F,
as the context requires.
Certificate Group A: The Class A-1A, Class A-2A, Class IOA, Class
M-1A, Class M-2A and Class B-1A Certificates.
Certificate Group F: The Class A-1F, Class A-2F, Class A-3F, Class
A-4F, Class A-5F, Class A-6F, Class IOF, Class M-1F, Class M-2F and Class B-1F
Certificates.
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 Adjustable 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 Index will be
the Certificate Index
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applicable to the preceding Distribution Date. On the second LIBOR Business Day
immediately preceding each Distribution Date, the Trustee shall determine the
Certificate Index for the Interest Period commencing on such Distribution Date
and inform the Servicer of such rate.
Certificate Margins: As to such Class of Adjustable Rate Certificates,
the applicable amount set forth below:
Certificate Margin
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Class (1) (2)
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A-1F 0.11% 0.11%
M-1F 0.55% 0.825%
M-2F 0.72% 1.080%
B-1F 1.45% 2.175%
A-2A 0.21% 0.420%
M-1A 0.45% 0.675%
M-2A 0.59% 0.885%
B-1A 1.26% 1.890%
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(1) Prior to or on the Optional Termination Date.
(2) After the Optional Termination Date.
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
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A-1F (1)
A-2F 6.310%(2)
A-3F 6.330%(2)
A-4F 6.550%(2)
A-5F 7.040%(2)(3)
A-6F 6.520%(2)
IOF 7.000%
M-1F (1)
M-2F (1)
B-1F (1)
A-1A 6.280%(2)
A-2A (1)
IOA 6.800%
M-1A (1)
M-2A (1)
B-1A (1)
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(1) As to any Distribution Date, a per annum rate equal to the lesser of (x)
the sum of the Certificate Index and the applicable Certificate Margin and (y)
the applicable Available Funds Cap.
(2) As to any Distribution Date, the lesser of (x) the fixed rate set forth and
(y) the applicable Available Funds Cap.
(3) The fixed rate will be increased by 75 basis points if this Class is
outstanding after the Optional Termination Date.
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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<PAGE>
Class A-1A Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit B-1 and
designated as a Class A-1A Certificate pursuant to Section 6.01.
Class A-2A Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit B-1 and
designated as a Class A-2A Certificate pursuant to Section 6.01.
Class A-1F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-1F Certificate pursuant to Section 6.01.
Class A-2F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-2F Certificate pursuant to Section 6.01.
Class A-3F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-3F Certificate pursuant to Section 6.01.
Class A-4F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-4F Certificate pursuant to Section 6.01.
Class A-5F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-5F Certificate pursuant to Section 6.01.
Class A-6F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-1 and
designated as a Class A-6F Certificate pursuant to Section 6.01.
Class A-6F Percentage: As to any Distribution Date, the applicable
percentage set forth below:
Distribution Dates Percentages
------------------ -----------
April 1998 - March 2001 0%
April 2001 - March 2003 45%
April 2003 - March 2004 80%
April 2004 - March 2005 100%
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<PAGE>
April 2005 and thereafter 300%
Class A-6F Principal Distribution: As to any Distribution Date, the
product of (i) the applicable Class A-6F Percentage and (ii) the product of (x)
the related Senior Principal Distribution Amount and (y) a fraction, the
numerator of which is the Class Principal Balance of the Class A-6F
Certificates immediately prior to such Distribution Date, and the denominator
of which is the aggregate Class Principal Balance of the Senior Certificates in
Group F immediately prior to such Distribution Date.
Class B-1A Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit B-3 and
designated as a Class B-1A Certificate pursuant to Section 6.01.
Class B-1F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-3 and
designated as a Class B-1F 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 IOA Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-4 and
designated as a Class IOA Certificate pursuant to Section 6.01.
Class IOF Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-4 and
designated as a Class IOF Certificate pursuant to Section 6.01.
Class M-1A Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached
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<PAGE>
hereto as Exhibit B-2 and designated as a Class M-1A Certificate pursuant to
Section 6.01.
Class M-2A Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit B-2 and
designated as a Class M-2A Certificate pursuant to Section 6.01.
Class M-1F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-2 and
designated as a Class M-1F Certificate pursuant to Section 6.01.
Class M-2F Certificate: Any Certificate executed and authenticated by
the Trustee substantially in the form attached hereto as Exhibit A-2 and
designated as a Class M-2F Certificate pursuant to Section 6.01.
Class Monthly Interest Amount: As to any Distribution Date and Class
of Regular Certificates, interest for the related 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, other than the Notional Amount 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 from the related Principal Distribution Amount 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 in a Certificate Group and (a) any Distribution
Date prior to the related Stepdown Date or on which a Trigger Event for
such Certificate Group is in effect and continuing, zero, and (b) any
other Distribution Date, the excess of (i) an amount equal to the sum of
(x) the Class Principal Balance (after giving effect to distributions of
the related Principal Distribution Amount on such Distribution Date) of
each Class of Certificates in such Certificate Group with a higher
payment priority and (y) the Class Principal Balance of such Class of
Subordinate 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
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Principal Balance of such Class of Subordinate Certificates on such
Distribution Date and (y) the amount of such reductions 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-4 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-4.
Class R Certificateholder: The Holder of a Residual Certificate.
Closing Date: March 31, 1998.
Code: The Internal Revenue Code of 1986, as the same may be amended
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Certificateholders pursuant to Section
3.02(b). The Collection Account shall be an Eligible Account.
Combined Loan-to-Value Ratio or CLTV: With respect to any Mortgage
Loan, the sum of the original principal balance of such Mortgage Loan and the
outstanding principal balance of the related 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.
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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 One First National Plaza, Suite 0126,
Chicago, Illinois 60670-0126, Attention: Corporate Trust Service Division
Corresponding Class: As indicated in Section 2.07 hereof.
Cumulative Loss Event: For Certificate Group A and any Distribution
Date in the applicable period below, Cumulative Net Losses for such Certificate
Group exceed the applicable percentage of the aggregate Original Class
Principal Balances of the Offered Certificates in such Certificate Group:
Number of
Distribution Dates Certificate Group A
- ------------------ -------------------
0-36 1.70%
37-48 2.80%
49-60 3.50%
61-72 4.00%
73-84 4.30%
85 and thereafter 4.50%
Cumulative Net Losses: As to either Certificate Group and as of any
date of determination, the aggregate of the Liquidation Loan Losses for such
Certificate Group incurred from the Cut-Off Date through the end of the
calendar month preceding such date of determination.
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.
Custodial Agreement: The Custodial Agreement, as amended and
supplemented from time to time, dated as of February 28, 1998, by and among the
Trustee, Delta, and the Custodian in the form set forth as Exhibit Q hereto.
Custodian: Bankers Trust Company of California, N.A.
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Cut-Off Date: The close of business on February 28, 1998, except that
the Cut-Off Date for any Mortgage Loan originated after February 28, 1998, will
be the date of origination of such Mortgage Loan.
Cut-Off Date Pool Principal Balance: $386,788,571.39.
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 I: As to either Certificate Group, the aggregate
Principal Balance of the Mortgage Loans that are 90 or more days delinquent,
including Mortgage Loans in foreclosure and REO Properties.
Delinquency Amount II: As to Certificate Group A and any date of
determination, the sum of (i) 50% of the aggregate Principal Balance of
the Mortgage Loans in the related Loan Group that are 60-89 days
delinquent, (ii) 75% of the aggregate Principal Balance of the Mortgage
Loans in the related Loan Group that are 90 to 119 days delinquent
(excluding Mortgage Loans in foreclosure and REO Properties) and (iii)
100% of the aggregate Principal Balance of the Mortgage Loans in the
related Loan Group that are 120 or more days delinquent or in foreclosure
and REO Properties.
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.
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Distribution Account: The account established and maintained by the
Trustee pursuant to Section 5.04. The Distribution Account shall be an Eligible
Account.
Distribution Date: The twenty-fifth day of each month, or, if such day
is not a Business Day, then the next Business Day, beginning in April 1998.
Distribution Percentage: As to the Senior Certificates in a
Certificate Group: 100% minus the product of (i) the Applicable Multiplier and
(ii) the sum of the applicable Original Credit Support Percentage and the
applicable Required OC Percentage as of the Cut-Off Date. As to any Class of
Subordinate Certificates in a Certificate Group, 100% minus the product of (i)
the Applicable Multiplier and (ii) the sum of the applicable Original Credit
Support Percentage and the applicable Required OC Percentage as of the Cut-Off
Date.
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 Distribution Date for
collections of principal and interest the period from and including March 1,
1998 through and including April 1, 1998. 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.
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" by
S&P and if rated by Fitch, rated at least "A", and that the deposits in
such account or accounts are fully insured to the maximum extent provided
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
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<PAGE>
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 "A1" for S&P 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 rated by S&P and, if
rated by Fitch, in Fitch's 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 S&P 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 S&P and if rated by Fitch, Fitch's in
their respective highest rating category of long term unsecured debt;
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<PAGE>
(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 AAA by S&P;
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 of more than one Mortgage
Loan for a Defective Mortgage Loan, an aggregate Principal Balance), not
in excess of and not less than 95% of 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 A, 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
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<PAGE>
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 A, 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 either Certificate Group the related
Allocated Pre-Funded Amount remaining on deposit in the Pre-Funding Account at
the end of the Funding Period.
Event of Default: As defined in Section 8.01.
Excess Delinquency Event: For Certificate Group A and any Distribution
Date in the applicable period below, the Delinquency Amount II, the Modified I
Delinquency Amount or the Modified II Delinquency Amount, as applicable, equals
or exceeds 2.50%:
Number of
Distribution Dates
- ------------------
0-36 Delinquency Amount II
37-48 Delinquency Amount II
49-60 Modified I Delinquency Amount
61-72 Modified I Delinquency Amount
73-84 Modified II Delinquency Amount
85 and thereafter Modified II Delinquency Amount
Excess Interest: As to either Loan Group and any Distribution Date the
excess, if any, of (x) the Interest Remittance Amount for such Loan Group over
(y) the sum of (i) the Class Interest Distributions for the related Senior
Certificates, (ii) the Class Monthly Interest Amounts for the related
Subordinate Certificates and (iii) the Trustee Fee for such Loan Group.
Excess Overcollateralization Amount: As to either Certificate Group
and any Distribution Date, the lesser of (i) the related Basic Principal Amount
for such Distribution Date and (ii) the excess, if any, of (x) the related
Overcollateralization Amount (assuming 100% of the applicable Basic Principal
Amount is
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<PAGE>
distributed on the related Offered Certificates) over (y) the related
Required Overcollateralization Amount.
Expense Fee Rate: 0.5028% 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:
Final Scheduled Final Scheduled
Class Distribution Date Class Distribution Date
A-1F October 25, 2017 M-2F May 25, 2030
A-2F August 25, 2019 B-1F May 25, 2030
A-3F June 25, 2026 A-1A May 25, 2030
A-4F March 25,2027 A-2A May 25, 2030
A-5F May 25, 2030 I0A March 25, 2001
A-6F May 25, 2030 M-1A May 25, 2030
IOF March 25, 2001 M-2A May 25, 2030
M-1F May 25, 2030 B-1A May 25, 2030
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 IBCA, Inc., or its successor in interest.
Fixed Rate Certificates: The Class A-1A Certificates, the Class
IOA Certificates and the Group F Certificates, other than the Class A-1F
Certificates.
FNMA: The Federal National Mortgage Association.
Foreclosure Profits: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
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Funding Period: The period from the Closing Date until the earliest of
(i) the date on which the amount on deposit in the Pre-Funding Account is less
than $100,000, (ii) the date on which an Event of Default occurs under the
Agreement or (iii) the close of business on April 30, 1998.
Group A Certificates: The Class A-1A, Class A-2A, Class IOA, Class
M-1A, Class M-2A and Class B-1A Certificates.
Group F Certificates: The Class A-1F, Class A-2F, Class A-3F, Class
A-4F, Class A-5F, Class A-6F, Class IOA, Class M-1F, Class A-2F and Class B-1F
Certificates.
Initial Interest Coverage Account: The Initial Interest Coverage
Account established pursuant to Section 4.02.
Initial Interest Deposit: An amount equal to 30 days' interest at the
weighted average initial Certificate Rate of the Offered Certificates
(including the Notional Amount Certificates) on the original Principal Balance
of each Initial Mortgage Loan with a first Due Date after the initial Due
Period, i.e., $394,719.55.
Initial Mortgage Loan Schedule: The schedule of Initial Mortgage Loans
included in the Trust as of the Closing 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 the Fixed Rate Certificates, the calendar
month preceding the month of the applicable Distribution Date, calculated
on the basis of a 360-day year comprised of twelve 30-day months. For the
Adjustable Rate Certificates, the period from the prior Distribution Date
(or, in the case of the first Distribution Date, from the Closing Date)
through the day preceding the current Distribution Date, calculated on
the basis
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<PAGE>
of a 360-day year and the actual number of days elapsed in such period;
provided, however, that interest accrued on any Class of Certificates at
the applicable 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 A, the date or dates on which the Loan Rate is subject
to adjustment in accordance with the related Mortgage Note.
Interest Rate Cap Agreement: The interest rate cap contract
referred to in the last paragraph of Section 2.12(f) and all related
provisions of this Agreement.
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.
LIBOR Carryover: As to any Class of Adjustable Rate Certificates
other than the Class A-1F Certificates, and any Distribution Date, the
sum of (i) the excess, if any, of the related Class Monthly Interest
Amount calculated on the basis of the Certificate Index plus the
applicable Certificate Margin over the related Class Monthly Interest
Amount for such Distribution Date (ii) any LIBOR Carryover remaining
unpaid from prior Distribution Dates and (iii) 30 days interest on the
amount in clause (ii) calculated on the basis of the Certificate Index
plus the applicable Certificate Margin.
LIBOR Carryover Reserve Fund: The separate Eligible Account
created and initially maintained by the Trustee pursuant to Section 5.07
in the name of the Trustee for the benefit of the Certificateholders in
Certificate Group F other than the Class A-1F Certificates and designated
"The First National Bank of Chicago, as Trustee in trust for registered
holders of Delta Funding Home Equity Loan Trust Series 1998-1". Funds in
the LIBOR Carryover Reserve Fund shall be held in trust for the
Certificateholders in Certificate Group F other than the Class A-1F
Certificates for the uses and purposes set forth in this Agreement.
Lifetime Rate Cap: With respect to each Mortgage Loan in Loan Group A,
the maximum Loan Rate permitted over the life of
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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 F Balance or the Loan Group
A Balance, as applicable.
Loan Group: Either Loan Group F or Loan Group A, 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 F: The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group F.
Loan Group F Balance: As of any date, the aggregate of the Principal
Balances of all Mortgage Loans in Loan Group F as of such date.
Loan Index: With respect to each Interest Rate Adjustment Date for
each Mortgage Loan in Loan Group A 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.
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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 A, the percentage set
forth as the "Margin" for such Mortgage Loan on the Mortgage Loan Schedule.
Maximum Rate: As to Loan Group F, 12.00%. As to Loan Group A, 15.00%
Mezzanine Certificates: The Class M-1F, Class M-2F, Class M-1A and
Class M-2A Certificates.
Modified I Delinquency Amount: As to Certificate Group A and any date
of determination, the sum of (i) 37.5% of the aggregate Principal Balance of
the Mortgage Loans in the related Loan Group that are 60-89 days delinquent,
(ii) 56.25% of the aggregate Principal Balance of the Mortgage Loans in the
related Loan Group that are 90 to 119 days delinquent (excluding Mortgage Loans
in foreclosure and REO Properties) and (iii) 75% of the aggregate Principal
Balance of the Mortgage Loans in the related Loan Group that are 120 or more
days delinquent or in foreclosure and REO Properties.
Modified II Delinquency Amount: As to Certificate Group A and any date
of determination, the sum of (i) 25% of the aggregate Principal Balance of the
Mortgage Loans in the related Loan Group that are 60-89 days delinquent, (ii)
37.5% of the aggregate Principal Balance of the Mortgage Loans in the related
Loan Group that are 90 to 119 days delinquent (excluding Mortgage Loans in
foreclosure and REO Properties) and (iii) 50% of the aggregate Principal
Balance of the Mortgage Loans in the related Loan Group that are 120 or more
days delinquent or in foreclosure and REO Properties.
Monthly Advance: An advance made by the Servicer pursuant to
Section 3.15.
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<PAGE>
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by a Mortgagor on the related Mortgage Loan.
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 each Subsequent Mortgage Loan
Schedule reflecting the Subsequent Mortgage Loans transferred to the Trust on
the related Subsequent Transfer 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 Cu 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 A, (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. Each Subsequent Mortgage
Loan Schedule shall provide the same categories of information with respect to
the related Subsequent Mortgage Loans as of the applicable Subsequent Cut-Off
Date, as with respect to the Initial Mortgage Loans on the Initial Mortgage
Loan Schedule.
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,
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<PAGE>
as from time to time are held by the Custodian on behalf of the Trustee as a
part of the Trust, such mortgage loans originally so held being identified in
the Mortgage Loan Schedule delivered on the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note pursuant to
which the related mortgagor agrees to pay the indebtedness evidenced thereby
which is secured by the related Mortgage.
Mortgaged Property: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan, which, with respect to a
Cooperative Loan, is the related Cooperative Shares and Proprietary Lease.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of unreimbursed Servicing Fees, Servicing
Advances and Monthly Advances with respect thereto.
Net Loan Rate: With respect to any Mortgage Loan as to any day, the
Loan Rate less the 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: The Notional Amount of the Class IOF Certificates for
any Distribution Date prior to the 37th Distribution Date will equal the lesser
of (i) $50,050,000 and (ii) the sum of the Class Principal Balance of the Class
A-6F Certificates and the last $3,850,000 of the Class M-1F Certificates
outstanding. The Notional Amount of the Class IOA Certificates for any
Distribution Date prior to the 37th Distribution Date will equal the lesser of
(i) $10,120,000 and (ii) the sum of the Class Principal Balances of the Class
M-1A and Class M-2A Certificates and the last $1,794,000 of the Class B-1A
Certificates outstanding. On and after the 37th Distribution Date, the Notional
Amount of each Class of Notional Amount Certificates will be zero.
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Notional Amount Certificates: The Class IOA and Class IOF
Certificates.
OC Floor: As to either Certificate Group, an amount equal to 0.50% of
the aggregate Original Class Principal Balances of the Offered Certificates in
such Certificate Group as of the Closing Date.
Offered Certificates: All Certificates other than the 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, Controller or Assistant Controller of the Servicer and
delivered to the Trustee or the Custodian.
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 Pre-Funding Account on the Closing Date.
Original Allocated Pre-Funded Amount: As to Certificate Group F,
$11,208,559.45. As to Certificate Group A, $2,002,869.16.
Original Capitalized Interest Deposit: $102,747.60.
Original Class Principal Balance: As to any Class, the respective
amount set forth below opposite such Class:
Original Class
Class Principal Balance
----- -----------------
Class A-1F $116,613,000
Class A-2F $ 15,438,000
Class A-3F $ 65,278,000
Class A-4F $ 10,220,000
Class A-5F $ 13,441,000
Class A-6F $ 46,200,000
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<PAGE>
Class IOF (1)
Class M-1F $ 17,710,000
Class M-2F $ 10,010,000
Class B-1F $ 13,090,000
Class A-1A $ 19,050,000
Class A-2A $ 56,620,000
Class IOA (1)
Class M-1A $ 4,232,000
Class M-2A $ 4,094,000
Class B-1A $ 8,004,000
Total $400,000,000
- ----------
(1) This Class has no Class Principal Balance, but will accrue interest
on its Notional Amount.
Original Credit Support Percentage: As to any Class of Senior or
Subordinate Certificates, the applicable percentage set forth below:
Senior Group F Certificates........................... 13.25%
Class M-1F............................................ 7.50%
Class M-2F............................................ 4.25%
Class B-1F............................................ 0%
Senior Group A Certificates........................... 17.75%
Class M-1A............................................ 13.15%
Class M-2A............................................ 8.70%
Class B-1A............................................ 0%
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 either Certificate Group and any
Distribution Date, the excess, if any, of (i) the sum of (x) the related Loan
Group Balance as of the end of the related Due Period and (y) the related
Allocated Pre-Funded Amount over (ii) the aggregate Class Principal Balance of
the Certificates in such Certificate Group after giving effect to the
distribution of principal 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.
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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 A
with respect to which the related Mortgage Note provides for a periodic rate
cap, the maximum percentage increase or decrease in the Loan Rate permitted for
such Mortgage Loan over the Loan Rate in effect as of an Interest Rate
Adjustment Date, as set forth on the Mortgage Loan Schedule.
Permitted Transferee: Any Person other than (i) the United
States or any State or any political subdivision thereof or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
international organization or any agency or instrumentality of either of
the foregoing, (iii) an organization which is exempt from tax imposed by
Chapter 1 of the Code (including the tax imposed by section 511 of the
Code on unrelated business taxable income) (except certain farmers'
cooperatives describe in Code section 521) on any excess inclusions (as
defined in Section 860E(c)(1)) with respect to any Residual Certificate;
(iv) rural electric and telephone cooperatives described in Code section
1381(a)(2)(C); (v) a Person that is not (a) a citizen or resident of the
United States, (b) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political
subdivision thereof, (c) an estate whose income from sources without the
United States is includible in gross income for United States federal
income tax purposes regardless of its connection with the conduct of a
trade or business within the United States or (d) a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States fiduciaries
have the authority to control all substantial decisions of the trust; or
(vi) any other Person so designated by the Trustee based on an Opinion of
Counsel to the effect that any transfer to such Person may cause the
Trust to fail to qualify as a REMIC at any time the Certificates are
outstanding. The terms "United States", "State" and "international
organization" shall have the meanings set forth in Code section 7701 or
successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political
subdivision thereof if all of its activities are subject to tax, and,
with the exception of the FHLMC, a majority of its board of directors is
not selected by such governmental unit.
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<PAGE>
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.
Pre-Funded Amount: As of the Closing Date, the sum of the Original
Allocated Pre-Funded Amount for each Certificate Group. As of any date
thereafter, the amount on deposit in the Pre-Funding Account, excluding any
Pre-Funding Earnings included therein.
Pre-Funding Account: The Pre-Funding Account established pursuant to
Section 4.02.
Pre-Funding Distribution Date: Each Distribution Date during the
Funding Period and the Distribution Date in the month following the end of the
Funding Period.
Pre-Funding Earnings: As of any date of determination, the amount of
investment earnings or income, net of any losses from such investments, on
deposit in the Pre-Funding Account.
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 1.454546% (precisely 16/11 percent per annum) in each month
thereafter until the twelfth month; beginning in the twelfth month and in each
month thereafter during the life of the mortgage loans, a conditional
prepayment rate of 20% per annum each month is assumed.
Prepayment Interest Shortfall: With respect to any Distribution
Date, for each Mortgage Loan that was the subject during the related Due
Period of a Principal Prepayment in full an amount equal to the excess,
if any, of (i) 30 days' interest on the Principal Balance of such
Mortgage Loan at the Net Loan Rate (or at such lower rate as may be in
effect for such Mortgage Loan pursuant to application of the Civil Relief
Act) over (ii) the amount of interest actually remitted by the Mortgagor
in connection with such Principal Prepayment.
Principal Balance: As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related Cut-Off Date Principal Balance, minus all
collections credited against the Principal Balance of any such Mortgage Loan.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the related
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Mortgage Loan immediately prior to the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter.
Principal Distribution Amount: As to either Certificate Group and any
Distribution Date, the sum of (i) the related Basic Principal Amount minus the
related Excess Overcollateralization Amount and (ii) the related 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 in a Certificate Group or any Class of Subordinate
Certificates in a Certificate Group, the lesser of (i) the product of (x) the
applicable Distribution Percentage and (y) the related Loan Group Balance as of
the last day of the related Due Period and (ii) the excess, if any, of (x) the
related Loan Group Balance as of the last day of the related Due Period over
(y) the applicable OC Floor.
Prospectus: The base prospectus of the Seller dated March 26, 1998.
Prospectus Supplement: The prospectus supplement dated March 26, 1998,
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 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
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<PAGE>
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 S&P 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 S&P and 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 Adjustable Rate
Certificates, the Business Day immediately preceding such Distribution
Date; provided, however, that if any Adjustable Rate Certificate becomes
a Definitive Certificate, the record date for such Adjustable 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
Adjustable 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 aggregate Class Principal Balance
of the Adjustable Rate Certificates; provided that at least two such
Reference Banks provide such rate. If fewer than two offered rates
appear, the Reference Bank Rate will be the arithmetic mean of the rates
quoted by one or more major banks in New York City, selected by the
Trustee after consultation with the Servicer, as of 11:00 A.M., New York
City time, on such date for loans in U.S. Dollars to leading European
Banks for a period of one month in
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<PAGE>
amounts approximately equal to the aggregate Class Principal Balance of the
Adjustable 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.
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,
the Pre-Funding Account and the LIBOR Carryover Reserve Fund.
REMIC I Interest: As defined in Section 2.07.
REMIC I Regular Interest: As defined in Section 2.07.
REMIC II: The segregated pool of assets consisting of the REMIC I
Regular Interests.
REMIC II Interest: As defined in Section 2.07.
REMIC Certificate Maturity Date: The "latest possible maturity date"
as that term is defined in Section 2.10.
REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to either REMIC and the REMIC Provisions issued after
the Closing Date.
REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear
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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 to either Certificate Group and any date of
determination, the percentage then applicable in the definition of Required
Overcollateralization Amount (other than the percentage used to calculate the
OC Floor).
Required Overcollateralization Amount: As to either Certificate
Group and any Distribution Date (a) prior to the related Stepdown Date,
the product of (i) 3.00% for Certificate Group F and (ii) 2.25% for
Certificate Group A and the aggregate Original Class Principal Balances
of the Offered Certificates in such Certificate Group as of the Closing
Date; and (b) on and after the related Stepdown Date, the greater of (i)
the product of 6.00% (for Certificate Group F) or 5.625% (for Certificate
Group A) and the related Loan Group Balance as of the end of the related
Due Period and (ii) the applicable OC Floor; provided, however, that on
each Distribution Date during the continuance of (a) in the case of
Certificate Group A, a Cumulative Loss Event and an Excess Delinquency
Event or (b) in the case of either Certificate Group, a Trigger Event for
such Certificate Group, the Required Overcollateralization Amount will
equal the Required Overcollateralization Amount in effect as of the
Distribution Date immediately preceding the date on which such Cumulative
Loss Event and Excess Delinquency Event or Trigger Event first occurred.
Reserve Fund Deposit: An amount equal to the LIBOR Carryover on any
Distribution Date or, if no LIBOR Carryover is payable on such Distribution
Date, the amount such that when added to other amounts already on deposit in
the LIBOR Carryover Reserve Fund, the aggregate amount on deposit therein will
be equal to $10,000.
Residential Dwelling: A one- to five-family dwelling, a five- to
eight-family dwelling, a mixed use property, 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
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president, trust officer, any assistant secretary, any trust officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement. When used with respect
to the Seller or Servicer, the President or any Vice President, Assistant Vice
President or any Secretary or Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or, if at any time after the execution of this
Agreement the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Security Agreement: With respect to any Cooperative Loan, the
agreement between the owner of the related Cooperative Shares and the
originator of the related Mortgage Note, which defines the terms of the
security interest in such Cooperative Shares and the related Proprietary Lease.
Seller: Delta Funding Corporation, a New York corporation, or any
successor thereto.
Senior Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A and designated as a
Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class A-5F, Class A-6F, Class
IOF, Class A-1A, Class A-2A or Class IOA Certificate pursuant to Section 6.01.
Senior Certificateholder: The Holder of a Senior Certificate.
Senior Principal Distribution Amount: As to either Certificate
Group and (a) any Distribution Date prior to the related Stepdown Date or
during the continuation of a Trigger Event for such Certificate Group,
100% of the applicable 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 in such
Certificate Group 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 5.05% of the aggregate Original Class Principal
Balance.
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Servicing Advances: All reasonable and customary "out of pocket"
costs and expenses incurred in the performance by the Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii)
the management and liquidation of the REO Property, including reasonable
fees paid to any independent contractor in connection therewith, (iv)
compliance with the obligations under Section 3.04, 3.06 or 3.19 and (v)
in connection with the liquidation of a Mortgage Loan, expenditures
relating to the purchase or maintenance of the First Lien pursuant to
Section 3.17, all of which reasonable and customary out-of-pocket costs
and expenses are reimbursable to the Servicer to the extent provided in
Sections 3.03(ii) and (vi), 3.06 and 5.01(a)(v).
Servicing Certificate: A certificate completed and executed by a
Servicing Officer on behalf of the Servicer.
Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 3.08.
Servicing Fee: As to each Distribution Date and each Mortgage Loan,
the annual fee payable to the Servicer, which subject to Section 3.02 is
calculated as an amount equal to the product of the Servicing Fee Rate and the
Principal Balance thereof at the beginning of the related Due Period.
Servicing Fee Rate: 0.50% per annum.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee by the Servicer, as such list may be amended from time to time.
S&P: Standard & Poor's Ratings Services, a Division of the McGraw-Hill
Companies, Inc.
Startup Day: The day designated as such pursuant to Section 2.08.
Stepdown Date: As to either Certificate Group, the later to
occur of (x) the earlier to occur of (i) the Distribution Date in April
2001 and (ii) the Distribution Date on which the aggregate Class
Principal Balance of the related Senior Certificates is reduced to zero,
and (y) the first Distribution Date on which the related Subordinate
Percentage (assuming 100% of the related Basic Principal Amount is
distributed on the Offered Certificates in such Certificate Group) is at
least equal to the product of (i)
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the Applicable Multiplier and (ii) the sum of the Original Credit Support
Percentage for the related Senior Certificates and the applicable Required OC
Percentage as of the Closing Date.
Subordinate Certificates: The Mezzanine Certificates and Class B
Certificates.
Subordinate Percentage: As to either Certificate Group and any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate Class Principal Balance of the Subordinate Certificates
in such Certificate Group after giving effect to the distribution of the
related Principal Distribution Amount on such Distribution Date, and the
denominator of which is the related Loan Group Balance as of the last day of
the related Due Period.
Subordination Deficiency: As to either Certificate Group and any
Distribution Date, the excess, if any, of (i) the applicable Required
Overcollateralization Amount for such Distribution Date over (ii) the related
Overcollateralization Amount for such Distribution Date after giving effect to
the distribution of the related Basic Principal Amount on such Distribution
Date.
Subordination Increase Amount: As to either Certificate Group and any
Distribution Date, the lesser of (i) the related Subordination Deficiency and
(ii) the related Excess Interest.
Subordination Trigger Event: As to Certificate Group A, the existence
and continuation of both a Cumulative Loss Event and an Excess Delinquency
Event for such Certificate Group.
Subsequent Cut-Off Date: As to any Subsequent Mortgage Loan and
related Subsequent Transfer Date, the close of business on the first day of the
month of such Subsequent Transfer Date; provided, however, that if a Subsequent
Mortgage Loan was originated during the month of such Subsequent Transfer Date,
the Subsequent Cut-Off Date therefor shall be the date of the related Mortgage
Note.
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 a Subsequent Transfer Agreement.
Subsequent Mortgage Loans: The Mortgage Loans identified on the
Subsequent Mortgage Loan Schedule.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement
entered into between the Seller and the Trustee, substantially in the form
attached as Exhibit D.
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Subsequent Transfer Date: Each date during the Funding Period on which
Subsequent Mortgage Loans are sold to the Trust.
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.
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.
Trigger Event: A Trigger Event shall have occurred and be continuing
with respect to a Certificate Group, if at any time, the related Delinquency
Amount I equals or exceeds twice the sum of (i) the related Overcollaterization
Amount (prior to giving effect to distributions on such Distribution Date) and
(ii) (a) the Excess Interest for the related Loan Group, assuming the related
Required Overcollateralization Amount equals such amount on the prior
Distribution Date, multiplied by (b) 12.
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.
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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 Pre-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: The First National Bank of Chicago, or any successor Trustee
appointed in accordance with this Agreement that has accepted such appointment
in accordance with this Agreement.
Trustee Fee: The fee owed to the Trustee pursuant to a letter
agreement between the Servicer and the Trustee.
Trustee Fee Rate: The per annum rate at which the Trustee Fee is
calculated.
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 sum of the Required Overcollateralization Amounts 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 Adjustable Rate Certificates shall
be calculated on the basis of a 360-day year and the actual number of
days elapsed except that if an Available Funds Cap is used to calculate
the Certificate Rate for any Class of 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
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basis of a 360-day year consisting of twelve 30-day months. All dollar
amounts calculated hereunder shall be rounded to the nearest penny with
one-half of one penny being rounded down.
ARTICLE II
Conveyance of Initial Mortgage Loans
Original Issuance of Certificates
Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans (a) The
Seller, concurrently with the execution and delivery of this Agreement,
does hereby transfer, assign, set over and otherwise convey to the Trust
without recourse (subject to Sections 2.02 and 2.04) (i) all of its
right, title and interest in and to each Initial Mortgage Loan, including
the Cut-Off Date Principal Balance and all collections in respect of
interest and principal received after the Cut-Off Date (other than
payments in respect of accrued interest due before March 1, 1998); (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
Pre-Funding Account and the Initial Interest Coverage Account, together
with all investment earnings on such amounts; (v) the Initial Interest
Deposit; and (vi) 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 or the Custodian
on behalf of 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 or the
Custodian on behalf of 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 The First National Bank of Chicago, as Trustee for Delta
Funding Home Equity Loan Trust 1998-1 without recourse" and signed, by
facsimile or manual signature, in the name of the Seller by a
Responsible Officer;
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(ii) Any of: (1) the original Mortgage and related power of
attorney, if any, with evidence of recording thereon, (2) a copy of
the Mortgage and related power of attorney, if any, certified as a
true copy of the original Mortgage or power of attorney by a
Responsible Officer of the Seller by facsimile or manual signature or
by the closing attorney or by an officer of the title insurer or
agent of the title insurer that issued the related title insurance
policy, in each case, if the original has been transmitted for
recording until such time as the original is returned by the public
recording office or (3) a copy of the original recorded Mortgage and
related power of attorney, if any, certified by the public recording
office;
(iii) The original Assignment of Mortgage in recordable
form, from the Seller in blank, or to "The First National Bank of
Chicago, as Trustee for Delta Funding Home Equity Loan Trust 1998-1";
(iv) The original lender's policy of title insurance or a
true copy thereof or, if such original lender's title insurance
policy has been lost, a copy thereof certified by the appropriate
title insurer to be true and complete or, if such lender's title
insurance policy has not been issued as of the Closing Date, a marked
up commitment (binder) to issue such policy;
(v) All intervening assignments, if any, showing a complete
chain of assignments from the originator to the Seller, including any
recorded warehousing assignments, with evidence of recording thereon,
or a copy thereof certified by a Responsible Officer of the Seller by
facsimile or manual signature, or by the closing attorney or by an
officer of the title insurer or agent of the title insurer that
issued the related title insurance policy, as a true copy of the
original of such intervening assignments if the original has been
transmitted for recording until such time as the original is returned
by the public recording office or a copy of the original recorded
intervening assignments certified by the public recording office;
(vi) Originals of all assumption, written assurance,
substitution and modification agreements, if any; and
(vii) In the case of a Cooperative Loan, the originals of the
following documents or instruments:
(a) The Cooperative Shares, together with a stock power
in blank;
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(b) The executed Security Agreement;
(c) The executed Proprietary Lease;
(d) The executed Recognition Agreement;
(e) The executed assignment of Recognition Agreement;
(f) The executed UCC-1 financing statement with evidence
of recording thereon which have been filed in all
places required to perfect the Seller's interest in
the Cooperative Shares and the Proprietary Lease;
and
(g) Executed UCC-3 financing statements or other
appropriate UCC financing statements required by
state law, evidencing a complete and unbroken line
from the mortgagee to the Trustee with evidence of
recording thereon (or in a form suitable for
recordation).
In instances where the original recorded Mortgage is not delivered as
provided above, and in instances where intervening assignments called for by
clause (v) above are unavailable, the Seller will deliver or cause to be
delivered the original recorded Mortgage and intervening assignments to the
Trustee or the Custodian on behalf of 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
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be a perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of the Agreement.
Except as may otherwise expressly be provided herein, neither the
Seller, the Servicer nor the Trustee shall (and the Servicer shall ensure that
no Subservicer shall) assign, sell, dispose of or transfer any interest in the
Trust or any portion thereof, or permit the Trust or any portion thereof to be
subject to any lien, claim, mortgage, security interest, pledge or other
encumbrance of, any other Person.
In the event that the parties hereto have failed to transfer the
entire legal ownership in and to each Mortgage Loan to the Trust, the parties
hereto intend that this document operate to transfer the entire equitable
ownership interest in and to each Mortgage Loan to the Trust.
(c) Within 30 days of the Closing Date, the Seller, at its own
expense, shall prepare and send for recording the Assignments of Mortgage in
favor of the Trustee in the appropriate real property or other records;
provided, however, that the Seller shall not be required to record Assignments
of Mortgage if the related Mortgaged Property is located in a jurisdiction in
which the recording thereof is not necessary to protect the interests of the
Trustee or Certificateholders in the related Mortgage as evidenced by an
Opinion of Counsel, in form and substance satisfactory to the Rating Agencies,
delivered to the Trustee and the Rating Agencies. 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 or the Custodian on behalf of 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) Neither the Trustee nor the Custodian on behalf of the Trustee
shall have any 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, neither the Trustee nor
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the Custodian shall have any responsibility for determining whether any
document is valid and binding, whether the text of any assignment or
endorsement is in proper or recordable form (except, if applicable, to
determine if the Trustee is the assignee or endorsee), whether any document
has been recorded in accordance with the requirements of any applicable
jurisdiction, or whether a blanket assignment is permitted in any applicable
jurisdiction, but shall only be required to determine whether a document has
been executed, that it appears to be what it purports to be, and, where
applicable, that it purports to be recorded, but shall not be required to
determine whether any Person executing any document is authorized to do so or
whether any signature thereon is genuine.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges
the sale and assignment of the Mortgage Loans, and, subject to the review
provided for in this Section 2.02 and the period for delivery provided for in
Section 2.01, its receipt or that of the Custodian on behalf of the Trustee of
the Mortgage Files, and declares that the Trustee or the Custodian on behalf
of 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 or the Custodian on behalf of the Trustee
of written notification of such deposit signed by a Responsible Officer of the
Seller, the Trustee or the Custodian on behalf of 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
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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.
No later than the 30th day following the Closing Date, the Trustee or
the Custodian on behalf of the Trustee shall certify to the Seller and the
Servicer (and the Trustee if the Custodian is so certifying) 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 or the Custodian on
behalf of 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 or the Custodian on behalf of the Trustee determines that
such Mortgage File is otherwise defective in any material respect, the Trustee
or the Custodian on behalf of 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 or the
Custodian on behalf of 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 or the Custodian on behalf of 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
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must be delivered to it, and on each such date, the Trustee or the Custodian
on behalf of 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 or the Custodian on behalf of the Trustee shall provide to the
Servicer and the Seller (and to the Trustee if delivered by the Custodian), 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 or the Custodian
on behalf of 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.
Neither the Trustee nor the Custodian makes any 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;
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(iii) Each of the Seller and the Servicer has the full power and
authority to enter into and consummate all transactions contemplated
by this Agreement to be consummated by it, has duly authorized the
execution, delivery and performance of this Agreement, and has duly
executed and delivered this Agreement. This Agreement, assuming due
authorization, execution and delivery by the other parties hereto,
constitutes a valid, legal and binding obligation of the Seller and
the Servicer, enforceable against it in accordance with the terms
hereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar
laws relating to or affecting the rights of creditors generally, and
by general equity principles (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(iv) Neither the Seller nor the Servicer is in violation of, and
the execution and delivery of this Agreement by the Seller and the
Servicer and the performance by each of them and compliance with the
terms of this Agreement will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of
any federal, state, municipal or governmental agency having
jurisdiction, which violation would materially and adversely affect
the condition (financial or otherwise) or operations of the Seller or
the Servicer or any of their respective properties or materially and
adversely affect the performance of any of their respective duties
hereunder;
(v) There are no actions or proceedings against, or
investigations of, the Seller or the Servicer pending or, to the
knowledge of the Seller or the Servicer, threatened, before any
court, administrative agency or other tribunal (A) that, if
determined adversely, would prohibit its entering into this
Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (C) that, if
determined adversely, would prohibit or materially and adversely
affect the performance by the Seller or the Servicer of any of their
respective obligations under, or the validity or enforceability of,
this Agreement;
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by the Seller of, or compliance by the
Seller or the Servicer with, this Agreement, or for the consummation
of the transactions contemplated by this Agreement, except for such
consents, approvals, authorizations and orders, if any, that have
been obtained prior to the Closing Date;
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(vii) The Seller did not sell the Mortgage Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; and the
Seller will not be rendered insolvent as a result of the sale of the
Mortgage Loans to the Trust;
(viii) The Seller acquired title to the Mortgage Loans in good
faith, without notice of any adverse claim;
(ix) The collection practices used by the Seller and the Servicer
with respect to the Mortgage Loans have been, in all material
respects, legal, proper, prudent and customary in the non-conforming
mortgage servicing business;
(x) No Officer's Certificate, statement, report or other
document prepared by the Seller or the Servicer and furnished or to be
furnished by it pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of
material fact;
(xi) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(xii) The Servicer believes that the Servicing Fee Rate provides
a reasonable level of base compensation to the Servicer for servicing
the Mortgage Loans on the terms set forth herein;
(xii) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer; and
(xiv) The Servicer has caused or hereby agrees to cause to be
performed any and all acts required to be performed to preserve the
rights and remedies of the Trustee in any insurance policies
applicable to the Mortgage Loans, including, without limitation, any
necessary notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint loss payee
and mortgagee rights in favor of the Trustee.
The representations and warranties set forth in this Section 2.03 shall
survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially
and adversely affects the interests of the Certificateholders, 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
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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 is
complete, true and correct as of the dates as of which the information
therein is given;
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
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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 or the Custodian on
behalf of the Trustee establishes in the Seller a valid and
subsisting lien on the property described therein, and the Seller has
full right to sell and assign the same to the Trust;
4. The terms of each Mortgage Note and Mortgage have not
been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary to protect
the interests of the Trust, and which has been delivered to the
Trustee or the Custodian on behalf of 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
or the Custodian on behalf of 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
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movement, windstorm, flood, tornado or otherwise, so as to affect
adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended;
8. There are no mechanics' or similar liens or claims which
have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to such lien) affecting
any Mortgaged Property which are, or may be, liens prior or equal to,
or coordinate with, the lien of the Mortgage except those that are
stated in the title insurance policy and for which related losses are
affirmatively insured against by such policy;
9. All of the improvements that were included for the
purpose of determining the Appraised Value of each Mortgaged Property
lie wholly within the boundaries and building restriction lines of
such property, and no improvements on adjoining properties encroach
upon the Mortgaged Property except those that are stated in the title
insurance policy and for which related losses are affirmatively
insured against by such policy;
10. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same,
including, but not limited to, certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law;
11. All parties that have had any interest in any Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest,
were) (1) in compliance with any and all licensing requirements of
the United States and of the laws of the state wherein the Mortgaged
Property is located that are applicable to such parties and (2)(A)
organized under the laws of such state or (B) qualified to do
business in such state or exempt from such qualification in a manner
so as not to affect adversely the enforceability of such Mortgage
Loan or (C) federal savings and loan associations or national banks
having principal offices in such state or (D) not doing business in
such state;
12. With respect to the Initial Mortgage Loans, as of the
Cut-Off Date, (i) all payments required to be made on
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each Initial Mortgage Loan under the terms of the related Mortgage
Note have been made except for 1.43% and 1.55% of the Initial
Mortgage Loans in Loan Group F and Loan Group A respectively (by
Cut-Off Date Principal Balance) are up to 59 days Delinquent and (ii)
no payment required to be made on any Initial Mortgage Loan has been
more than 59 days Delinquent more than once during the twelve month
period immediately preceding the Cut-Off Date;
13. Each of the documents and instruments included in a
Mortgage File is duly executed and in due and proper form and each
such document or instrument is in a form generally acceptable to
prudent institutional mortgage lenders that regularly originate or
purchase mortgage loans;
14. The Mortgage Notes and the related Mortgages are
genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law). All parties to the
Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage, and each Mortgage Note and Mortgage
have been duly and properly executed by such parties. The Mortgagor
is a natural person who is a party to the Mortgage Note and the
Mortgage in an individual capacity, and not in the capacity of a
trustee or otherwise;
15. Any and all requirements of any federal, state or local
law, including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws, applicable to the origination
and servicing of the Mortgage Loans or otherwise applicable to the
Mortgage Loans have been complied with, and the Seller has and shall
maintain in its possession, available for the Trustee's inspection,
and shall deliver to the Trustee upon demand, evidence of compliance
with all such requirements;
16. The proceeds of the Mortgage Loans have been fully
disbursed, there is no requirement for future advances thereunder and
any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor
have been complied with. All costs, fees and expenses incurred in
making, closing or recording the Mortgage Loan have been paid;
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17. Each Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other form of policy acceptable to FNMA or
FHLMC, issued by and constituting the valid and binding obligation of
a title insurer generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market
that invest in mortgage loans such as the Mortgage Loans and
qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring the Seller, its successors and assigns,
as to the first priority lien of the Mortgage in the case of a
Mortgage Loan secured by a First Lien on the related Mortgaged
Property and the second priority lien of the Mortgage in the case of
a Mortgage Loan secured by a second lien on the related Mortgaged
Property, in the original principal amount of the Mortgage Loan. The
Seller is the sole named insured of such mortgage title insurance
policy, the assignment to the Purchaser or the Trustee as assignee of
the Purchaser of the Seller's interest in such mortgage title
insurance policy does not require the consent of or notification to
the insurer or the same has been obtained, and such mortgage title
insurance policy is in full force and effect and will be in full
force and effect and inure to the benefit of the Trustee upon the
consummation of the transactions contemplated by this Agreement. No
claims have been made under such mortgage title insurance policy and
no prior holder of the related Mortgage, including the Seller, has
done, by act or omission, anything that would impair the coverage of
such mortgage title insurance policy;
18. All improvements upon the Mortgaged Properties are
insured by a generally acceptable insurer against loss by fire,
hazards of extended coverage and such other hazards as are customary
in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of this Agreement.
If a Mortgaged Property was, at the time of origination of the
related Mortgage Loan, in an area identified on a Flood Hazard
Boundary Map or Flood Hazard Rate Map issued by the Federal Emergency
Management Agency as having special flood hazards (and if the flood
insurance policy referenced herein has been made available), a flood
insurance policy is in effect with respect to such Mortgaged Property
with a generally acceptable carrier in an amount representing
coverage described in this Agreement. All individual insurance
policies (collectively, the "hazard insurance policy") are the valid
and binding obligation of the insurer and contain a standard
mortgagee clause naming the Seller, its successors and assigns, as
mortgagee. All premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at
the
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Mortgagor's cost and expense, and upon the Mortgagor's failure to
do so, authorizes the holder of the Mortgage to obtain and maintain
such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
19. No Mortgage Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note or the
related Mortgage, or the exercise of any right thereunder in
accordance with the terms thereof, render either the Mortgage Note or
the Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
20. Each Mortgage Loan was originated or purchased and
reunderwritten by the Seller;
21. Except with respect to any Balloon Loan, each Mortgage
Loan is payable in equal monthly installments of principal and
interest which would be sufficient, in the absence of late payments,
to fully amortize such loan within the term thereof, beginning no
later than 60 days after disbursement of the proceeds of the Mortgage
Loan. Each Mortgage Loan in Loan Group F 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 A 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;
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25. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (ii) otherwise
by judicial or nonjudicial fore-closure. There is no homestead or
other exemption available to the Mortgagor that would interfere with
the right to sell the Mortgaged Property at a trustee's sale or the
right to foreclose the Mortgage;
26. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will become
payable by the Trustee or the Certificateholders to the trustee under
the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor, which fees and expenses shall constitute
Servicing Advances;
27. Each Mortgaged Property is located in the state
identified in the Mortgage Loan Schedule. No residence or dwelling is
a manufactured dwelling. No Mortgaged Properties are held under a
ground lease;
28. The Mortgage Loans were underwritten in accordance with
the Seller's underwriting guidelines described in the Prospectus
under the heading "The Seller and the Servicer--Underwriting";
29. There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made, and no escrow
deposits or payments of other charges or payments due the Seller have
been capitalized under any Mortgage or the related Mortgage Note;
30. No Mortgage Loan was originated under a buy-down plan;
31. Other than as provided by this Agreement, there is no
obligation on the part of the Seller or any other party to make
payments in addition to those made by the Mortgagors;
32. With respect to each Mortgage Loan, the Seller is in
possession of a complete Mortgage File, except those documents
delivered to the Trustee or Custodian on behalf of the Trustee, and
there are no custodial agreements in effect
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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:
(a) if the Combined Loan-to-Value Ratio is higher
than 80%, either the related First Lien does not provide for
a balloon payment or, if the related First Lien does provide
for a balloon payment, the maturity date of the second lien
is prior to the maturity date of the First Lien;
(b) the related First Lien does not provide for
negative amortization;
(c) either no consent for the Mortgage Loan secured
by a second lien on the related Mortgaged Property is
required by the holder of the related First Lien or such
consent has been obtained and is contained in the Mortgage
File; and
(d) except with respect to no more than 10% of the
Initial Mortgage Loans in Loan Group F 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;
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38. To the best of the Seller's knowledge, no Mortgaged
Property was, as of the related Cut-Off Date, located within a
one-mile radius of any site listed in the National Priorities List as
defined under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or on any similar state list
of hazardous waste sites which are known to contain any hazardous
substance or hazardous waste;
39. None of the Mortgage Loans are subject to a bankruptcy
proceeding;
40. No more than 19.1% 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
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44. Each Mortgage Loan in Loan Group A 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 or the Custodian on behalf of 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 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 or the
Custodian on behalf of 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 or the Custodian on behalf of the Trustee (1) the Eligible Substitute
Mortgage Loans to be substituted for the Defective Mortgage Loans, (2) a list
of the Defective
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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
Original Class Principal Balance as of the Closing Date, (C) stating that all
conditions precedent to such substitution specified in subsection (a) have
been satisfied and attaching as an exhibit a supplemental Mortgage Loan
schedule (the "Supplemental Mortgage Loan Schedule") setting forth the same
type of information as appears on the Mortgage Loan Schedule and representing
as to the accuracy thereof and (D) confirming that the representations and
warranties contained in Section 2.04 are true and correct in all material
respects with respect to the Substitute Mortgage Loans on and as of such
Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Sections 2.02, 2.04 and this
Section 2.05, (4) an Opinion of Counsel to the effect set forth below and (5)
a certificate stating that cash in the amount of the related Substitution
Adjustment, if any, has been deposited to the Collection Account. Upon receipt
of the foregoing, the Trustee or the Custodian on behalf of 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 either REMIC to fail
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to qualify as a REMIC at any time that any Certificate is outstanding. In the
event that such opinion indicates that a repurchase or substitution will
result in the imposition of a prohibited transaction tax, give rise to net
taxable income or be deemed a contribution to a REMIC after its Startup Day,
the Seller shall not be required to repurchase or replace any such Mortgage
Loan unless and until the Servicer has determined there is an actual or
imminent default with respect thereto or that such defect or breach adversely
affects the enforceability of such Mortgage Loan.
Section 2.06. Execution and Authentication of Certificates. The
Trustee on behalf of the Trust shall cause to be executed, authenticated and
delivered on the Closing Date to or upon the order of the Seller, in exchange
for the Mortgage Loans, concurrently with the sale, assignment and conveyance
to the Trustee of the Mortgage Loans, each Class of Certificates in authorized
denominations or Percentage Interests, together evidencing the ownership of
the entire Trust.
Section 2.07. Designation of Interests in REMIC. (a) For Federal tax
purposes, the Trust will consist of REMIC I and REMIC II. REMIC I will be
evidenced by (x) uncertificated and non-transferable interests described below
(the "REMIC I Regular Interests") which are hereby designated as the "regular
interests" in REMIC I, and (y) the Class R-1 Certificates, which are hereby
designated as the single "residual interest" in REMIC I. All Realized Losses
on Loan Group F will be allocated to class 1 and 1-IO and all Realized Losses
on Loan Group A will be allocated to class 3 and 3-IO (and between the class 1
and class 1-IO and between the class 3 and class 3-IO in accordance with the
way the losses are allocated between their corresponding classes (and in the
case of losses allocable to Class M-1F or Class B-1A first to class 1 or class
3, respectively)). 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:
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Corresponding Class of
Certificates(1)
----------------------------
REMIC I Allocation Allocation
Regular Initial Pass-Through of of
Interests Balance Rate Principal Interest
- --------- ------- ------------ --------- ----------
1-IO $50,050,000 (2) (3) (4)
1 $257,950,000 (2) (3) (5)
3-IO $10,120,000 (6) (3) (7)
3 $81,880,000 (6) (3) (5)
- -----------------
(1) Except as otherwise indicated, the amount of principal and interest
allocable from a REMIC I Regular Interest to its Corresponding Class
of Certificates on any Distribution Date shall be 100%.
(2) The pass-through rate on 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 F less the sum of the Servicing
Fee Rate and the Trustee Fee Rate.
(3) Principal allocated to the Certificate Group F as described in
Article 5 will be distributed on class 1, except that principal
payable on Class A-6F and the last $3,850,000 on Class M-1F shall be
distributed on class 1-IO. Principal allocated to Certificate Group A
as described in Article 5 will be distributed on class 3, except that
principal payable on Classes M-1A and M-2A and the last $1,794,000 of
the Class B-1A shall be distributed to on the class 3-IO.
(4) 700 basis points of the interest on this class will be allocated to
the Class IOF Certificate and interest in excess of 700 basis points
will be allocated to the Certificate Group F (other than the Class
IOF) as described in Article 5.
(5) Interest will be allocated to the Certificate Group F 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 A less the sum of the Servicing
Fee Rate and the Trustee Fee Rate.
(7) 680 basis points of the interest on this Class will be allocated to
the Class IOA Certificate and interest in excess of 680 basis points
will be allocated to the Certificate Group A (other than the Class
IOA) as described in Article 5.
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(b) REMIC II will be evidenced by the Certificates, other
than the Class R-1 Certificates. The Offered 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 the regular interests in each REMIC is the
Distribution Date in May 2033.
Section 2.10. Tax Returns and Reports to Certificateholders. (a) For
federal income tax purposes, the REMICs comprising the Trust shall have a
calendar year and shall maintain its books on the accrual method of
accounting.
(b) The Tax Matters Person shall prepare, or cause to be prepared,
execute and deliver to the Servicer or Certificateholders, as applicable, any
income tax information returns for each taxable year with respect to the Trust
containing such information at the times and in the manner as may be required
by the Code or state or local tax laws, regulations or rules, and shall
furnish or cause to be furnished to the Trust and the Certificateholders the
schedules, statements or information at such times and in such manner as may
be required thereby. Within thirty (30) days of the Closing Date, the Tax
Matters Person shall furnish or cause to be furnished to the Internal Revenue
Service, on Form 8811 or as otherwise required by the Code, the name, title,
address and telephone number of the person that Holders of the Certificates
may contact for tax information relating thereto, together with such
additional information at the time or times and in the manner required by the
Code. Such federal, state or local income tax or information returns shall be
signed by the Trustee or such other Person as may be required to sign such
returns by the Code or state or local tax laws, regulations or rules.
(c) In the first federal income tax return of the Trust for its short
taxable year ending December 31, 1998, 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 Tax Matters Person 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
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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 Tax
Matters Person with all such information as may be required in connection with
the Tax Matters 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 holder of the Tax
Matters Person Residual Interest which initially is 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. 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. For as long as the Trust shall exist, the Trustee the
Servicer and the Tax Matters Person shall act in accordance herewith to assure
continuing treatment of each REMIC as a REMIC and avoid the imposition of tax
on the Trust. In particular:
(a) The Trustee shall not create, or permit the creation of, any
"interests" in either REMIC within the meaning of Code Section 860D(a)(2)
other than the interests represented by the Regular Certificates and the
Residual Certificates.
(b) Except as otherwise provided in the Code, the Seller shall not
grant and the Trustee shall not accept property unless (i) substantially all
of the property held in the Trust constitutes either "qualified mortgages" or
"permitted investments" as defined in Code Sections 860G(a)(3) and (5),
respectively, and (ii) no property shall be contributed to the Trust after the
Startup Day unless such grant would not subject any REMIC to the 100% tax on
contributions to a REMIC after its Startup Day imposed by Code Section
860G(d).
(c) The Trustee shall not accept on behalf of the Trust any fee or
other compensation for services (other than as otherwise provided herein) and
shall not accept on behalf of the Trust any income from assets other than
those permitted to be held by a REMIC.
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(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 and the Tax Matters Person 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 Tax Matters
Person shall furnish to the Trustee and, subject to its receipt thereof, 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 120% of the
Prepayment Assumption in the case of Loan Group F and 140% of the
Prepayment Assumption in the case of Loan Group A;
(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 125% of the Prepayment Assumption in the
case of Loan Group F and 140% of the Prepayment Assumption in the
case of Loan Group A;
(iii) The applicable percentage of 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
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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 Tax Matters Person, if such tax
arises out of or results from a breach by the Tax Matters Person of any of the
obligations under this Agreement, (iii) 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 (iv) otherwise the Holders of the applicable Residual
Certificates in proportion to their Percentage Interests. To the extent any
tax is chargeable against the Holders of the Residual Certificates,
notwithstanding anything to the contrary contained herein, the Trustee is
hereby authorized to retain from amounts otherwise distributable to the
Holders of the applicable Residual Certificates on any Distribution Date
sufficient funds to reimburse the Trustee for the payment of such tax (to the
extent that the Trustee has not been previously reimbursed or indemnified
therefor).
The Trustee shall not engage in a "prohibited transaction" (as
defined in Code Section 860F(a)(2)), except that, with the prior written
consent of the Seller , the Trustee may engage in the activities otherwise
prohibited by the foregoing clauses (b), (c) and (d), provided that the Seller
shall have delivered to the Trustee an Opinion of Counsel to the effect that
such transaction will not result in the imposition of a contribution or
prohibited transaction tax on the Trust and will not disqualify any REMIC from
treatment as a REMIC; and provided that the Seller shall have demonstrated to
the satisfaction of the Trustee that such action will not adversely affect the
rights of the holders of the Certificates and the Trustee and that such action
will not adversely impact the rating of the Senior Certificates.
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The Trustee shall treat the LIBOR Carryover Reserve Fund as an
outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
that is owned by the Class R-1 and Class R-2 Certificateholders and that is
not an asset of the REMIC. The Trustee shall treat the rights of the Class
M-1F, Class M-2F and Class B-1F Certificateholders to receive payments from
the LIBOR Carryover Reserve Fund as rights in an interest rate cap contract
written by the Class M-2F Certificateholder in favor of the Class M-1F, Class
M-2F and Class B-1F Certificateholders. Thus each Class M-1F, Class M-2F, and
Class B-1F Certificate shall be treated as representing ownership of an
interest in an interest rate cap contract. For purposes of determining the
issue price of the REMIC II Regular interests, the Trustee shall assume that
the interest rate cap contract has a value of $10,000.
(g) Except as provided below, the Tax Matters Person 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 and the Tax Matters Person 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 their respective
duties hereunder.
(h) On behalf of each REMIC, the Trustee, Servicer or Tax Matters
Person, as applicable, shall do the following:
(i) the Tax Matters Person shall 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) the Tax Matters Person shall 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) the Tax Matters Person shall prepare and forward, or
cause to be prepared and forwarded, to the Servicer, the Seller, the
Trustee (which, subject to receipt thereof shall forward to the
Certificateholders) and to the Internal
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Revenue Service and any other relevant governmental taxing authority
all information returns or reports as and when required to be
provided to them in accordance with the REMIC Provisions;
(iv) the Trustee and the Servicer shall 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 125% of the Prepayment Assumption with respect to Certificate
Group F 140% of the Prepayment Assumptions with respect to and
Certificate Group A, respectively and calculated by using the issue
price of the Certificates;
(v) the Trustee, the Servicer and Tax Matters Person 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;
(vi) the Trustee shall pay the amount of any and all
federal, state and local taxes, including, without limitation,
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) the Trustee and the Tax Matters Person shall ensure
that any such returns or reports filed on behalf of the Trust are
properly executed by the appropriate person;
(viii) the Tax Matters Person shall 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;
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(ix) the Trustee and the Tax Matters Person shall as
provided in Section 5.12, make available information necessary for
the computation of any tax imposed (1) on transferors of residual
interests to transferees that are not Permitted Transferees or (2) on
pass-through entities, any interest in which is held by an entity
which is not a Permitted Transferee.
(x) the Trustee and the Tax Matters Person shall 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) the Trustee, the Servicer and the Tax Matters Person
shall cooperate with each other in connection with the foregoing
obligations, including signing any Tax Returns to the extent required
by law.
Section 2.13. Subsequent Transfers. (a) Subject to the satisfaction
of the conditions set forth in paragraph (b) below and pursuant to the terms
of each Subsequent Transfer Agreement, in consideration of the Trustee's
delivery on the related Subsequent Transfer Date to or upon the order of the
Seller of the purchase price therefor, the Seller shall on any Subsequent
Transfer 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 related Subsequent Mortgage Loan
Schedule delivered by the Seller on such Subsequent Transfer Date, including
(i) the related Principal Balance as of the related Subsequent Cut-Off Date;
(ii) all collections in respect of interest and principal received after the
related Subsequent Cut-Off Date; (iii) property which secured such Subsequent
Mortgage Loan and which has been acquired by foreclosure or deed in lieu of
foreclosure; (iv) its interest in any insurance policies in respect of such
Subsequent Mortgage Loan; and (v) all proceeds of any of the foregoing. The
transfer by the Seller of the Subsequent Mortgage Loans set forth
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on each 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 such
Subsequent Transfer 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 Subsequent Cut-Off Date.
(b) The Seller shall transfer and deliver to the Trustee or the
Custodian on behalf of 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
applicable Subsequent Transfer 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 five Business Days prior to the applicable Subsequent
Transfer Date and shall designate the Subsequent Mortgage Loans to be
sold to the Trust and the aggregate Principal Balance of such
Mortgage Loans and the Rating Agencies shall not have informed the
Seller or the Trustee prior to such Subsequent Transfer Date that the
inclusion of such Subsequent Mortgage Loans would affect the
applicable Required Overcollateralization Amount or result in the
downgrade or withdrawal of the ratings assigned to the Offered
Certificates as of the Closing Date;
(ii) The Seller shall have delivered to the Trustee a duly
executed Subsequent Transfer Agreement 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 Subsequent Cut-Off Date;
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(iv) As of each Subsequent Transfer Date, the Seller was not
insolvent nor will the Seller be made insolvent by such transfer nor
is the Seller aware of any pending insolvency;
(v) Such addition will not result in a material adverse tax
consequence to any REMIC or the Holders of the Certificates;
(vi) the Funding Period shall not have terminated;
(vii) 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 unless such
matters were covered in the opinions delivered on the Closing Date;
and
(viii) If such Subsequent Transfer Date is the last
Subsequent Transfer Date, the Seller shall have delivered to the
Trustee, with a copy to each Rating Agency, of an agreed upon
procedures letter from KPMG Peat Marwick to the effect that each Loan
Group, after giving effect to all additions of Subsequent Mortgage
Loans satisfies the description thereof set forth on page S-30 of the
Prospectus Supplement.
(c) The Seller, Custodian and the Trustee shall comply with their
respective obligations set forth in Section 2.01, 2.02, 2.04 and 2.05 with
respect to the Subsequent Mortgage Loans delivered on each Subsequent Transfer
Date. References in such Sections to the Initial Mortgage Loans or Mortgage
Loans shall be deemed to refer to the Subsequent Mortgage Loans and references
to the Closing Date shall be deemed to refer to the applicable Subsequent
Transfer Date except that references to 360 days after the Closing Date shall
remain unchanged as shall representations made with specific reference to the
Initial Mortgage Loans.
Section 2.14. The Custodian. Notwithstanding anything to the contrary
in this Agreement, the parties hereto acknowledge that the functions of the
Trustee with respect to the acceptance, inspection, custody and release of the
Mortgage Files pursuant to Sections 2.01, 2.02, 2.05 and 2.13 shall be
performed by the Custodian pursuant to the Custodial Agreement. The fees and
expenses of the Custodian will be paid by Delta. The Trustee will not be
liable for any acts or omissions of the Custodian.
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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 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
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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 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
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(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 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.
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(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.
(b) The Servicer shall establish and maintain a separate trust
account (the "Collection Account") titled "The First National Bank of Chicago,
as Trustee, in trust for the registered holders of Delta Funding Home Equity
Loan Asset Backed Certificates, Series 1998-1." The Collection Account shall
be an Eligible Account. The Servicer shall on the Closing Date deposit any
amounts representing payments on and any collections in respect of the
Mortgage Loans received after the related Cut-Off Date (other than interest
accrued and due prior to March 1, 1998) 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
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Principal Prepayments and Curtailments collected after the related
Cut-Off Date;
(ii) all payments received after the related Cut-Off Date on
account of interest on the Mortgage Loans (exclusive of payments in
respect of interest on the Mortgage Loans which have accrued and were
due on or prior to March 1, 1998);
(iii) all Net Liquidation Proceeds net of Foreclosure
Profits;
(iv) all Insurance Proceeds other than any portion thereof
constituting Net Liquidation Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase
of any Mortgage Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.02, 2.04, 2.06 and 3.16; and
(vii) any amount required to be deposited in the Collection
Account pursuant to Sections 3.05, 3.06, 3.07, 5.02 or 5.05;
provided, however, that, with respect to each Due Period, the Servicer shall
be permitted to retain (x) from payments in respect of interest on a Mortgage
Loan, the Servicing Fee for such Mortgage Loan and (y) from payments from
Mortgagors, Liquidation Proceeds, Insurance Proceeds and Released Mortgaged
Property Proceeds, any unreimbursed Servicing Advances and Monthly Advances
related thereto. The foregoing requirements respecting deposits to the
Collection Account are exclusive, it being understood that, without limiting
the generality of the foregoing, the Servicer need not deposit in the
Collection Account amounts representing Servicing Compensation or amounts
received by the Servicer for the accounts of Mortgagors for application toward
the payment of taxes, insurance premiums, assessments and similar items.
The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Servicer or any of its Affiliates, if such
obligations otherwise qualify as Eligible Investments) pursuant to Section
5.05.
Section 3.03. Withdrawals from the Collection Account. The Servicer
shall withdraw or cause to be withdrawn funds from the Collection Account for
the following purposes:
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(i) before 11:00 a.m. (New York City time) on the Business
Day preceding each Distribution Date, to withdraw the portion of
Available Funds then in the Collection Account and remit such funds
to the Trustee for deposit to the Distribution Account;
(ii) to reimburse the Servicer for any accrued unpaid
Servicing Compensation which the Servicer would not have been
required to deposit in the Collection Account and for unreimbursed
Monthly Advances and Servicing Advances. The Servicer's right to
reimbursement for unpaid Servicing Fees and unreimbursed Servicing
Advances shall be limited to late collections on the related Mortgage
Loan, including Liquidation Proceeds, Released Mortgaged Property
Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the related Mortgagor or otherwise
relating to the Mortgage Loan in respect of which such reimbursed
amounts are owed. The Servicer's right to reimbursement for
unreimbursed Monthly Advances shall be limited to late collections of
interest on any Mortgage Loan and to Liquidation Proceeds, Released
Mortgaged Property Proceeds and Insurance Proceeds on related
Mortgage Loans;
(iii) to withdraw any amount received from a Mortgagor that
is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the United States Bankruptcy Code
in accordance with a final, nonappealable order of a court having
competent jurisdiction;
(iv) to withdraw any funds deposited in the Collection
Account that were not required to be deposited therein (such as
Servicing Compensation) or were deposited therein in error and to pay
such funds to the appropriate Person;
(v) to withdraw funds necessary for the conservation and
disposition of REO Property pursuant to Section 3.06 to the extent
not advanced by the Servicer;
(vi) to reimburse the Servicer for Nonrecoverable Advances;
(vii) to pay to the Seller collections received in respect
of accrued interest on the Mortgage Loans due on or before March 1,
1998;
(viii) to pay to the Servicer or the Trustee 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
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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
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.
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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.
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.
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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 Property within three years
after its acquisition or (ii) prior to the expiration of any extension to such
three-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 three 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 three
years is permitted
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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 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 or Custodian is holding
the Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee or Custodian 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 or Custodian 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 or the Custodian, as the case may be,
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 or Custodian to the Servicer.
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In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the related
Assignment of Mortgage in accordance with the provisions hereof, the Trustee
shall, if so requested in writing by the Servicer, execute an appropriate
assignment in the form provided to the Trustee by the Servicer to assign such
Mortgage Loan for the purpose of collection to the Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only) and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise
enforce the terms of the Mortgage Loan and deposit or credit the Net
Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect
thereto in the Collection Account. In the event that all delinquent payments
due under any such Mortgage Loan are paid by the Mortgagor and any other
defaults are cured then the assignee for collection shall promptly reassign
such Mortgage Loan to the Trustee and return it to the place where the related
Mortgage File was being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Servicer. Subject to Section 5.02, the Servicer shall be entitled to retain
the Servicing Fee in accordance with Section 3.02 as compensation for its
services in connection with servicing the Mortgage Loans. Moreover, additional
servicing compensation in the form of prepayment penalties or late payment
charges or other receipts not required to be deposited in the Collection
Account, including, without limitation, Foreclosure Profits and, subject to
Section 5.05, investment income on the Accounts (other than the Initial
Interest Coverage Account) shall be retained by the Servicer. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder (including payment of all other fees and expenses not
expressly stated hereunder to be for the account of the Trust or the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
Section 3.09. Annual Statement as to Compliance. (a) The Servicer
will deliver to the Trustee 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 1999, 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
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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 Review. Not later than the last
Business Day of the fifth month following the end of the Servicer's fiscal
year (December 31), beginning in 1999, 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 Trustee,
Custodian 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.
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Section 3.13. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller and the Servicer shall cooperate
with the Trustee in the preparation of any such report and shall provide to
the Trustee in a timely manner all such information or documentation as the
Trustee may reasonably request in connection with the performance of its
duties and obligations under this Section 3.13.
Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged
Properties, Returns Relating to Mortgage Interest Received from Individuals
and Returns Relating to Cancellation of Indebtedness. The Servicer shall make
reports of foreclosures and abandonments of any Mortgaged Property for each
year beginning in 1998. The Servicer shall file reports relating to each
instance occurring during the previous calendar year in which the Servicer (i)
on behalf of the Trustee acquires an interest in any Mortgaged Property
through foreclosure or other comparable conversion in full or partial
satisfaction of a Mortgage Loan or (ii) knows or has reason to know that any
Mortgaged Property has been abandoned. The reports from the Servicer shall be
in form and substance sufficient to meet the reporting requirements imposed by
Sections 6050J, 6050H and 6050P of the Code.
Section 3.15. Advances by the Servicer. (a) Not later than 12:00 noon
New York time on the Business Day preceding each Distribution 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
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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 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
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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, 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.
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With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges
which are or may become a lien upon the Mortgaged Property and the status of
primary mortgage guaranty insurance premiums, if any, and fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in any escrow account which shall have been
estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage. To the extent that a
Mortgage does not provide for escrow payments, the Servicer shall, if it has
received notice of a default or deficiency, monitor such payments to determine
if they are made by the Mortgagor.
ARTICLE IV
Initial Interest Coverage Account
Section 4.01. [Reserved]
Section 4.02. Initial Interest Coverage Account and Pre-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 "The First National Bank of Chicago, as Trustee of the Delta
Funding Home Equity Loan Trust Series 1998-1 Initial Interest Coverage
Account". The Initial Interest Coverage Account shall be treated as an
"outside reserve fund" under applicable Treasury regulations and will not be
part of any REMIC. Any investment earnings on the Initial Interest Coverage
Account will be treated as owned by the Seller and will be taxable to the
Seller. The amount on deposit in the Initial Interest Coverage Account shall
be invested in Eligible Investments in accordance with the provisions of
Section 5.05.
The Trustee has heretofore established or caused to be established
and shall hereafter maintain or cause to be maintained a separate account
denominated a Pre-Funding Account, which is and shall continue to be an
Eligible Account in the name of the Trustee and shall be designated "The First
National Bank of Chicago, as Trustee of the Delta Funding Home Equity Loan
Trust Series 1998-1 Pre-Funding Account". The Pre-Funding Account shall
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be treated as an "outside reserve fund" under applicable Treasury regulations
and will not be part of any REMIC. Any Pre-Funding Earnings will be deposited
into the Initial Interest Coverage Account on each Pre-Funding Distribution
Date; provided, however, that if the final Subsequent Transfer Date occurs
after the Distribution Date in a month, on such Subsequent Transfer Date, the
Trustee shall (i) transfer the Excess Funding Amount(s) from the Pre-Funding
Account to the Distribution Account, (ii) transfer Pre-Funding Earnings to the
Initial Interest Coverage Account and (iii) close the Pre-Funding Account. The
amount on deposit in the Pre-Funding Account shall be invested in Eligible
Investments in accordance with the provisions of Section 5.05. All investment
earnings on funds on deposit in the Initial Interest Coverage Account and the
Pre-Funding Account will be treated as owned by, and will be taxable to, the
Seller.
(b) On the Closing Date, the Seller will cause to be deposited the
Initial Interest Deposit in the Distribution Account and the Original
Capitalized Interest Deposit into the Initial Interest Coverage Account from
the sale of the Offered Certificates. On the Closing Date, the Seller will
cause to be deposited the Pre-Funding Amount in the Pre-Funding Account from
the sale of the Offered Certificates.
(c) On each Pre-Funding 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;
provided, however, that on the final Subsequent Transfer Date the Trustee
shall (i) transfer the Capitalized Interest Requirement, if any, for the
following Distribution Date from the Initial Interest Coverage Account to the
Distribution Account, (ii) remit the balance of the funds on deposit in the
Initial Interest Coverage Account to the Seller and (iii) close the Initial
Interest Coverage Account.
(d) On each Subsequent Transfer Date, the Seller shall instruct the
Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of
the aggregate Principal Balances of the Subsequent Mortgage Loans sold to the
Trust on such Subsequent Transfer Date and pay such amount to or upon the
order of the Seller with respect to such transfer.
(e) If at the end of the Funding Period amounts still remain in the
Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw such
amounts from the Pre-Funding Account on the immediately following Distribution
Date and deposit such amounts in the Distribution Account.
(f) The Initial Interest Coverage Account and Pre-Funding Account
shall be closed on the Distribution Date immediately
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following the end of the Funding Period. All amounts, if any, remaining in the
Initial Interest Coverage Account on such day 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 F:
(i) to the Trustee, the Trustee Fee for such Loan Group
and Distribution Date;
(ii) concurrently, to the Classes of Senior Certificates
in Certificate Group F, the related Class Interest
Distribution for such Distribution Date;
(iii) sequentially, to the Class M-1F, Class M-2F and
Class B-1F Certificates, in that order, the related
Class Monthly Interest Amount;
(iv) to fund the Subordination Increase Amount for
Certificate Group F as part of the related
Principal Distribution Amount; and
(v) the remainder pursuant to clause C. below.
B. Loan Group A:
(i) to the Trustee, the Trustee Fee for such Loan Group
and Distribution Date;
(ii) concurrently, to the Classes of Senior Certificates
in Certificate Group A, the related Class Interest
Distribution for such Distribution Date;
(iii) sequentially, to the Class M-1A, Class M-2A and
Class B-1A Certificates, in that order, the related
Class Monthly Interest Amount;
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(iv) to fund the Subordination Increase Amount for
Certificate Group A as part of the related Principal
Distribution Amount; and
(v) the remainder pursuant to clause D. below.
C. Remaining Interest and Excess Overcollateralization Amount
for Loan Group F:
(i) sequentially, to the Class M-1F, Class M-2F and Class
B-1F Certificates, in that order, an amount equal to
the related Class Interest Carryover Shortfall;
(ii) sequentially, to the Class M-1F, Class M-2F and Class
B-1F Certificates, in that order, the related Class
Principal Carryover Shortfall;
(iii) to fund any amount listed in clauses D. (i) and (ii)
below, in that order, which were not fully funded as
provided therein; and
(iv) concurrently, to the Class M-1F, Class M-2F and Class
B-1F Certificates, any related LIBOR Carryover,
allocated pro rata among such Classes in proportion to
their respective amounts of LIBOR Carryover, such
amounts to be treated as paid from and to the extent of
amounts on deposit in the LIBOR Carryover Reserve Fund;
(v) to the LIBOR Carryover Reserve Fund for distribution,
if any, pursuant to clause (iv) above, the Reserve Fund
Deposit; and
(vi) to the Residual Certificates, the remainder.
D. Remaining Interest and Excess Overcollateralization Amount
for Loan Group A:
(i) sequentially, to the Class M-1A, Class M-2A and Class
B-1A Certificates, in that order, an amount equal to
the related Class Interest Carryover Shortfall;
(ii) sequentially, to the Class M-1A, Class M-2A and Class
B-1A Certificates, in that order, the related Class
Principal Carryover Shortfall;
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(iii) to fund any amount listed in clauses C. (i) and (ii)
above, in that order, which were not fully funded as
provided therein;
(iv) concurrently, to the Class A-2A, Class M-1A, Class M-2A
and Class B-1A Certificates, any related LIBOR
Carryover allocated pro rata among such Classes in
proportion to their respective amounts of LIBOR
Carryover; and
(v) to the Residual Certificates, the remainder, provided,
however, that if the Excess Overcollateralization
Amount for Certificate Group A is zero solely due to
the existence of a Subordination Trigger Event for such
Certificate Group, the amount that otherwise would
constitute such Excess Overcollateralization Amount
shall be distributed as part of the related Class
Principal Distribution Amount in reduction of the Class
Principal Balance of the related Subordinate
Certificates sequentially to the Class B-1A, Class M-2A
and Class M-1A Certificates, in that order, until the
respective Class Principal Balances thereof are reduced
to zero, and provided, further, that such distribution
will not cause the credit enhancement available to any
Class of Certificates Senior to the class receiving
such distribution, expressed as a percentage of the
related Loan Group Balance as of the end of the related
Due Period, to be less than the product of (i) the
Applicable Multiplier and (ii) the sum of the
applicable Original Credit Support Percentage and the
applicable Required OC Percentage as of the Closing
Date.
On each Distribution Date, the Class Interest Distribution for each
Class of Senior Certificates in a Certificate Group 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 each Basic
Principal Amount and, on the Distribution Date immediately
following the end of the Funding Period, 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)A.(iv)
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or B.(iv)hereof in the following order of priority, in each
case, to the extent of the funds remaining therefor:
A. Loan Group F:
(i) to the Senior Certificates in Certificate Group F, the
related Senior Principal Distribution Amount plus the
related Excess Funding Amount, if any, allocated in
the following order o+f priority:
(a) to the Class A-6F Certificates, the Class A-6F
Principal Distribution, until the Class Principal
Balance thereof has been reduced to zero; and
(b) sequentially, to the Class A-1F, Class A-2F,
Class A-3F, Class A-4F, Class A-5F and Class A-6F
Certificates, in that order, until the respective
Class Principal Balances thereof have been
reduced to zero; and
(ii) on and after the related Stepdown Date and so long as
a Trigger Event for the related Certificate Group is
not in effect, sequentially, to the Class M-1F, Class
M-2F and Class B-1F Certificates, in that order, the
related Class Principal Distribution Amount until the
respective Class Principal Balances thereof have been
reduced to zero; and
(iii) to the Residual Certificates, any remaining principal.
B. Loan Group A:
(i) to the Senior Certificates in Certificate Group A, the
related Senior Principal Distribution Amount plus the
related Excess Funding Amount, if any allocated in the
following order of priority;
(a) 100% to the Class A-2A Certificates until the
earlier to occur of (i) the 21st Distribution
Date and (ii) the Distribution Date on which the
Class Principal Balance thereof is reduced to
zero;
(b) If the Class A-2A Certificates are outstanding,
concurrently, 90% to the Class A-1A Certificates
and 10% to the Class A-2A Certificates until the
Class Principal Balance of
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the Class A-1A Certificates is reduced to zero;
and
(c) to the Class A-1A or Class A-2A Certificates
whichever is outstanding, until the Class
Principal Balance thereof is reduced to zero.
(ii) on and after the related Stepdown Date and so long as
a Trigger Event for the related Certificate Group is
not in effect sequentially, to the Class M-1A, Class
M-2A and Class B-1A Certificates, in that order, the
related Class Principal Distribution Amount until the
Class Principal Balances thereof have been reduced to
zero; and;
(iii) to the Residual Certificates, any remaining principal.
Notwithstanding the priorities set forth in clauses A.(i) and B.(i)
above, if the aggregate Class Principal Balance of the related Subordinate
Certificates is reduced to zero, the applicable Senior Principal Distribution
Amount shall be distributed concurrently to each Class of Senior Certificates
in the applicable Certificate Group on a pro rata basis in accordance with
their respective Class Principal Balances.
Notwithstanding the foregoing, in the event that the Class Principal
Balances of all of the Senior Certificates relating to a Certificate Group have
been reduced to zero either prior to the Distribution Date in April 2001 or
thereafter during the continuation of a Trigger Event for such Certificate
Group, all amounts of principal that would have been distributed to such Senior
Certificates will be distributed to the related Subordinate Certificates of
such Certificate Group sequentially in the following order: Class M-1, Class
M-2, Class B-1. Similarly, if the Class Principal Balance of the Class M-1
Certificates has been reduced to zero and a Trigger Event for such Certificate
Group is continuing, all amounts of principal that would have been distributed
to such Class M-1 Certificates will be distributed to the related Class M-2 and
Class B-1 Certificates. Finally, if the Class Principal Balance of the Class
M-2 Certificates has been reduced to zero, and a Trigger Event for such
Certificate Group is continuing, all amounts of principal that would have been
distributed on such Class M-2 Certificates will be distributed to the related
Class B-1 Certificates.
(d) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each
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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
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 Notional Amount
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, New York
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 (xxiii) below as of the end of
the preceding Due Period and such other information as the Trustee
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shall reasonably require. Not later than 12:00 noon, New York 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 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) each Overcollateralization Amount and each Required
Overcollateralization Amount as of the close of business on the
Distribution Date, after giving effect to distributions of principal
on such Distribution Date;
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(x) for each Certificate Group, whether a Trigger Event has
occurred and is continuing;
(xi) The number and Principal Balances of all Mortgage Loans in
each Loan Group that were the subject of Principal Prepayments during
the Due Period;
(xii) The amount of all Curtailments in each Loan Group that were
received during the Due Period;
(xiii) The principal portion of all Monthly Payments in each Loan
Group received during the Due Period;
(xiv) The interest portion of all Monthly Payments in each Loan
Group received on the Mortgage Loans during the Due Period;
(xv) For each Certificate Group, 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 in each Loan Group 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 in each Loan Group outstanding
at the beginning and at the end of the related Due Period;
(xx) For each Certificate Group, 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) For each Loan Group, 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 90 or more 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;
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(xxii) For each Certificate Group the calculation of the Trigger
Event and the Subordination Trigger Event; and
(xxiii) For each Pre-Funding Distribution Date, the remaining
Allocated Pre-Funded Amount.
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 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
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Certificateholder, if requested in writing by such Person, such information as
is reasonably necessary to provide to such Person a statement containing the
information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
Class R Certificateholder. Such obligation of the Trustee shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be prepared and furnished to Certificateholders by the Trustee pursuant
to any requirements of the Code as from time to time in force.
(e) The Servicer and the Trustee shall furnish to each
Certificateholder (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
The First National Bank of Chicago, a separate account (the "Distribution
Account") titled "The First National Bank of Chicago, as Trustee, in trust for
the registered holders of Delta Funding Home Equity Loan Asset-Backed
Certificates, Series 1998-1." The Distribution Account shall be an Eligible
Account. The Trustee shall deposit any amounts representing payments on and any
collections in respect of the Mortgage Loans received by it immediately
following receipt thereof, including, without limitation, all amounts withdrawn
by the Servicer from the Collection Account pursuant to Section 3.03 for
deposit to the Distribution Account. Amounts on deposit in the Distribution
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Account may be invested in Eligible Investments pursuant to Section 5.05.
Section 5.05. Investment of Accounts. (a) So long as no Event of
Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account held by the Trustee
shall be invested and reinvested by the Trustee, as directed in writing by the
Servicer, in one or more Eligible Investments bearing interest or sold at a
discount. If an Event of Default shall have occurred and be continuing or if
the Servicer does not provide investment directions, the Trustee shall invest
all Accounts in Eligible Investments described in paragraph (vi) of the
definition of Eligible Investments. No such investment in any Account shall
mature later than the Business Day immediately preceding the next Distribution
Date (except that (i) if such Eligible Investment is an obligation of the
Trustee, then such Eligible Investment shall mature not later than such
Distribution Date and (ii) any other date may be approved by the Rating
Agencies).
(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
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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
each Certificate Group for such Distribution Date. The Applied Realized Loss
Amount for each Certificate Group for any Distribution Date shall be applied by
reducing the Class Principal Balance of each Class of Subordinate Certificates
in such Certificate Group in the following order, Class B, Class M-2 and Class
M-1, 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.
Section 5.07 LIBOR Carryover Reserve Fund
(a) On the Closing Date, the Trustee shall establish and
maintain in its name, in trust for the benefit of the Certificateholders in
Certificate Group F other than the Class A-1F Certificates, the LIBOR Carryover
Reserve Fund. The LIBOR Carryover Reserve Fund shall be an Eligible Account,
and funds on deposit therein shall be held separate and apart from, and shall
not be commingled with, any other moneys, including without limitation, other
moneys held by the Trustee pursuant to this Agreement. The Libor Carryover
Reserve Fund 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 Libor Carryover Reserve Fund will be treated as owned by the Class R-1
Certificateholder and will be taxable to the Class R-1 Certificateholder.
Distributions made to any outside reserve fund under this document shall be
treated as made to the owner of such fund.
(b) On each Distribution Date for which the amount on deposit in the
LIBOR Carryover Reserve Fund is less than the amount of the Reserve Fund
Deposit, the Trustee shall deposit amounts from the Distribution Account to the
LIBOR Carryover Reserve Fund pursuant to Section 5.01(a). The Trustee shall
make withdrawals from the LIBOR Carryover Reserve Fund to make distributions
pursuant to Section 5.01(a) hereof.
(c) Funds in the LIBOR Carryover Reserve Fund may be invested in
Eligible Investments. Any earnings on such amounts
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shall be payable to the Class R-1 and Class R-2 Certificates. The Class R-1 and
Class R-2 Certificates shall evidence ownership of the LIBOR Carryover Reserve
Fund for federal tax purposes and shall direct the Trustee in writing as to the
investment of amounts therein.
(d) Upon termination of the Trust, any amounts remaining in the LIBOR
Carryover Reserve Fund shall be distributed to the Certificateholders of the
Class R-1 and Class R-2 Certificates in the same manner as if distributed
pursuant to Section 5.01(a) hereof.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. Each of the Offered 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 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
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dated the date of their authentication. Subject to Section 6.02(c), the Offered
Certificates 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 ertificates 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 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 Residual
Certificates by the Seller, no transfer, sale, pledge or other disposition of
any 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 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.
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 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
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("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.
(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
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shall as a condition to registration of the transfer, require delivery
to it, in form and substance satisfactory to it, of each of the
following:
(A) an affidavit in the form of Exhibit G from the proposed
transferee to the effect that such transferee is a Permitted
Transferee and that it is not acquiring its Ownership Interest in
the Residual Certificate that is the subject of the proposed
transfer as a nominee, trustee or agent for any Person who is not
a Permitted Transferee; and
(B) a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Residual Certificates.
(iv) Any attempted or purported transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 6.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall,
in violation of the provisions of this Section 6.02, become a Holder
of a Residual Certificate, then the prior Holder of such Residual
Certificate that is a Permitted Transferee shall, upon discovery that
the registration of transfer of such Residual Certificate was not in
fact permitted by this Section 6.02, be restored to all rights as
Holder thereof retroactive to the date of registration of transfer of
such Residual Certificate. The Trustee shall be under no liability to
any Person for any registration of transfer of a Residual Certificate
that is in fact not permitted by this Section 6.02 or for making any
distributions due on such Residual Certificate to the Holder thereof
or taking any other action with respect to such Holder under the
provisions of the Agreement so long as the Trustee received the
documents specified in clause (iii). The Trustee shall be entitled to
recover from any Holder of a Residual Certificate that was in fact not
a Permitted Transferee at the time such distributions were made all
distributions made on such Residual Certificate. Any such
distributions so recovered by the Trustee shall be distributed and
delivered by the Trustee to the prior Holder of such Residual
Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee shall have the
right but not the obligation, without notice to the Holder of such
Residual Certificate or any
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other Person having an Ownership Interest therein, to notify the
Depositor to arrange for the sale of such Residual Certificate.
The proceeds of such sale, net of commissions (which may include
commissions payable to the Depositor or its affiliates in
connection with such sale), expenses and taxes due, if any, will
be remitted by the Trustee to the previous Holder of such
Residual Certificate that is a Permitted Transferee, except that
in the event that the Trustee determines that the Holder of such
Residual Certificate may be liable for any amount due under this
Section 6.02 or any other provisions of this Agreement, the
Trustee may withhold a corresponding amount from such remittance
as security for such claim. The terms and conditions of any sale
under this clause (v) shall be determined in the sole discretion
of the Trustee, and it shall not be liable to any Person having
an Ownership Interest in a Residual Certificate as a result of
its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section 6.02, then the Trustee, based on
information provided to the Trustee by the Depositor will provide to
the Internal Revenue Service, and to the persons specified in Sections
860E(e)(3) and (6) of the Code, information needed to compute the tax
imposed under Section 860E(e)(5) of the Code on transfers of residual
interests to disqualified organizations.
The foregoing provisions of this Section 6.02(d) shall cease to apply to
transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee,
(i) written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in this Section 6.02 will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion
of Counsel to the effect that such removal will not cause any REMIC to fail to
qualify as a REMIC.
Each Tax Matters Person Residual Interest shall at all times be
registered in the name of the Trustee.
(e) No service charge shall be made for any registration of transfer
or exchange of Certificates of any Class, but the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of
Certificates.
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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 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
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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 Servicer. Any corporation into which the
Seller or the Servicer may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Seller or
the Servicer shall be a party, or any corporation succeeding to the business of
the Seller or the Servicer, shall be the successor of the Seller or the
Servicer, as the case may be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor
Servicer shall satisfy all the requirements of Section 8.02 with respect to the
qualifications of a successor Servicer.
Section 7.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or
agents of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of
any action by the Servicer in good faith pursuant to this Agreement, or for
errors
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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 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
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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.
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.
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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;
(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 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;
(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
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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 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
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Collection Account or thereafter received by the Servicer with
respect to the Mortgage Loans. All reasonable out- -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 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
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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.
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 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.
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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 or waiver of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against the Trustee and, in the absence of bad faith on the part of
the Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
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(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;
(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
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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, 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)
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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) [reserved]
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
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Trustee shall assume the duties of the Servicer pursuant to Section 8.02); the
compliance by the Seller or the Servicer with any warranty or representation
made under this Agreement or in any related document or the accuracy of any
such warranty or representation prior to the Trustee's receipt of notice or
other discovery of any non-compliance therewith or any breach thereof; any
investment of monies by or at the direction of the Servicer or any loss
resulting therefrom, it being understood that the Trustee shall remain
responsible for any Trust property that it may hold in its individual capacity;
the acts or omissions of any of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), any Subservicer or
any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02) or any Subservicer
taken in the name of the Trustee; the failure of the Servicer or any
Subservicer to act or perform any duties required of it as agent of the Trustee
hereunder; or any action by the Trustee taken at the instruction of the
Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 8.02); provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement, including, without limitation, the Trustee's duty to review the
Mortgage Files pursuant to Section 2.02. Until such time as the Trustee shall
have become the Successor Servicer, the Trustee shall have no responsibility to
perfect or maintain the perfection of any security interest or lien granted to
it hereunder.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Certificates with the same rights as it would have if it were not Trustee and
may transact any banking and trust business with the Seller or the Servicer.
Section 9.05. Servicer to Pay Trustee Fees and Expenses. The Trustee
will be paid the Trustee Fee pursuant to Section 5.01 and such other amounts as
agreed with Delta. The Servicer will pay or reimburse 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,
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 incurred in connection with or
relating to this Agreement or the Certificates, other than any loss, liability
or
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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. 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 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
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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, 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
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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 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
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such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly 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
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authority conferred and vested in it by this Agreement. Each of the
undertakings and agreements made on the part of the Trustee in the Certificates
is made and intended not as a personal undertaking or agreement by the Trustee
but is made and intended for the purpose of binding only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates; Inspection. (a) All rights of action and claims under this
Agreement or the Certificates may be prosecuted and enforced by the Trustee
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, the Custodian 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 option as provided in Section 10.01,
the Trust shall be terminated in
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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 subject, in the case of any
amendment or modification which affects any right, benefit, duty or obligation
of the Custodian, to the consent of the Custodian, 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
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provisions herein that may be inconsistent with any other provisions herein or
the expectations of Certificateholders, (iii) to add to the duties of the
Servicer, (iv)to add any other provisions with respect to matters or questions
arising under this Agreement 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.
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Prior to the solicitation of consent of Certificateholders in
connection with any such amendment, the party seeking such 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
Trust, nor otherwise
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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 IBCA, Inc., One State Street Plaza, New York, New York 10004
(d) in the case of S&P, 26 Broadway, 15th Floor, New York, New York 10007,
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 each Rating
Agency copies of the following:
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(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 rior notice thereof to the Trustee.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented
by the Certificates shall be nonassessable for any losses or expenses of the
Trust or for any reason whatsoever, and that the Certificates upon
- 129 -
<PAGE>
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.
- 130 -
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers all
as of the day and year first above written.
DELTA FUNDING CORPORATION,
as Seller and Servicer
By
---------------------------
Name: Michele Loesch
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By
---------------------------
Name: Mary R. Fonti
Title: Assistant Vice President
<PAGE>
State of New York )
) ss.:
County of New York )
On the 31st day of March, 1998 before me, a notary public in
and for the State of New York, personally appeared Michele Loesch known to me
who, being by me duly sworn, did depose and say that she is the Vice President
of Delta Funding Corporation, a New York corporation, one of the parties that
executed the foregoing instrument; that she 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 she signed
her name thereto by like order.
-----------------------
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York )
On the 31st day of March, 1998 before me, a notary public in
and for the State of New York, Mary R. Fonti, personally appeared, known to me
who, being by me duly did depose and say that she is the Assistant Vice
President of The First National Bank of Chicago, 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]
<PAGE>
EXHIBIT A-1
A-1-1
<PAGE>
FORM OF CLASS A FIXED RATE CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : A-_F
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class A-_F
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end fixed rate home equity loans
(the "Mortgage Loans")
A-1-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
A-1-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
A-1-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off
A-1-6
<PAGE>
Date Pool Principal Balances, the Servicer will have the option to
repurchase, in whole, from the Trust the Mortgage Loans at a purchase
price determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
A-1-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto _________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: ____________________________
_________________________________________.
Dated: _____________
______________________________________
Signature by or on behalf of assignor
A-1-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
A-1-9
<PAGE>
EXHIBIT A-2
A-2-1
<PAGE>
FORM OF CLASS M FIXED RATE CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORP-ORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
PAYMENTS ON THIS CERTIFICATE ARE SUBORDINATED TO CERTAIN OTHER CLASSES OF
CERTIFICATES AS PROVIDED IN THE AGREEMENT REFERRED TO HEREIN.
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : M-_F
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class M-_F
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end fixed rate home equity loans
(the "Mortgage Loans")
A-2-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
A-2-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
A-2-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
A-2-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
A-2-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
______________________________________
Signature by or on behalf of assignor
A-2-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
A-2-9
<PAGE>
EXHIBIT A-3
A-3-1
<PAGE>
FORM OF CLASS B FIXED RATE CERTIFICATES
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
PAYMENTS ON THIS CERTIFICATES ARE SUBORDINATED TO CERTAIN OTHER CLASSES
OF CERTIFICATES AS PROVIDED IN THE AGREEMENT REFERRED TO HEREIN.
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : B-_F
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class B-_F
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end fixed rate home equity loans
(the "Mortgage Loans")
A-3-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
A-3-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
A-3-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
A-3-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
A-3-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
A-3-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
______________________________________
Signature by or on behalf of assignor
A-3-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
A-3-9
<PAGE>
EXHIBIT A-4
A-4-1
<PAGE>
FORM OF CLASS IO CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
THIS CLASS IO_ CERTIFICATE HAS NO PRINCIPAL BALANCE
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Notional Amount
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class :
Percentage Interest
Evidenced by this Certificate :
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class IO_
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end [fixed rate] [adjustable
rate] home equity loans (the "Mortgage Loans")
A-4-2
<PAGE>
This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Initial Notional Amount of this Certificate by the initial
denominator of all Private Certificates) in the interest represented by
all Certificates of the Class to which this Certificate belongs in the
Trust. The Trust was created pursuant to a Pooling and Servicing
Agreement dated as of the Cut-Off Date specified above (the "Agreement")
among Delta Funding Corporation, as seller and servicer (in such
capacities, the "Seller" or the "Servicer"), and The First National Bank
of Chicago, as trustee (the "Trustee"). To the extent not defined herein,
the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder
of this Class Certificate by virtue of the acceptance hereof assents and
by which such Holder is bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
A-4-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
A-4-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
A-4-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
A-4-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
A-4-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
______________________________________
Signature by or on behalf of assignor
A-4-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
A-4-9
<PAGE>
EXHIBIT B-1
B-1-1
<PAGE>
FORM OF CLASS A ADJUSTABLE RATE CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : A-_A
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class A-_A
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end adjustable rate home equity
loans (the "Mortgage Loans")
B-1-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
B-1-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
B-1-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
B-1-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
B-1-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
________________________________________
Signature by or on behalf of assignor
B-1-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
B-1-9
<PAGE>
EXHIBIT B-2
B-2-1
<PAGE>
FORM OF CLASS M ADJUSTABLE RATE CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
PAYMENTS ON THIS CERTIFICATES ARE SUBORDINATED TO CERTAIN OTHER CLASSES
OF CERTIFICATES AS PROVIDED IN THE AGREEMENT REFERRED TO HEREIN.
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : M-_A
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class M-_A
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end adjustable rate home equity
loans (the "Mortgage Loans")
B-2-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
B-2-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
B-2-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
B-2-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
B-2-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
B-2-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
________________________________________
Signature by or on behalf of assignor
B-2-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
B-2-9
<PAGE>
EXHIBIT B-3
B-3-1
<PAGE>
FORM OF CLASS B ADJUSTABLE RATE CERTIFICATES
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
PAYMENTS ON THIS CERTIFICATE ARE SUBORDINATED TO CERTAIN OTHER CLASSES OF
CERTIFICATES AS PROVIDED IN THE AGREEMENT REFERRED TO HEREIN.
Certificate No. :
Cut-Off Date :
First Distribution Date :
Initial Certificate Principal
Balance of this Certificate
("Denomination") :
Initial Class Principal
Balance :
Certificate Rate :
CUSIP :
Class : B-_A
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class B-_A
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting of closed-end adjustable rate home equity
loans (the "Mortgage Loans")
B-3-2
<PAGE>
Principal in respect of this Certificate is distributable
monthly as set forth herein. Accordingly, the Certificate Principal
Balance of this Certificate at any time may be less than the Initial
Certificate Principal Balance set forth on the face hereof, as described
herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Seller or the Trustee referred
to below or any of their respective affiliates. Neither this Certificate
nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing
the Denomination of this Certificate by the Class Principal Balance) in
certain monthly distributions with respect to the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of the
Cut-Off Date specified above (the "Agreement") among Delta Funding
Corporation, as seller and servicer (in such capacities, the "Seller" or
the "Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Class Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
B-3-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
B-3-4
<PAGE>
[Reverse of Certificate]
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing on the first Distribution Date specified
on the face hereof, to the Person in whose name this Certificate is
registered at the close of business on the applicable Record Date in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of
Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or
money order mailed to the address of the person entitled thereto as it
appears on the Certificate Register or, upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $1,000,000, by wire transfer or otherwise, as set forth in the
Agreement. The final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of such Certificate
at the office or agency of the Trustee specified in the notice to
Certificateholders of such final distribution.
B-3-5
<PAGE>
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
Holders of the requisite percentage of the Voting Rights of each Class of
Certificates affected by such amendment, as specified in the Agreement.
Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent
of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the
Trustee in Chicago, Illinois, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the holder hereof or such holder's attorney
duly authorized in writing, and thereupon one or more new Certificates of
the same Class in authorized denominations and evidencing the same
aggregate Percentage Interest in the Trust will be issued to the
designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
B-3-6
<PAGE>
On any Distribution Date following the Period at the end of
which the Pool Principal Balance is less than 10% of the Cut-Off Date
Pool Principal Balances, the Servicer will have the option to repurchase,
in whole, from the Trust the Mortgage Loans at a purchase price
determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earliest of (i) the day
following the Distribution Date on which the aggregate Class Principal
Balance has been reduced to zero and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. In no event, however,
will the trust created by the Agreement continue beyond the expiration of
21 years from the death of the last survivor of the descendants living at
the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
B-3-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address: _____________________________
_________________________________________.
Dated: _____________
________________________________________
Signature by or on behalf of assignor
B-3-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
B-3-9
<PAGE>
EXHIBIT B-4
B-4-1
<PAGE>
FORM OF CLASS R CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE
WITHOUT REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A
TRANSACTION EXEMPTED FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN
ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
THIS CLASS R-_ CERTIFICATE HAS NO PRINCIPAL BALANCE, DOES NOT BEAR
INTEREST AND WILL NOT RECEIVE ANY DISTRIBUTIONS EXCEPT AS PROVIDED
HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED
UNLESS THE PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER
AFFIDAVIT IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED
UNLESS THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION
LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR AN OPINION OF
COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY
PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE
BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND
OF NO EFFECT.
B-4-2
<PAGE>
Certificate No. : 1
Percentage Interest
evidenced by this
Certificate : 99.999999%
Class : R-_
DELTA FUNDING HOME EQUITY LOAN TRUST
1998-1 Home Equity Loan Asset-Backed Certificates, Series 1998-1
Class R-_
evidencing a percentage interest in the distributions allocable
to the Certificates of the above-referenced Class with respect
to a Trust consisting primarily of pool of closed-end fixed rate
and variable rate home equity loans (the "Mortgage Loans")
This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Seller or the
Trustee referred to below or any of their respective affiliates. Neither
this Certificate nor the Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality.
This certifies that DF Special Holdings Corporation is the
registered owner of the Percentage Interest evidenced by this Certificate
specified above in the interest represented by all Certificates of the
Class to which this Certificate belongs in the Trust. The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of
February 28, 1998 (the "Agreement") among the Delta Funding Corporation,
as seller and servicer (in such capacities, the "Seller" and the
"Servicer"), and The First National Bank of Chicago, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of
the Agreement, to which Agreement the Holder of this Certificate by
virtue of the acceptance hereof assents and by which such Holder is
bound.
No distributions are expected to be made on this Certificate.
This Certificate does not have a principal balance or pass-through rate
and will be entitled to distributions only to the extent set forth in the
Agreement. In addition, any distribution of the proceeds of any remaining
assets of the Trust will be made only upon presentment and surrender of
this Certificate at the
B-4-3
<PAGE>
Corporate Trust Office or the office or agency maintained by the Trustee
in Chicago, Illinois.
No transfer of a Certificate of this Class shall be made unless
such transfer is made pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws or is
exempt from the registration requirements under said Act and such laws.
In the event that a transfer is to be made in reliance upon an exemption
from the Securities Act and such laws, in order to assure compliance with
the Securities Act and such laws, the Certificateholder desiring to
effect such transfer and such Certificateholder's prospective transferee
shall each certify to the Trustee in writing the facts surrounding the
transfer. In the event that such a transfer is to be made within three
years from the date of the initial issuance of Certificates pursuant to
the Agreement, there shall also be delivered (except in the case of a
transfer pursuant to Rule 144A of the Securities Act) to the Trustee of
an Opinion of Counsel that such transfer may be made pursuant to an
exemption from the Securities Act, which Opinion of Counsel shall not be
obtained at the expense of the Trustee or the Seller. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal
and state laws.
No transfer of a Certificate of this Class shall be made unless
the Trustee shall have received either (i) a representation letter from
the transferee of such Certificate, acceptable to and in form and
substance satisfactory to the Trustee, to the effect that such transferee
is not an employee benefit plan subject to Section 406 of ERISA or
Section 4975 of the Code, nor a person acting on behalf of any such plan,
which representation letter shall not be an expense of the Trustee, 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 Certificate presented for registration in the name of an employee
benefit plan subject to ERISA, or 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, an Opinion of
Counsel satisfactory to the Trustee to the effect that the purchase or
holding of such Certificate will not result in the assets of the Trust
being deemed to be "plan assets" and subject to the
B-4-4
<PAGE>
prohibited transaction provisions of ERISA and the Code and will not
subject the Trustee to any obligation in addition to those undertaken in
this Agreement, which Opinion of Counsel shall not be an expense of the
Trustee. Notwithstanding anything else to the contrary herein, any
purported transfer of a Certificate of this Class to or on behalf of an
employee benefit plan subject to ERISA or to the Code without the opinion
of counsel satisfactory to the Trustee as described above shall be void
and of no effect.
Each Holder of this Certificate will be deemed to have agreed to
be bound by the restrictions of the Agreement, including but not limited
to the restrictions that (i) each person holding or acquiring any
Ownership Interest in this Certificate must be a Permitted Transferee,
(ii) no Ownership Interest in this Certificate may be transferred without
delivery to the Trustee of (a) a transfer affidavit of the proposed
transferee and (b) a transfer certificate of the transferor, each of such
documents to be in the form described in the Agreement, (iii) each person
holding or acquiring any Ownership Interest in this Certificate must
agree to require a transfer affidavit and to deliver a transfer
certificate to the Trustee as required pursuant to the Agreement, (iv)
each person holding or acquiring an Ownership Interest in this
Certificate must agree not to transfer an Ownership Interest in this
Certificate if it has actual knowledge that the proposed transferee is
not a Permitted Transferee and (v) any attempted or purported transfer of
any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in
the purported transferee.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this
place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized officer of the Trustee.
* * *
B-4-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: March 31, 1998
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By _______________________________________
This is one of the Certificates
referenced in the within-mentioned Agreement
By _________________________________________
Authorized Signatory of
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
B-4-6
<PAGE>
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Asset-Backed Certificates,
Series 1998-1
This Certificate is one of a duly authorized issue of
Certificates designated as Delta Funding Home Equity Loan Trust 1998-1,
Home Equity Loan Asset-Backed Certificates, Series 1998-1 (herein
collectively called the "Certificates"), and representing a beneficial
ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the
Distribution Account for payment hereunder and that the Trustee is not
liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the
Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced
thereby, and the rights, duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be
made on the 25th day of each month or, if such 25th day is not a Business
Day, then the first Business Day following such Distribution Date (the
"Distribution Date"), commencing in April, 1998, to the Person in whose
name this Certificate is registered at the close of business on the
applicable Record Date in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required
to be distributed to Holders of Certificates of the Class to which this
Certificate belongs on such Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by wire transfer
of immediately available funds to the account of the Holder hereof at a
bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have so notified the Trustee in writing at least
five Business Days prior to the related Record Date and such
Certificateholder shall satisfy the conditions to receive such form of
payment set forth in the Agreement, or, if not, by check mailed by first
class mail to the address of such Certificateholder appearing in the
Certificate Register. The final distribution on each Certificate will be
made in like manner, but only upon presentment and surrender of such
Certificate at the office or agency of the
B-4-7
<PAGE>
Trustee specified in the notice to Certificateholders of such final
distribution.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations
of the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of
the Certificate Insurer and of Holders of the requisite percentage of the
Percentage Interests of each Class of Certificates affected by such
amendment, as specified in the Agreement. Any such consent by the Holder
of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange therefor or in lieu hereof
whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the
Certificates.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller and the Trustee and any agent of the Seller or the
Trustee may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Seller, the Trustee
nor any such agent shall be affected by any notice to the contrary.
On any Distribution Date following the Period at the end of
which the Pool Balance is less than 10% of the Principal Balances of the
Mortgage Loans as of the Cut-Off Date, the Servicer will have the option
to repurchase, in whole, from the Trust the Mortgage Loans at a purchase
price determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created
by the Agreement will terminate upon the earlier of (i) the day following
the Distribution Date on which the aggregate Class Principal Balance of
the Offered Certificates has been reduced to zero and (ii) the
B-4-8
<PAGE>
final payment or other liquidation of the last Mortgage Loan in the
Trust. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last
survivor of the descendants living at the date of the Agreement of a
certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement
shall have the meanings ascribed to them in the Agreement, and nothing
herein shall be deemed inconsistent with that meaning.
B-4-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto _________________________________________ (Please
print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of
a like denomination and Class, to the above named assignee and deliver
such Certificate to the following address:______________________________
__________________________________.
Dated: _____________
_______________________________________
Signature by or on behalf of assignor
B-4-10
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _______________ for the account of
______________, account number ___________, or, if mailed by check, to
_____________________. Applicable statements should be mailed to
___________________.
This information is provided by ____________________, the
assignee named above, or ________________, as its agent.
B-4-11
<PAGE>
EXHIBIT C
MORTGAGE LOAN SCHEDULE
[DELIVERED TO TRUSTEE AT CLOSING]
C-1
<PAGE>
EXHIBIT D
FORM OF SUBSEQUENT TRANSFER AGREEMENT
D-1
<PAGE>
FORM OF SUBSEQUENT TRANSFER AGREEMENT
SUBSEQUENT TRANSFER AGREEMENT (the "Agreement"), dated as of
April __, 1998, by and among Delta Funding Corporation (the "Seller") and
Delta Funding Home Equity Loan Trust 1998-1 (the "Trust") pursuant to the
Pooling and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of February 28, 1998,
between the Seller, as seller and servicer, and The First National Bank
of Chicago, as trustee (the "Trustee"), the Seller wishes to convey the
Subsequent Mortgage Loans (as defined below) to the Trust, and the Trust
wishes to acquire the same for the consideration set forth in Section IV
below; and
WHEREAS, the Seller shall timely deliver to the Trustee an
Addition Notice related to such conveyance as required by Section 2.13 of
the Pooling and Servicing Agreement;
NOW THEREFORE, the Trust and the Seller hereby agree as follows:
Section I. Capitalized terms used herein shall have the meanings
ascribed to them in the Pooling and Servicing Agreement unless otherwise
defined.
"Subsequent Mortgage Loans" shall mean, for purposes of
this Agreement, the Subsequent Mortgage Loans listed in the
Subsequent Mortgage Loan Schedule attached hereto as Schedule I.
"Subsequent Transfer Date" shall mean, with respect to
the Subsequent Mortgage Loans transferred hereby, the date
hereof.
Section II. Subsequent Mortgage Loan Schedule. The Subsequent
Mortgage Loan Schedule attached hereto as Schedule I is a supplement to
the Initial Mortgage Loan Schedule attached as Exhibit B to the Pooling
and Servicing Agreement. The Mortgage Loans listed in the Subsequent
Mortgage Loan Schedule constitute the Subsequent Mortgage Loans to be
transferred pursuant to this Agreement on the Subsequent Transfer Date.
Section III. Transfer of Subsequent Mortgage Loans. As of the
related Subsequent Cut-off Date, subject to and upon the
D-2
<PAGE>
terms and conditions set forth in Sections 2.01, 2.04 and 2.13 of the
Pooling and Servicing Agreement and set forth in this Agreement and the
Purchase Agreement, the Seller hereby irrevocably sells, transfers,
assigns, sets over and otherwise conveys to the Trust without recourse
other than as expressly provided herein and in the Pooling and Servicing
Agreement, all the right, title and interest of the Seller in and to the
(i) Subsequent Mortgage Loans including the related Principal Balance as
of the Subsequent Cut-off Date, all interest accruing thereon after the
Subsequent Cut-off Date, and all collections in respect of principal
received after the related Subsequent Cut-Off Date; (ii) property which
secured a Subsequent Mortgage Loan and which is acquired by foreclosure
or in lieu of foreclosure; (iii) interest of the Seller in any insurance
policies in respect of the Subsequent Mortgage Loans; and (iv) all
proceeds of any of the foregoing.
Section IV. Representations and Warranties of the Seller. (a)
The Seller hereby represents and warrants to the Trust for the benefit of
the Certificateholders that the representations and warranties of the
Seller set forth in Section 2.03 and 2.04(a) of the Pooling and Servicing
Agreement are true and correct with respect to the Seller and the
Subsequent Mortgage Loans as of the Subsequent Transfer Date.
(b) The Seller hereby affirms, as of the Subsequent Transfer
Date, that the Funding Period has not ended.
(c) The Seller hereby represents and warrants that (i) the
aggregate of the Principal Balances of the Subsequent Mortgage Loans
listed on the Subsequent Mortgage Loan Schedule and conveyed to the Trust
pursuant to this Agreement as of the related Subsequent Cut-off Date is
$__________ for Loan Group F and $__________ for Loan Group A, and (ii)
the conditions precedent for the transfer of Subsequent Mortgage Loans
set forth in Section 2.13 of the Pooling and Servicing Agreement have
been satisfied as of the Subsequent Transfer Date.
(d) The Seller hereby represents and warrants that the Seller is
not (i) insolvent and will not be rendered insolvent by the transfer of
Subsequent Mortgage Loans pursuant to this Agreement or (ii) aware of any
pending insolvency of the Seller.
Section V. Counterparts. This Agreement may be executed in two
or more counterparts (and by different parties in separate counterparts),
each of which shall be an original but all of which together shall
constitute one and the same instrument.
D-3
<PAGE>
Section VI. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to
its conflict of law provisions, and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with such
laws.
D-4
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the ____ day of March, 1998 before me, a Notary Public in and
for said State, personally appeared Michele Loesch, known to me to be a
Vice President of DELTA FUNDING CORPORATION, the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_____________________________
Notary Public
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the ____ day of March, 1998 before me, a Notary Public in and
for said State, personally appeared _______________, known to me to be an
_______________________ of THE FIRST NATIONAL BANK OF CHICAGO, the
company that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_____________________________
Notary Public
D-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their respective officers thereunto
authorized as of the date first written above.
DELTA FUNDING CORPORATION
as Seller
By:________________________________
Name:
Title:
DELTA FUNDING HOME EQUITY LOAN
TRUST 1998-1
By: THE FIRST NATIONAL BANK
OF CHICAGO,
as Trustee
By:________________________________
Name:
Title:
D-6
<PAGE>
EXHIBIT E
FORM OF MORTGAGE NOTE
[NOT INCLUDED HEREIN]
E-1
<PAGE>
EXHIBIT F
FORM OF MORTGAGE
[NOT INCLUDED HEREIN]
F-1
<PAGE>
EXHIBIT G
AFFIDAVIT OF TRANSFER OF RESIDUAL CERTIFICATES
PURSUANT TO SECTION 6.02(d)
DELTA FUNDING HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Pass-Through Certificates,
Series 1998-1
STATE OF )
) ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as
follows:
1. The undersigned is an officer of ________________________,
the proposed Transferee of an Ownership Interest in a Residual
Certificate (the "Certificate") issued pursuant to the Pooling Agreement,
(the "Agreement"), relating to the above-referenced Series, by and
between Delta Funding Corporation, as seller and servicer (in such
capacities, the "Seller" and the "Servicer"), and The First National Bank
of Chicago, as trustee (the "Trustee"). Capitalized terms used, but not
defined herein or in Exhibit 1 hereto, shall have the meanings ascribed
to such terms in the Agreement. The Transferee has authorized the
undersigned to make this affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of
the date of the Transfer, a Permitted Transferee. The Transferee is
acquiring its Ownership Interest in the Certificate either (i) for its
own account or (ii) as nominee, trustee or agent for another Person and
has attached hereto an affidavit from such Person in substantially the
same form as this affidavit. The Transferee has no knowledge that any
such affidavit is false.
3. The Transferee has been advised of, and understands that (i)
a tax will be imposed on Transfers of the Certificate to Persons that are
not Permitted Transferees; (ii) such tax will be imposed on the
transferor, or, if such Transfer is through an agent (which includes a
broker, nominee or middleman) for a Person that is not a Permitted
Transferee, on the agent; and (iii) the Person otherwise liable for the
tax shall be relieved of liability for the tax if the subsequent
Transferee furnished to such Person
G-1
<PAGE>
an affidavit that such subsequent Transferee is a Permitted Transferee
and, at the time of Transfer, such Person does not have actual knowledge
that the affidavit is false.
4. The Transferee has been advised of, and understands that a
tax will be imposed on a "pass-through entity" holding the Certificate if
at any time during the taxable year of the pass-through entity a Person
that is not a Permitted Transferee is the record holder of an interest in
such entity. The Transferee understands that such tax will not be imposed
for any period with respect to which the record holder furnishes to the
pass-through entity an affidavit that such record holder is a Permitted
Transferee and the pass-through entity does not have actual knowledge
that such affidavit is false. (For this purpose, a "pass-through entity"
includes a regulated investment company, a real estate investment trust
or common trust fund, a partnership, trust or estate, and certain
cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for
another Person.)
5. The Transferee has reviewed the provisions of Section 6.02(d)
of the Agreement (attached hereto as Exhibit 2 and incorporated herein by
reference) and understands the legal consequences of the acquisition of
an Ownership Interest in the Certificate including, without limitation,
the restrictions on subsequent Transfers and the provisions regarding
voiding the Transfer and mandatory sales. The Transferee expressly agrees
to be bound by and to abide by the provisions of Section 6.02(d) of the
Agreement and the restrictions noted on the face of the Certificate. The
Transferee understands and agrees that any breach of any of the
representations included herein shall render the Transfer to the
Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from
any Person to whom the Transferee attempts to Transfer its Ownership
Interest in the Certificate, and in connection with any Transfer by a
Person for whom the Transferee is acting as nominee, trustee or agent,
and the Transferee will not Transfer its Ownership Interest or cause any
Ownership Interest to be Transferred to any Person that the Transferee
knows is not a Permitted Transferee. In connection with any such Transfer
by the Transferee, the Transferee agrees to deliver to the Trustee a
certificate substantially in the form set forth as Exhibit H to the
Agreement (a "Transferor Certificate") to the effect that such Transferee
has no actual knowledge that the Person to which the Transfer is to be
made is not a Permitted Transferee.
G-2
<PAGE>
7. The Transferee does not have the intention to impede the
assessment or collection of any tax legally required to be paid with
respect to the Certificate.
8. The Transferee's taxpayer identification number is
_________________.
9. The Transferee is a U.S. Person as defined in Code Section
7701(a)(30).
10. The Transferee is aware that the Certificate may be a
"noneconomic residual interest" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with
respect to the income on such residual interest, unless no significant
purpose of the transfer was to impede the assessment or collection of
tax.
11. The Transferee is not an employee benefit plan that is
subject to ERISA or a plan that is subject to Section 4975 of the Code,
nor are we acting on behalf of such a plan.
* * *
G-3
<PAGE>
IN WITNESS WHEREOF, the Transferee has caused this instrument to
be executed on its behalf, pursuant to authority of its Board of
Directors, by its duly authorized officer and its corporate seal to be
hereunto affixed, duly attested, this ___day of ________________, 19__.
[NAME OF TRANSFEREE]
By:________________________________
Name:
Title:
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named , known or proved
to me to be the same person who executed the foregoing instrument and to
be the of the Transferee, and acknowledged that he executed the same as
his free act and deed and the free act and deed of the Transferee.
Subscribed and sworn before me this ___ day of __________, 19__.
______________________________
NOTARY PUBLIC
My Commission expires the
__day of _______________,
19__.
G-4
<PAGE>
EXHIBIT 1 to EXHIBIT G
Certain Definitions
"Ownership Interest": As to any Certificate, any ownership
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.
"Permitted Transferee": Any Person other than (i) the United
States, any State or 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 (except certain farmers'
cooperatives described in Code Section 521) which is exempt from tax
imposed by Chapter 1 of the Code (including the tax imposed by Code
Section 511 on unrelated business taxable income) on any excess
inclusions (as defined in Code 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
citizen or resident of the United States, a corporation, partnership, or
other entity created or organized in or under the laws of the United
States or any political subdivision thereof, or an estate or trust whose
income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United
States, and (vi) any other Person so designated by the Trustee based upon
an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause the Trust Fund to fail to
qualify as a REMIC at any time that certain 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, bank, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or
political subdivision thereof.
G-5
<PAGE>
"Transfer": Any direct or indirect transfer or sale of any
Ownership Interest in a Certificate, including the acquisition of a
Certificate by the Depositor.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
G-6
<PAGE>
EXHIBIT 2 to EXHIBIT G
Section 6.02(d) of the Agreement
(d) No transfer, sale, pledge or other disposition of any
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 (i) unless such transfer is made in reliance upon Rule 144A
under the 1933 Act, the Trustee and the Depositor shall require 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
Depositor 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 Depositor 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) acceptable to and in form and substance
reasonably satisfactory to the Depositor and the Trustee certifying to
the Depositor and the Trustee the facts surrounding such transfer, which
investment letter shall not be an expense of the Trustee or the
Depositor. The Holder of a Class A-6IO or Residual Certificate desiring
to effect such transfer shall, and does hereby agree to, indemnify the
Trustee and the Depositor against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal
and state laws.
No transfer of a Residual Certificate shall be made unless the
Trustee shall have received either (i) a representation from the
transferee of such Certificate acceptable to and in form and substance
satisfactory to the Trustee, such requirement is satisfied only by the
Trustee's receipt of a representation letter from the transferee
substantially in the form of Exhibit N-1 or Exhibit N-2, as appropriate),
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section
4975 of the Code, nor a person acting on behalf of any such plan or
arrangement nor using the assets of any such plan or arrangement to
effect such transfer, or (ii) if the purchaser is an insurance company, a
G-7
<PAGE>
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 Residual Certificate presented for
registration in the name of an employee benefit plan subject to ERISA, or
a plan or arrangement subject to Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a trustee of any such plan
or any other person acting on behalf of any such plan or arrangement or
using such plan's or arrangement's assets, an Opinion of Counsel
satisfactory to the Trustee, which Opinion of Counsel shall not be an
expense of either the Trustee or the Trust, addressed to the Trustee, to
the effect that the purchase or holding of Residual Certificate will not
result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code
and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or to any liability.
Notwithstanding anything else to the contrary herein, any purported
transfer of a Residual Certificate to or on behalf of an employee benefit
plan subject to ERISA or to the Code without the delivery to the Trustee
of an Opinion of Counsel satisfactory to the Trustee as described above
shall be void and of no effect.
Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following
provisions and to have irrevocably appointed the Depositor or its
designee as its attorney-in-fact to negotiate the terms of any mandatory
sale under clause (v) below and to execute all instruments of transfer
and to do all other things necessary in connection with any such sale,
and the rights of each Person acquiring any Ownership Interest in a
Residual Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any change
or impending change in its status as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a
Residual Certificate unless such Ownership Interest is a pro
rata undivided interest.
G-8
<PAGE>
(iii) In connection with any proposed transfer of any
Ownership Interest in a Residual Certificate, the Trustee shall
as a condition to such consent, 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
hereto 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 transfer was not registered upon the
express written consent of the Trustee. 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.
G-9
<PAGE>
(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 either REMIC to fail to qualify as a REMIC.
The Tax Matters Person Residual Interest shall at all times be
registered in the name of the Trustee.
G-10
<PAGE>
EXHIBIT H
LETTER OF REPRESENTATIONS
H-1
<PAGE>
EXHIBIT I
FORM OF REQUEST FOR RELEASE
[DATE]
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Re: Delta Funding Home Equity Loan Trust 1998-1
Home Equity Loan Pass-Through Certificates, Series 1998-1
---------------------------------------------------------
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held
by you as Trustee under the Pooling and Servicing Agreement dated as of
February 28, 1998, between Delta Funding Corporation, as Seller and
Servicer, and you, as Trustee (the "Agreement"), we hereby request a
release of the Mortgage File held by you as Trustee with respect to the
following described Mortgage Loan for the reason indicated below.
Loan No.:
Reason for requesting file:
. Mortgage Loan paid in full. (The Servicer hereby
certifies that all amounts received in connection with
the payment in full of the Mortgage Loan which are
required to be deposited in the Collection Account
pursuant to Section 3.02 of the Agreement have been so
deposited).
. Retransfer of Mortgage Loan. (The Servicer hereby
certifies that the Purchase Price has been deposited in
the Collection Account pursuant to the Agreement.)
. The Mortgage Loan is being foreclosed.
. The Mortgage Loan is being re-financed by another
depository institution. (The Servicer hereby
I-1
<PAGE>
certifies that all amounts received in connection with
the payment in full of the Mortgage Loan which are
required to be deposited in the Collection Account
pursuant to Section 3.02 of the Agreement have been so
deposited).
. Other (Describe).
The undersigned acknowledges that the above Mortgage File will
be held by the undersigned in accordance with the provisions of the
Agreement and will promptly be returned to the Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan has
been liquidated.
Capitalized terms used herein shall have the meanings ascribed
to them in the Agreement.
DELTA FUNDING CORPORATION
By: _________________________
Name:
Title: Servicing Officer
I-2
<PAGE>
EXHIBIT J
[RESERVED]
J-1
<PAGE>
EXHIBIT K
FORM OF CUSTODIAL AGREEMENT
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to time,
the "Custodial Agreement"), dated as of February 28, 1998, by and among
The First National Bank of Chicago, not individually, but solely as
Trustee (the "Trustee"), Delta Funding Corporation ("Delta") and Bankers
Trust Company of California, N.A. (together with any successor in
interest or any successor appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T
WHEREAS, Delta, in its capacity as seller (the "Seller") and as servicer
(the "Servicer") and the Trustee have entered into a Pooling and
Servicing Agreement dated as of February 28, 1998, relating to the
issuance of Delta's Home Equity Loan Asset-Backed Certificates, Series
1998-1 (as amended and supplemented from time to time, the "Agreement");
and
WHEREAS, the Custodian has agreed to act as agent for the Trustee for the
purposes of receiving and holding certain documents and other instruments
delivered by Delta under the Agreement, all upon the terms and conditions
and subject to the limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the Trustee and the Custodian
hereby agree as follows:
ARTICLE I Definitions
Capitalized terms used in this Custodial Agreement and not
defined herein shall have the meanings assigned in the Agreement, unless
otherwise required by the context herein.
ARTICLE II Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent; Acceptance of Mortgage Files.
The Custodian, as the duly appointed agent of the Trustee for
these purposes, acknowledges receipt of the Mortgage Notes, the Related
Documents, the assignments and other documents required to be delivered
by the Seller to the Custodian pursuant
K-1
<PAGE>
to Section 2.01(b) of the Agreement and relating to the Mortgage Loans
identified on Schedule I hereto and declares that it holds and will hold
such Mortgage Notes, Related Documents, assignments and other documents
and any similar documents received by the Trustee subsequent to the date
hereof (the "Mortgage Files") as agent for the Trustee, in trust, for the
benefit of all present and future Certificateholders. The Custodian
agrees to execute the Initial Certification and the Final Certification
described in Sections 2.02 and set forth on Exhibits O and P of the
Agreement.
Section 2.2. Recordation of Assignments.
If any Mortgage File includes one or more assignments to the
Trustee of Related Documents that have not been recorded, within 15 days
of the Closing Date, Delta or the Trustee, at no expense to the
Custodian, shall, cause to be recorded in the appropriate public office
for real property records each such assignment and, upon receipt thereof
from such public office, shall return each such assignment to the
Custodian. The Custodian also agrees to perform its other obligations
under the Agreement, including but not limited to, its obligations under
Sections 2.01, 2.02, 2.05, 2.13, 2.14, 3.01, 3.07 and 3.11 thereof.
Section 2.3. Review of Mortgage Files.
The Custodian agrees, for the benefit of the Seller and the
Certificateholders, to review, in accordance with the provisions of
Section 2.02 of the Agreement, each Mortgage File. If in performing the
reviews required by this Section 2.3, the Custodian finds any document or
documents constituting a part of a Mortgage File to be unexecuted or
missing or, based on the criteria set forth in Section 2.02 of the
Agreement, to be unrelated to the applicable Mortgage Loan, the Custodian
shall promptly so notify Delta and the Trustee.
In connection with such review, the Custodian makes no
representations as to, and shall not be responsible to verify (A) the
validity, legality, enforceability, due authorization, recordability,
sufficiency, or genuiness of any of the documents contained in any
Mortgage File or (B) the collectability, insurability, effectiveness, or
suitability of any Mortgage Loan.
Section 2.4. Notification of Breaches of Representations and Warranties.
Upon discovery by the Custodian of a breach of any
representation or warranty made by Delta as set forth in Section 2.03 of
the Agreement, the Custodian shall give prompt written notice to Delta
and to the Trustee.
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Section 2.5. Custodian to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Servicer shall promptly notify
the Custodian by delivering to the Custodian a Request for Release
(Exhibit I to the Agreement) (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Certificate Account pursuant to the Agreement have been or will be so
deposited) executed by a Servicing Officer and shall request delivery to
it of the Mortgage File. The Custodian agrees, upon receipt of such
certification and request, promptly to release the related Mortgage File
to the Servicer.
From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, the Servicer shall deliver to the
Custodian a Request for Release requesting that possession of all, or any
document constituting part of, the Mortgage File be released to the
Servicer and certifying as to the reason for such release. With such
Request for Release, the Servicer shall deliver to the Custodian a
receipt signed by a Servicing Officer of the Servicer on behalf of the
Servicer, and upon receipt of the foregoing, the Custodian shall deliver
the Mortgage File or such document to the Servicer and the Servicer shall
hold the Mortgage File or such document in trust for the benefit of the
Seller and the Certificateholders. The Servicer shall cause each Mortgage
File or any document therein so released to be returned to the Custodian
when the need therefor by the Servicer no longer exists, unless (i) the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating
to the Mortgage Loan have been deposited in the Certificate Account to
the extent required by the Agreement or (ii) the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or
other public official as required by law, for purposes of initiating or
pursuing legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially, and the Servicer
has delivered to the Custodian a certificate of a Servicing Officer of
the Servicer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or
purposes of such delivery. In the event of the liquidation of a Mortgage
Loan, the Custodian shall deliver such receipt with respect thereto to
the Servicer upon deposit of the related Liquidation Proceeds in the
Distribution Account to the extent required by the Agreement.
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Section 2.6. Assumption Agreements.
In the event that any assumption agreement or substitution of
liability agreement is entered into with respect to any Mortgage Loan
subject to this Custodial Agreement in accordance with the terms and
provisions of the Agreement, the Servicer shall notify the Custodian that
such assumption or substitution agreement has been completed by
forwarding to the Custodian the original of such assumption or
substitution agreement, which copy shall be added to the related Mortgage
File and, for all purposes, shall be considered a part of such Mortgage
File to the same extent as all other documents and instruments
constituting parts thereof.
ARTICLE III Concerning the Custodian
Section 3.1. Custodian a Bailee and Agent of the Trustee.
With respect to each Mortgage Note, Related Document and other
documents constituting each Mortgage File which are delivered to the
Custodian, the Custodian is exclusively the bailee and agent of the
Trustee, holds such documents for the benefit of the Trust and the
Certificateholders and undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement. Except upon
compliance with the provisions of Section 2.5 of this Custodial
Agreement, no Mortgage Note, Related Document or other document
constituting a part of a Mortgage File shall be delivered by the
Custodian to the Servicer or otherwise released from the possession of
the Custodian.
Section 3.2. Indemnification.
Delta hereby agrees to indemnify and hold the Custodian harmless
from and against all claims, liabilities, losses, actions, suits or
proceedings at law or in equity, or any other expenses, fees or charges
of any character or nature, which the Custodian may incur or with which
the Custodian may be threatened by reason of its acting as custodian
under this Custodial Agreement, including indemnification of the
Custodian against any and all expenses, including attorney's fees if
counsel for the Custodian has been approved by the Seller, which approval
shall not be unreasonably withheld, and the cost of defending any action,
suit or proceedings or resisting any claim. Notwithstanding the
foregoing, it is specifically understood and agreed that in the event any
such claim, liability, loss, action, suit or proceeding or other expense,
fees, or charge shall have been caused by reason of any negligent act,
negligent failure to act, or willful misconduct on the part of the
Custodian, or which shall constitute a willful breach of its duties
hereunder, the
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<PAGE>
indemnification provisions of this Custodial Agreement shall not apply.
The indemnification provided by this Section 3.2 shall survive the
termination or assignment of this Custodial Agreement or the resignation
or removal of the Custodian hereunder.
Section 3.3. Custodian May Own Certificates.
The Custodian in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights it would have
if it were not Custodian.
Section 3.4. Custodian's Fees and Expenses.
Delta will pay all fees payable to the Custodian hereunder for
all services rendered by it in the exercise and performance of any of the
powers and duties hereunder of the Custodian, as set forth in a separate
letter agreement. Delta will pay or reimburse the Custodian upon its
request for all reasonable expenses, disbursements and advances incurred
or made by the Custodian in accordance with any of the provisions of this
Custodial 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.
Section 3.5. Custodian May Resign; Trustee May Remove Custodian.
The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as
Custodian of the Mortgage Loans upon giving 60 days written notice to the
Trustee. Upon receiving such notice of resignation, the Trustee shall
either take custody of the Mortgage Files itself and give prompt notice
thereof to Delta and the Custodian or promptly appoint a successor
Custodian which is able to satisfy the requirements of Section 3.7 (i) of
this Custodial Agreement by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Custodian and one
copy to the successor Custodian. If the Trustee shall not have taken
custody of the Mortgage Files and no successor Custodian shall have been
so appointed and have accepted resignation, the resigning Custodian may
petition any court of competent jurisdiction for the appointment of a
successor Custodian. All fees and expenses of any successor Custodian
shall be the responsibility of Delta.
The Trustee may remove the Custodian at any time for cause, or
otherwise the Trustee may remove the Custodian at any time upon giving 60
days written notice. In such event, the Trustee
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shall take custody of the Mortgage Files itself, or shall appoint, or
petition a court of competent jurisdiction to appoint, a successor
Custodian hereunder. Any successor Custodian shall be a depository
institution subject to supervision or examination by federal or state
authority and shall be able to satisfy the other requirements contained
in Section 3.7 (i) of this Custodial Agreement.
Any resignation or removal of the Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 3.5
shall become effective only upon acceptance of appointment by the
successor Custodian and subject to the prior approval of Delta. The
Trustee shall give prompt notice to Delta and the Custodian of the
appointment of any successor Custodian.
Section 3.6. Merger or Consolidation of Custodian.
Any Person into which the Custodian may be merged or converted
or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Custodian shall be a
party, or any Person succeeding to the business of the Custodian, shall
be the successor of the Custodian hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 3.7. Representations of the Custodian.
The Custodian hereby represents and warrants as follows:
(i) It is a national banking association subject to
supervision or examination by a federal authority, has a
combined capital and surplus of at least $100,000,000 and is
qualified to do business in the jurisdiction in which it will
hold any Mortgage File;
(ii) It has full power, authority and legal right to
execute and deliver this Custodial Agreement and to perform its
obligations hereunder and has taken all necessary action to
authorize the execution, delivery and performance by it of this
Custodial Agreement;
(iii) To the best of its knowledge, after reasonable
investigation, the execution and delivery by it of this
Custodial Agreement and the performance by it of its obligations
hereunder will not violate any provision of its Charter or
By-Laws or any law or regulation governing it or any order,
writ, judgment or decree of any court, arbitrator or
governmental authority or agency applicable to it or any of its
assets. To the best of its knowledge, after
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reasonable investigation, such execution, delivery and
performance will not require the authorization, consent or
approval of, the giving of notice to, the filing or registration
with, or the taking of any other action with respect to, any
governmental authority or agency regulating its activities. To
the best of its knowledge, after reasonable investigation, such
execution, delivery and performance will not conflict with, or
result in a breach or violation of, any material indenture,
mortgage, deed of trust, lease or other agreement or instrument
to which it is a party or by which it or its properties are
bound;
(iv) This Custodial Agreement has been duly executed
and delivered by it. This Custodial Agreement, when executed and
delivered by the other parties hereto, will constitute its
valid, legal and binding obligation, enforceable against it in
accordance with its terms, except as the enforcement thereof may
be limited by applicable debtor relief laws and that certain
equitable remedies may not be available regardless of whether
enforcement is sought in equity or at law.
ARTICLE IV Miscellaneous Provisions
Section 4.1. Notices.
All notices, requests, consents and demands and other
communications required under this Custodial Agreement or pursuant to any
other instrument or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered personally, by
telegram or telex, or by registered or certified mail, postage prepaid,
return receipt requested, at the addresses specified below (unless
changed by the particular party whose address is stated herein by similar
notice in writing), in which case the notice will be deemed delivered
when received:
The Trustee: The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust
Services Division
Telecopy .: (312) 407-1708
Confirmation: Mary R. Fonti (212) 373-1105
The Custodian: Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92614
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<PAGE>
Attention: Mortgage Custody-Delta-1998-1
Telecopy No.:
Confirmation:
Delta: Delta Funding Corporation
1000 Woodbury Road, Suite 200
Woodbury, New York 11797
Attention:
Telecopy No.: (516) 364-9450
Confirmation: (516) 364-8500
Section 4.2. Amendments.
No modification or amendment of or supplement to this Custodial
Agreement shall be valid or effective unless the same is in writing and
signed by all parties hereto, and the Trustee shall not enter into any
amendment hereof except as permitted by the Agreement. The Trustee shall
give prompt notice to the Custodian of any amendment or supplement to the
Agreement and furnish the Custodian with written copies thereof. Delta
and the Trustee agree to obtain the Custodian's written consent prior to
entering into any amendment or modification of the Agreement which
affects any right, benefit, duty, or obligation of the Custodian
thereunder.
Section 4.3. Governing Law.
This Custodial Agreement shall be deemed a contract made under
the laws of the State of New York and shall be construed and enforced in
accordance with and governed by the laws of the State of New York.
Section 4.4. Recordation of Agreement.
To the extent permitted by applicable law, this Custodial
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 Mortgaged Properties subject to
the Mortgage Loans are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by Delta
and at its expense on direction by the Trustee, but only upon direction
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this
Custodial Agreement as herein provided and for other purposes, this
Custodial Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be
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<PAGE>
deemed to be an original, and such counterparts shall constitute but one
and the same instrument.
Section 4.5. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Custodial 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 Custodial Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Custodial Agreement or
of the Certificates or the rights of the Holders thereof.
Section 4.6. Waiver of Trial By Jury.
Each party hereto waives the right to trial by jury in any
action, suit, proceeding, or counterclaim of any kind arising out of or
related to this Custodial Agreement. In the event of litigation, this
Custodial Agreement may be filed as a written consent to a trial by the
court.
Section 4.7. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 4.8. Reliance of Custodian.
In the absence of bad faith, negligence or willful misconduct on
the part of the Custodian, the Custodian may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any request, instructions, certificate, opinion or the
document furnished to the Custodian, reasonably believed by the Custodian
to be genuine and to have been signed or presented by the proper party or
parties and conforming to the requirements of this Custodial Agreement;
but in the case of any Related Document or other request, instruction,
document or certificate which by any provision hereof is specifically
required to be furnished to the Custodian, the Custodian shall be under a
duty to examine the same to determine whether or not it conforms to the
requirements of this Custodial Agreement.
The Custodian may rely upon the validity of documents delivered
to it, without investigation as to their authenticity or legal
effectiveness and Delta will hold the Custodian harmless
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<PAGE>
from any claims that may arise or be asserted against the Custodian
because of the invalidity of any such documents. Except as provided
herein, no provision of this Custodial Agreement shall require the
Custodian to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, if
it should have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it. The Custodian may consult with competent
counsel with regard to legal questions arising out of or in connection
with this Custodian Agreement and the informed advice or opinion of such
counsel shall be full and complete authorization and protection in
respect of any action taken, omitted or suffered by the Custodian in good
faith in accordance herewith.
Section 4.9. Transmission of Mortgage Files.
Written instructions as to the method of shipment and shipper(s)
the Custodian is directed to utilize in connection with the transmission
of Mortgage Files and Related Documents in the performance of the
Custodian's duties hereunder shall be delivered by the Servicer to the
Custodian prior to any shipment of any Mortgage Files and Related
Document hereunder. The Servicer will arrange for the provision of such
services at its sole cost and expense (or, at the Custodian's option,
reimburse the Custodian for all costs and expenses incurred by the
Custodian consistent with such instructions) and will maintain such
insurance against loss or damage to Mortgage Files and Related Documents
as the Servicer deems appropriate. Without limiting the generality of the
provisions of Section 3.2 above, it is expressly agreed that in no event
shall the Custodian have any liability for any losses or damages to any
person, including without limitation, the Servicer, arising out of
actions of the Custodian consistent with instructions of the Servicer. If
the Custodian does not receive written direction, the Custodian is hereby
authorized and indemnified to utilize a nationally recognized courier
service.
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<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., as Custodian
By: __________________________________
Name:
Title:
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
By: __________________________________
Name:
Title:
DELTA FUNDING CORPORATION
By: __________________________________
Name:
Title:
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<PAGE>
Schedule I
K-I-1
<PAGE>
EXHIBIT L
DELINQUENCY AND LOSS INFORMATION
[NOT INCLUDED HEREIN]
L-1
<PAGE>
EXHIBIT M
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Re: Delta Funding Home Equity Loan Asset-Backed
Certificates, Series 1998-1, Class R-1, Class R-2
-------------------------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above
Certificates we certify that (a) we understand that the Certificates have
not been registered under the Securities Act of 1933, as amended (the
"Act"), and are being disposed by us in a transaction that is exempt from
the registration requirements of the Act, (b) we have not offered or sold
any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with
respect thereto, in a manner that would be deemed, or taken any other
action which would result in, a violation of Section 5 of the Act and (c)
with respect to our disposition of the Class R-1 Certificates and Class
R-2 Certificates, we have no knowledge that the transferee is not a
Permitted Transferee.
Very truly yours,
______________________________
By: _________________________
Authorized Officer
M-1
<PAGE>
EXHIBIT N-1
FORM OF INVESTMENT LETTER [NON-RULE 144A]
[DATE]
[Depositor]
[Depositor Address]
[Trustee]
[Trustee Address]
Re: Delta Funding Home Equity Loan Trust 1997-4
Home Equity Loan Pass-Through Certificates,
Series 1998-1, Class [ ]
--------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the
above-captioned Certificates, we certify that (a) we understand that the
Certificates are not being registered under the Securities Act of 1933,
as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we are an "accredited
investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and
receive answers from the Depositor concerning the purchase of the
Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the
Certificates, (d) either (i) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan that is subject to Section 4975 of the Internal
Revenue Code of 1986, as amended, nor are we acting on behalf of any such
plan or (ii) 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, (e) we are
acquiring the Certificates for investment for our own account and not
with a view to any
N-1-1
<PAGE>
distribution of such Certificates (but without prejudice to our right at
all times to sell or otherwise dispose of the Certificates in accordance
with clause (g) below), (f) we have not offered or sold any Certificates
to, or solicited offers to buy any Certificates from, any person, or
otherwise approached or negotiated with any person with respect thereto,
or taken any other action which would result in a violation of Section 5
of the Act, and (g) we will not sell, transfer or otherwise dispose of
any Certificates unless (1) such sale, transfer or other disposition is
made pursuant to an effective registration statement under the Act or is
exempt from such registration requirements, and if requested, we will at
our expense provide an opinion of counsel satisfactory to the addressees
of this Certificate that such sale, transfer or other disposition may be
made pursuant to an exemption from the Act, (2) the purchaser or
transferee of such Certificate has executed and delivered to you a
certificate to substantially the same effect as this certificate, and (3)
the purchaser or transferee has otherwise complied with any conditions
for transfer set forth in the Pooling Agreement.
Very truly yours,
[NAME OF TRANSFEREE]
By:________________________
Authorized Officer
N-1-2
<PAGE>
EXHIBIT N-2
FORM OF RULE 144A LETTER
[DATE]
[Depositor]
[Depositor Address]
[Trustee]
[Trustee Address]
Re: Delta Funding Home Equity Loan Trust 1997-4
Home Equity Loan Pass-Through Certificates,
Series 1998-1, Class [ ]
-------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above
Certificates we certify that (a) we understand that the Certificates are
not being registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities laws and are being transferred to us in a
transaction that is exempt from the registration requirements of the Act
and any such laws, (b) we have had the opportunity to ask questions of
and receive answers from the Depositor concerning the purchase of the
Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the
Certificates, (c) either (i) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan that is subject to Section 4975 of the Internal
Revenue Code of 1986, as amended, nor are we acting on behalf of any such
plan or (ii) the purchaser is an insurance company which is purchasing
such Certificates with funds obtained 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, (d) we
have not, nor has anyone acting on our behalf offered, transferred,
pledged, sold or otherwise disposed of the Certificates, any interest in
the Certificates or any other similar security to, or solicited any offer
to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar
security from, or otherwise approached or negotiated with respect to the
Certificates, any interest in the Certificates or any other
N-2-1
<PAGE>
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Certificates under the Securities Act or that would render the
disposition of the Certificates a violation of Section 5 of the
Securities Act or require registration pursuant thereto, nor will act,
nor has authorized or will authorize any person to act, in such manner
with respect to the Certificates, (e) we are a "qualified institutional
buyer" as that term is defined in Rule 144A under the Securities Act and
have completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. We are aware that the sale to us
is being made in reliance on Rule 144A. We are acquiring the Certificates
for our own account or for resale pursuant to Rule 144A and further,
understand that such Certificates may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified institutional
buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
N-2-2
<PAGE>
ANNEX 1 TO EXHIBIT N-2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as
follows to the parties listed in the Rule 144A Transferee Certificate to
which this certification relates with respect to the Certificates
described therein:
(a) As indicated below, the undersigned is the
President, Chief Financial Officer, Senior Vice President or other
executive officer of the Buyer.
(b) In connection with purchases by the Buyer, the
Buyer is a "qualified institutional buyer" as that term is defined in
Rule 144A under the Securities Act of 1933, as amended ("Rule 144A")
because (i) the Buyer owned and/or invested on a discretionary basis
$______________(1) in securities (except for the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year
(such amount being calculated in accordance with Rule 144A and (ii) the
Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation
(other than a bank, savings and loan
association or similar institution),
Massachusetts or similar business trust,
partnership, or charitable organization
described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended.
___ Bank. The Buyer (a) is a national bank or
banking institution organized under the laws
of any State, territory or the District of
Columbia, the business of which is
substantially confined to banking and is
supervised by the State or territorial banking
commission or similar official or is a foreign
bank or equivalent institution,
- --------------
(1) Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that
case, Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
N-2-3
<PAGE>
and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest
annual financial statements, a copy of which
is attached hereto.
___ Savings and Loan. The Buyer (a) is a savings
and loan association, building and loan
association, cooperative bank, homestead
association or similar institution, which is
supervised and examined by a State or Federal
authority having supervision over any such
institutions or is a foreign savings and loan
association or equivalent institution and (b)
has an audited net worth of at least
$25,000,000 as demonstrated in its latest
annual financial statements, a copy of which
is attached hereto.
___ Broker-dealer. The Buyer is a dealer
registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance
company whose primary and predominant business
activity is the writing of insurance or the
reinsuring of risks underwritten by insurance
companies and which is subject to supervision
by the insurance commissioner or a similar
official or agency of a State, territory or
the District of Columbia.
___ State or Local Plan. The Buyer is a plan
established and maintained by a State, its
political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its
employees.
___ ERISA Plan. The Buyer is an employee benefit
plan within the meaning of Title I of the
Employee Retirement Income Security Act of
1974.
___ Investment Advisor. The Buyer is an investment
advisor registered under the Investment
Advisors Act of 1940.
___ Small Business Investment Company. Buyer is a
small business investment company licensed by
the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business
Investment Act of 1958.
N-2-4
<PAGE>
___ Business Development Company. Buyer is a
business development company as defined in
Section 202(a)(22) of the Investment Advisors
Act of 1940.
(c) The term "securities" as used herein does not
include (i) securities of issuers that are affiliated with the Buyer,
(ii) securities that are part of an unsold allotment to or subscription
by the Buyer, if the Buyer is a dealer, (iii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iv) bank deposit
notes and certificates of deposit, (v) loan participations, (vi)
repurchase agreements, (vii) securities owned but subject to a repurchase
agreement and (viii) currency, interest rate and commodity swaps.
(d) For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer,
the Buyer used the cost of such securities to the Buyer and did not
include any of the securities referred to in the preceding paragraph,
except (i) where the Buyer reports its securities holdings in its
financial statements on the basis of their market value, and (ii) no
current information with respect to the cost of those securities has been
published. If clause (ii) in the preceding sentence applies, the
securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by
subsidiaries of the Buyer, but only if such subsidiaries are consolidated
with the Buyer in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Buyer's direction. However, such
securities were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the Buyer is not itself
a reporting company under the Securities Exchange Act of 1934, as
amended.
(e) The Buyer acknowledges that it is familiar with
Rule 144A and understands that the seller to it and other parties related
to the Certificates are relying and will continue to rely on the
statements made herein because one or more sales to the Buyer may be in
reliance on Rule 144A.
(f) Until the date of purchase of the Rule 144A
Securities, the Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Buyer's purchase of the
Certificates will constitute a reaffirmation of this certification as of
the date of such purchase. In addition, if the Buyer is a bank or savings
and loan is provided above, the
N-2-5
<PAGE>
Buyer agrees that it will furnish to such parties updated annual financial
statements promptly after they become available.
Print Name of Buyer
By:________________________________
Name:
Title:
Date:
N-2-6
<PAGE>
ANNEX 2 TO EXHIBIT N-2
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as
follows to the parties listed in the Rule 144A Transferee Certificate to
which this certification relates with respect to the Certificates
described therein:
(a) As indicated below, the undersigned is the
President, Chief Financial Officer or Senior Vice President of the Buyer
or, if the Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act of 1933, as amended ("Rule
144A") because Buyer is part of a Family of Investment Companies (as
defined below), is such an officer of the Adviser.
(b) In connection with purchases by Buyer, the Buyer is
a "qualified institutional buyer" as defined in SEC Rule 144A because (i)
the Buyer is an investment company registered under the Investment
Company Act of 1940, as amended and (ii) as marked below, the Buyer
alone, or the Buyer's Family of Investment Companies, owned at least
$100,000,000 in securities (other than the excluded securities referred
to below) as of the end of the Buyer's most recent fiscal year. For
purposes of determining the amount of securities owned by the Buyer or
the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on
the basis of their market value, and (ii) no current information with
respect to the cost of those securities has been published. If clause
(ii) in the preceding sentence applies, the securities may be valued at
market.
N-2-7
<PAGE>
___ The Buyer owned $______________ in securities
(other than the excluded securities referred
to below) as of the end of the Buyer's most
recent fiscal year (such amount being
calculated in accordance with Rule 144A).
___ The Buyer is part of a Family of Investment
Companies which owned in the aggregate $ in
securities (other than the excluded securities
referred to below) as of the end of the
Buyer's most recent fiscal year (such amount
being calculated in accordance with Rule
144A).
(c) The term "Family of Investment Companies" as used
herein means two or more registered investment companies (or series
thereof) that have the same investment adviser or investment advisers
that are affiliated (by virtue of being majority owned subsidiaries of
the same parent or because one investment adviser is a majority owned
subsidiary of the other).
(d) The term "securities" as used herein does not
include (i) securities of issuers that are affiliated with the Buyer or
are part of the Buyer's Family of Investment Companies, (ii) securities
issued or guaranteed by the U.S. or any instrumentality thereof, (iii)
bank deposit notes and certificates of deposit, (iv) loan participations,
(v) repurchase agreements, (vi) securities owned but subject to a
repurchase agreement and (vii) currency, interest rate and commodity
swaps.
(e) The Buyer is familiar with Rule 144A and
under-stands that the parties listed in the Rule 144A Transferee
Certificate to which this certification relates are relying and will
continue to rely on the statements made herein because one or more sales
to the Buyer will be in reliance on Rule 144A. In addition, the Buyer
will only purchase for the Buyer's own account.
N-2-8
<PAGE>
(f) Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the
Buyer's purchase of the Certificates will constitute a reaffirmation of
this certification by the undersigned as of the date of such purchase.
Print Name of Buyer or Adviser
By:___________________________
Name:
Title:
IF AN ADVISER:
______________________________
Print Name of Buyer
Date:
N-2-9
<PAGE>
EXHIBIT O
FORM OF
INITIAL CERTIFICATION OF TRUSTEE
April __, 1998
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Delta Funding Corporation
1000 Woodbury Road
Woodbury, NY 11797
Re: Pooling and Servicing Agreement, dated as of
February 28, 1998 between Delta Funding
Corporation, as Seller and Servicer, and The First
National Bank of Chicago, as Trustee, Home Equity
Loan Asset-Backed Certificates, Series 1998-1.
Ladies and Gentlemen:
In accordance with the provisions of Section 2.02 of
the above-referenced Pooling and Servicing Agreement, the undersigned, as
Custodian, hereby certifies that as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified on the attachment hereto), it has
reviewed the documents delivered to it pursuant to Section 2.02 of the
Pooling and Servicing Agreement and has determined that (i) all documents
required to be delivered to it pursuant to the above-referenced Pooling
and Servicing Agreement are in its possession, (ii) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to
such Mortgage Loans, (iii) based on its examination and only as to the
foregoing documents, the information set forth in the Mortgage Loan
Schedule as to the information set forth in clauses (ii), (iii), (v) and
(vii) of the definition "Mortgage Loan Schedule" set forth in the Pooling
and Servicing Agreement accurately reflects the information set forth in
the Trustee's Mortgage File and (iv) each Mortgage Note has been endorsed
as provided in Section 2.01 of the Pooling and Servicing Agreement. The
Custodian has made no independent
O-1
<PAGE>
examination of such documents beyond the review specifically required in
the above-referenced Pooling and Servicing Agreement. The Custodian makes
no representations as to: (i) the validity, legality, enforceability or
genuineness of any such documents contained in each or any of the
Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such
Mortgage Loan.
Capitalized words and phrases used herein shall have
the respective meanings assigned to them in the above-captioned Pooling
and Servicing Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Custodian
By:_______________________________
Name:
Title:
O-2
<PAGE>
EXHIBIT P
FORM OF TRUSTEE FINAL CERTIFICATION
__________, 199__
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Delta Funding Corporation
1000 Woodbury Road
Suite 200
Woodbury, New York 11797-9003
Re: Pooling and Servicing Agreement, dated as of
February 28, 1998 relating to Delta Funding
Home Equity Loan Trust 1998-1
-----------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Custodian, hereby certifies
that, except as noted on the attachment hereto, as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid
in full or listed on the attachment hereto) the Custodian has reviewed
the documents delivered to it pursuant to Section 2.01 (other than items
listed in Section 2.01(a)(vii) and (viii)) of the Pooling and Servicing
Agreement and has determined that (i) all such documents are in its
possession, (ii) such documents have been reviewed by it and have not
been mutilated, damaged, torn or otherwise physically altered and relate
to such Mortgage Loan, (iii) based on its examination, and only as to the
foregoing documents, the information set forth in the Mortgage Loan
Schedule respecting such Mortgage Loan is correct and (iv) each Mortgage
Note has been endorsed as provided in Section 2.01 of the Pooling and
Servicing Agreement. Further, [except for Mortgaged Properties relating to
P-1
<PAGE>
Mortgage Loans identified on the Mortgage Loan Schedule by an account
number beginning with _____ or _____,] each Mortgaged Property is a
Residential dwelling of the type set forth in the appraisal obtained in
connection with the origination of the related Mortgage Loan.
The Custodian has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Custodian makes no representations
as to: (i) the validity, legality, enforceability or genuineness of any
such documents contained in each or any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (ii) the collectibility, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:_____________________________
Name:___________________________
Title:__________________________
P-2
<PAGE>
EXHIBIT 99.1
<PAGE>
II. Terms of the Offering (cont'd)
Sensitivity of Group F Available Funds Cap
The table below shows the Group F Available Funds Cap for the first 36 periods
at varying PPC:
PPC
Period 80% 100% 120% 140% 160% 180% 200%
1 8.90 8.90 8.90 8.90 8.90 8.90 8.90
2 8.89 8.89 8.89 8.89 8.89 8.89 8.89
3 8.89 8.89 8.88 8.88 8.88 8.87 8.87
4 8.88 8.88 8.87 8.87 8.86 8.86 8.85
5 8.87 8.86 8.86 8.85 8.84 8.84 8.83
6 8.86 8.85 8.84 8.83 8.82 8.81 8.80
7 8.85 8.84 8.82 8.81 8.80 8.78 8.77
8 8.83 8.82 8.80 8.78 8.77 8.75 8.73
9 8.82 8.80 8.78 8.76 8.73 8.71 8.68
10 8.80 8.78 8.75 8.73 8.70 8.67 8.63
11 8.78 8.75 8.72 8.69 8.65 8.62 8.58
12 8.76 8.73 8.69 8.65 8.61 8.56 8.51
13 8.74 8.70 8.66 8.61 8.56 8.50 8.44
14 8.72 8.68 8.63 8.57 8.51 8.44 8.37
15 8.70 8.65 8.59 8.53 8.46 8.38 8.30
16 8.68 8.62 8.56 8.48 8.40 8.32 8.22
17 8.66 8.59 8.52 8.44 8.35 8.25 8.14
18 8.64 8.57 8.48 8.39 8.29 8.18 8.05
19 8.62 8.54 8.45 8.35 8.23 8.11 7.97
20 8,60 8.51 8.41 8.30 8.17 8.03 7.87
21 8.57 8.48 8.37 8.25 8.11 7.95 7.78
22 8.55 8.44 8.33 8.19 8.04 7.87 7.68
23 8.53 8.41 8.29 8.14 7.98 7.79 7.57
24 8.50 8.38 8.24 8.09 7.91 7.70 7.46
25 8.48 8.35 8.20 8.03 7.84 7.61 7.35
26 8.45 8.31 8.15 7.97 7.76 7.51 7.23
27 8.43 8.28 8.11 7.91 7.68 7.42 7.10
28 8.40 8.24 8.06 7.85 7.60 7.31 6.97
29 8.38 8.21 8.01 7.79 7.52 7.21 6.83
30 8.35 8.17 7.96 7.72 7.44 7.10 6.69
31 8.32 8.13 7.91 7.65 7.35 6.98 6.54
32 8.30 8.10 7.86 7.59 7.26 6.86 6.41
33 8.27 8.06 7.81 7.51 7.16 6.74 6.56
34 8.24 8.02 7.75 7.44 7.06 6.61 6.72
35 8.21 7.98 7.70 7.37 6.96 6.47 6.89
36 8.18 7.94 7.64 7.29 6.86 6.46 7.06
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
9
<PAGE>
II. Terms of the Offering (cont'd)
o Group A Certificate Structure
- The Class A-lA Certificates are fixed rate Certificates which are not
scheduled to receive principal payments for the 20 months. Thereafter,
they receive 90% of the Group A senior principal payments until retired.
- The Class A-2A, M-1A, M-2A and B-lA Certificates (the "Group A Floating
Rate Certificates") are floating rate certificates based off 1 month
LIBOR that pay interest on an actua1/360 day basis.
- The Group A Floating Rate Certificates are subject to an available finds
cap (the "Group A Available Funds Cap") equal to the weighted average
Loan Rate on the Group A loans minus the sum of (i) the servicing and
trustee fee rates (0.50625%) and (ii) the Class A-IO coupon expressed as
a percentage of the Group A loans. The Group A Available Funds Cap
equals approximately 9.25% at the Cutoff Date. The Group A Floating Rate
Certificates are also subject to a stated cap equal to 15%.
- The weighted average loan rate on the Group A loans is approximately
10.50% at the Cutoff Date. The weighted average lifetime cap is
approximately 17.02% at the Cutoff Date. The lifetime maximum Group A
Available Funds Cap is approximately 16.51% after month 36, based on the
weighted average lifetime cap as of the Cutoff Date.
- The Group A Floating Rate Certificates have a catch-up feature that
reimburses investors for unpaid interest due to Available Funds Cap
limitations ("LIBOR Carryover Shortfalls") with accrued interest
thereon, on future Distribution Dates from the Group A remaining excess
interest. The catch-up feature will not reimburse interest above the
stated cap.
- If the optional termination is not exercised when the combined Group F
and Group A pool balance falls below 10% of the combined Group F and
Group A Original Collateral Amount, the margins on the Group A Floating
Rate Certificates will step up to:
i) two times the initial margin on the Group A Senior Certificates
(Class A-2A)
ii) one and a half times the initial margin on the Group A Subordinate
Certificates (Classes M-1A, M-2A and B-lA).
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
10
<PAGE>
II. Terms of the Offering (cont'd)
o Group A Credit Enhancement
- Senior/subordinate structure with credit enhancement at each rating
level as shown below. The credit enhancement levels at each rating level
will step down after month 36 such that the targeted enhancement level
at each rating level is maintained.
- Monthly Subordination of Excess Interest (approximately equal to 3.10%
per annum at Cutoff).
- Build up of Overcollateralization ("OC") through distributions of
excess interest as principal to Certificateholders to achieve a target
2.25% of the sum of the Closing Date Group A Pool Balance and the
original amount on deposit in the Prefunding Account Associated to
Group A (such sum, the "Group A Original Collateral Amount").
- As with credit enhancement levels, the Group A OC will step down after
month 36 to 5.625% of the outstanding pool balance subject to a floor of
0.50% of the Group A Original Collateral Amount.
CE (before Step-down)(1) CE (after Step-down)(1)
(S&P/Fitch) (% of Orig Collateral Amount) (% of current pool balance)
----------- ----------------------------- -----------------------------
AAA/AAA 20.00% 50.000%
AA/AA+ 15.40% 38.050%
A/A+ 10.95% 27.375%
BBB-/BBB 2.25% 5.625%
(1) Includes overcollateralization.
- Cross-collateralization between the two Groups: excess interest in
either group, after covering any shortfalls in that group (which
shortfalls do not include LIBOR Carryover Shortfalls), can be used to
cover shortfalls in interest in the other group (which shortfalls do not
include LIBOR Carryover Shortfalls).
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
11
<PAGE>
II. Terms of the Offering (cont'd)
o Group A Available Funds Cap
The following table shows the Group A Available Funds Cap each month assuming
the Group A Loans prepay at 140% PPC and 6 month LIBOR remains constant at
5.6875%.
Month Available Month Available Month Available
Funds Cap (%) Funds Cap (%) Funds Cap (%)
1 9.25 33 10.05 65 11.68
2 9.24 34 10.00 66 11.68
3 9.23 35 9.96 67 11.68
4 9.25 36 9.91 68 11.68
5 9.36 37 11.68 69 11.68
6 9.48 38 11.68 70 11.68
7 9.54 39 11.68 71 11.68
8 9.52 40 11.68 72 11.68
9 9.51 41 11.68 73 11.68
10 9.51 42 11.68 74 11.68
11 9.60 43 11.68 75 11.68
12 9.72 44 11.68 76 11.68
13 9.76 45 11.68 77 11.68
14 9.73 46 11.68 78 11.68
15 9.70 47 11.68 79 11.68
16 9.68 48 11.68 80 11.68
17 9.65 49 11.68 81 11.68
18 9.63 50 11.68 82 11.68
19 9.61 51 11.68 83 11.68
20 9.58 52 11.68 84 11.68
21 9.61 53 11.68 85 11.68
22 9.57 54 11.68 86 11.68
23 9.85 55 11.68 87 11.68
24 10.20 56 11.68 88 11.68
25 10.16 57 11.68 89 11.68
26 10.34 58 11.68 90 11.68
27 10.30 59 11.68 91 11.68
28 10.26 60 11.68 92 11.68
29 10.22 61 11.68 93 11.68
30 10.18 62 11.68 94 11.68
31 10.14 63 11.68 95 11.68
32 10.10 64 11.68 96 11.68
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
12
<PAGE>
II. Terms of the Offering (cont'd)
Advances: - Monthly Advances. Delta, as servicer, is required to
advance interest for delinquent loans ("Monthly Advances")
unless the Servicer determines that the delinquency
advances are not recoverable from collections on these
loans. The Servicer will be reimbursed for these advances
from future collections on these loans.
- Servicer Advances. The Servicer is also required to pay
all customary "out-of-pocket pocket" expenses associated
with servicing the loans ("Servicer Advances"). The
Servicer's fight of reimbursement for Servicing Advances is
limited to late collections of on the related mortgage
loans, released mortgaged property proceeds, etc.
- Compensating Interest. The Servicer will be required to
remit to the Trustee any interest shortfalls due to the
receipt of less than 30 days of accrued interest with a
full prepayment ("Compensating Interest") up to the
Servicing Fee for the related period, without any right of
reimbursement.
Certificate Ratings: See Cover
Trustee: First Chicago National Bank
Payment Date: The Payment Date for the Certificates will be on the
25th of each month or if such date is not a Business Date,
the next succeeding Business Date commencing April 25,
1998.
Principal: Principal collections from each Loan Group are allocated
to the Certificates in each respective Group.
Allocation of Principal Amount Classes of Different Ratings
Prior to month 37 principal for a Loan Group will be paid
to Class A's, M-l, M-2 and B-I sequentially in that order.
Commencing on the 37th Distribution Date, and so long as a
Trigger Event has not occurred, principal payments will be
allocated concurrently to classes of all rating levels such
that the credit enhancement level at each rating is double
or 2.5 times the initial credit enhancement for the Group F
and Group A Certificates, respectively at that rating.
Although principal will be allocated concurrently, priority
of payments will be given to the A's, M-1, M-2 and B-I
classes in that order.
Group F Class A Certificates
Principal allocated to the Group F Class A Certificates
will be paid among these certificates as follows:
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
13
<PAGE>
II. Terms of the Offering (cont'd)
Principal will be paid to Classes A-1F through A-5F (the
"Sequential Classes") sequentially from the amount
received on the Group F loans. Class A-6F (the NAS Class)
will commence paying in month 37 and will thereafter pay
concurrently with the Sequential Classes. Principal
allocation between the NAS Class and the Sequential
Classes is determined by the following formula:
A-6F Principal = Shifting Percent x (Pro rata Alloc.
of Group F Principal Pmt.);
where the Pro rata Allocation is determined by the
outstanding balances of the NAS Class and the Sequential
Classes each month, and the Shifting Percent is as
follows:
Months Shifting Percent
37 - 60 45%
61 - 72 80%
73 - 84 100%
85 onward 300%
Group A Class A Certificates
Prior to month 21, all principal allocated to the Group A
Class A Certificates will be paid to Class A-2A.
Commencing in month 21, 90% of principal collections
allocated to Class A will be paid to Class A-1A and 10%
to Class A-2A until Class A-1A is paid off. Thereafter,
all principal cashflow allocated to Class A will again be
paid to Class A-2A.
Trigger Event: A trigger event will be in effect for the respective
Certificate Group if the related three month average
90+ delinquency percentages exceed two times the
sum of (i) the three month average OC amount as a
percentage of the related outstanding pool balance and
(ii) the three month average related annualized excess
spread percentage. If a trigger event is in effect, OC
will not step down and all principal will be paid
sequentially, from the highest to the lowest ratings.
Optional Cleanup 10% Clean Up Call based on aggregate Group F and Group A
Call: loan balances
Legal Final See Cover
Maturity:
Delivery: Class A Certificates: Denominations of $25,000 and
integral multiples of $1,000 in excess thereof.
Book-entry through DTC, Euroclear and CEDEL.
Tax Status: REMIC for Federal income tax purposes.
SMMEA: The Group F Certificates are not SMMEA eligible. After
the Funding Period, the Group A Class A Certificates and
Class M-l Certificates are SMMEA eligible.
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
14
<PAGE>
II. Terms of the Offering (cont'd)
ERISA: The Class A Certificates and the IO Certificates are
expected to be ERISA eligible.
All other: Certificates are not ERISA eligible.
- -------------------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell
and solicitations of offers to buy the securities are made only by, and this
information must be read in conjunction with, the final Prospectus Supplement
and the related Prospectus or, if not registered under the securities laws,
the final Offering Memorandum (the "Offering Document"). Information contained
herein does not purport to be complete and is subject to the same
qualifications and assumptions and should be considered by investors only in
the light of the same warnings, lack of assurances and representations and
other precautionary matters, as disclosed in the Offering Document.
Information regarding the underlying assets has been provided by the issuer of
the securities or an affiliate thereof and has not been independently verified
by Lehman Brothers Inc. or any affiliate. The analyses contained herein have
been prepared and delivered by Lehman Brothers Inc. and the contents and
accuracy thereof have not been reviewed by the issuer. This information was
prepared on the basis of certain assumptions (including, in certain cases,
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives, weighted average loan age, losses and other
matters, including, but not limited to, the assumptions described in the
Offering Document. Lehman Brothers Inc., and any of its affiliates, make no
representation or warranty as to the actual rate or timing of payments on any
of the underlying assets or the payments or yield on the securities. This
information supersedes any prior versions hereof and will be deemed to be
superseded by any subsequent versions (including, with respect to any
description of the securities or underlying assets, the information contained
in the Offering Document).
