SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 27, 1998
HOMESIDE MORTGAGE SECURITIES, INC.
-------------------------------------------
(Exact name of registrant specified in Charter)
Delaware 33-34957 59-2957725
--------------- ----------- -------------
(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
7301 Baymeadows Way, Jacksonville, FL 32256
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(Address of principal executive offices) Zip Code
Registrant's telephone, including area code: (904) 281-3000
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(Former name and former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets: General.
On May 27, 1998, HomeSide Mortgage Securities, Inc. issued its
Multi-Class Mortgage Pass-Through Certificates, Series 1998-2, such series
representing interests in a pool of fixed rate conventional one- to four-family
mortage loans. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the prospectus dated May 26, 1998, as
supplemented by the prospectus supplement dated May 26, 1998 (together, the
"Prospectus").
The Class A Certificates consist of the Class IA-1 Certificates, the
Class IA-2 Certificates, the Class IA-3 Certificates, the Class IA-4
Certificates, the Class IA-5 Certificates, the Class IA-6 Certificates, the
Class IA-7 Certificates, the Class IA-X Certificates, the Class IIA-1
Certificates, the Class IA-P Certificates, the Class IIA-X Certificates, the
Class A-R Certificates. The Class M Certificates consist of the Class M
Certificates. The Class B Certificates consist of the Class B-1 Certificates,
the Class B-2 Certificates, the Class B-3 Certificates, the Class B-4
Certificates and the Class B-5 Certificates.
The Class A Certificates evidence in the aggregate the Class A
Percentage ownership interest in the Trust Fund. The Class M Certificates
evidence in the aggregate the Class M Percentage ownership interest in the Trust
Fund. The Class B Certificates evidence the remaining ownership interest in the
Trust Fund and are subordinated to the rights of the Class A Certificates and
the Class M Certificates to the extent described in the Prospectus. The Trust
Fund consists of the Mortgage Pool and certain other property described in the
Prospectus.
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ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
- ----------- -----------
4 Pooling and Servicing Agreement among HomeSide Mortgage
Securities, Inc., HomeSide Lending, Inc. and Norwest Bank
Minnesota, National Association, as trustee, dated as of
May 1, 1998, for Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOMESIDE MORTGAGE SECURITIES, INC.
May 27, 1998
By: /s/ Blake Wilson
-----------------------------------
Name: W. Blake Wilson
Title: Vice President
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
4 Pooling and Servicing Agreement among HomeSide Mortgage
Securities, Inc., HomeSide Lending, Inc. and Norwest Bank
Minnesota, National Association, as trustee, dated as of May 1,
1998, for Multi-Class Mortgage Pass-Through Certificates, Series
1998-2.
EXECUTION COPY
HOMESIDE MORTGAGE SECURITIES, INC.,
DEPOSITOR,
HOMESIDE LENDING, INC.,
SERVICER
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
TRUSTEE
POOLING AND SERVICING AGREEMENT
Dated as of May 1, 1998
$257,110,470.87
Multi-Class Mortgage Pass-Through Certificates
Series 1998-2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
<S> <C>
DEFINITIONS..............................................................................................1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND................................................................45
Section 2.01. Conveyance of Mortgage Loans..........................................................45
Section 2.02. Acceptance by Trustee.................................................................48
Section 2.03. Trust Fund; Authentication of Certificates............................................49
Section 2.04. REMIC Election........................................................................49
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS..............................................................53
Section 3.01. Representations and Warranties of the Depositor with respect to the
Mortgage Loans........................................................................53
Section 3.02. Representations and Warranties of the Depositor.......................................61
Section 3.03. Representations and Warranties of the Servicer........................................61
Section 3.04. Option to Substitute..................................................................62
ARTICLE IV
THE CERTIFICATES........................................................................................64
Section 4.01. The Certificates......................................................................64
Section 4.02. Registration of Transfer and Exchange of Certificates.................................66
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates.....................................70
Section 4.04. Persons Deemed Owners.................................................................70
Section 4.05. Establishment of Certificate Account; Deposit in Certificate Account..................70
Section 4.06. Permitted Withdrawals from the Certificate Account....................................71
Section 4.07. Authenticating Agents.................................................................72
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..........................................................73
Section 5.01. Servicer to Service Mortgage Loans....................................................73
Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers;
Enforcement of Sub-Servicer's Obligations.............................................74
Section 5.03. Successor Sub-Servicers...............................................................74
Section 5.04. Liability of the Servicer.............................................................75
Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or
Certificateholders....................................................................75
Section 5.06. Termination of Sub-Servicing Agreement................................................75
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Section 5.07. Collection of Mortgage Loan Payments..................................................75
Section 5.08. Establishment of Collection Account; Deposit in Collection Account....................75
Section 5.09. Permitted Withdrawals from the Collection Account.....................................77
Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account...........................78
Section 5.11. Permitted Withdrawals from Escrow Account.............................................78
Section 5.12. Payment of Taxes, Insurance and Other Charges.........................................79
Section 5.13. Transfer of Accounts..................................................................79
Section 5.14. Year 2000 Compliance..................................................................79
Section 5.15. Maintenance of the Primary Insurance Policies.........................................79
Section 5.16. Maintenance of Standard Hazard Policies...............................................80
Section 5.17. Reports of Foreclosures and Abandonment of Mortgaged Properties.......................81
Section 5.18. [Reserved]............................................................................81
Section 5.19. Fidelity Bond and Errors and Omissions Insurance......................................81
Section 5.20. Collections under Insurance Policies; Enforcement of Due-On-Sale
Clauses; Assumption Agreements........................................................81
Section 5.21. Income and Realization from Defaulted Mortgage Loans..................................82
Section 5.22. Trustee to Cooperate; Release of Mortgage Files.......................................84
Section 5.23. Servicing and Other Compensation......................................................85
Section 5.24. [Reserved]............................................................................85
Section 5.25. Annual Statement as to Compliance.....................................................85
Section 5.26. Annual Independent Public Accountants' Servicing Report...............................86
Section 5.27. Access to Certain Documentation; Rights of the Depositor in Respect of
the Servicer..........................................................................86
Section 5.28. REMIC-Related Covenants...............................................................87
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS......................................................................88
Section 6.01. Distributions.........................................................................88
Section 6.02. Statements to the Certificateholders..................................................95
Section 6.03. Advances by the Servicer..............................................................98
Section 6.04. Allocation of Realized Losses.........................................................99
Section 6.05. Compensating Interest; Allocation of Certain Interest Shortfalls.....................100
Section 6.06. Subordination........................................................................101
ARTICLE VII
[RESERVED].............................................................................................102
ARTICLE VIII
THE DEPOSITOR AND THE SERVICER.........................................................................102
Section 8.01. Indemnification; Third Party Claims..................................................102
Section 8.02. Merger or Consolidation of the Depositor or the Servicer.............................102
Section 8.03. Limitation on Liability of the Depositor, the Servicer, the Trustee and
Others...............................................................................103
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Section 8.04. Depositor and Servicer Not to Resign.................................................104
Section 8.05. Successor to the Servicer............................................................104
Section 8.06. Maintenance of Ratings...............................................................105
ARTICLE IX
DEFAULT................................................................................................106
Section 9.01. Events of Default....................................................................106
Section 9.02. Waiver of Defaults...................................................................107
Section 9.03. Trustee to Act; Appointment of Successor.............................................107
Section 9.04. Notification to Certificateholders and the Rating Agencies...........................107
ARTICLE X
CONCERNING THE TRUSTEE.................................................................................108
Section 10.01. Duties of Trustee....................................................................108
Section 10.02. Certain Matters Affecting the Trustee................................................109
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans................................110
Section 10.04. Trustee May Own Certificates.........................................................110
Section 10.05. Fees and Expenses....................................................................110
Section 10.06. Eligibility Requirements for Trustee.................................................110
Section 10.07. Resignation and Removal of the Trustee...............................................111
Section 10.08. Successor Trustee....................................................................112
Section 10.09. Merger or Consolidation of Trustee...................................................112
Section 10.10. Appointment of Co-Trustee or Separate Trustee........................................112
Section 10.11. Appointment of Office or Agency......................................................113
Section 10.12. 1934 Act Reports.....................................................................114
ARTICLE XI
TERMINATION............................................................................................114
Section 11.01. Termination..........................................................................114
ARTICLE XII
MISCELLANEOUS PROVISIONS...............................................................................116
Section 12.01. Severability of Provisions...........................................................116
Section 12.02. Limitation on Rights of Certificateholders...........................................116
Section 12.03. Amendment...............................................................................117
Section 12.04. Counterparts............................................................................118
Section 12.05. Duration of Agreement...................................................................118
Section 12.06. Governing Law...........................................................................118
Section 12.07. Notices.................................................................................118
</TABLE>
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EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B CONTENTS OF MORTGAGE FILE
EXHIBIT C FORMS OF CLASS A CERTIFICATES
EXHIBIT D FORM OF CLASS M CERTIFICATE
EXHIBIT E FORMS OF CLASS B CERTIFICATES
EXHIBIT F FORM OF CLASS A-R CERTIFICATE
EXHIBIT G FORM OF TRUSTEE CERTIFICATION
EXHIBIT H FORM OF INVESTMENT LETTER
EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER
EXHIBIT J FORM OF SPECIAL SERVICING AGREEMENT
EXHIBIT K FORM OF CLASS A-R TRANSFER LETTER
EXHIBIT L REQUEST FOR RELEASE
ANNEX 1 ADDITIONAL MORTGAGE LOAN INFORMATION
APPENDIX A PLANNED PRINCIPAL BALANCES
TARGETED PRINCIPAL BALANCES
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This Pooling and Servicing Agreement, dated as of May 1, 1998, is executed
among HomeSide Mortgage Securities, Inc., as seller (together with its permitted
successors and assigns, the "Depositor"), HomeSide Lending, Inc., as servicer
(together with its permitted successors and assigns, the "Servicer") and Norwest
Bank Minnesota, National Association, as trustee (together with its permitted
successors and assigns, the "Trustee").
In consideration of the premises and the mutual agreements hereinafter set
forth, the Depositor, the Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage Loan, those
mortgage servicing practices (including collection procedures) of prudent
mortgage banking institutions which service mortgage loans of the same type as
such Mortgage Loan in the jurisdiction where the related Mortgaged Property is
located, and which are in accordance with FNMA servicing practices and
procedures, for MBS pool mortgages, as defined in the FNMA Guides including
future updates.
ADJUSTED LOCK-OUT PERCENTAGE: Equals (i) for any Distribution Date prior to
the Distribution Date in June 2003, 0% and (ii) for any Distribution Date on or
after the Distribution Date in June 2003, the Lock-out Percentage.
ADVANCE: The aggregate of the advances made by the Servicer with respect to
a particular Distribution Date pursuant to Section 6.03.
AGGREGATE CLASS A INTEREST ACCRUAL AMOUNT: On any Distribution Date, an
amount equal to the sum of the Class IA-1 Component Two Interest Accrual Amount,
the Class IA-1 Component Three Interest Accrual Amount, the Class IA-1 Component
Five Interest Accrual Amount, the Class IA-2 Interest Accrual Amount, the Class
IA-3 Interest Accrual Amount, the Class IA-4 Interest Accrual Amount, the Class
IA-5 Interest Accrual Amount, the Class IA-6 Interest Accrual Amount, the Class
IA-7 Interest Accrual Amount, the Class IA-X Interest Accrual Amount, the Class
IIA-1 Interest Accrual Amount, the Class IIA-X Interest Accrual Amount and the
Class A-R Interest Accrual Amount.
AGGREGATE CLASS IA INTEREST ACCRUAL AMOUNT: On any Distribution Date, an
amount equal to the sum of the Class IA-1 Component Two Interest Accrual Amount,
Class IA-1 Component Three Interest Accrual Amount, Class IA-1 Component Five
Interest Accrual Amount, the Class IA-2 Interest Accrual Amount, the Class IA-3
Interest
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Accrual Amount, the Class IA-4 Interest Accrual Amount, the Class IA-5 Interest
Accrual Amount, the Class IA-6 Interest Accrual Amount, the Class IA-7 Interest
Accrual Amount, the Class IA-X Interest Accrual Amount and the Class A-R
Interest Accrual Amount.
AGGREGATE CLASS IIA INTEREST ACCRUAL AMOUNT: On any Distribution Date, an
amount equal to the sum of the Class IIA-1 Interest Accrual Amount and the IIA-X
Interest Accrual Amount.
AGGREGATE CLASS A INTEREST SHORTFALL: On any Distribution Date, an amount
equal to the sum of the Class IA-1 Component Two Shortfall, the Class IA-1
Component Three Shortfall, the Class IA-1 Component Five Shortfall, the Class
IA-2 Shortfall, the Class IA-3 Shortfall, the Class IA-4 Shortfall, the Class
IA-5 Shortfall, the Class IA-6 Shortfall, the Class IA-7 Shortfall, the Class
IA-X Shortfall, the Class IIA-1 Shortfall, the Class IIA-X Shortfall and the
Class A-R Shortfall.
AGGREGATE CLASS IA INTEREST SHORTFALL: On any Distribution Date, an amount
equal to the sum of the Class IA-1 Component Two Interest Shortfall, Class IA-1
Component Three Interest Shortfall, Class IA-1 Component Five Interest
Shortfall, the Class IA-2 Interest Shortfall, the Class IA-3 Interest Shortfall,
the Class IA-4 Interest Shortfall, the Class IA-5 Interest Shortfall, the Class
IA-6 Interest Shortfall, the Class IA-7 Interest Shortfall, the Class IA-X
Shortfall and the Class A-R Interest Shortfall.
AGGREGATE CLASS IIA INTEREST SHORTFALL: On any Distribution Date, an amount
equal to the sum of the Class IIA-1 Interest Shortfall and the Class IIA-X
Interest Shortfall.
AGGREGATE SUBORDINATED PERCENTAGE: The meaning specified in Section
6.01(b)(vii)(A).
AGREEMENT: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
APPRAISED VALUE: The value set forth in an appraisal made in connection
with the origination of the related Mortgage Loan as the value of the Mortgaged
Property.
ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage, notice of transfer
or equivalent instrument, in recordable form, sufficient under the laws of the
jurisdiction where the related Mortgaged Property is located to reflect of
record the sale and assignment of the Mortgage Loan to the Trustee, which
assignment, notice of transfer or equivalent instrument may, if permitted by
law, be in the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county.
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AVAILABLE DISTRIBUTION AMOUNT: As to either Mortgage Group or, as the
context requires, both Mortgage Groups, on any Distribution Date, an amount
equal to the amount on deposit in the Collection Account with respect to such
Mortgage Group as of the close of business on the related Servicer Remittance
Date except:
(a) amounts received on particular Mortgage Loans in such Mortgage
Group as late payments or other recoveries of principal or interest
(including Liquidation Proceeds, Insurance Proceeds and condemnation
awards) and respecting which the Servicer previously made an unreimbursed
Advance of such amounts;
(b) reimbursement for Nonrecoverable Advances and other amounts
permitted to be withdrawn by the Servicer pursuant to Section 5.09 from, or
not required to be deposited in, the Certificate Account attributable, in
each case, to Mortgage Loans in such Mortgage Group;
(c) amounts representing the Servicing Fee and the Trustee Fee
attributable to Mortgage Loans in such Mortgage Group with respect to such
Distribution Date;
(d) amounts representing all or part of a Monthly Payment with respect
to a Mortgage Loan in such Mortgage Group due (i) after the related Due
Period or (ii) on or prior to the Cut-off Date;
(e) all Repurchase Proceeds, Principal Prepayments, Liquidation
Proceeds, Insurance Proceeds and condemnation awards with respect to
Mortgage Loans in such Mortgage Group received after the related Principal
Prepayment Period, and all related payments of interest representing
interest for any period of time after the last day of the related Due
Period for such Mortgage Loans; and
(f) all income from Eligible Investments held in the Collection
Account for the account of the Servicer.
BANKRUPTCY AMOUNT: As of any date of determination, $100,000.00 minus all
Bankruptcy Losses on the Mortgage Loans, if any, previously allocated solely to
the Certificates in accordance with Section 6.04.
BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Realized Loss
resulting from a Deficient Valuation or Debt Service Reduction.
BOOK-ENTRY CERTIFICATES: The Non-PO Class A Certificates (other than the
Class IA-1, Class IIA-P and Class A-R Certificates), referred to collectively.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, (b) a legal
holiday in the State of New York or (c) a day on which banking institutions in
the State of New
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York, the State of Minnesota or the State of Florida are authorized or obligated
by law or executive order to be closed.
CARRY-OVER SUBORDINATED PRINCIPAL AMOUNT: As of any Distribution Date, with
respect to any Class of Subordinated Certificates, an amount, if any, equal to
the amount of principal distributable to such Class on any prior Distribution
Date that has not been so distributed.
CASH LIQUIDATION: Recovery of all cash proceeds by the Servicer with
respect to the liquidation of any Mortgage Loan, including Insurance Proceeds
and other payments or recoveries (whether made at one time or over a period of
time) which the Servicer deems to be finally recoverable, in connection with the
sale, assignment or satisfaction of such Mortgage Loan, trustee's sale,
foreclosure sale or otherwise, but only if title to the related Mortgaged
Property was not acquired by foreclosure or deed in lieu of foreclosure by the
Servicer pursuant to Section 5.21.
CERTIFICATE: Any Class A, Class M or Class B Certificate.
CERTIFICATE ACCOUNT: The account created and maintained pursuant to Section
4.05.
CERTIFICATEHOLDER or HOLDER: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Depositor, the Servicer, any
Sub-Servicer, or any of their respective affiliates shall be disregarded and the
undivided 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, waiver, request or demand has been obtained. The
Trustee shall be entitled to conclusively rely upon the certificate of the
Depositor or the Servicer as to the determination of which Certificates are
registered in the name of such affiliates.
CERTIFICATE OWNER: Any Person who is the beneficial owner of a Book- Entry
Certificate registered in the name of the Depository or its nominee.
CERTIFICATE RATE: The per annum rate of interest borne by each Class or
Component of Certificates (other than Class IA-1 Component One, Class IA-1
Component Four and the Class IIA-P Certificates), which rate shall equal (i)
6.50% with respect to the Class IA-2, Class IA-6, Class IA-7 and Class IIA-1
Certificates; (ii) 6.75% with respect to the Class IA-5 and Class A-R
Certificates; (iii) 7.00% with respect to the Class IA-3 Certificates, the Class
IA-4 Certificates, Class IA-1 Component Two and the Class IA-1 Component Three
in each case on the Outstanding Certificate Principal Balance of each Class or
Component (or with respect to Class IA-1 Component Two, the Class IA-1 Component
Two Notional Amount). In the case of the Class IA-X Certificates, the
Certificate Rate shall equal, with respect to any Distribution
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Date, the weighted average of (A) 35.6881361638% of the weighted average,
expressed as a percentage, of the Class IA-X Stripped Interest Rates on
Non-Discount Mortgage Loan in Mortgage Group One having Net Mortgage Rates less
than or equal to 7.74% per annum as of the Due Date in the month immediately
preceding the month in which such Distribution Date occurs, weighted on the
basis of the respective Principal Balances of such Mortgage Loans, which
Principal Balances shall be the Principal Balances of such Mortgage Loans at the
close of business on the immediately preceding Distribution Date after giving
effect to distributions thereon allocable to principal (or, in the case of the
Certificate Rate for the initial Distribution Date, at the close of business on
the Cut-off Date) and (B) the weighted average, expressed as a percentage, of
the Class IA-X Stripped Interest Rates on the Non-Discount Mortgage Loans in
Mortgage Group One having Net Mortgage Rates greater than 7.74% per annum as of
the Due Date in the month immediately preceding the month in which such
Distribution Date occurs, weighted on the basis of the respective Principal
Balances of such Mortgage Loans, which Principal Balances shall be the Principal
Balances of such Mortgage Loans at the close of business on the immediately
preceding Distribution Date after giving effect to distributions thereon
allocable to principal (or, in the case of the Certificate Rate for the initial
Distribution Date, at the close of business on the Cut-off Date). In the case of
Class IA-1 Component Five, the Certificate Rate shall equal, with respect to any
Distribution Date, 64.3118638362% of the weighted average, expressed as a
percentage, of the Class IA-X Stripped Interest Rates on the Non-Discount
Mortgage Loans in Mortgage Group One having Net Mortgage Rates less than or
equal to 7.74% per annum as of the Due Date in the month immediately preceding
the month in which such Distribution Date occurs, weighted on the basis of the
respective Principal Balances of such Mortgage Loans, which Principal Balances
shall be the Principal Balances of such Mortgage Loans at the close of business
on the immediately preceding Distribution Date after giving effect to
distributions thereon allocable to principal (or, in the case of the Certificate
Rate for the initial Distribution Date, at the close of business on the Cut-off
Date). In the case of the Class IIA-X Certificates, the Certificate Rate shall
equal, with respect to any Distribution Date, the weighted average, expressed as
a percentage, of the Class IIA-X Stripped Interest Rates on each Group Two
Mortgage Loan having a Class IIA-X Stripped Interest Rate exceeding zero as of
the Due Date in the month immediately preceding the month in which such
Distribution Date occurs, weighted on the basis of the respective Principal
Balances of the Group Two Mortgage Loans, which Principal Balances shall be the
Principal Balances of the Group Two Mortgage Loans at the close of business on
the immediately preceding Distribution Date after giving effect to distributions
thereon allocable to principal (or, in the case of the Certificate Rate for the
initial Distribution Date, at the close of business on the Cut-off Date). With
respect to any Distribution Date, the Certificate Rate on each Class of
Subordinated Certificates will equal the fraction, expressed as a percentage,
the numerator of which will equal the sum of (i) the product of (x) 6.75% and
(y) the excess of the aggregate Scheduled Principal Balance of the Group One
Mortgage Loans over the aggregate Outstanding Principal Balance of the Class IA
Certificates (the "Group One Subordinated Amount") and (ii) the product of (x)
6.50% and (y) the excess of the aggregate Scheduled Principal Balance of the
Group Two Mortgage Loans over the aggregate Outstanding Certificate Principal
Balance of the Class IIA Certificates (the "Group Two Subordinated Amount") and
the denominator of which will equal the sum of the Group One
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Subordinated Amount and the Group Two Subordinated Amount. Interest with respect
to each Class of Certificates or Component (other than Class IA-1 Component One,
Class IA-1 Component Four and the Class IIA-P Certificates) at the Certificate
Rate shall be calculated based on a year of 360 days comprised of twelve 30 day
months.
CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02.
CLASS: Pertaining to the Class IA-1, Class IA-2, Class IA-3, Class IA-4,
Class IA-5, Class IA-6, Class IA-7, Class IA-X, Class II-A1, Class IIA-P, Class
IIA-X, Class A-R, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class
B-5 Certificates, as the case may be.
CLASS A, CLASS M OR CLASS B: Pertaining to Class A Certificates, Class M
Certificates or Class B Certificates, as the case may be.
CLASS IA-4 ACCRETION TERMINATION DATE: The earlier to occur of (i) the
Distribution Date following the Distribution Date on which the Outstanding
Certificate Principal Balance of Class IA-1 Component Three has been reduced to
zero and (ii) the Distribution Date following the Credit Support Depletion Date.
CLASS A CERTIFICATES: The Class IA-1, Class IA-2, Class IA-3, Class IA-4,
Class IA-5, Class IA-6, Class IA-7, Class IA-X, Class IIA-1, Class IIA-P, Class
IIA-X and Class A-R Certificates, referred to collectively.
CLASS IA CERTIFICATES: The Class IA-1, Class IA-2, Class IA-3, Class IA- 4,
Class IA-5, Class IA-6, Class IA-7 and Class IA-X Certificates, referred to
collectively.
CLASS IIA CERTIFICATES: The Class IIA-1, Class IIA-P and Class IIA-X
Certificates, referred to collectively.
CLASS IA-1 CERTIFICATE: Any one of the Class IA-1 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-2 CERTIFICATE: Any one of the Class IA-2 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-3 CERTIFICATE: Any one of the Class IA-3 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and
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Class B Certificates, substantially in the form of the Class A Certificate set
forth in Exhibit C hereto.
CLASS IA-4 CERTIFICATE: Any one of the Class IA-4 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-5 CERTIFICATE: Any one of the Class IA-5 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-6 CERTIFICATE: Any one of the Class IA-6 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-7 CERTIFICATE: Any one of the Class IA-7 Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IA-X CERTIFICATE: Any one of the Class IA-X Certificates, executed by
the Trustee and authenticated by the Trustee, senior in right of payment to the
Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IIA-1 CERTIFICATE: Any one of the Class IIA-1 Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IIA-P CERTIFICATE: Any one of the Class IIA-P Certificates, executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
CLASS IIA-X CERTIFICATE: Any one of the Class IIA-X Certificates executed
by the Trustee and authenticated by the Trustee, senior in right of payment to
the Class M and Class B Certificates, substantially in the form of the Class A
Certificate set forth in Exhibit C hereto.
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CLASS A-R CERTIFICATE: The Class A-R Certificate executed by the Trustee
and authenticated by the Trustee, which represents the Master Residual Interest
and the Subsidiary Residual Interest, substantially in the form of the Class A-R
Certificate set forth in Exhibit F hereto.
CLASS IA-1 COMPONENT ONE: The portion of the Class IA-1 Certificates
representing parts of the entitlement of such Class to principal, designated as
such in Section 4.01(d).
CLASS IA-1 COMPONENT TWO: The portion of the Class IA-1 Certificates
representing parts of the entitlement of such Class to interest, designated as
such in Section 4.01(d).
CLASS IA-1 COMPONENT THREE: The portion of the Class IA-1 Certificates
representing parts of the entitlement of such Class to principal and interest,
designated as such in Section 4.01(d).
CLASS IA-1 COMPONENT FOUR: The portion of the Class IA-1 Certificates
representing parts of the entitlement of such Class to principal, designated as
such in Section 4.01(d).
CLASS IA-1 COMPONENT FIVE: The portion of the Class IA-1 Certificates
representing parts of the entitlement of such Class to interest, designated as
such in Section 4.01(d).
CLASS IA-1 COMPONENT THREE ACCRETION TERMINATION DATE: The earlier to occur
of (i) the Distribution Date following the Distribution Date on which the
Outstanding Certificate Principal Balance of the Class IA-3 Certificates has
been reduced to zero and (ii) the Distribution Date following the Credit Support
Depletion Date.
CLASS IA-1 COMPONENT FOUR DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the sum of:
(i) the applicable PO Percentage of the principal portion of all
Monthly Payments, whether or not received, which were due during the
related Due Period on Group One Mortgage Loans which were outstanding
during such Due Period;
(ii) the applicable PO Percentage of all Principal Prepayments made on
any Group One Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Group One Mortgage Loan not described in
(iv) below, the applicable PO Percentage of the principal portion of all
Insurance Proceeds, condemnation awards and any other cash proceeds from a
source other than the
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applicable Mortgagor, to the extent required to be deposited in the
Collection Account pursuant to Section 5.08(iv) and (v), which were
received during the related Principal Prepayment Period, net of related
unreimbursed Servicing Advances and net of any portion thereof which, as to
any such Mortgage Loan, constitutes Late Collections that have been the
subject of an Advance on any prior Distribution Date;
(iv) with respect to each Group One Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment Period,
the applicable PO Percentage of an amount equal to the Principal Balance of
such Liquidated Mortgage Loan as of the Due Date immediately preceding the
date on which it became a Liquidated Mortgage Loan; and
(v) with respect to each Group One Mortgage Loan repurchased during
the related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the applicable PO Percentage of the
principal portion of the Purchase Price (net of amounts with respect to
which a distribution of principal has previously been made to Class IA-1
Component Four).
CLASS IA-1 COMPONENT FIVE NOTIONAL AMOUNT: With respect to any Distribution
Date, an amount equal to the aggregate Scheduled Principal Balance of the
Non-Discount Mortgage Loans in Mortgage Group One having Net Mortgage Rates less
than or equal to 7.74% per annum.
CLASS IA-1 COMPONENT TWO NOTIONAL AMOUNT: With respect to any Distribution
Date, 7.1428571% of the aggregate Outstanding Certificate Principal Balance of
the PACs.
CLASS IA-1 COMPONENT TWO INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the Class
IA-1 Component Two Notional Balance minus (i) any Compensating Interest
Shortfall allocated to Class IA-1 Component Two on such Distribution Date
pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to Class IA-1 Component Two on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-1 COMPONENT THREE INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the
Outstanding Certificate Principal Balance of Class IA-1 Component Three minus
(i) any Compensating Interest Shortfall allocated to Class IA-1 Component Three
on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to Class IA-1 Component Three on such Distribution
Date pursuant to Section 6.05(c).
CLASS IA-1 COMPONENT FIVE INTEREST ACCRUAL AMOUNT: With respect to any
Distribution Date, one month's interest at the Certificate Rate on the Class
IA-1
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Component Five Notional Balance minus (i) any Compensating Interest Shortfall
allocated to Class IA-1 Component Five on such Distribution Date pursuant to
Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to Class
IA-1 Component Five on such Distribution Date pursuant to Section 6.05(c).
CLASS IIA-P DISTRIBUTION AMOUNT: With respect to any Distribution Date, the
sum of:
(i) the applicable PO Percentage of the principal portion of all
Monthly Payments, whether or not received, which were due during the
related Due Period on Group Two Mortgage Loans which were outstanding
during such Due Period;
(ii) the applicable PO Percentage of all Principal Prepayments made on
any Group Two Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Group Two Mortgage Loan not described in
(iv) below, the applicable PO Percentage of the principal portion of all
Insurance Proceeds, condemnation awards and any other cash proceeds from a
source other than the applicable Mortgagor, to the extent required to be
deposited in the Collection Account pursuant to Section 5.08(iv) and (v),
which were received during the related Principal Prepayment Period, net of
related unreimbursed Servicing Advances and net of any portion thereof
which, as to any such Mortgage Loan, constitutes Late Collections that have
been the subject of an Advance on any prior Distribution Date;
(iv) with respect to each Group Two Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment Period,
the applicable PO Percentage of an amount equal to the Principal Balance of
such Liquidated Mortgage Loan as of the Due Date immediately preceding the
date on which it became a Liquidated Mortgage Loan; and
(v) with respect to each Group Two Mortgage Loan repurchased during
the related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the applicable PO Percentage of the
principal portion of the Purchase Price (net of amounts with respect to
which a distribution of principal has previously been made to the Class
IIA-P Certificateholders).
CLASS IA-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-2 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-2 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-2 Certificates on such Distribution Date pursuant to
Section 6.05(c).
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CLASS IA-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-3 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-3 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-3 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-4 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-4 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-4 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-5 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-5 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-5 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-6 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-6 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-6 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-6 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-7 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class IA-7 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IA-7 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class IA-7 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-X INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Class IA-X Notional Balance
minus (i) any Compensating Interest Shortfall allocated to the Class IA-X
Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any
Realized Loss Interest Shortfall allocated to the Class IA-X on such
Distribution Date pursuant to Section 6.05(c).
CLASS IIA-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
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Principal Balance of the Class IIA-1 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class IIA-1 Certificates on such
Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss
Interest Shortfall allocated to the Class IIA-1 Certificates on such
Distribution Date pursuant to Section 6.05(c).
CLASS IIA-X INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Class IIA-X Notional Balance
minus (i) any Compensating Interest Shortfall allocated to the Class IIA-X
Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any
Realized Loss Interest Shortfall allocated to the Class IIA-X Certificates on
such Distribution Date pursuant to Section 6.05(c).
CLASS A-R INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class A-R Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class A-R Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class A-R Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS IA-X NOTIONAL AMOUNT: With respect to any Distribution Date, an
amount equal to the aggregate Scheduled Principal Balance of the Non-Discount
Mortgage Loans in Mortgage Group One.
CLASS IIA-X NOTIONAL AMOUNT: With respect to any Distribution Date, an
amount equal to the aggregate Scheduled Principal Balance of the Non-Discount
Mortgage Loans in Mortgage Group Two.
CLASS A PERCENTAGE: As of any Distribution Date, the percentage obtained by
dividing the Class A Principal Balance by the Mortgage Pool Principal Balance,
but not more than 100%.
CLASS IA PERCENTAGE: As of any Distribution Date, the percentage obtained
by dividing the Class IA Principal Balance by the Group One Mortgage Pool
Principal Balance, but not more than 100%.
CLASS IIA PERCENTAGE: As of any Distribution Date, the percentage obtained
by dividing the Class IIA Principal Balance by the Group Two Mortgage Pool
Principal Balance, but not more than 100%.
CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class A
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class A Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and
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Realized Losses allocated to the Class A Certificates pursuant to Section 6.04;
provided that the Class A Principal Balance on the first Distribution Date shall
be the Original Class A Principal Balance.
CLASS IA PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class IA
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class IA Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class IA Certificates pursuant to Section 6.04); provided that
the Class IA Principal Balance on the first Distribution Date shall be the
Original Class IA Principal Balance.
CLASS IIA PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class IIA
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class IIA Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class IIA Certificates pursuant to Section 6.04); provided that
the Class IIA Principal Balance on the first Distribution Date shall be the
Original Class IIA Principal Balance.
CLASS IA-1 COMPONENT TWO SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class IA-1 Component Two Interest
Accrual Amount over the amount actually distributed to the Class IA-1 Component
Two Certificateholders on such Distribution Date pursuant to Section
6.01(b)(i)(A).
CLASS IA-1 COMPONENT THREE SHORTFALL: With respect to any Distribution
Date, the amount equal to the excess, if any, of the Class IA-1 Component Three
Interest Accrual Amount over the amount actually distributed to the Class IA-1
Component Three Certificateholders on such Distribution Date pursuant to Section
6.01(b)(i)(B).
CLASS IA-1 COMPONENT FOUR SHORTFALL AMOUNT: With respect to any
Distribution Date, the amount equal to the excess, if any, of the amounts
calculated pursuant to Sections 6.01(b)(ii)(B) and 6.01(b)(iii)(A) over the
amount actually distributed to Class IA-1 Component Four on such Distribution
Date pursuant to such Sections.
CLASS IA-1 COMPONENT FIVE SHORTFALL: With respect to any Distribution Date,
the amount equal to the excess, if any, of the Class IA-1 Component Five
Interest Accrual Amount over the amount actually distributed to the Class IA-1
Component Five Certificateholders on such Distribution Date pursuant to Section
6.01(b)(i)(C).
CLASS IA-2 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-2 Interest Accrual Amount over the
amount actually
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distributed to the Class IA-2 Certificateholders on such Distribution Date
pursuant to Section 6.01(b)(i)(D).
CLASS IA-3 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-3 Interest Accrual Amount over the
amount actually distributed to the Class IA-3 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(E).
CLASS IA-4 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-4 Interest Accrual Amount over the
amount actually distributed to the Class IA-4 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(F).
CLASS IA-5 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-5 Interest Accrual Amount over the
amount actually distributed to the Class IA-5 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(G).
CLASS IA-6 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-6 Interest Accrual Amount over the
amount actually distributed to the Class IA-6 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(H).
CLASS IA-7 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-7 Interest Accrual Amount over the
amount actually distributed to the Class IA-7 Certificateholders on such
Distribution Date pursuant to Section 6.01(b)(i)(I).
CLASS IA-X SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IA-X Interest Accrual Amount over the
amount actually distributed to the Class IA-X Certificates on such Distribution
Date pursuant to Section 6.01(b)(i)(J).
CLASS A-R SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class A-R Interest Accrual Amount over the
amount actually distributed to the Class A-R Certificates on such Distribution
Date pursuant to Section 6.01(b)(i)(K).
CLASS IIA-1 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IIA-1 Interest Accrual Amount over the
amount actually distributed to the Class IIA-1 Certificates on such Distribution
Date pursuant to Section 6.01(b)(i)(L).
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CLASS IIA-X SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class IIA-X Interest Accrual Amount over the
amount actually distributed to the Class IIA-X Certificates on such Distribution
Date pursuant to Section 6.01(b)(i)(M).
CLASS IIA-P SHORTFALL AMOUNT: With respect to any Distribution Date, the
amount equal to the excess, if any, of the amounts calculated pursuant to
Sections 6.01(b)(ii)(D) and 6.01(b)(iii)(B) over the amount actually distributed
to the Class IIA-P Certificates on such Distribution Date pursuant to such
Sections.
CLASS IA-X STRIPPED INTEREST RATE: For each Group One Mortgage Loan, the
excess, if any, of the Net Mortgage Rate for such Mortgage Loan over 6.75%.
CLASS IIA-X STRIPPED INTEREST RATE: For each Group Two Mortgage Loan, the
excess, if any, of the Net Mortgage Rate for such Mortgage Loan over 6.50%.
CLASS B CERTIFICATES: The Class B-1, Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates, referred to collectively.
CLASS B-1 CERTIFICATE: Any one of the Class B-1 Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A and Class M Certificates, substantially in the form of the Class
B Certificate set forth in Exhibit E hereto.
CLASS B-2 CERTIFICATE: Any one of the Class B-2 Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A, Class M and Class B-1 Certificates, substantially in the form of
the Class B Certificate set forth in Exhibit E hereto.
CLASS B-3 CERTIFICATE: Any one of the Class B-3 Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A, Class M, Class B-1 and Class B-2 Certificates, substantially in
the form of the Class B Certificate set forth in Exhibit E hereto.
CLASS B-4 CERTIFICATE: Any one of the Class B-4 Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A, Class M, Class B-1, Class B-2 and Class B-3 Certificates,
substantially in the form of the Class B Certificate set forth in Exhibit E
hereto.
CLASS B-5 CERTIFICATE: Any one of the Class B-5 Certificates executed by
the Trustee and authenticated by the Trustee, subordinated in right of payment
to the Class A, Class M, Class B-1, Class B-2, Class B-3 and Class B-4
Certificates, substantially in the form of the Class B Certificate set forth in
Exhibit E hereto.
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CLASS B-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class B-1 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class B-1 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class B-1 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS B-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class B-2 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class B-2 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class B-2 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS B-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class B-3 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class B-3 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class B-3 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS B-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class B-4 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class B-4 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class B-4 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS B-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date,
one month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class B-5 Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class B-5 Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class B-5 Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS B-1 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-1 Interest Accrual Amount over the
amount actually distributed to the Class B-1 Certificates on such Distribution
Date pursuant to Section 6.01(d)(1) (A) and (B).
CLASS B-2 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-2 Interest Accrual Amount over the
amount actually
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distributed to the Class B-2 Certificates on such Distribution Date pursuant to
Section 6.01(d)(2) (A) and (B).
CLASS B-3 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-3 Interest Accrual Amount over the
amount actually distributed to the Class B-3 Certificates on such Distribution
Date pursuant to Section 6.01(d)(3) (A) and (B).
CLASS B-4 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-4 Interest Accrual Amount over the
amount actually distributed to the Class B-4 Certificates on such Distribution
Date pursuant to Section 6.01(d)(4) (A) and (B).
CLASS B-5 SHORTFALL: With respect to any Distribution Date, the amount
equal to the excess, if any, of the Class B-5 Interest Accrual Amount over the
amount actually distributed to the Class B-5 Certificates on such Distribution
Date pursuant to Section 6.01(d)(5) (A) and (B).
CLASS B PERCENTAGE: As of any Distribution Date, the difference between
100% and the sum of (i) the Class A Percentage and (ii) the Class M Percentage
for such Distribution Date.
CLASS B PRINCIPAL BALANCE: As of any Distribution Date, the excess of the
Mortgage Pool Principal Balance (together with the principal portion of any
Monthly Payment due but not paid with respect to which an Advance has not been
made) over the sum of (i) the Class A Principal Balance and (ii) the Class M
Principal Balance.
CLASS M CERTIFICATE: Any one of the Class M Certificates executed by the
Trustee and authenticated by the Trustee, subordinated in right of payment to
the Class A Certificates, substantially in the form of the Class M Certificate
set forth in Exhibit D hereto.
CLASS M INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one
month's interest at the Certificate Rate on the Outstanding Certificate
Principal Balance of the Class M Certificates minus (i) any Compensating
Interest Shortfall allocated to the Class M Certificates on such Distribution
Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall
allocated to the Class M Certificates on such Distribution Date pursuant to
Section 6.05(c).
CLASS M PERCENTAGE: As of any Distribution Date, the percentage obtained by
dividing the Class M Principal Balance by the Mortgage Pool Principal Balance,
but not more than 100%; provided, however, that on any Distribution Date on
which the Class B Percentage equals 0%, the Class M Percentage shall equal 100%
minus the Class A Percentage.
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CLASS M PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class M
Principal Balance for the immediately preceding Distribution Date less (b)
amounts distributed to the Class M Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Class M Certificates pursuant to Sections 6.04 and 6.01(c));
provided that the Class M Principal Balance on the first Distribution Date shall
be the Original Class M Principal Balance, and provided further that if the
aggregate Outstanding Certificate Principal Balance of the Class B Certificates
has been reduced to zero, as of any Distribution Date, the Class M Principal
Balance will equal the excess of the Mortgage Pool Principal Balance (together
with the portion of any Monthly Payment due but not paid with respect to which
an Advance has not been made) over the Class A Principal Balance.
CLASS M SHORTFALL: With respect to any Distribution Date, the amount equal
to the excess, if any, of the Class M Interest Accrual Amount over the amount
actually distributed to the Class M Certificateholders on such Remittance Date
pursuant to Section 6.01(c).
CLOSING DATE: May 27, 1998.
CODE: The Internal Revenue Code of 1986, as amended from time to time, and
any successor statutes thereto, and applicable U.S. Department of Treasury
temporary or final regulations promulgated thereunder.
COLLECTION ACCOUNT: The account created and maintained pursuant to Section
5.08.
COMPENSATING INTEREST: The meaning specified in Section 6.05(a).
COMPENSATING INTEREST SHORTFALL: The meaning specified in Section 6.05(b).
COMPONENT: Any of Class IA-1 Component One, Class IA-1 Component Two, Class
IA-1 Component Three, Class IA-1 Component Four or Class IA-1 Component Five.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the date of execution of this instrument is located at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070.
CREDIT SUPPORT: With respect to each Class of Subordinated Certificates
(other than the Class B-5 Certificates), the level of credit support supporting
such Class, expressed as a percentage of the aggregate Outstanding Certificate
Principal Balance of all Classes and Components of Certificates (other than
Class IA-1 Component Four and the Class
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IIA-P Certificates). With respect to each Distribution Date, Credit Support for
each such Class will equal in each case the percentage, rounded to two decimal
places, obtained by dividing the aggregate Outstanding Certificate Principal
Balances immediately prior to such Distribution Date of all Classes of
Subordinated Certificates having higher numerical class designations than such
Class (for this purpose, each Class of Class M Certificates shall be deemed to
have a lower numerical class designation than each Class of Class B
Certificates) by the aggregate Outstanding Certificate Principal Balance of all
Classes of Certificates (other than Class IA-1 Component Four and the Class
IIA-P Certificates) immediately prior to such Distribution Date.
CREDIT SUPPORT DEPLETION DATE: The first Distribution Date on which the
aggregate outstanding principal balance of the Subordinated Certificates has
been or will be reduced to zero.
CUT-OFF DATE: May 1, 1998.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction in
the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, other than such a
reduction resulting from a Deficient Valuation.
DEFAULTED MORTGAGE LOAN: As of any date of determination, any Mortgage Loan
as to which the related Mortgagor has failed to make full payments as required
under the related Note for three consecutive months.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of the
related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding principal balance of the Mortgage Loan, which
valuation results from a proceeding initiated under the Bankruptcy Code.
DEFINITIVE CERTIFICATES: The Certificates referred to in Section 4.01(c).
DEPOSITOR: HomeSide Mortgage Securities, Inc., a Delaware corporation, or
its successor in interest or any successor under this Agreement appointed as
herein provided.
DEPOSITORY: The Depository Trust Company, the nominee of which is Cede &
Co.
DEPOSITORY AGREEMENT: The agreement referred to in Section 4.01(b).
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
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DETERMINATION DATE: The sixteenth day of the month in which the related
Distribution Date occurs (or, if such sixteenth day is not a Business Day, the
preceding Business Day).
DISQUALIFIED ORGANIZATION: An organization referred to in section
860E(e)(5) of the Code.
DISTRIBUTION DATE: The 25th day of any month, or if such 25th day is not a
Business Day, the first Business Day immediately following, beginning with June
25, 1998.
DUE DATE: The first day of each month, being the day of the month on which
each Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
DUE PERIOD: With respect to any Distribution Date, the period from the
second day of the month preceding the month in which such Distribution Date
occurs through the first day of the month in which such Distribution Date
occurs.
ELIGIBLE ACCOUNT: An account that is (i) maintained with a depository
institution the long-term unsecured debt obligations of which are rated by each
Rating Agency and S&P in one of its two highest rating categories, or (ii)
maintained with the corporate trust department of a national bank which has a
rating of at least BBB- or A-2 by S&P, or (iii) an account or accounts the
deposits in which are fully insured by the FDIC, or (iv) an account or accounts
in a depository institution in which such accounts are insured by the FDIC (to
the limit established by the FDIC), the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
and acceptable to the Trustee and each Rating Agency, the Certificateholders
have a claim with respect to the funds in such account and a perfected first
security interest against any collateral (which shall be limited to Eligible
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, or (v) otherwise acceptable to each Rating Agency without reduction
or withdrawal of the rating of any Class of Certificates, as evidenced by a
letter from each Rating Agency.
ELIGIBLE CERTIFICATEHOLDER: As defined in Section 6.02(c).
ELIGIBLE INVESTMENTS: One or more of the following:
(i) obligations of, or guaranteed as to principal and interest by, the
United States or obligations of any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States; provided that any such obligation held as a "cash flow investment"
within the meaning of section 860G(a)(6) of the Code shall not have a
remaining maturity of more than 45 days;
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(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than two months from the date of acquisition thereof,
provided that the long-term unsecured obligations of the party agreeing to
repurchase such obligations are at the time rated by each Rating Agency in
one of its two highest rating categories and the short-term debt
obligations of the party agreeing to repurchase are rated A-1 by S&P and
F-1+ by Fitch, if rated by Fitch;
(iii) federal funds, certificates of deposit, time deposits and
bankers' acceptances (which shall each have an original maturity of not
more than 60 days and, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any United States
depository institution or trust company incorporated under the laws of the
United States or any state, provided that the long-term unsecured debt
obligations of such depository institution or trust company at the date of
acquisition thereof have been rated by each Rating Agency in one of its two
highest rating categories and the short-term obligations of such depository
institution or trust company are rated A-1 by S&P and F-1+ by Fitch, if
rated by Fitch;
(iv) commercial paper (having original maturities of not more than 365
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
each Rating Agency in its highest short-term unsecured commercial paper
rating category; provided that such commercial paper shall have a remaining
maturity of not more than 45 days; and
(vi) other obligations or securities that are "permitted investments"
within the meaning of Section 860G(a)(5) of the Code and acceptable to each
Rating Agency rating the Certificates as an Eligible Investment hereunder
and will not result in a reduction or withdrawal in the then current rating
of any Class of Certificates, as evidenced by a letter to such effect from
each Rating Agency.
provided that no such instrument shall be an Eligible Investment if such
instrument evidences either (a) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (b) both principal and
interest payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a yield
to maturity of greater than 120% of the yield to maturity at par of such
underlying obligations.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ESCROW ACCOUNT: The account or accounts created and maintained pursuant to
Section 5.10.
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ESCROW PAYMENTS: The amounts constituting applicable ground rents, taxes,
assessments, water rates, Standard Hazard Policy premiums and other payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to a
Mortgage Loan.
EVENT OF DEFAULT: Any of the events specified in Section 9.01.
EXCEPTION REPORT: The report of the Trustee referred to in Section 2.02.
EXCESS BANKRUPTCY LOSS: Any Bankruptcy Loss, or portion thereof, which
exceeds the then applicable Bankruptcy Amount.
EXCESS FRAUD LOSS: Any Fraud Loss, or portion thereof, which exceeds the
then applicable Fraud Loss Amount.
EXCESS LOSSES: Excess Bankruptcy Losses, Excess Fraud Losses and Excess
Special Hazard Losses, referred to collectively.
EXCESS PROCEEDS: All amounts (net of the related Servicing Advances)
received on any Mortgage Loan (whether as regular principal payments, Principal
Prepayments, Repurchase Proceeds, Liquidation Proceeds, Insurance Proceeds,
condemnation awards, or with respect to a disposition of a Mortgaged Property
which has been acquired by foreclosure or deed in lieu of foreclosure or
otherwise) in excess of the Principal Balance at the Cut-off Date of such
Mortgage Loan and accrued interest thereon at its Mortgage Rate to the Due Date
immediately succeeding the date of prepayment, repurchase or liquidation, as the
case may be.
EXCESS SPECIAL HAZARD LOSS: Any Special Hazard Loss, or portion thereof,
that exceeds the then applicable Special Hazard Amount.
FDIC: The Federal Deposit Insurance Corporation or any successor
organization.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
organization.
FIDELITY BOND: A fidelity bond and errors and omissions insurance to be
maintained by the Servicer pursuant to Section 5.19.
FITCH: Fitch IBCA, Inc., or its successor in interest.
FNMA: The Federal National Mortgage Association, or any successor
organization.
FNMA GUIDES: The FNMA Sellers' Guide and the FNMA Servicers' Guide, and all
amendments or additions thereto.
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FRAUD LOSS: Any Realized Loss or portion thereof sustained by reason of a
default arising from fraud, dishonesty or misrepresentation in connection with
the related Mortgage Loan, including by reason of the denial of coverage under
any related Primary Insurance Policy.
FRAUD LOSS AMOUNT: As of any date of determination after the Cut-off Date,
an amount equal to: (X) prior to the third anniversary of the Cut-off Date,
1.00% (initially, $2,571,105.00) of the aggregate outstanding principal balance
of all of the Mortgage Loans as of the Cut-off Date minus the aggregate amount
of Fraud Loss on the Mortgage Loans allocated to the Certificates in accordance
with Section 6.04 since the Cut-off Date up to such date of determination and
(Y) from the third to the fifth anniversary of the Cut-off Date, (1) 0.50% of
the aggregate outstanding principal balance of all of the Mortgage Loans as of
the most recent anniversary of the Cut-off Date minus (2) the Fraud Losses
allocated to the Certificates in accordance with Section 6.04 since the most
recent anniversary of the Cut-off Date up to such date of determination. On and
after the fifth anniversary of the Cut-off Date, the Fraud Loss Amount shall be
zero.
GROUP ONE MORTGAGE LOANS: The Mortgage Loans in Mortgage Group One.
GROUP ONE MORTGAGE POOL PRINCIPAL BALANCE: As of any date on which the
Group One Mortgage Pool Principal Balance is determined, the aggregate of the
Principal Balances of each Outstanding Mortgage Loan in Mortgage Group One on
such date of determination less the principal portion of any Monthly Payment due
but not paid with respect to which an Advance has not been made.
GROUP TWO MORTGAGE POOL PRINCIPAL BALANCE: As of any date on which the
Group Two Mortgage Pool Principal Balance is determined, the aggregate of the
Principal Balances of each Outstanding Mortgage Loan in Mortgage Group Two on
such date of determination less the principal portion of any Monthly Payment due
but not paid with respect to which an Advance has not been made.
GROUP ONE NON-PO ALLOCATED AMOUNT: With respect to Mortgage Group One, will
be calculated as of any date by (i) multiplying the outstanding principal
balance of each Mortgage Loan in Mortgage Group One as of such date (giving
effect to any Advances but prior to giving effect to any principal prepayments
received with respect to such Mortgage Loan that have not been passed through to
the Certificateholders) by the Non-PO Class IA Percentage with respect to such
Mortgage Loan and (ii) summing the results.
GROUP ONE REMITTANCE RATE: 6.75% per annum.
GROUP ONE SUBORDINATED AMOUNT: For any Distribution Date, the product of
(x) 6.75% and (y) the excess of the aggregate Scheduled Principal Balance of the
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Group One Mortgage Loans over the aggregate Outstanding Principal Balance of the
Class IA Certificates.
GROUP TWO MORTGAGE LOANS: The Mortgage Loans in Mortgage Group Two.
GROUP TWO NON-PO ALLOCATED AMOUNT: With respect to Mortgage Group Two, will
be calculated as of any date by (i) multiplying the outstanding principal
balance of each Mortgage Loan in Mortgage Group Two as of such date (giving
effect to any Advances but prior to giving effect to any principal prepayments
received with respect to such Mortgage Loan that have not been passed through to
the Certificateholders) by the Non-PO Class IIA Percentage with respect to such
Mortgage Loan and (ii) summing the results.
GROUP TWO REMITTANCE RATE: 6.50% per annum.
GROUP TWO SUBORDINATED AMOUNT: The product of (x) 6.50% and (y) the excess
of the aggregate Scheduled Principal Balance of the Group Two Mortgage Loans
over the aggregate Outstanding Principal Balance of the Class IIA Certificates.
INDIRECT PARTICIPANT: A broker, dealer, bank or other financial institution
or other Person that clears through or maintains a custodial relationship with a
Depository Participant.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any insurance
policy covering a Mortgage Loan, net of costs of collecting such proceeds and
net of amounts released to the Mortgagor or applied to the restoration of the
Mortgaged Property.
INSURED EXPENSES: Expenses covered by any insurance policy.
LATE COLLECTIONS: With respect to any Mortgage Loan, all amounts received
during any Due Period, whether as late payments of Monthly Payments or as
Liquidation Proceeds, condemnation proceeds, Insurance Proceeds, or with respect
to a disposition of a Mortgaged Property which has been acquired by foreclosure
or deed in lieu of foreclosure or otherwise, which represent late payments or
collections of Monthly Payments due but delinquent for a previous Due Period and
not previously recovered.
LIQUIDATED MORTGAGE LOAN: Any Mortgage Loan (a) as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Mortgage Loan or property acquired in respect thereof have been
recovered, (b) as to which a Cash Liquidation has taken place or (c) with
respect to which the Mortgaged Property has been acquired by foreclosure or deed
in lieu of foreclosure and a disposition (the term disposition shall include,
for purposes of a repurchase pursuant to Section 11.01, any repurchase of a
Mortgaged Property pursuant to such Section) of such Mortgaged Property has
occurred.
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LIQUIDATION EXPENSES: Expenses which are incurred by the Servicer or any
Sub-Servicer in connection with the liquidation of any defaulted Mortgage Loan
or property acquired in respect thereof including, without limitation, legal
fees and expenses, any unreimbursed amount expended by the Servicer pursuant to
Sections 5.16 and 5.21 respecting the related Mortgage Loan and any related and
unreimbursed expenditures for real estate property taxes or for property
restoration or preservation.
LIQUIDATION PROCEEDS: Cash (including Insurance Proceeds) received by the
Servicer in connection with the liquidation of any Mortgage Loan or Mortgaged
Property acquired in respect thereof, whether through the sale or assignment of
such Mortgage Loan (other than pursuant to Section 5.21), trustee's sale,
foreclosure sale or otherwise, or the sale of the Mortgaged Property if the
Mortgaged Property is acquired in satisfaction of the Mortgage Loan other than
amounts required to be paid to the Mortgagor pursuant to law or the terms of the
applicable Mortgage Note.
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the numerator
of which is the outstanding principal amount of the related Mortgage Loan at the
time of origination (or, (i) for purposes of Section 5.15, at the time of
determination and (ii) for purposes of a Mortgage Loan with respect to which a
conversion from adjustable rate to fixed rate has occurred, at the time of
initial origination) and the denominator of which is the appraised value of the
related Mortgaged Property at the time of origination or, in the case of a
Mortgage Loan financing the acquisition of the Mortgaged Property, the sales
price of the Mortgaged Property, if such sales price is less than such appraised
value.
LOCK-OUT LIQUIDATION AMOUNT: With respect to any Distribution Date, the
aggregate, for each Mortgage Loan which became a Liquidated Mortgage Loan during
the calendar month preceding the month of such Distribution Date, of the lesser
of (i) the Lock-out Percentage of the PO Percentage of such Mortgage Loan and
(ii) the Lock-out Percentage on any Distribution Date occurring prior to the
fifth anniversary of the first Distribution Date, and the Lock-out Prepayment
Percentage on any Distribution Date thereafter, in each case, of the Net
Liquidation Proceeds with respect to such Mortgage Loan.
LOCK-OUT PERCENTAGE: With respect to any Distribution Date, the Outstanding
Certificate Principal Balance of the Class IA-5 Certificates divided by the
Non-PO Allocated Amount with respect to Mortgage Group One.
LOCK-OUT PREPAYMENT PERCENTAGE: The product of (a) the Lock-out Percentage
and (b) the Step Down Percentage.
LOCK-OUT PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of (i) the Adjusted Lock-out Percentage of the applicable Non-PO
Percentage of the principal portion of Monthly Payments, whether or not
received, which were due on the related Due Date on Outstanding Mortgage Loans
in Mortgage Group One as of such
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Due Date, (ii) the Lock-out Prepayment Percentage of the applicable Non-PO
Percentage of the principal portion of Principal Prepayments, Insurance
Proceeds, condemnation awards and other cash proceeds from sources other than
Mortgagors, and Repurchase Proceeds, in each case received with respect to the
Group One Mortgage Loans during the related Principal Prepayment Period and
(iii) the Lock-out Liquidation Amount.
MASTER REMIC: The pool of assets consisting of the Subsidiary Regular
Interests and all payments of principal or interest on or with respect to the
Subsidiary Regular Interests after the Cut-off Date.
MASTER RESIDUAL INTEREST: The interest in the Master REMIC represented by
amounts, if any, remaining in the Certificate Account following termination of
the Trust Fund after payments to the Class A Certificateholders (other than the
Class A-R Certificateholders), the Class M Certificateholders, the Class B
Certificateholders and the Class A-R Certificateholder with respect to their
interests in the Subsidiary Residual Interest (or the holders of any separate
certificates representing the Subsidiary Residual Interest).
MODIFIED MORTGAGE LOAN: Any Mortgage Loan which the Servicer has modified
pursuant to Section 5.01.
MONTHLY PAYMENT: The minimum required monthly payment of principal and
interest due on a Mortgage Loan as specified in the Mortgage Note for any Due
Date (before any adjustment to such scheduled amount by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver or grace period).
Monthly Payments shall be deemed due on an Outstanding Mortgage Loan until such
time as it becomes a Liquidated Mortgage Loan.
MORTGAGE: The mortgage, deed of trust or other instrument creating a first
lien or a first priority ownership interest in an estate in fee simple in real
property securing a Mortgage Note.
MORTGAGE GROUP: Pertaining to Mortgage Group One or Mortgage Group Two, as
the case may be.
MORTGAGE GROUP ONE: The Mortgage Loans in the Trust Fund that are
designated in the Mortgage Loan Schedule as comprising Mortgage Group One.
MORTGAGE GROUP ONE SUBORDINATED PERCENTAGE: As of any Distribution Date,
the difference between 100% and the Non-PO Class IA Percentage.
MORTGAGE GROUP ONE SUBORDINATED PREPAYMENT PERCENTAGE: As of any
Distribution Date, the difference between 100% and the Non-PO Class IA
Prepayment Percentage.
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MORTGAGE GROUP TWO: The Mortgage Loans in the Trust Fund that are
designated in the Mortgage Loan Schedule as comprising Mortgage Group Two.
MORTGAGE GROUP TWO SUBORDINATED PERCENTAGE: As of any Distribution Date,
the difference between 100% and the Non-PO Class IIA Percentage.
MORTGAGE GROUP TWO SUBORDINATED PREPAYMENT PERCENTAGE: As of any
Distribution Date, the difference between 100% and the Non-PO Class IIA
Prepayment Percentage.
MORTGAGE FILE: As to each Mortgage Loan, the items referred to in Exhibit B
annexed hereto.
MORTGAGE LOAN: An individual mortgage loan and all rights with respect
thereto, evidenced by a Mortgage and a Mortgage Note, sold and assigned by the
Depositor to the Trustee and which is subject to this Agreement and included in
the Trust Fund. The Mortgage Loans originally sold and subject to this Agreement
are identified on the Mortgage Loan Schedule.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto as
Exhibit A and also provided to the Trustee in a mutually acceptable electronic
format, as it may be amended in accordance with Section 3.04, setting forth the
following information as to each Mortgage Loan: (i) the Mortgage Loan
identifying number; (ii) the street address of the Mortgaged Property including
the zip code; (iii) an indication of whether the Mortgaged Property is
owner-occupied; (iv) the property type of the Mortgaged Property; (v) the
original number of months to stated maturity and the number of months remaining
to stated maturity from the Cut-off Date; (vi) (a) the appraised value of the
Mortgaged Property as set forth in an appraisal which was delivered at the time
of the origination of the Mortgage Loan, or, in the event the Mortgage Loan was
made in connection with the acquisition of the Mortgaged Property by the
Mortgagor, the lesser of such appraised value and the purchase price of the
Mortgaged Property actually paid by the Mortgagor at the time of the origination
of the Mortgage Loan, and (b) the percentage of the original principal amount of
the Mortgage Loan to the amount specified in (a) above; (vii) the original
principal balance of the Mortgage Loan; (viii) the unpaid principal balance of
the Mortgage Loan as of the close of business on the Cut-off Date; (ix) the
Mortgage Rate; (x) the amount of the current Monthly Payment; and (xi) the PO
Percentage with respect to such Mortgage Loan.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
MORTGAGE POOL: The pool of Mortgage Loans held in the Trust Fund.
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MORTGAGE POOL PRINCIPAL BALANCE: As of any date on which the Mortgage Pool
Principal Balance is determined, the aggregate of the Principal Balances of each
Outstanding Mortgage Loan on such date of determination less the principal
portion of any Monthly Payment due but not paid with respect to which an Advance
has not been made.
MORTGAGED PROPERTY: The property securing a Mortgage Note.
MORTGAGE RATE: With respect to each Mortgage Loan, the per annum rate of
interest borne by the Mortgage Loan, as specified in the Mortgage Note.
MORTGAGOR: The obligor on a Mortgage Note.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan, Liquidation
Proceeds net of Liquidation Expenses.
NET MORTGAGE RATE: With respect to each Mortgage Loan, a per annum rate of
interest for the applicable period equal to the Mortgage Rate less the sum of
(i) the Servicing Fee and (ii) the Trustee Fee.
NON-DISCOUNT MORTGAGE LOANS: The Mortgage Loans having Net Mortgage Rates
in excess of the applicable Remittance Rate.
NON-PO ALLOCATED AMOUNT: At the time of any determination, the amount
derived by (i) multiplying the Principal Balance of each Mortgage Loan on such
date of determination by the Non-PO Percentage with respect to such Mortgage
Loan and (ii) summing the results.
NON-PO CLASS A CERTIFICATES: The Class A Certificates (exclusive of Class
IA-1 Component Four and the Class IIA-P Certificates), referred to collectively.
NON-PO CLASS IA CERTIFICATES: The Class IA Certificates (exclusive of Class
IA-1 Component Four), referred to collectively.
NON-PO CLASS IIA CERTIFICATES: The Class IIA Certificates (exclusive of the
Class IIA-P Certificates), referred to collectively.
NON-PO CLASS IA OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution
Date, the lesser of (a) the Non-PO Class IA Principal Balance and (b) the sum
of:
(i) the Non-PO Class IA Percentage of the applicable Non-PO Percentage
of the principal portion of all Monthly Payments, whether or not received,
which were due during the related Due Period on Group One Mortgage Loans
which were outstanding during such Due Period;
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(ii) the Non-PO Class IA Prepayment Percentage of the applicable
Non-PO Percentage of all Principal Prepayments made on any Group One
Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Group One Mortgage Loan not described in
(iv) below, the Non-PO Class IA Percentage of the applicable Non-PO
Percentage of the principal portion of all Insurance Proceeds, condemnation
awards and any other cash proceeds from a source other than the applicable
Mortgagor, to the extent required to be deposited in the Collection Account
pursuant to Section 5.08(iv) and (v), which were received during the
related Principal Prepayment Period, net of related unreimbursed Servicing
Advances and net of any portion thereof which, as to any such Mortgage
Loan, constitutes Late Collections that have been the subject of an Advance
on any prior Distribution Date;
(iv) with respect to each Group One Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment Period,
the lesser of (A) the Non-PO Class IA Percentage of the applicable Non-PO
Percentage of an amount equal to the Principal Balance of such Liquidated
Mortgage Loan as of the Due Date immediately preceding the date on which it
became a Liquidated Mortgage Loan and (B) the Non-PO Class IA Prepayment
Percentage of the applicable Non-PO Percentage of the Net Liquidation
Proceeds with respect to such Liquidated Mortgage Loan (net of any
unreimbursed Advances);
(v) with respect to each Group One Mortgage Loan repurchased during
the related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the Non-PO Class IA Prepayment Percentage
of the applicable Non-PO Percentage of the principal portion of the
Purchase Price (net of amounts with respect to which a distribution of
principal has previously been made to the Non-PO Class IA
Certificateholders); and
(vi) during such time as the aggregate Outstanding Certificate
Principal Balance of the Subordinated Certificates equals zero, the excess
of the Non-PO Class IA Principal Balance (calculated after giving effect to
reductions thereof on such Distribution Date with respect to the amounts
described in (i) - (v) above) over the Group One Non-PO Allocated Amount,
if any, as of the preceding Distribution Date.
NON-PO CLASS IIA OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution
Date, the lesser of (a) the Non-PO Class IIA Principal Balance and (b) the sum
of:
(i) the Non-PO Class IIA Percentage of the applicable Non-PO
Percentage of the principal portion of all Monthly Payments, whether or not
received, which were due during the related Due Period on Group Two
Mortgage Loans which were outstanding during such Due Period;
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(ii) the Non-PO Class IIA Prepayment Percentage of the applicable
Non-PO Percentage of all Principal Prepayments made on any Group Two
Mortgage Loan during the related Principal Prepayment Period;
(iii) with respect to each Group Two Mortgage Loan not described in
(iv) below, the Non-PO Class IIA Percentage of the applicable Non-PO
Percentage of the principal portion of all Insurance Proceeds, condemnation
awards and any other cash proceeds from a source other than the applicable
Mortgagor, to the extent required to be deposited in the Collection Account
pursuant to Section 5.08(iv) and (v), which were received during the
related Principal Prepayment Period, net of related unreimbursed Servicing
Advances and net of any portion thereof which, as to any such Mortgage
Loan, constitutes Late Collections that have been the subject of an Advance
on any prior Distribution Date;
(iv) with respect to each Group Two Mortgage Loan which has become a
Liquidated Mortgage Loan during the related Principal Prepayment Period,
the lesser of (A) the Non-PO Class IIA Percentage of the applicable Non-PO
Percentage of an amount equal to the Principal Balance of such Liquidated
Mortgage Loan as of the Due Date immediately preceding the date on which it
became a Liquidated Mortgage Loan and (B) the Non-PO Class IIA Prepayment
Percentage of the applicable Non-PO Percentage of the Net Liquidation
Proceeds with respect to such Liquidated Mortgage Loan (net of any
unreimbursed Advances);
(v) with respect to each Group Two Mortgage Loan repurchased during
the related Principal Prepayment Period pursuant to Section 2.02, 3.01,
5.21 or 11.01, an amount equal to the Non-PO Class IIA Prepayment
Percentage of the applicable Non-PO Percentage of the principal portion of
the Purchase Price (net of amounts with respect to which a distribution of
principal has previously been made to the Non-PO Class IIA
Certificateholders); and
(vi) during such time as the aggregate Outstanding Certificate
Principal Balance of the Subordinated Certificates equals zero, the excess
of the Non-PO Class IIA Principal Balance (calculated after giving effect
to reductions thereof on such Distribution Date with respect to the amounts
described in (i) - (v) above) over the Group Two Non-PO Allocated Amount,
if any, as of the preceding Distribution Date.
NON-PO CLASS A PERCENTAGE: As of any Distribution Date, the fraction,
expressed as a percentage (which shall never exceed 100%), the numerator of
which is the Non-PO Class A Principal Balance and the denominator of which is
the Non-PO Allocated Amount as of the immediately preceding Due Date.
NON-PO CLASS IA PERCENTAGE : As of any Distribution Date, a fraction,
expressed as a percentage (which shall never exceed 100%), the numerator of
which is the
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Non-PO Class IA Principal Balance and the denominator of which is the Non-PO
Class IA Allocated Amount as of the immediately preceding Due Date.
NON-PO CLASS IIA PERCENTAGE : As of any Distribution Date, a fraction,
expressed as a percentage (which shall never exceed 100%), the numerator of
which is the Non-PO Class IIA Principal Balance and the denominator of which is
the Non-PO Class IIA Allocated Amount as of the immediately preceding Due Date.
NON-PO CLASS IA PREPAYMENT PERCENTAGE: As of any Distribution Date up to
and including the Step-down Date, 100%; as of any Distribution Date in the first
year thereafter, the Non-PO Class IA Percentage plus 70% of the Mortgage Group
One Subordinated Percentage for such Distribution Date; as of any Distribution
Date in the second year thereafter, the Non-PO Class IA Percentage plus 60% of
the Mortgage Group One Subordinated Percentage for such Distribution Date; as of
any Distribution Date in the third year thereafter, the Non-PO Class IA
Percentage plus 40% of the Mortgage Group One Subordinated Percentage for such
Distribution Date; as of any Distribution Date in the fourth year thereafter,
the Non-PO Class IA Percentage plus 20% of the Mortgage Group One Subordinated
Percentage for such Distribution Date; and as of any Distribution Date after the
fourth year thereafter, the Non-PO Class IA Percentage; provided that, if the
Non-PO Class IA Percentage as of any such Distribution Date is greater than the
Non-PO Class IA Percentage on the first Distribution Date, the Non-PO Class IA
Prepayment Percentage shall be 100%; and provided further, however, that
whenever the Non-PO Class IA Percentage equals 0%, the Non-PO Class IA
Prepayment Percentage shall equal 0%; and provided further that no reduction of
the Non-PO Class IA Prepayment Percentage below the level in effect for the most
recent period shall occur with respect to any Distribution Date unless, as of
the last day of the month preceding such Distribution Date, (i) the aggregate
outstanding principal balance of Mortgage Loans delinquent 60 days or more
(including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans
with respect to which the related Mortgaged Property has been acquired by the
Trust Fund) does not exceed 50% of the aggregate principal balance of the
Subordinated Certificates as of such date and (ii) cumulative Realized Losses do
not exceed (a) 30% of the aggregate principal balance of the Subordinated
Certificates as of the date of issuance of the Certificates (the "Original
Subordinated Principal Balance") if such Distribution Date occurs between and
including June 2003 and May 2004, (b) 35% of the Original Subordinated Principal
Balance if such Distribution Date occurs between and including June 2004 and May
2005, (c) 40% of the Original Subordinated Principal Balance if such
Distribution Date occurs between and including June 2005 and May 2006, (d) 45%
of the Original Subordinated Principal Balance if such Distribution Date occurs
between and including June 2006 and May 2007, and (e) 50% of the Original
Subordinated Principal Balance if such Distribution Date occurs during or after
June 2007.
NON-PO CLASS IIA PREPAYMENT PERCENTAGE: As of any Distribution Date up to
and including the Step-down Date, 100%; as of any Distribution Date in the first
year thereafter, the Non-PO Class IIA Percentage plus 70% of the Mortgage Group
Two Subordinated Percentage for such Distribution Date; as of any Distribution
Date in the second year thereafter,
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the applicable Non-PO Class IIA Percentage plus 60% of the Mortgage Group Two
Subordinated Percentage for such Distribution Date; as of any Distribution Date
in the third year thereafter, the Non-PO Class IIA Percentage plus 40% of the
Mortgage Group Two Subordinated Percentage for such Distribution Date; as of any
Distribution Date in the fourth year thereafter, the applicable Non-PO Class IIA
Percentage plus 20% of the Mortgage Group Two Subordinated Percentage for such
Distribution Date; and as of any Distribution Date after the fourth year
thereafter, the Non-PO Class IIA Percentage; provided that, if the Non-PO Class
IIA Percentage on the first Distribution Date is greater than the Non-PO Class
IIA Percentage, the Non-PO Class IIA Prepayment Percentage shall be 100%; and
provided further, however, that whenever the Non-PO Class IIA Percentage equals
0%, the Non-PO Class IIA Prepayment Percentage shall equal 0%; and provided
further that no reduction of the Non-PO Class IIA Prepayment Percentage below
the level in effect for the most recent period shall occur with respect to any
Distribution Date unless, as of the last day of the month preceding such
Distribution Date, (i) the aggregate outstanding principal balance of Mortgage
Loans delinquent 60 days or more (including for this purpose any Mortgage Loans
in foreclosure and Mortgage Loans with respect to which the related Mortgaged
Property has been acquired by the Trust Fund) does not exceed 50% of the
aggregate principal balance of the Subordinated Certificates as of such date and
(ii) cumulative Realized Losses do not exceed (a) 30% of the aggregate principal
balance of the Subordinated Certificates as of the date of issuance of the
Certificates (the "Original Subordinated Principal Balance") if such
Distribution Date occurs between and including June 2003 and May 2004, (b) 35%
of the Original Subordinated Principal Balance if such Distribution Date occurs
between and including June 2004 and May 2005, (c) 40% of the Original
Subordinated Principal Balance if such Distribution Date occurs between and
including June 2005 and May 2006, (d) 45% of the Original Subordinated Principal
Balance if such Distribution Date occurs between and including June 2006 and May
2007, and (e) 50% of the Original Subordinated Principal Balance if such
Distribution Date occurs during or after June 2007.
NON-PO CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the
Non-PO Class A Principal Balance for the preceding Distribution Date less (b)
amounts distributed to the Non-PO Class A Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Non-PO Class A Certificates pursuant to Section 6.04); provided
that the Non-PO Class A Principal Balance on the first Distribution Date shall
be the Original Non-PO Class A Principal Balance.
NON-PO CLASS IA PRINCIPAL BALANCE: As of any Distribution Date, (a) the
Non-PO Class IA Principal Balance for the preceding Distribution Date less (b)
amounts distributed to the Non-PO Class IA Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Non-PO Class IA Certificates pursuant to Section 6.04);
provided that the Non-PO Class IA Principal Balance on the first Distribution
Date shall be the Original Non-PO Class IA Principal Balance.
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NON-PO CLASS IIA PRINCIPAL BALANCE: As of any Distribution Date, (a) the
Non-PO Class IIA Principal Balance for the preceding Distribution Date less (b)
amounts distributed to the Non-PO Class IIA Certificateholders on such preceding
Distribution Date allocable to principal (including the principal portion of
Advances of the Servicer made pursuant to Section 6.03 and Realized Losses
allocated to the Non-PO Class IIA Certificates pursuant to Section 6.04);
provided that the Non-PO Class IIA Principal Balance on the first Distribution
Date shall be the Original Non-PO Class IIA Principal Balance.
NON-PO CLASS IA PRINCIPAL PAYMENT RULES: (I) With respect to any
Distribution Date prior to the Credit Support Depletion Date, distributions to
the Non-PO Class IA Certificateholders pursuant to Section 6.01(b)(ii)(A) shall
be made in the following amounts and priority:
first, to the Class A-5 Certificates, up to the Lockout Principal
Distribution Amount (defined below), until the Outstanding Certificate Principal
Balance of such Class has been reduced to zero; and
second, to the Class A-R Certificate, until the Outstanding Certificate
Principal Balance of such Class has been reduced to zero;
third, (A) 3.5714290601% to Class IA-1 Component One until the
Outstanding Certificate Principal Balance of such Component has been reduced to
zero; and
(B) 96.4285709399% sequentially as follows:
(1) first, to the Class IA-2, Class IA-7 and Class IA-6
Certificates, sequentially, in each case until the
Outstanding Certificate Principal Balance of each such Class
has been reduced to its Planned Principal Balance;
(2) second, to the Class IA-3 Certificates and Class IA-1
Component Three, sequentially, in each case until the
Outstanding Certificate Principal Balance of such Class and
such Component has been reduced to its Targeted Principal
Balance;
(3) third, to the Class IA-4 Certificates, until the Outstanding
Certificate Principal Balance of such Class has been reduced
to zero;
(4) fourth, 90.00% to the Class IA-3 Certificates and 10.00% to
Class IA-1 Component Three, without regard to their
respective Targeted Principal Balances, until the
Outstanding Certificate Principal Balance of the Class IA-3
Certificates has been reduced to zero; and
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(5) fifth, to Class IA-1 Component Three, without regard to the
Targeted Principal Balance of such Component, until the
Outstanding Certificate Principal Balance of such Component
has been reduced to zero; and
(6) sixth, to the Class IA-2, Class IA-7 and Class IA-6
Certificates, sequentially, until the Outstanding
Certificate Principal Balances of such Classes have been
reduced to zero; and
fourth, to the Class IA-5 Certificates, until the Outstanding Certificate
Principal Balance of such Class has been reduced to zero; and
(II) With respect to any Distribution Date on or after the Credit Support
Depletion Date, distributions pursuant to Section 6.01(b)(ii)(A) shall
be made pro rata among the outstanding Classes of Non-PO Class A
Certificates in relation to the respective Outstanding Certificate
Principal Balances of such outstanding Classes, and not in accordance
with the priority of payments among such Classes set forth in clause
(I) above.
NON-PO PERCENTAGE: With respect to each Mortgage Loan, the fraction,
expressed as a percentage (but not greater than 100%), the numerator of which
equals the applicable Net Mortgage Rate and the denominator of which equals the
Remittance Rate.
NONRECOVERABLE ADVANCE: Any Advance previously made or proposed to be made
in respect of a Mortgage Loan by the Servicer pursuant to Section 6.03 which, in
the good faith judgment of the Servicer, will not or, in the case of a proposed
Advance, would not, ultimately be recoverable by the Servicer from Late
Collections or otherwise. The determination by the Servicer that it has made, or
would be making, a Nonrecoverable Advance shall be evidenced by a certificate of
a Servicing Officer of the Servicer delivered to the Trustee, any co-trustee and
the Depositor and detailing the reasons for such determination.
OFFICERS' CERTIFICATE: A certificate signed by two of the Chairman of the
Board, the Vice Chairman of the Board, the President or a Vice President, the
Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries or any other duly authorized officer of the Depositor or the
Servicer, and delivered to the Trustee.
OPINION OF COUNSEL: A written opinion of counsel, who may be counsel for
the Depositor or the Servicer and who is reasonably acceptable to the Trustee.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: With respect to any Class of
Certificates, the amount specified for such Class in Section 4.01(d).
ORIGINAL CLASS A PRINCIPAL BALANCE: $248,111,603.50
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ORIGINAL CLASS IA PRINCIPAL BALANCE: $203,166,466.78
ORIGINAL CLASS IIA PRINCIPAL BALANCE: $44,945,036.72
ORIGINAL CLASS M PRINCIPAL BALANCE: $4,113,767.00
ORIGINAL CLASS B PRINCIPAL BALANCE: $4,885,100.37
ORIGINAL NON-PO CLASS A PRINCIPAL
BALANCE: $247,844,627.00
ORIGINAL NON-PO CLASS IA PRINCIPAL BALANCE: $203,012,553.00
ORIGINAL NON-PO CLASS IIA PRINCIPAL BALANCE: $44,832,074.00
ORIGINAL CREDIT SUPPORT: With respect to any Class of Subordinated
Certificates (other than the Class B-5 Certificates), the level of Credit
Support indicated below:
Class M: 1.90%
Class B-1: 1.15%
Class B-2: 0.75%
Class B-3: 0.40%
Class B-4: 0.25%
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE: With respect to any Class (other
than the Class IA-X or Class IIA-X Certificates) or Component (other than Class
IA-1 Component Two and Class IA-1 Component Five) of Certificates and any
Distribution Date, the Original Certificate Principal Balance of such Class or
Component minus the sum of (i) any distributions of principal made on such Class
or Component prior to such Distribution Date and (ii) any Realized Losses
allocated to such Class or Component prior to such Distribution Date plus, with
respect to the Class IA-4 Certificates and Class IA-1 Component Three, the Class
IA-4 Interest Accrual Amount or Class IA-1 Component Three Interest Accrual
Amount, respectively, for all prior Distribution Dates until the occurrence of
the Class IA-4 Accretion Termination Date or the Class IA-1 Component Three
Accretion Termination Date, as the case may be; provided, however, that (I) with
respect to the Class of Class B Certificates then outstanding having the highest
numerical class designation, the Outstanding Certificate Principal Balance of
such Class shall equal the excess of the Mortgage Pool Principal Balance
(together with the principal portion of any Monthly Payment due but not paid
with respect to which an Advance has not been made) over the sum of the
Outstanding Certificate Principal Balances of all Classes of Certificates (other
than the Class of Class B Certificates then outstanding having the highest
numerical class designation); and (II) during such time as the Outstanding
Certificate Principal Balance of the Class B-1 Certificates equals zero, with
respect to the Class M Certificates, the Outstanding Certificate Principal
Balance of such Class shall equal the excess of
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the Mortgage Pool Principal Balance (together with the principal portion of any
Monthly Payment due but not paid with respect to which an Advance has not been
made) over the Class A Principal Balance.
OUTSTANDING MORTGAGE LOAN: As to any Distribution Date, a Mortgage Loan
which was not paid in full during the related or any previous Principal
Prepayment Period, which did not become a Liquidated Mortgage Loan during the
related or any previous Principal Prepayment Period and which was not
repurchased under Section 2.02, 3.01, 5.21 or 11.01 during the related or any
previous Principal Prepayment Period.
PACs: The Class IA-2, Class IA-6 and Class IA-7 Certificates, referred to
collectively.
PASS-THRU ENTITY: A "Pass-Thru Entity" as defined in Section 860E(e)(6) of
the Code.
PERCENTAGE INTEREST: As to any Certificate (other than a Class IA-X or
Class IIA-X Certificate), the percentage interest evidenced thereby in
distributions required to be made hereunder, such percentage interest being
equal, with respect to any Class or Component, to the percentage obtained by
dividing the denomination of such Certificate by the aggregate of the
denominations of all the Certificates of such Class or Component and with
respect to all Certificates, the percentage obtained by dividing the
denomination of such Certificate by the aggregate of the denominations of all
the Certificates. With respect to any Class IA-X or Class IIA-X Certificate, the
percentage interest specified on the face of such Certificate.
PERSON: Any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
PLANNED PRINCIPAL BALANCE: With respect to any Distribution Date, the
amount specified for such Distribution Date in Appendix A hereto.
PO ALLOCATED AMOUNT: At the time of any determination, the amount derived
by (i) multiplying the Principal Balance of each Mortgage Loan by the PO
Percentage with respect to such Mortgage Loan and (ii) summing the results.
PO PERCENTAGE: The PO Percentage with respect to each Mortgage Loan as
identified on the Mortgage Loan Schedule, such percentage being equal to the
fraction, expressed as a percentage (but not less than 0%), the numerator of
which equals the excess of the applicable Remittance Rate over the applicable
Net Mortgage Rate and the denominator of which equals the applicable Remittance
Rate.
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PREMIUM MORTGAGE LOAN: Any Mortgage Loan having a Net Mortgage Rate in
excess of the applicable Remittance Rate.
PRIMARY INSURANCE POLICY: Each primary policy of mortgage guaranty
insurance or any replacement policy therefor referred to in Section 5.15 hereof.
PRINCIPAL BALANCE: At the time of any determination, the principal balance
of a Mortgage Loan remaining to be paid at the close of business on the Cut-off
Date (after deduction of all principal payments due on or before the Cut-off
Date whether or not paid) (or, in the case of a substitute Mortgage Loan
included in the Trust Fund pursuant to Section 3.04, the close of business as of
the date of substitution) reduced by all amounts previously distributed to
Certificateholders that are allocable to payments of principal on such Mortgage
Loan (including the principal portion of Advances of the Servicer made pursuant
to Section 6.03).
PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on a
Mortgage Loan (other than Late Collections) which is received other than as part
of a Monthly Payment; provided, however, that the term Principal Prepayment does
not include Insurance Proceeds, Liquidation Proceeds, condemnation awards or
other cash proceeds from a source other than the applicable Mortgagor.
PRINCIPAL PREPAYMENT PERIOD: With respect to any Distribution Date, the
period beginning on the first day of the month preceding the month in which such
Distribution Date occurs and ending on the last day of such month.
PURCHASE PRICE: With respect to any Mortgage Loan required to be purchased
on any date pursuant to Section 2.02, 3.01, 5.01, 5.21 or 11.01, an amount equal
to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid accrued
interest at the Mortgage Rate thereon from the Due Date on which interest was
last paid by the Mortgagor or Advanced by the Servicer to the Due Date next
following the date of repurchase and (c) the aggregate of any unreimbursed
Advances.
QUALIFIED INSURER: An insurance company duly qualified as such under the
laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, approved as an insurer by FNMA and
FHLMC and whose claims-paying ability is rated in the two highest rating
categories by S&P, Moody's and Fitch with respect to primary mortgage insurance
and in the two highest rating categories for general policyholder rating and
financial performance index rating by Best's with respect to hazard and flood
insurance.
RATING AGENCY: Any nationally recognized statistical rating organization,
or its successor, that rated one or more Classes of Certificates at the request
of the Depositor at the time of the initial issuance of the Certificates. If
such organization or a successor is no longer in existence, "Rating Agency"
shall be such nationally recognized statistical rating organization, or
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other comparable Person, designated by the Depositor, notice of which
designation shall be given to the Trustee and the Servicer. References herein to
the two highest long-term debt rating categories of a Rating Agency shall mean
AA or better in the case of S&P and AA or better in the case of Fitch.
REALIZED LOSS: With respect to (i) a Liquidated Mortgage Loan, the amount,
if any, by which the unpaid Principal Balance and accrued interest thereon at a
rate equal to the Net Mortgage Rate exceeds the amount actually recovered by the
Servicer with respect thereto (net of reimbursement of Advances and Servicing
Advances) at the time such Mortgage Loan became a Liquidated Mortgage Loan or
(ii) with respect to a Mortgage Loan which is not a Liquidated Mortgage Loan,
any amount of principal that the Mortgagor is no longer legally required to pay
(except for the extinguishment of debt that results from the exercise of
remedies due to default by the Mortgagor).
REALIZED LOSS INTEREST SHORTFALL: The meaning specified in Section 6.05(c).
RECORD DATE: The close of business of the last Business Day of the month
preceding the month of the related Distribution Date.
RELEVANT MORTGAGE LOAN: The meaning specified in Section 5.01.
REMIC: A "real estate mortgage investment conduit," as such term is defined
in Section 860D of the Code. References herein to "the REMIC" shall mean the
REMIC created hereunder.
REMIC POOL: Either of the Master REMIC or the Subsidiary REMIC.
REMIC PROVISIONS: Provisions of the federal income tax law relating to
REMICs which appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury temporary, proposed or final regulations and rulings promulgated
thereunder, as the foregoing are in effect (or with respect to proposed
regulations, are proposed to be in effect) from time to time.
REMITTANCE RATE: The Group One Remittance Rate or the Group Two Remittance
Rate, as applicable.
REPURCHASE PROCEEDS: All proceeds of any Mortgage Loan or property acquired
in respect thereof repurchased pursuant to Section 2.02, 3.01, 5.01, 5.21 or
11.01.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any Senior Vice
President, any Vice President, any Assistant Vice President, any Senior Trust
Officer, any
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Trust Officer or any other officer of the Trustee in its Corporate Trust Office
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer in its Corporate Trust Office to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. or its successor in interest.
SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan as of any
Distribution Date, the unpaid principal balance of such Mortgage Loan as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such schedule by reason of bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) as of the Due Date in the month
preceding the month of such Distribution Date, or as the Cut-off Date, with
respect to the first Distribution Date, after giving effect to any previously
applied prepayments, the payment of principal due on such first day of the month
and any reduction of the principal balance of such Mortgage Loan by a bankruptcy
court, irrespective of any delinquency in payment by the related Mortgagor.
SELLER: HomeSide Lending, Inc.
SERVICER: HomeSide Lending, Inc. or its successor in interest or any
successor under this Agreement as herein provided.
SERVICER REMITTANCE DATE: With respect to any Distribution Date, the 24th
day of the month in which such Distribution Date occurs, or if such 24th day is
not a Business Day, the Business Day preceding such 24th day.
SERVICING ADVANCES: All customary, reasonable and necessary "out of pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations and which are "unanticipated expenses" of the REMIC, as defined in
the REMIC Provisions, 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 Mortgaged Property if the Mortgaged Property
is acquired in satisfaction of the Mortgage, (iv) taxes and assessments on the
Mortgaged Properties subject to the Mortgage Loans and (v) compliance with the
obligations under Section 5.21.
SERVICING FEE: The amount of the monthly fee paid for the servicing of the
Mortgage Loans, equal to, as of any Distribution Date, the total of, with
respect to each Mortgage Loan, one-twelfth of 0.25% per annum of the Principal
Balance thereof as of the Determination Date in the preceding month, subject to
adjustment as provided in Section 6.05. The Servicing Fee shall be payable only
at the time of and with respect to those Mortgage Loans for which
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payment is in fact made of the entire amount of the Monthly Payments that shall
have come due and only at the time such Monthly Payment shall be made. The right
to receive the Servicing Fee is limited to, and the Servicing Fee is payable
solely from, the interest portion of such Monthly Payments (or the interest
portion of any Principal Prepayment in full) collected by the Servicer, or as
otherwise provided under Section 5.09 or 5.23.
SERVICING OFFICER: Any officer of the Servicer or any Sub-servicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name appears on a written certificate listing servicing officers furnished
to the Trustee by the Servicer on or prior to the Closing Date, and signed on
behalf of the Servicer or any Sub-servicer by its President, any Vice President
or its Treasurer, as such certificate may from time to time be amended.
SINGLE CERTIFICATE: A Certificate of any Class that evidences the smallest
permissible original denomination for such Class of Certificates as specified in
Section 4.01(d).
SPECIAL HAZARD AMOUNT: Initially, $2,571,105.00. As of the first
anniversary of the Cut-off Date, the Special Hazard Amount shall be reduced, but
not increased, to the lesser of (i) the initial Special Hazard Amount less the
sum of all amounts allocated to the Subordinated Certificates in respect of
Special Hazard Losses on the Mortgage Loans during such year or (ii) the
Adjustment Amount for such anniversary. As of each subsequent anniversary of the
Cut-off Date, the Special Hazard Amount on the immediately preceding anniversary
of the Cut-off Date less the sum of all amounts allocated to the Subordinated
Certificates in respect of Special Hazard Losses on the Mortgage Loans during
such year and (ii) the Adjustment Amount for such anniversary. The "Adjustment
Amount" with respect to each anniversary of the Cut-off Date will be equal to
the greatest of (i) 1.00% multiplied by the aggregate outstanding principal
balance of the Mortgage Loans, (ii) the aggregate outstanding principal balance
of the Mortgage Loans secured by Mortgaged Properties located in the California
postal zip code area in which the highest percentage of Mortgage Loans by
Principal Balance are located and (iii) twice the outstanding principal balance
of the Mortgage Loan having the largest outstanding principal balance.
SPECIAL HAZARD LOSS: Any Realized Loss or portion thereof resulting from
direct physical loss or damage to the Mortgaged Property, which is not insured
against under the Standard Hazard Policy required to be maintained hereunder.
STANDARD HAZARD POLICY: Each standard hazard insurance policy or
replacement therefor referred to in Section 5.16.
STARTUP DAY: The meaning specified in Section 2.04(a).
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STEP-DOWN DATE: The earliest of the Distribution Date in June 2003 or any
succeeding Distribution Date on which the following conditions are satisfied as
of the last day of the month preceding such Distribution Date:
(a) the aggregate outstanding Principal Balance of Outstanding
Mortgage Loans 60 days or more delinquent (including loans in foreclosure
and with respect to owned real estate) does not exceed 50% of the aggregate
Outstanding Certificate Balance of the Subordinated Certificates as of such
date; and
(b) Realized Losses through the last day of the month preceding such
Distribution Date (including Nonrecoverable Advances) do not exceed the
following thresholds:
(i) if such Distribution Date occurs between and including June
2003 and May 2004, 30% of the Subordinated Percentage of the Mortgage
Pool Principal Balance as of the Cut-off Date;
(ii) if such Distribution Date occurs between and including June
2004 and May 2005, 35% of the Subordinated Percentage of the Mortgage
Pool Principal Balance as of the Cut-off Date;
(iii) if such Distribution Date occurs between and including June
2005 and May 2006, 40% of the Subordinated Percentage of the Mortgage
Pool Principal Balance as of the Cut-off Date;
(iv) if such Distribution Date occurs between and including June
2006 and May 2007, 45% of the Subordinated Percentage of the Mortgage
Pool Principal Balance as of the Cut-off Date; and
(v) if such Distribution Date occurs after May 2007, 50% of the
Subordinated Percentage of the Mortgage Pool Principal Balance as of
the Cut-off Date.
STEP DOWN PERCENTAGE: With respect to any Distribution Date, the percentage
indicated below:
Distribution Date Occurring in Step Down Percentage
- ------------------------------ --------------------
June 1998 through May 2003.................................... 0%
June 2003 through May 2004.................................... 30%
June 2004 through May 2005.................................... 40%
June 2005 through May 2006.................................... 60%
June 2006 through May 2007.................................... 80%
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June 2007 and thereafter...................................... 100%
SUBORDINATED CERTIFICATES: The Class M and Class B Certificates, referred
to collectively.
SUBORDINATED LOCK-OUT AMOUNT: With respect to any Distribution Date, the
amounts described in clause (b)(ii) of the definition of Subordinated Optimal
Principal Amount.
SUBORDINATED OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution
Date, the lesser of (a) the aggregate Outstanding Certificate Principal Balance
of the Subordinated Certificates (before giving effect to any distributions of
principal on such Distribution Date) and (b)(1) the sum of: (i) the applicable
Subordinated Percentage of the applicable Non-PO Percentage of the principal
portion of all Monthly Payments, whether or not received, which were due during
the related Due Period on Mortgage Loans which were outstanding during such Due
Period; (ii) the applicable Subordinated Prepayment Percentage of the applicable
Non-PO Percentage of all Principal Prepayments made on any Mortgage Loan during
the related Principal Prepayment Period; (iii) with respect to each Mortgage
Loan not described in (iv) below, the applicable Subordinated Percentage of the
applicable Non-PO Percentage of the principal portion of all Insurance Proceeds,
condemnation awards and any other cash proceeds from a source other than the
applicable Mortgagor, to the extent required to be deposited in the Certificate
Account pursuant to Section 5.08(iv) and (v), which were received during the
related Principal Prepayment Period, net of related unreimbursed Servicing
Advances and net of any portion thereof which, as to any such Mortgage Loan,
constitutes Late Collections that have been the subject of an Advance on any
prior Distribution Date; (iv) with respect to each Mortgage Loan which has
become a Liquidated Mortgage Loan during the related Principal Prepayment
Period, an amount equal to the portion (if any) of the Net Liquidation Proceeds
with respect to such liquidated Mortgage Loan (net of any unreimbursed Advances)
that was not included in the Class IA-1 Component Four Distribution Amount, the
Class IIA-P Distribution Amount, the Non-PO Class IA Optimal Principal Amount or
the Non-PO Class IIA Optimal Principal Amount with respect to such Distribution
Date; and (v) with respect to each Mortgage Loan repurchased during the related
Principal Prepayment Period pursuant to Section 2.02, 3.01, 5.21 or 11.01, an
amount equal to the applicable Subordinated Prepayment Percentage of the
applicable Non-PO Percentage of the principal portion of the Purchase Price (net
of amounts with respect to which a distribution of principal has previously been
made to the Subordinated Certificateholders) minus (2) the sum of (A) Class IA-1
Component Four Shortfall Amount and (B) the Class IIA-P Shortfall Amount with
respect to such Distribution Date. Any reduction in the Subordinated Optimal
Principal Amount pursuant to clause (b)(2) above will be applied in reduction of
the Subordinated Optimal Principal Amount as follows: first, by the amounts
described in clause (b)(1)(i) of the definition thereof, second, by the amounts
described in clause (b)(1)(iv) of the definition thereof, third, by the amounts
described in clause (b)(1)(iii) of the definition thereof, fourth, by the
amounts described in clause (b)(1)(v) of the definition thereof, and fifth, by
the amounts described in clause (b)(1)(ii) of the definition thereof.
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SUBORDINATED PERCENTAGE: The Mortgage Group One Subordinated Percentage or
the Mortgage Group Two Subordinated Percentage, as the case may be.
SUBORDINATED PREPAYMENT PERCENTAGE: The Mortgage Group One Subordinated
Prepayment Percentage or the Mortgage Group Two Subordinated Prepayment
Percentage, as the case may be.
SUB-SERVICER: Any Person with whom the Servicer enters into a Sub-Servicing
Agreement.
SUB-SERVICING AGREEMENT: Any agreement between the Servicer and any
Sub-Servicer, relating to servicing or administration of certain Mortgage Loans
as provided in Section 5.02, in such form as has been approved by the Servicer
and the Depositor.
SUBSIDIARY REGULAR INTEREST: There shall be eleven Subsidiary Regular
Interests. The first subsidiary regular interest (the "First Subsidiary Regular
Interest") shall have the same characteristics as Class IA-1 Component One, and
shall have the right to receive distributions from the Mortgage Pool in the
amounts necessary to make all required distributions with respect to such
Component. The second subsidiary regular interest (the "Second Subsidiary
Regular Interest") shall have the same characteristics as the Class IA-5
Certificates, and shall have the right to receive distributions from the
Mortgage Pool in the amounts necessary to make all required distributions with
respect to such Class. The third subsidiary regular interest (the "Third
Subsidiary Regular Interest") shall have the same characteristics as Class IA-1
Component Two and the Class IA-2, Class IA-6 and Class IA-7 Certificates, and
shall have the right to receive distributions from the Mortgage Pool in the
amounts necessary to make all required distributions with respect to such
Component and such Classes. The fourth subsidiary regular interest (the "Fourth
Subsidiary Regular Interest") shall have the same characteristics as Class IA-1
Component Three and the Class IA-3 and Class IA-4 Certificates and shall have
the right to receive distributions from the Mortgage Pool in the amounts
necessary to make all required distributions with respect to such Component and
such Classes. The fifth subsidiary regular interest (the "Fifth Subsidiary
Regular Interest") shall have the same characteristics as Class IA-1 Component
Four, and shall have the right to receive distributions from the Mortgage Pool
in the amounts necessary to make all required distributions with respect to such
Component. The sixth subsidiary regular interest (the "Sixth Subsidiary Regular
Interest") shall have the same characteristics as Class IA-1 Component Five and
the Class IA-X Certificates, and shall have the right to receive distributions
from the Mortgage Pool in the amounts necessary to make all required
distributions with respect to such Component and such Class. The seventh
subsidiary regular interest (the "Seventh Subsidiary Regular Interest") shall
have the same characteristics as the Class IIA-1 Certificates, and shall have
the right to receive distributions from the Mortgage Pool in the amounts
necessary to make all required distributions with respect to such Class. The
eighth subsidiary regular interest (the "Eighth Subsidiary Regular Interest")
shall have the same characteristics as the Class IIA-X Certificates, and shall
have the right to receive distributions from the Mortgage Pool in the amounts
necessary
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to make all required distributions with respect to such Class. The ninth
subsidiary regular interest (the "Ninth Subsidiary Regular Interest") shall have
the same characteristics as the Class IIA-P Certificates, and shall have the
right to receive distributions from the Mortgage Pool in the amounts necessary
to make all required distributions with respect to such Class. The tenth
subsidiary regular interest (the "Tenth Subsidiary Regular Interest") and the
eleventh subsidiary regular interest (the "Eleventh Subsidiary Regular
Interest") in the aggregate shall have the same characteristics as the Class M,
Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates, and shall
have the right to receive distributions from the Mortgage Pool in the amounts
necessary to make all required distributions with respect to such Classes. The
twelfth subsidiary regular interest (the "Twelfth Subsidiary Regular Interest")
shall have the same characteristics as the Class IA-X Certificates and shall
have the right to receive distributions from the Mortgage Pool in the amount
necessary to make all required distributions with respect to such class.
SUBSIDIARY REMIC: The pool of assets consisting of the Trust Fund.
SUBSIDIARY RESIDUAL INTEREST: The interest in the Subsidiary REMIC
consisting of Excess Proceeds and Substitute Excess Interest, and with respect
to each Mortgage Loan, any amounts payable or received with respect to such
Mortgage Loan after payment in full of the Subsidiary Regular Interests.
SUBSTITUTE EXCESS INTEREST: As defined in Section 3.04.
TARGETED PRINCIPAL BALANCE: With respect to any Distribution Date, the
amount specified for such Distribution Date in Appendix A hereto.
TRUST: The Trust created pursuant to this Agreement.
TRUST FUND: The corpus of the Trust consisting of (i) the Mortgage Loans,
(ii) such assets as shall from time to time be identified as deposited in the
Collection Account and the Certificate Account, (iii) property which secured a
Mortgage Loan and which has been acquired by foreclosure or deed in lieu of
foreclosure, (iv) Standard Hazard Policies and any other insurance policies, and
the proceeds thereof and (v) any proceeds of any of the foregoing.
TRUSTEE: Norwest Bank Minnesota, National Association, a national banking
association and its successors and any corporation resulting from or surviving
any consolidation or merger to which it or its successors may be a party, and
any successor trustee at the time serving as successor trustee hereunder,
appointed as herein provided.
TRUSTEE FEE: The amount of the monthly fee paid to the Trustee as
compensation for the services rendered hereunder by it, equal to, as of any
Distribution Date, the total of, with respect to each Mortgage Loan, one-twelfth
of 0.01% per annum of the Principal Balance of such Mortgage Loan at the opening
of business on the related Determination date.
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U.S. PERSON: A "United States Person" as defined in Section 7701(a)(30) of
the Code.
[End of Article I]
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TRUST FUND
Section 2.01. Conveyance of Mortgage Loans. The Depositor, concurrently
with the execution and delivery hereof, does hereby sell, transfer, assign, set
over and convey to the Trustee without recourse all the right, title and
interest of the Depositor in and to the Mortgage Loans, including all interest
and principal received on or with respect to the Mortgage Loans on or after the
Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before
the Cut-off Date).
In connection with such assignment, the Depositor does hereby deliver to,
and deposit with, the Trustee the following documents or instruments with
respect to each Mortgage Loan so assigned:
(A) (I) Original Mortgage Note (or a lost note affidavit (including a
copy of the original Mortgage Note)) or (II) original Consolidation,
Extension and Modification Agreement (or a lost note affidavit (including a
copy of the original Consolidation, Extension and Modification Agreement),
in either case endorsed, "Pay to the order of Norwest Bank Minnesota,
National Association, as trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with evidence
of recording thereon, or a copy thereof certified by the public recording
office in which such mortgage has been recorded or, if the original
Mortgage has not been returned from the applicable public recording office,
a true certified copy, certified by the Seller, of the original Mortgage
together with a certificate of the Seller certifying that the original
Mortgage has been delivered for recording in the appropriate public
recording office of the jurisdiction in which the Mortgaged Property is
located.
(C) The original or certified to be true copy, certified by the
Seller, of the Primary Insurance Policy, if required.
(D) The original Assignment of Mortgage to "Norwest Bank Minnesota,
National Association, as trustee," which assignment shall be in form and
substance acceptable for recording, or a copy certified by the Seller as a
true and correct copy of the original Assignment which has been sent for
recordation. Subject to the foregoing, such assignments may, if permitted
by law, be by blanket assignments for Mortgage Loans covering Mortgaged
Properties situated within the same county. If the Assignment of
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Mortgage is in blanket form, a copy of the Assignment of Mortgage shall be
included in the related individual Mortgage File.
(E) The original policy of title insurance, including riders and
endorsements thereto, or if the policy has not yet been issued, a written
commitment or interim binder or preliminary report of title issued by the
title insurance or escrow company.
(F) Originals of all recorded intervening Assignments of Mortgage, or
copies thereof, certified by the public recording office in which such
Assignments or Mortgage have been recorded showing a complete chain of
title from the originator to the Depositor, with evidence of recording,
thereon, or a copy thereof certified by the public recording office in
which such Assignment of Mortgage has been recorded or, if the original
Assignment of Mortgage has not been returned from the applicable public
recording office, a true certified copy, certified by the Seller of the
original Assignment of Mortgage together with a certificate of the Seller
certifying that the original Assignment of Mortgage has been delivered for
recording in the appropriate public recording office of the jurisdiction in
which the Mortgaged Property is located.
(G) Originals, or copies thereof certified by the public recording
office in which such documents have been recorded, of each assumption,
extension, modification, written assurance or substitution agreements, if
applicable, or if the original of such document has not been returned from
the applicable public recording office, a true certified copy, certified by
the Seller, of such original document together with certificate of Seller
certifying the original of such document has been delivered for recording
in the appropriate recording office of the jurisdiction in which the
Mortgaged Property is located.
(H) If the Mortgaged Note or Mortgage or any other material document
or instrument relating to the Mortgaged Loan has been signed by a person on
behalf of the Mortgagor, the original power of attorney or other instrument
that authorized and empowered such person to sign bearing evidence that
such instrument has been recorded, if so required in the appropriate
jurisdiction where the Mortgaged Property is located (or, in lieu thereof,
a duplicate or conformed copy of such instrument, together with a
certificate of receipt from the recording office, certifying that such copy
represents a true and complete copy of the original and that such original
has been or is currently submitted to be recorded in the appropriate
governmental recording office of the jurisdiction where the Mortgaged
Property is located), or if the original power of attorney or other such
instrument has been delivered for recording in the appropriate public
recording office of the jurisdiction in which the Mortgaged Property is
located.
If in connection with any Mortgage Loan the Depositor cannot deliver the
Mortgage, Assignments of Mortgage or assumption, consolidation or modification,
as the case may be, with evidence of recording thereon concurrently with the
execution and delivery of this
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Agreement solely because of a delay caused by the public recording office where
such Mortgage, Assignments of Mortgage or assumption, consolidation or
modification, as the case may be, has been delivered for recordation, the
Depositor shall deliver or cause to be delivered to the Trustee written notice
stating that such Mortgage, Assignments of Mortgage or assumption, consolidation
or modification, as the case may be, has been delivered to the appropriate
public recording office for recordation. Thereafter, the Depositor shall deliver
or cause to be delivered to the Trustee such Mortgage, Assignments of Mortgage
or assumption, consolidation or modification, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public recording
office.
The Servicer shall cause to be recorded in the appropriate public recording
office for real property records each Assignment of Mortgage referred to in this
Section 2.01 as soon as practicable. While each Assignment of Mortgage to be
recorded is being recorded, the Servicer shall deliver to the Trustee a
photocopy of such document. If any such Assignment of Mortgage is returned
unrecorded to the Servicer because of any defect therein, the Servicer shall
cause such defect to be cured and such document to be recorded in accordance
with this paragraph. The Depositor shall deliver or cause to be delivered each
original recorded Assignment of Mortgage and intermediate assignment to the
Trustee within 270 days of the Closing Date or shall deliver to the Trustee on
or before such date an Officer's Certificate stating that such document has been
delivered to the appropriate public recording office for recordation, but has
not been returned solely because of a delay caused by such recording office. In
any event, the Depositor shall use all reasonable efforts to cause each such
document with evidence of recording thereon to be delivered to the Trustee
within 300 days of the Closing Date.
The ownership of each Mortgage Note, the Mortgage and the contents of the
related Mortgage File is vested in the Trustee. Neither the Depositor nor the
Servicer shall take any action inconsistent with such ownership and shall not
claim any ownership interest therein. The Depositor and the Servicer shall
respond to any third party inquiries with respect to ownership of the Mortgage
Loans by stating that such ownership is held by the Trustee on behalf of the
Certificateholders. Mortgage documents relating to the Mortgage Loans not
delivered to the Trustee are and shall be held in trust by the Servicer or any
Sub-Servicer, for the benefit of the Trustee as the owner thereof, and the
Servicer's or such Sub-Servicer's possession of the contents of each Mortgage
File so retained is for the sole purpose of servicing the related Mortgage Loan,
and such retention and possession by the Servicer or such Sub-Servicer is in a
custodial capacity only. The Depositor agrees to take no action inconsistent
with the Trustee's ownership of the Mortgage Loans, to promptly indicate to all
inquiring parties that the Mortgage Loans have been sold and to claim no
ownership interest in the Mortgage Loans. Each Mortgage File and the mortgage
documents relating to the Mortgage Loans contain proprietary business
information of the Servicer and its customers. The Trustee and the Depositor
agree that they will not use such information for business purposes without the
express written consent of the Servicer and that all such information shall be
kept strictly confidential.
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It is the intention of this Agreement that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If the conveyance
of the Mortgage Loans from the Depositor to the Trustee is characterized as a
pledge, it is the intention of this Agreement that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted to the Trustee a first priority security
interest in all of the Depositor's right, title and interest in, to and under
the Mortgage Loans, all payments of principal of or interest on such Mortgage
Loans, all other rights relating to and payments made in respect of the Trust
Fund, and all proceeds of any thereof. If the trust created by this Agreement
terminates prior to the satisfaction of the claims of any Person in any
Certificates, the security interest created hereby shall continue in full force
and effect and the Trustee shall be deemed to be the collateral agent for the
benefit of such Person.
In addition to the conveyance made in the first paragraph of this Section
2.01, the Depositor does hereby convey, assign and set over to the Trustee all
of its right, title and interest in that portion of the Trust Fund described in
items (ii), (iii), (iv) and (v) of the definition thereof.
Section 2.02. Acceptance by Trustee. Except as set forth in the Exception
Report delivered contemporaneously herewith (the "Exception Report"), the
Trustee acknowledges receipt of the Mortgage Note for each Mortgage Loan and
delivery of a Mortgage File (but does not acknowledge receipt of all documents
required to be included in such Mortgage File) with respect to each Mortgage
Loan and declares that it holds and will hold such documents and any other
documents constituting a part of the Mortgage Files delivered to it in trust for
the use and benefit of all present and future Certificateholders. The Depositor
will repurchase any Mortgage Loans to which an exception was taken in the
Exception Report unless such exception is cured to the satisfaction of the
Trustee within 45 Business Days of the Closing Date.
The Trustee agrees, for the benefit of Certificateholders, to review each
Mortgage File delivered to it within 270 days after the Closing Date to
ascertain that all documents required by Section 2.01 have been executed and
received, and that such documents relate to the Mortgage Loans identified in
Exhibit A that have been conveyed to it. If the Trustee finds any document or
documents constituting a part of a Mortgage File to be missing or defective
(that is, mutilated, damaged, defaced or unexecuted) in any material respect,
the Trustee shall promptly (and in any event within no more than five Business
Days) after such finding so notify the Servicer and the Depositor. In addition,
the Trustee shall also notify the Servicer and the Depositor, if (a) in
examining the Mortgage Files, the documentation shows on its face (i) any
adverse claim, lien or encumbrance, (ii) that any Mortgage Note was overdue or
had been dishonored, (iii) any evidence on the face of any Mortgage Note or
Mortgage of any security interest or other right or interest therein, or (iv)
any defense against or claim to the Mortgage Note by any party or (b) the
original Mortgage with evidence of recording thereon with respect to a Mortgage
Loan is not received within 270 days of the Closing Date. The Trustee shall
request that the Depositor correct or cure such omission, defect or other
irregularity, or substitute a
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Mortgage Loan pursuant to the provisions of Section 3.03, within 60 days from
the date the Depositor was notified of such omission or defect and, if the
Depositor does not correct or cure such omission or defect within such period,
that the Depositor purchase such Mortgage Loan from the Trustee within 90 days
from the date the Trustee notified the Depositor of such omission, defect or
other irregularity at the Purchase Price of such Mortgage Loan. The Purchase
Price for any Mortgage Loan purchased pursuant to this Section 2.02 shall be
paid to the Servicer and deposited by the Servicer in the Collection Account
promptly upon receipt, and, upon receipt by the Trustee of written notification
of such deposit signed by a Servicing Officer, the Trustee shall promptly
release to the Depositor the related Mortgage File and the Trustee shall execute
and deliver such instruments of transfer or assignment, without recourse, as
shall be necessary to vest in the Depositor or its designee, as the case may be,
any Mortgage Loan released pursuant hereto, and the Trustee shall have no
further responsibility with regard to such Mortgage Loan. It is understood and
agreed that the obligation of the Depositor to purchase, cure or substitute any
Mortgage Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy respecting such defect or
omission available to the Trustee on behalf of Certificateholders. The Trustee
shall be under no duty or obligation to inspect, review and examine such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable or appropriate to the represented purpose, or that they
have actually been recorded, or that they are other than what they purport to be
on their face. The Trustee shall keep confidential the name of each Mortgagor
and shall not solicit any such Mortgagor for the purpose of refinancing the
related Mortgage Loan.
Within 270 days of the Closing Date, the Trustee shall deliver to the
Depositor and the Servicer the Trustee's Certification, substantially in the
form of Exhibit G attached hereto, setting forth the status of the Mortgage
Files as of such date.
Section 2.03. Trust Fund; Authentication of Certificates. The Trustee
acknowledges and accepts the assignment to it of the Trust Fund created pursuant
to this Agreement in trust for the use and benefit of all present and future
Certificateholders. The Trustee acknowledges the assignment to it for the
benefit of the Trust Fund of the Mortgage Loans and has caused to be
authenticated and delivered to or upon the order of the Depositor, in exchange
for the Mortgage Loans, Certificates duly authenticated by the Trustee in
authorized denominations evidencing ownership of the entire Trust Fund.
Section 2.04. REMIC Election.
(a) The Depositor hereby instructs and authorizes the Trustee to make
appropriate elections to treat each of the Subsidiary REMIC and the Master REMIC
as a REMIC. This Agreement shall be construed so as to carry out the intention
of the parties that each REMIC Pool be treated as a REMIC at all times prior to
the date on which the Trust Fund is terminated. The Closing Date is hereby
designated as the "startup day" of each REMIC Pool within the meaning of Section
860G(a)(9) of the Code. The "regular interests" (within the meaning of Section
860G(a)(1) of the Code) in the Master REMIC shall consist of the Class A
Certificates
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(other than the Class A-R Certificate), the Class M Certificates and the Class B
Certificates, and the "residual interest" (within the meaning of Section
860G(a)(2) of the Code) in the Master REMIC shall consist of the Master Residual
Interest, and all such interests shall be designated as such on the Startup Day.
The "regular interests" (within the meaning of Section 860G(a)(1) of the Code)
in the Subsidiary REMIC shall consist of the Subsidiary Regular Interests and
the "residual interest" (within the meaning of Section 860G(a)(2) of the Code)
in the Subsidiary REMIC shall consist of the Subsidiary Residual Interest and
all such interests shall be designated as such on the Startup Date. The regular
interests in the Subsidiary REMIC shall be held by the Master REMIC at all times
and shall not be transferable under any circumstances.
(b) All payments with respect to Class IA-1 Component One shall be
considered to have been made solely from the First Subsidiary Regular Interest.
All payments with respect to the Class IA-5 Certificates shall be considered to
have been made solely from the Second Subsidiary Regular Interest. All payments
with respect to Class IA-1 Component Two and the Class IA-2, Class IA-6 and
Class IA-7 Certificates shall be considered to have been made solely from the
Third Subsidiary Regular Interest. All payments with respect to Class IA-1
Component Three and the Class A-3 and Class A-4 Certificates shall be considered
to have been made solely from the Fourth Subsidiary Regular Interest. All
payments with respect to Class IA-1 Component Four shall be considered to have
been made solely from the Fifth Subsidiary Regular Interest. All payments with
respect to Class IA-1 Component Five shall be considered to have been made
solely from the Sixth Subsidiary Regular Interest. All payments with respect to
the Class IIA-1 Certificates shall be considered to have been made solely from
the Seventh Subsidiary Regular Interest. All payments with respect to the Class
IIA-X Certificates shall be considered to have been made solely from the Eighth
Subsidiary Regular Interest. All payments with respect to the Class IIA-P
Certificates shall be considered to have been made solely from the Ninth
Subsidiary Regular Interest. All payments with respect to the Subordinated
Certificates shall be considered to have been made solely from the Tenth
Subsidiary Regular Interest (in the case of amounts in respect of Mortgage Group
One) or the Eleventh Subsidiary Regular Interest (in the case of amounts in
respect of Mortgage Group Two). All payments with respect to the Class IA-X
Certificates shall be considered to be made solely from the Twelfth Subsidiary
Regular Interest.
The principal amount of the regular interests in the Master REMIC is equal
to the sum of the Original Class A Principal Balance, the Original Class M
Principal Balance and the Original Class B Principal Balance. The original
principal balance of the First Subsidiary Regular Interest is equal to the
principal balance of Class IA-1 Component One. The original principal balance of
the Second Subsidiary Regular Interest is equal to the principal balance of the
Class IA-5 Certificates. The original principal balance of the Third Subsidiary
Regular Interest is equal to the aggregate principal balance of the Class IA-2,
Class IA-6 and Class IA-7 Certificates. The original principal balance of the
Fourth Subsidiary Regular Interest is equal to the aggregate principal balance
of Class IA-1 Component Three and the Class IA-3 and Class IA-4 Certificates.
The original principal balance of the Fifth Subsidiary Regular Interest is equal
to the principal balance of Class IA-1 Component Four. The original principal
balance of the Sixth
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Subsidiary Regular Interest is zero. The original principal balance of the
Seventh Subsidiary Regular Interest is equal to the principal balance of the
Class IIA-1 Certificates. The original principal balance of the Eighth
Subsidiary Regular Interest is zero. The original principal balance of the Ninth
Subsidiary Regular Interest is equal to the principal balance of the Class IIA-P
Certificates. The original principal balance of the Tenth Subsidiary Regular
Interest is $7,368,736.20 . The original principal balance of the Eleventh
Subsidiary Regular Interest is $1,630,131.17. The interest rate on the Twelfth
Subsidiary Regular Interest is zero.
The interest rate on the First Subsidiary Regular Interest and the
Fifth Subsidiary Regular Interest is 0.00%. The interest rate on the Second
Subsidiary Regular Interest and the Tenth Subsidiary Regular Interest is 6.75%.
The interest rate on the Third Subsidiary Regular Interest and the Fourth
Subsidiary Regular Interest is 7.00%. The interest rate on the Sixth Subsidiary
Regular Interest is equal to the aggregate of the Class IA-X Stripped Interest
Rates. The interest rate on the Seventh Subsidiary Regular Interest and the
Eleventh Subsidiary Regular Interest is equal to 6.50%. The interest rate on the
Eighth Subsidiary Regular Interest is equal to the aggregate of the Class IIA-X
Stripped Interest Rates. The interest rate on the Twelfth Subsidiary Regular
Interest is equal to the aggregate of the Class IA-X Stripped Interest Rates.
(c) The assets of the Subsidiary REMIC shall consist of the pool of
assets consisting of the Trust Fund. The assets of the Master REMIC shall
consist of the pool of assets consisting of the Subsidiary Regular Interests and
all payments or principal or interest on or with respect to the Subsidiary
Regular Interests after the Cut-off Date.
(d) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the
Treasury regulations, the "latest possible maturity date" by which the
Outstanding Certificate Principal Balance of each Class of Certificates
representing a regular interest in the Master REMIC would be reduced to zero is
the Distribution Date immediately following the latest scheduled maturity of any
Mortgage Loan.
(e) The "tax matters person" with respect to each REMIC Pool for
purposes of the REMIC provisions shall be the beneficial owner of the Class A-R
Certificate having the largest Percentage Interest of such Class; provided,
however, that such largest beneficial owner and, to the extent relevant, each
other Holder of a Class A-R Certificate, by it acceptance thereof, irrevocably
appoints the Trustee as its agent and attorney-in-fact to act as "tax matters
person" with respect to each REMIC Pool for purposes of the REMIC provisions.
(f) It is intended that each REMIC Pool shall constitute, and that the
affairs of the Trust Fund shall be conducted so as to qualify each REMIC Pool
as, a "real estate mortgage investment conduit" as defined in and in accordance
with the REMIC Provisions. In furtherance of such intention, the Trustee
covenants and agrees that it shall act as agent (and the Trustee is hereby
appointed to act as agent) on behalf of the Trust Fund and the respective
Holders of the Class A-R Certificates and that in such capacity it shall:
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(i) prepare 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 prepare and file or cause to be prepared and filed with the
Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to
each REMIC Pool, using the calendar year as the taxable year and the
accrual method of accounting, containing such information and 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
Certificateholders the schedules, statements or information at such times
and in such manner as may be required thereby;
(ii) within thirty days of the Closing Date, shall furnish or cause to
be furnished to the Internal Revenue Service, on Form 8811 or as otherwise
may be required by the Code, the name, title, address, and telephone number
of the person that the holders of the Certificates may contact for tax
information relating thereto (and the Trustee shall act as the
representative of each REMIC Pool for this purpose), together with such
additional information as may be required by such Form, and shall update
such information at the time or times in the manner required by the Code;
(iii) make or cause to be made elections, on behalf of each REMIC
Pool, to be treated as a REMIC, and make the appropriate designations, if
applicable, in accordance with this Section 2.04 on the federal tax return
of each REMIC Pool for its first taxable year (and, if necessary, under
applicable state law);
(iv) prepare and forward, or cause to be prepared and forwarded, to
the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns or reports, or
furnish or cause to be furnished by telephone, mail, publication or other
appropriate method such information, as and when required to be provided to
them in accordance with the REMIC Provisions, including without limitation,
the calculation of any original issue discount;
(v) provide information necessary for the computation of tax imposed
on the transfer of the Class A-R Certificate to a Disqualified
Organization, or an agent (including a broker, nominee or other middleman)
of a Disqualified Organization, or a pass-through entity in which a
Disqualified Organization is the record holder of an interest (the
reasonable cost of computing and furnishing such information may be charged
to the Person liable for such tax);
(vi) ensure that 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 laws,
regulations or rules; and
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(vii) maintain such records relating to each REMIC Pool, as may be
required by the Code and, as may be necessary to prepare the foregoing
returns, schedules, statements or information.
[End of Article II]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND
THE SERVICER; REPURCHASE OF MORTGAGE LOANS
Section 3.01. Representations and Warranties of the Depositor with respect
to the Mortgage Loans.
References in this Section to percentages of Mortgage Loans refer in each
case to the percentage of the aggregate principal balance of the Mortgage Loans
as of the Cut-off Date, based on the outstanding balances of the Mortgage Loans
as of the Cut-off Date, and giving effect to scheduled Monthly Payments due on
or prior to the Cut-off Date, whether or not received. References to percentages
of Mortgaged Properties refer, in each case, to the percentages of expected
aggregate principal balances of the related Mortgage Loans (determined as
described in the preceding sentence). The Depositor hereby represents and
warrants to the Trustee for the benefit of the Certificateholders, as to each
Mortgage Loan, as of the Closing Date as follows:
(a) The information set forth in the Mortgage Loan Schedule is complete,
true and correct in all material respects;
(b) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simple in real property securing the related
Mortgage Note;
(c) All payments due prior to the Cut-off Date for such Mortgage Loan have
been made as of the Closing Date, the Mortgage Loan is not delinquent in payment
more than 30 days and has not been dishonored; there are no material defaults
under the terms of the Mortgage Loan; the Seller has not advanced funds, or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required by the Mortgage Loan; there
has been no more than one delinquency in excess of 30 days during the preceding
twelve-month period;
(d) To the best of the Seller's knowledge, all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
or escrow funds have been established in an amount sufficient to pay for every
such escrowed item which remains unpaid and which has been assessed but is not
yet due and payable;
(e) The terms of the Mortgage Note and the Mortgage have not been impaired,
waived, altered or modified in any respect, except by written instruments. No
Mortgagor has been released, in whole or in part, from the terms thereof except
in connection
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with an assumption agreement and which assumption agreement is part of the
Mortgage File and the terms of which are reflected in the Mortgage Loan
Schedule;
(f) The Mortgage Note and the Mortgage are not subject to any right of
rescission, set-off, counterclaim or defense, including, without limitation, the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or Mortgage, or the exercise of any right thereunder, render the Mortgage
Note or 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, and the Mortgagor was not a debtor in any state
or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was
originated;
(g) All buildings or other customarily insured improvements upon the
Mortgaged Property are insured by an insurer acceptable under the FNMA Guides
against loss by fire, hazards of extended coverage and such other hazards as are
provided for in the FNMA Guides or by FHLMC. All such standard hazard policies
are in full force and effect and on the date of origination contained a standard
mortgagee clause naming the Seller and its successors in interest and assigns as
loss payee and such clause is still in effect and all premiums due thereon have
been paid. If required by the Flood Disaster Protection Act of 1973, as amended,
the Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
which policy conforms to FNMA and FHLMC requirements. The Mortgage obligates the
Mortgagor thereunder to maintain all such insurance at the Mortgagor's cost and
expense, and on the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to maintain such insurance at the Mortgagor's cost and expense and to
seek reimbursement therefor from the Mortgagor;
(h) 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 Mortgage Loan have been complied with in all material
respects;
(i) The Mortgage has not been satisfied, canceled or subordinated, in whole
or in part, or rescinded, and the Mortgaged Property has not been released from
the lien of the Mortgage, in whole or in part nor has any instrument been
executed that would effect any such release, cancellation, subordination or
rescission;
(j) The Mortgage is a valid, subsisting, enforceable and perfected first
lien on the Mortgaged Property, including, all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air conditioning systems affixed to such buildings, and all additions,
alterations and replacements made at any time with respect to the foregoing
securing the Mortgage Note's original principal balance. The Mortgage and the
Mortgage Note do not contain any evidence of any security interest or other
interest or right thereto. Such lien is free and clear of all adverse claims,
liens and encumbrances having priority
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over the first lien of the Mortgage subject only to (1) the lien of
non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to or otherwise considered in the appraisal made for the originator of
the Mortgage Loan, or (B) which do not adversely affect the appraised value of
the Mortgaged Property as set forth in such appraisal, and (3) other matters to
which like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the Mortgage or the
use, enjoyment, value or marketability of the related Mortgaged Property. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting, enforceable and perfected first lien and first priority security
interest on the property described therein, and the Depositor has the full right
to sell and assign the same to the Trustee for the benefit of the
Certificateholders;
(k) The Mortgage Note and the related Mortgage are original and genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in all respects in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors and the Depositor has taken all action necessary to transfer such
rights of enforceability to the Trustee for the benefit of the
Certificateholders. All parties to the Mortgage Note and the Mortgage had the
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage. The Mortgage Note and the Mortgage have been
duly and property executed by such parties. The proceeds of the Mortgage Loan
have been fully disbursed and 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;
(1) The Depositor is the sole owner of record and holder of the Mortgage
Loan and the indebtedness evidenced by the Mortgage Note, except for the
Assignments of Mortgage which have been sent for recording, and upon recordation
the Depositor will be the owner of record of the Mortgage and the indebtedness
evidenced by the Mortgage Note, and upon the sale of the Mortgage Loan to the
Trust for the benefit of the Certificateholders, the Depositor will retain the
Mortgage File or any part thereof with respect thereto not delivered to the
Trust for the benefit of the Certificateholders or its designee in trust only
for the purpose of servicing and supervising the servicing of the Mortgage Loan.
Immediately prior to the transfer and assignment to the Trust for the benefit of
the Certificateholders, the Mortgage Loan, including the Mortgage Note and the
Mortgage, were not subject to an assignment or pledge, and the Depositor had
good and marketable title to and was the sole owner thereof and had full right
to transfer and sell the Mortgage Loan to the Trustee for the benefit of the
Certificateholders free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest and has the full right and authority subject
to no interest or participation of, or agreement with, any other party, to sell
and assign the Mortgage Loan pursuant to this Agreement and following the sale
of the Mortgagee Loan, the Trustee for the benefit of the Certificateholders
will own such Mortgage
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Loan free and clear of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest;
(m) The Mortgage Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy or insurance acceptable to FNMA or
FHLMC, issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
(subject to the exceptions contained in (j) (1), (2) and (3) above) the Seller,
its successors and assigns, as to the first priority lien of the Mortgage in the
original principal amount of the Mortgage Loan. Such lender's title insurance
policy insures ingress and egress by or upon the Mortgaged Property or any
interest therein. Where required by state law or regulation, the Mortgagor has
been given the opportunity to choose the carrier of the required mortgage title
insurance. The Seller, its successors and assigns, are the sole insureds of such
lender's title insurance policy, such title insurance policy has been duly and
validly endorsed to the Trustee for the benefit of the Certificateholders or the
assignment to the Trustee for the benefit of the Certificateholders of the
Seller's interest therein does not require the consent of or notification to the
insurer and such lender's title insurance policy is in full force and effect and
will be in full force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such lender's
title insurance policy, and no prior holder of the related Mortgage, including
the Seller, has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy;
(n) There is no default, breach, violation or event of acceleration
existent, under the Mortgage or the related Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event permitting
acceleration; and neither the Seller nor any prior mortgagee has waived any
default, breach, violation or event permitting acceleration;
(o) 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 liens) affecting the related Mortgaged Property which
are or may be liens prior to or equal to the lien of the related Mortgage;
(p) All improvements subject to the Mortgage which were considered in
determining the Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of the Mortgaged Property (and wholly
within the project with respect to a condominium unit) and no improvements on
adjoining properties encroach upon the Mortgaged Property except those which are
insured against by the title insurance policy referred to in clause (m) above
and all improvements on the property comply with all applicable zoning and
subdivision laws and ordinances; the Mortgaged Property is lawfully occupied
under applicable law;
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(q) The Mortgage Loan complies in all material respects with all the terms,
conditions and requirements of the Seller's underwriting standards in effect at
the time of origination of such Mortgage Loan. The Mortgage Notes and Mortgages
(exclusive of any riders) are on forms generally acceptable to FNMA or FHLMC.
Monthly Payments under the Mortgage Note are due and payable on the first day of
each month. The Mortgage contains the usual and enforceable provisions of the
originator at the time of origination for the acceleration of the payment of the
unpaid principal amount of the Mortgage Loan if the related Mortgaged Property
is sold without the prior consent of the mortgagee thereunder;
(r) The Mortgaged Property is not subject to any material damage by waste,
fire, earthquake, windstorm, flood or other casualty. At origination of the
Mortgage Loan there was, and there currently is, no proceeding pending for the
total or partial condemnation of the Mortgaged Property;
(s) The related Mortgage contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (l) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (2) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage;
(t) If the Mortgage constitutes a deed of trust, a trustee, authorized and
duly qualified if required under applicable law to act as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses, except as may be required by local law, are or will become
payable by, the Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale or attempted sale after default by the
Mortgagor;
(u) The Mortgage File contains an appraisal of the related Mortgaged
Property signed prior to the final approval of the mortgage loan application by
an appraiser approved by the Seller who had no interest, direct or indirect, in
the Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan. The appraisal is in a form acceptable to FNMA or FHLMC;
(v) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (A) in substantial compliance
with any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (B) (1) organized under the laws
of such state, or (2) qualified to do business in such state, or (3) federal
savings and loan associations or national banks or a Federal Home Loan Bank or
savings bank having principal offices in such state, or (4) not doing business
in such state;
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(w) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security interest of any applicable agreement or
chattel mortgage referred to above and such collateral does not serve as
security for any other obligation;
(x) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of such mortgage loans;
(y) The Mortgage Loan does not contain "graduated payment" features;
(z) The Mortgagor is not in bankruptcy and, to the best of the Depositor's
knowledge, the Mortgagor is not insolvent;
(aa) The Mortgage Loans are fixed rate mortgage loans. The Mortgage Loans
have an original term to maturity of not more than thirty (30) years, with
interest payable in arrears on the first day of each month. Each Mortgage Note
is payable in equal monthly installments of principal and interest which is
sufficient to amortize the Mortgage Loan fully by the stated maturity date. No
Mortgage Loan contains terms or provisions which would result in negative
amortization;
(bb) Each Mortgage Note, each Mortgage, each Assignment of Mortgage and any
other documents required pursuant to this Agreement to be delivered to the
Trustee on behalf of the Certificateholders or its designee, or its assignee for
each Mortgage Loan, have been, on or before the Closing Date, delivered to the
Trustee on behalf of the Certificateholders or its designee, or its assignee;
(cc) All escrow payments have been collected in full compliance with state
and federal law and the provisions of the related Mortgage Note and Mortgage. As
to any Mortgage Loan that is the subject of an escrow, escrow of funds is not
prohibited by applicable law and has been established in an amount sufficient to
pay for every escrowed item that remains unpaid and has been assessed but is not
yet due and payable. No escrow deposits or other charges or payments due under
the Mortgage Note have been capitalized under any Mortgage or the related
Mortgage Note. Any interest required to be paid pursuant to state, federal and
local law has been properly paid and credited;
(dd) [Reserved];
(ee) In the event the Mortgage Loan has a Loan-to-Value Ratio greater than
80%, the excess of the principal balance of the Mortgage Loan over 75% of the
Appraised Value, with respect to a refinanced Mortgage Loan, or the lesser of
the Appraised Value or the purchase price of the Mortgaged Property, with
respect to a purchase money Mortgage Loan, is and will be insured as to payment
defaults by a Primary Insurance Policy issued by a Qualified Insurer. All
provisions of such Primary Insurance Policy have been and are being complied
with such policy
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is in full force and effect, and all premiums due thereunder have been paid. No
action, inaction, or event has occurred and no state of facts exists that has,
or will result in the exclusion from, denial of, or defense to coverage. Any
Mortgage Loan subject to a Primary Insurance Policy obligates the Mortgagor
thereunder to maintain the Primary Insurance Policy and to pay all premiums and
charges in connection therewith. The Mortgage Rate for the Mortgage Loan as set
forth on the Mortgage Loan Schedule is net of any such insurance premium;
(ff) The assignment of Mortgage is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged Property is
located;
(gg) As to Mortgage Loans that are not secured by an interest in a
leasehold estate, the Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule and consists of a single parcel of real property with
a detached single family residence erected thereon, or a townhouse, or a two-to
four-family dwelling, or an individual condominium unit in a condominium
project, or an individual unit in a planned unit development or a de minimis
planned unit development, provided, however, that no residence or dwelling is a
single parcel of real property with a mobile home thereon. As of the date of
origination, no portion of the Mortgaged Property was used for commercial
purposes, and since the date of origination, to the best of the Depositor's
knowledge, no portion of the Mortgaged Property is used for commercial purposes;
(hh) If the Mortgaged Property is a condominium unit or a planned unit
development (other than a de minimis planned unit development) such condominium
or planned unit development project meets the Seller's eligibility requirements,
as set forth in the Seller's underwriting guidelines;
(ii) To the best of the Seller's knowledge, there is no pending action or
proceeding directly involving the Mortgaged Property in which compliance with
any environmental law, rule or regulation is an issue;
(jj) The Mortgagor has not notified the Seller, and the Depositor has no
knowledge of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940;
(kk) No Mortgage Loan was made in connection with the construction or
rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange
of a Mortgaged Property;
(ll) No action has been taken or failed to be taken by Depositor, on or
prior to the Closing Date which has resulted or will result in an exclusion
from, denial of, or defense to coverage under any Primary Insurance Policy
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
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representations, errors, omissions, negligence, or fraud of the Depositor, or
for any other reason under such coverage;
(mm) The Mortgage Loan was originated by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of
the Act, a savings and loan association, a savings bank, a commercial bank,
credit union, insurance company or similar institution which is supervised and
examined by a federal or state authority;
(nn) Principal payments on the Mortgage Loan commenced no more than sixty
(60) days after funds were disbursed in connection with the Mortgage Loan. The
Mortgage Note is payable on the first day of each month in equal monthly
installments of principal and interest, with interest calculated and payable in
arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity
date, over an original term of not more than thirty years from commencement of
amortization; and
(oo) The Mortgage Loan is a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code (without regard to Treasury Regulations ss.
1.860G-2(f) or any similar rule that provides that a defective obligation is a
qualified mortgage for a temporary period);
Upon discovery by any of the Depositor, the Servicer or the Trustee of a
breach of any of the foregoing representations and warranties which materially
and adversely affects the value of a Mortgage Loan or the interest of the
Certificateholders (or which materially and adversely affects the interests of
the Certificateholders in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan), the party
discovering such breach shall give prompt written notice to the other parties,
which notice shall specify the date of discovery. The Depositor shall within 90
days from the earlier of (i) the date specified in the notice as the date of
discovery of such breach or (ii) the date the Depositor otherwise discovers such
breach, cure such breach, substitute a Mortgage Loan pursuant to the provisions
of Section 3.04 or, if the breach relates to a particular Mortgage Loan,
purchase such Mortgage Loan from the Trustee at the Purchase Price. The Purchase
Price for the purchased Mortgage Loan shall be paid to the Servicer and shall be
deposited by the Servicer in the Collection Account promptly upon receipt, and,
upon receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee shall promptly release to the Depositor the
related Mortgage File, and the Trustee shall execute and deliver such
instruments of transfer or assignment as may be provided to it by the Servicer,
without recourse, as shall be necessary to vest in the Depositor or its
designee, as the case may be, any Mortgage Loan released pursuant hereto, and
the Trustee shall have no further responsibility with regard to such Mortgage
Loan. It is understood and agreed that the obligation of the Depositor to cure,
substitute or purchase any Mortgage Loan as to which such a breach has occurred
shall constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on behalf of Certificateholders.
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Section 3.02. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and covenants with, the Trustee for the
benefit of the Certificateholders that as of the Closing Date:
(a) The Depositor is a corporation duly chartered and validly existing
in good standing under the laws of the State of Delaware;
(b) The execution and delivery of this Agreement by the Depositor and
its performance and compliance with the terms of this Agreement will not
violate the Depositor's corporate charter 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 of, any material
contract, agreement or other instrument to which the Depositor is a party
or which may be applicable to the Depositor or any of its assets;
(c) This Agreement, assuming due authorization, execution and delivery
by the Trustee and the Servicer, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the
terms hereof subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
generally and to general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law;
(d) The Depositor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Depositor or its properties or
might have consequences that would affect its performance hereunder; and
(e) No litigation is pending or, to the best of the Depositor's
knowledge, threatened against the Depositor which would prohibit its
entering into this Agreement or performing its obligations under this
Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive the issuance and delivery of the
Certificates and shall be continuing as long as any Certificate shall be
outstanding or this Agreement has been terminated.
Section 3.03. Representations and Warranties of the Servicer. The Servicer
represents and warrants to, and covenants with, the Trustee for the benefit of
the Certificateholders that as of the Closing Date:
(a) The Servicer is a corporation duly chartered and validly existing
in good standing under the laws of the State of Florida, and the Servicer
is duly qualified or registered as a foreign corporation in good standing
in each jurisdiction in which the
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ownership or lease of its properties or the conduct of its business
requires such qualification;
(b) The execution and delivery of this Agreement by the Servicer and
its performance and compliance with the terms of this Agreement will not
violate the Servicer's corporate charter 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 of, any material contract,
agreement or other instrument to which the Servicer is a party or which may
be applicable to the Servicer or any of its assets;
(c) This Agreement, assuming due authorization, execution and delivery
by the Trustee and the Depositor, constitutes a valid, legal and binding
obligation of the Servicer, enforceable against it in accordance with the
terms hereof subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
generally and to general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law;
(d) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
other) or operations of the Servicer or its properties or might have
consequences that would affect its performance hereunder; and
(e) No litigation is pending or, to the best of the Servicer's
knowledge, threatened against the Servicer which would prohibit its
entering into this Agreement or performing its obligations under this
Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 3.03 shall survive the issuance and delivery of the
Certificates and shall be continuing as long as any Certificate shall be
outstanding or this Agreement has been terminated.
Section 3.04. Option to Substitute. If the Depositor is required to
repurchase any Mortgage Loan pursuant to Section 2.02 or 3.01, the Depositor
may, at its option, within two years from the Closing Date, remove such
defective Mortgage Loan from the terms of this Agreement and substitute another
mortgage loan for such defective Mortgage Loan, in lieu of repurchasing such
defective Mortgage Loan. Any substitute Mortgage Loan shall (a) have a Principal
Balance at the time of substitution not in excess of the Principal Balance of
the removed Mortgage Loan (the amount of any difference, plus one month's
interest thereon at the Mortgage Rate borne by the removed Mortgage Loan, being
paid by the Depositor and deemed to be a Principal Prepayment to be deposited by
the Servicer in the Collection Account), (b) have a Mortgage Rate not less than,
and not more than one percentage point greater than, the Mortgage Rate of the
removed Mortgage Loan (provided, however, that if the Mortgage Rate on the
substitute Mortgage Loan exceeds the Mortgage Rate on the removed Mortgage Loan,
the
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amount of that excess interest (the "Substitute Excess Interest") shall be
payable to the Subsidiary Residual Interest), (c) have a remaining term to
stated maturity not later than, and not more than one year less than, the
remaining term to stated maturity of the removed Mortgage Loan, (d) be, in the
reasonable determination of the Servicer, of the same type, quality and
character (including location of the Mortgaged Property) as the removed Mortgage
Loan as if the breach had not occurred, (e) have a Loan-to-Value Ratio at
origination no greater than that of the removed Mortgage Loan and (f) be, in the
reasonable determination of the Servicer, in material compliance with the
representations and warranties contained in Section 3.01, as of the date of
substitution.
The Servicer shall amend the Mortgage Loan Schedule to reflect the
withdrawal of the removed Mortgage Loan from this Agreement and the substitution
of such substitute Mortgage Loan therefor and shall send a copy of such amended
Mortgage Loan Schedule to the Trustee. Upon such amendment the Depositor shall
be deemed to have made as to such substitute Mortgage Loan the representations
and warranties set forth in Section 3.01 as of the date of such substitution,
which shall be continuing as long as any Certificate shall be outstanding or
this Agreement has not been terminated, and the remedies for breach of any such
representation or warranty shall be as set forth in Section 3.01. Upon such
amendment, the Trustee shall review the Mortgage File delivered to it relating
to the substitute Mortgage Loan, within the time and in the manner and with the
remedies specified in Section 2.02, except that for purposes of this Section
3.04 (other than the two-year period specified in the first sentence of this
Section), such time shall be measured from the date of the applicable
substitution. In the event of such a substitution, accrued interest on the
substitute Mortgage Loan for the month in which the substitution occurs and any
Principal Prepayments made thereon during such month shall be the property of
the Trust Fund, and accrued interest for such month on the Mortgage Loan for
which the substitution is made and any Principal Prepayments made thereon during
such month shall be the property of the Depositor. The principal payment on a
substitute Mortgage Loan due on the Due Date in the month of substitution shall
be the property of the Depositor, and the principal payment on the Mortgage Loan
for which the substitution is made due on such date shall be the property of the
Trust Fund.
[End of Article III]
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ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. (a) The Class A, Class M and Class B
Certificates shall be substantially in the forms thereof included within
Exhibits C, D, E and F and shall, on original issue, be executed by the Trustee
and authenticated by the Trustee upon receipt by the Trustee of the documents
specified in Section 2.01, delivered to or upon the order of the Depositor.
(b) The Depository, the Depositor and the Trustee have entered into a
Depository Agreement dated as of May 27, 1998 (the "Depository Agreement").
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 the Book-Entry Certificates may not be
transferred by the Trustee except to a successor to the Depository; (ii)
ownership and transfers of registration of the Book-Entry Certificates on the
books of the Depository shall be governed by applicable rules established by the
Depository; (iii) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (iv) the Trustee shall
deal with the Depository, Depository Participants and Indirect Participants as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of such Holders under this Agreement, and
requests and directions for and votes of such representatives shall not be
deemed to be inconsistent if they are made with respect to different Certificate
Owners; and (v) 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 Participants and persons shown on the books of such Indirect
Participants as direct or indirect Certificate Owners. The Depository Agreement
provides that the Depository shall maintain book-entry records with respect to
the Certificate Owners and with respect to ownership and transfers of such
Certificates.
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 it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
(c) If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Trustee or the Depositor are unable
after exercise of their reasonable best efforts to locate a qualified successor
or (ii) the Depositor at its option advises the Trustee in writing that it
elects to terminate the book-entry system through the Depository, the Trustee
shall notify all Certificate Owners, through the Depository, of the occurrence
of any such event and of the availability of definitive, fully registered
Certificates (the "Definitive Certificates") to Certificate Owners requesting
the same. Upon surrender to the Trustee of the Book-Entry Certificates by the
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Depository for registration and receipt by the Trustee of an adequate supply of
certificates from the Depositor, the Trustee shall issue the Definitive
Certificates based on information received from the Depository. Neither the
Depositor, the Servicer 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.
(d) The Certificates shall be issuable in the minimum original dollar
denominations (and integral multiples of $1,000 in excess of such amount) and
aggregate original dollar denominations per Class as set forth in the following
table (except that one Class IA-1 Certificate, one Class IA-5 Certificate, one
Class IA-7 Certificate, one Class IIA-1 Certificate, one Class IIA-P Certificate
and one of each Class of Subordinated Certificates may be issued in a different
denomination).
<TABLE>
<CAPTION>
Aggregate Original Certificate
Minimum Principal Balance of all
Original Certificates of the CUSIP
Class Denomination Indicated Class Number
----- ------------ --------------- ------
<S> <C> <C> <C> <C>
IA-1(1) $100,000 $58,517,612.78 437609 AV 2
IA-2 $25,000 $13,800,000.00 437609 AW 0
IA-3 $25,000 $62,400,000.00 437609 AX 8
IA-4 $25,000 $3,750,000.00 437609 AY 6
IA-5 $25,000 $20,301,266.00 437609 AZ 3
IA-6 $25,000 $31,000,000.00 437609 BA 7
IA-7 $25,000 $13,397,588.00 437609 BB 5
IA-X (2) (2) 437609 BC 3
IIA-1 $25,000 $44,832,074.00 437609 BE 9
IIA-P $25,000 $112,962.72 437609 BF 6
IIA-X (3) (3) 437609 BG 4
A-R(4) $100 $100.00 437609 BH 2
M $25,000 $4,113,767.00 437609 BJ 8
B-1 $25,000 $1,928,329.00 437609 BK 5
B-2 $25,000 $1,028,442.00 437609 BL 3
B-3 $100,000 $899,886.00 437609 BM 1
B-4 $100,000 $385,666.00 437609 BN 9
B-5 $100,000 $642,777.37 437609 BP 4
</TABLE>
- ---------------
(1) The Class IA-1 Certificates consist of five Components. Class IA-1
Component One shall have an Original Certificate Principal Balance of
$6,525,404.00. Class IA-1 Component
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Two shall have no Principal Balance, but will accrue interest on the
Class IA-1 Component Two Notional Balance (initially $4,156,970.57).
Class IA-1 Component Three shall have an Original Certificate Principal
Balance of $51,838,295.00. Class IA-1 Component Four shall have an
Original Certificate Principal Balance of $153,913.78. Class IA-1
Component Five shall have no Principal Balance, but will accrue
interest on the Class IA-1 Component Five Notional Balance (initially
$181,319,776.83).
(2) The Class IA-X Certificates have no Principal Balance, but will accrue
interest on the Class IA-X Notional Balance (initially
$192,697,166.12).
(3) The Class IIA-X Certificates have no Principal Balance, but will accrue
interest on the Class IIA-X Notional Balance (initially
$36,869,450.22).
(4) The Class A-R Certificate represents the Master Residual Interest and
the Subsidiary Residual Interest.
The Certificates shall be signed by manual or facsimile signature on behalf
of the Trustee by a Responsible Officer of the Trustee. Certificates bearing the
manual or facsimile signatures of individuals who were at the time of signature
Responsible Officers of the Trustee shall bind the Trustee, notwithstanding that
such individuals or any of them have ceased to be a Responsible Officer prior to
the authentication and delivery of such Certificate or did not hold such offices
at the date of such Certificates. No Certificate shall be entitled to any
benefit under this Agreement, or be valid for any purpose, unless there appears
on such Certificate a manual authentication by a Responsible Officer of the
Trustee and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Section 4.02. Registration of Transfer and Exchange of Certificates. (a)
The Trustee shall cause to be kept at its Corporate Trust Office, or at the
office of its designated agent, a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Trustee shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Components of the Class IA-1 Certificates shall not be
separately transferable.
(b) Upon surrender for registration of transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose, the Depositor shall
execute and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, a Certificate of a like Class and
aggregate Percentage Interest and dated the date of authentication by the
Trustee.
(c) No transfer of a Class IA-1, Class B-3, Class B-4 or Class B-5
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement or otherwise in accordance with the requirements under
the Securities Act of 1933, as amended. If such a transfer is to be made in
reliance upon an exemption from said Act, (i) the Trustee or the Depositor may
require (except with respect to the initial transfer of a Class IA-1, Class B-3,
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Class B-4 or Class B-5 Certificate from Donaldson, Lufkin & Jenrette Securities
Corporation and except if the transferee executes a certificate substantially in
the form of Exhibit I hereto) a written opinion of independent counsel
acceptable to and in form and substance 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 said Act and laws or is
being made pursuant to said Act and laws, which opinion of counsel shall not be
an expense of the Trust Fund, the Trustee, the Depositor or the Servicer, and
(ii) the Trustee shall require the transferee to execute a certification
substantially in the form of Exhibit H or Exhibit I. The Trustee shall notify
each Rating Agency upon any transfer of a Class B Certificate.
(d) No transfer of a Subordinated Certificate shall be made to any employee
benefit plan subject to Section 406 of ERISA or Section 4975 of the Code, nor a
person acting on behalf of such plan or using the assets of such plan. No
transfer of a Subordinated Certificate 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
and the Depositor, to the effect that (A) 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 or using the assets of such plan, or,
alternatively, in the case of an insurance company, the assets of any separate
accounts to effect such acquisition, or alternatively, (B) the source of funds
for the purchase of such Certificate is an "insurance company general account"
within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in
Section I and III of PTCE 95-60 are satisfied with respect to the purchase and
holding of such Certificate, which representation letter shall not be an expense
of the Trustee, the Depositor or the Servicer, or (ii) in the case of a
Subordinated 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 who is using the assets of any such plan to effect such
acquisition, an Opinion of Counsel satisfactory to the Trustee and the Depositor
to the effect that the purchase or holding of such Subordinated Certificate will
not result in the assets of the Trust Fund being deemed to be "plan assets"
pursuant to the Department of Labor Plan Asset Regulations set forth in 29
C.F.R. ss.2510.3-101 and subject to the fiduciary responsibility provisions of
ERISA or the prohibited transaction provisions of the Code, will not constitute
or result in a prohibited transaction within the meaning of Section 406 or
Section 407 of ERISA or Section 4975 of the Code, and will not subject the
Trustee, the Depositor or the Servicer to any obligation in addition to those
undertaken in this Agreement, which opinion of counsel shall not be an expense
of the Trustee, the Depositor or the Servicer. For purposes of the prohibited
transaction exemption granted by the Department of Labor to Donaldson, Lufkin &
Jenrette Securities Corporation, the Class A Certificates represent fractional
undivided interests in one of the two Mortgage Groups, each constituting a
separate pool of assets within the Trust Fund. The Subordinated Certificates and
the Class A-R Certificates represent an undivided ownership interest in the
Trust Fund.
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(e) At the option of a Certificateholder, a Certificate may be exchanged
for another Certificate or Certificates of authorized denominations of a like
Class, upon surrender of the Certificate to be exchanged at any office or agency
of the Trustee maintained for such purpose. Whenever the Certificate is so
surrendered for exchange, the Depositor shall execute and the Trustee shall
authenticate and deliver, the Certificate which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing.
(f) No service charge shall be made to the Holder for any transfer or
exchange of a Certificate, but the Trustee may require payment by the
Certificateholders of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of such
Certificate.
(g) All Certificates surrendered for transfer or exchange shall be
destroyed by the Trustee in accordance with the Trustee's standard procedures.
(h) At the option of the Holder of the Class A-R Certificate, the
Subsidiary Residual Interest and the Master Residual Interest may be severed and
represented by separate certificates; provided, however, that such separate
certification may not occur until the Trustee receives an Opinion of Counsel to
the effect that separate certification in the form and manner proposed would not
result in the imposition of federal tax upon either REMIC Pool or cause either
REMIC Pool to fail to qualify as a REMIC; and provided further, that the
provisions of Sections 4.02(c), 4.02(d), 4.02(i) and 7.02(b) will apply to each
such separate certificate as if the separate certificate were a Class A-R
Certificate. If, as evidenced by an Opinion of Counsel, it is necessary to
preserve the REMIC status of either REMIC Pool, the Subsidiary Residual Interest
and the Master Residual Interest shall be severed and represented by separate
certificates.
(i) A Disqualified Organization is prohibited from acquiring beneficial
ownership of a Class A-R Certificate. Notwithstanding anything to the contrary
contained herein, unless and until the Trustee shall have received an Opinion of
Counsel, satisfactory in form and substance to the Trustee, to the effect that
the absence of the conditions contained in this Section 4.02(i) would not result
in the imposition of federal tax upon either REMIC Pool or cause either REMIC
Pool to fail to qualify as a REMIC, no transfer, sale or other disposition of
the Class A-R Certificate (including for purposes of this section any beneficial
interest therein) may be made without the express written consent of the
Trustee, which consent is to be granted by the Trustee only upon compliance with
the requirements of this Section and a copy of which written consent shall be
supplied to the Servicer. As a condition to granting its consent to a transfer
of a Class A-R Certificate, the Trustee shall require the proposed transferee of
such Certificate (including, in the case of the initial issuance of the Class
A-R Certificate, the initial Holder thereof) to execute a letter and affidavit
substantially in the form attached hereto as Exhibit K.
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As a condition to the granting of the consent referred to in this Section
4.02(i), prior to the transfer, sale, pledge, hypothecation or other disposition
of the Class A-R Certificate or any interest therein, the Trustee shall require
that the proposed transferee deliver to the Servicer and the Trustee (1) its
taxpayer identification number and state, under penalties of perjury that such
number is the social security or employee identification number, as the case may
be, of the transferee or provide an affidavit under penalties of perjury stating
that as of the date of such transfer such transferee is not and has no intention
of becoming a Disqualified Organization, (2) an affidavit stating (i) that such
transferee is not acquiring such Class A-R Certificate as an agent, broker,
nominee, or middleman for a Disqualified Organization, (ii) if the Residual
Interest is a "non-economic residual interest" within the meaning of Treas. Reg.
ss.1.860E-1(c)(2), (X) that no purpose of the acquisition of the Class A-R
Certificate is to avoid or impede the assessment or collection of tax, (Y) that
such transferee has historically paid its debts as they came due and will
continue to pay its debts as they come due, and (Z) that such transferee
represents that it understands that, as the holder of the non-economic residual
interest, the transferee may incur tax liabilities in excess of any cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest, and (iii) unless the Trustee
consents to the transfer of the Class A-R Certificate to a Person who is not a
U.S. Person, that it is a U.S. Person, and (3) the transferor deliver to the
Trustee and the Servicer a written certification that as of the date of such
transfer it has no knowledge and no reason to know that the affirmations
described in clauses (1) and (2) were false. The Trustee shall not grant the
consent referred to in this Section 4.02(i) if it has actual knowledge that any
statement made in the affidavit issued pursuant to the preceding sentence is not
true. Notwithstanding any purported transfer, sale or other disposition of the
Class A-R Certificate to a Disqualified Organization, such transfer, sale or
other disposition shall be deemed to be of no legal force or effect whatsoever
and such Disqualified Organization shall not be deemed to be a Class A-R
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class A-R Certificate. If any purported
transfer shall be in violation of the provisions of this Section 4.02(i) then
the prior holder of the Class A-R Certificate shall, upon discovery that the
transfer of such Class A-R Certificate was not in fact permitted by this Section
4.02(i), be restored to all rights as a Holder thereof retroactive to the date
of the purported transfer of such Class A-R Certificate. The Trustee and the
Servicer shall be under no liability to any Person for any registration or
transfer of a Class A-R Certificate that is not permitted by this Section
4.02(i) or for making payments due on such Class A-R Certificate to the
purported Holder thereof or taking any other action with respect to such
purported Holder under the provisions of this Agreement so long as the transfer
was not registered under the written certification of the Servicer as described
in this Section 4.02(i). The prior Holder shall be entitled to recover from any
purported Holder of a Class A-R Certificate that was in fact not a permitted
purported transferee under this Section 4.02(i) at the time it became a
purported Holder all payments made to such purported Holder on such Class A-R
Certificate; provided that the Servicer shall not be responsible for such
recovery. Each Class A-R Certificateholder, by the acceptance of the Class A-R
Certificate, shall be deemed for all purposes to have consented to the
provisions of this Section 4.02(i) and to any amendment to this Agreement deemed
necessary by counsel of the Trustee or the Servicer to ensure that the Class A-R
Certificate is not
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transferred to a Disqualified Organization and that any transfer of such Class
A-R Certificate will not cause the imposition of a tax upon either REMIC Pool or
cause either REMIC Pool to fail to qualify as a REMIC. The restrictions on
transfer of the Class A-R Certificate will cease to apply and be void upon
receipt by the Trustee of an Opinion of Counsel to the effect that such
restrictions on transfer are no longer necessary to avoid the risk of material
federal taxation to either REMIC Pool or prevent either REMIC Pool from
qualifying as a REMIC.
(j) The Servicer shall make available upon written request to each Holder
and each proposed transferee of a Class B-3, Class B-4 or Class B-5 Certificate
such information as may be required to permit the proposed transfer to be
effected pursuant to Rule 144A under the Securities Act of 1933.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee such security or
indemnity as may be required by it to save it harmless, then, in the absence of
notice to the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall 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 Class. Upon the issuance of any new Certificate
under this Section, the Trustee may require of the Certificateholder 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 connected therewith. Any
replacement Certificate of any Class issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership of the Percentage
Interest in the distributions to which the Certificateholders of such Class are
entitled, as if originally issued, whether or not the mutilated, destroyed, lost
or stolen Certificate shall be found at any time, and such mutilated, destroyed,
lost or stolen Certificate shall be of no force or effect under this Agreement,
to the extent permitted by law.
Section 4.04. Persons Deemed Owners. Prior to due presentation of a
Certificate of any Class for registration of transfer, the Depositor, the
Servicer and the Trustee may treat the person in whose name any Certificate is
registered on the Record Date as the owner of such Certificate and the
Percentage Interest in the distributions to which the Certificateholders of such
Class are entitled on the relevant date as the Holder of such Certificate and
the Percentage Interest represented by such Certificate for the purpose of
receiving remittances pursuant to Section 6.01 and for all other purposes
whatsoever, and neither the Depositor, the Servicer nor the Trustee shall be
affected by notice to the contrary.
Section 4.05. Establishment of Certificate Account; Deposit in Certificate
Account. The Trustee shall establish and maintain one or more Certificate
Accounts for the benefit of the Certificateholders (collectively, the
"Certificate Account") which are Eligible Accounts, in the form of a trust
account, in the name of "Norwest Bank Minnesota, National Association, as
Trustee, in trust for and for the benefit of the Certificateholders of
Multi-Class Mortgage Pass-Through Certificates, HomeSide Mortgage Securities,
Inc. Series 1998-2-
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Certificate Account." Such Certificate Account shall be established with a
commercial bank, a savings bank or a savings and loan association.
By 1:00 p.m. New York time on each Servicer Remittance Date, the Servicer
shall cause to be deposited in the Certificate Account, from funds on deposit in
the Collection Account, (a) an amount equal to the Available Distribution Amount
for the related Distribution Date and (b) Advances for such Distribution Date
required to be made pursuant to Section 6.03. Upon becoming aware of any failure
of the Servicer to make any such required deposit, the Trustee shall promptly
give written notice of such failure to the Servicer.
The Trustee may invest, or cause the institution maintaining the
Certificate Account to invest, moneys in the Certificate Account in Eligible
Investments, which shall mature not later than the Business Day next preceding
the Distribution Date next following the date of such investment (except that if
such Eligible Investment is an obligation of the institution that maintains the
Certificate Account, then, such Eligible Investment shall mature not later than
the related Distribution Date) and shall not be sold or disposed of prior to its
maturity. All income and gain realized from any such investment shall be for the
benefit of the Trustee as additional compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses incurred in
respect of any such investments (to the extent not offset by income from other
such investments) shall be deposited in the Certificate Account by the Trustee
out of its own funds immediately as realized.
Section 4.06. Permitted Withdrawals from the Certificate Account. The
Trustee may, from time to time, make withdrawals from the Certificate Account
for the following purposes:
(i) to make payments in the amounts and in the manner provided for in
Section 6.01;
(ii) to reimburse itself for expenses incurred by it and reimbursable
pursuant to Section 8.03 and to reimburse the Depositor or the Servicer for
expenses incurred by either of them and reimbursable pursuant to Section
8.03;
(iii) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or replaced
pursuant to Section 2.02 or 3.01 or to pay to the Servicer with respect to
each Mortgage Loan or property acquired in respect thereof that has been
purchased pursuant to Section 11.01 all amounts received thereon and not
required to be distributed as of the date on which the related Purchase
Price was determined;
(iv) to reimburse the Servicer for unreimbursed Advances made by it
with respect to previous Distribution Dates, to the extent such
reimbursement is permitted to
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be made from the Collection Account pursuant to Section 5.09(iv) and only
if such reimbursement has not been made from the Collection Account;
(v) to pay itself any interest earned on or investment income earned
with respect to funds in the Certificate Account;
(vi) to return to the Collection Account any amount deposited in the
Certificate Account that was not required to be deposited therein; and
(vii) to clear and terminate the Certificate Account pursuant to
Section 11.01.
The Trustee shall keep and maintain an accurate accounting of all
withdrawals from the Certificate Account pursuant to each of the subparagraphs
listed above.
Section 4.07. Authenticating Agents. (a) The Trustee may appoint one or
more Authenticating Agents (each, an "Authenticating Agent") which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates.
Wherever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an Authenticating Agent and a certificate of authentication executed on behalf
of the Trustee by an Authenticating Agent. Each Authenticating Agent must be an
entity organized and doing business under the laws of the United States of
America or of any state, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities.
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency business of any
Authenticating Agent, shall continue to be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least 30
days' advance written notice of resignation to the Trustee and the Depositor.
The Trustee may at any time terminate the agency of any Authenticating Agent by
giving written notice of termination to such Authenticating Agent and the
Depositor. Upon receiving a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance within the provisions of this Section 4.07, the Trustee may appoint a
successor Authenticating Agent, shall give written notice of such appointment to
the Depositor and shall mail notice of such appointment to all Holders of
Certificates. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. No successor Authenticating Agent
shall be appointed unless
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eligible under the provisions of this Section 4.07. No Authenticating Agent
shall have responsibility or liability for any action taken by it as such at the
direction of the Trustee. Any Authenticating Agent shall be entitled to
reasonable compensation for its services and any such compensation shall be
payable solely by the Trustee, without any right of reimbursement from the
Depositor, the Servicer or the Trust Fund.
[End of Article IV]
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ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 5.01. Servicer to Service Mortgage Loans. The Servicer shall
service and administer the Mortgage Loans and shall have full power and
authority, acting alone or through Sub-Servicers as provided in Section 5.02, to
do any and all things which it may deem necessary or desirable in connection
with such servicing and administration, all in accordance with Accepted
Servicing Practices. Without limiting the generality of the foregoing, the
Servicer in its own name or in the name of a Sub-Servicer shall, pursuant to a
power of attorney granted hereby by the Trustee for such purposes, when the
Servicer or the Sub-Servicer, as the case may be, believes it appropriate in its
best judgment, to execute and deliver, on behalf of the Certificateholders and
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Properties; provided, however, that subject to the provisions of
this paragraph, the Servicer may allow a modification with respect to a Mortgage
Loan if the Servicer would take such action in the ordinary course of its
business if it were the owner of the Mortgage Loan. The Servicer may agree to a
modification of any Mortgage Loan (the "Relevant Mortgage Loan") upon the
request of the related Mortgagor, provided that (i) the modification is in lieu
of a refinancing and the Mortgage Rate on the Relevant Mortgage Loan, as
modified, is approximately a prevailing market rate of newly-originated mortgage
loans having similar terms, (ii) the aggregate of the adjusted bases of all
Modified Mortgage Loans (including the Relevant Mortgage Loans) plus the
aggregate adjusted bases of any assets that are not qualified mortgages or
permitted investments under Section 860G(a) of the Code that are assets of the
Trust Fund established hereunder at all times on any day is less than one
percent of the aggregate of the adjusted bases of all assets of the Trust Fund
(including such Modified Mortgage Loans) on such day, and (iii) the Servicer
purchases the Relevant Mortgage Loan from the Trust Fund as described below.
Effective immediately after such modification, and, in any event, on the same
Business Day on which the modification occurs, all right, title and interest of
the Trustee in and to the Modified Mortgage Loan shall automatically be deemed
transferred and assigned to the Servicer and all benefits and burdens of
ownership thereof, including without limitation the right to accrued interest
thereon from and including the date of modification and the risk of default
thereon, shall pass to the Servicer. To confirm such transfer and assignment,
the Servicer, as servicer hereunder, as soon as practicable shall execute an
instrument of assignment of the Modified Mortgage Loan without recourse in
customary form to the Servicer in its individual capacity. The Servicer shall
deposit the Purchase Price for any Modified Mortgage Loan in the Collection
Account pursuant to Section 5.08. Upon receipt by the Trustee of written
notification of any such deposit signed by a Servicing Officer, the Trustee
shall release to the Servicer the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary more fully to vest in the Servicer any Modified
Mortgage Loan previously transferred and assigned pursuant thereto.
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The Servicer shall furnish to the Trustee for execution and redelivery to
the Servicer or, at the request of the Servicer, a Sub-Servicer, such documents
necessary or appropriate to enable the Servicer to service and administer the
Mortgage Loans and the Trustee shall not be responsible for the Servicer's
application thereof. The Servicer agrees to remain eligible as either a FNMA or
FHLMC seller/servicer, or both, for so long as it is Servicer.
All Servicing Advances made by the Servicer in effecting the timely payment
of taxes, insurance and assessments on the properties subject to the Mortgage
Loans shall not, for the purpose of calculating monthly distributions to
Certificateholders, be added to the amount owing under the related Mortgage
Loans, notwithstanding that the terms of such Mortgage Loan so permit, and such
Servicing Advances shall be recoverable by the Servicer to the extent permitted
by Sections 5.09 and 5.23.
Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers;
Enforcement of Sub-Servicer's Obligations. (a) The Servicer may enter into
Sub-Servicing Agreements with Sub-Servicers for the servicing and administration
of all or part of the Mortgage Loans. References in this Agreement to actions
taken or to be taken by the Servicer in servicing the Mortgage Loans include
actions taken or to be taken by a Sub-Servicer on behalf of the Servicer. Each
Sub-Servicing Agreement will be upon such terms and conditions as are not
inconsistent with this Agreement and as the Servicer and the Sub-Servicer have
agreed. The Servicer shall notify the Trustee in writing promptly upon the
appointment of any Sub-Servicer. For purposes of this Agreement, the receipt by
the Sub-Servicer of any amount with respect to a Mortgage Loan (other than
amounts representing servicing compensation or reimbursement for an advance)
shall be treated as the receipt by the Servicer of such amount. The Sub-Servicer
shall deposit all such funds in an Eligible Account.
(b) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Trustee and the Certificateholders, shall enforce the obligations
of each Sub-Servicer under the related Sub-Servicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements as appropriate, and the pursuit of other
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense but shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement only to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loans or (ii) from a specific recovery of costs, expenses or attorneys'
fees against the party against whom such enforcement is directed.
Section 5.03. Successor Sub-Servicers. The Servicer shall be entitled to
terminate any Sub-Servicing Agreement that may exist in accordance with the
terms and conditions of such Sub-Servicing Agreement and without any limitation
by virtue of this Agreement.
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Section 5.04. Liability of the Servicer. Notwithstanding any Sub-Servicing
Agreement, any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer and a Sub-Servicer or reference to actions
taken through a Sub-Servicer or otherwise, the Servicer shall remain obligated
and liable to the Trustee and Certificateholders for the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Servicer alone were servicing and administering the Mortgage Loans.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee
or Certificateholders. Any Sub-Servicing Agreement that may be entered into and
any other transactions or services relating to the Mortgage Loans involving a
Sub-Servicer in its capacity as such and not as an originator shall be deemed to
be between the Sub-Servicer 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 Sub-Servicer.
Section 5.06. Termination of Sub-Servicing Agreement. If the Servicer shall
for any reason no longer be the Servicer hereunder (including by reason of any
Event of Default), the Servicer shall thereupon terminate each Sub-Servicing
Agreement that may have been entered into, and the Trustee, its designee or the
successor servicer and the Trustee shall not be deemed to have assumed any of
the Servicer's interest therein or to have replaced the Servicer as a party to
any such Sub-Servicing Agreement.
Section 5.07. Collection of Mortgage Loan Payments. Continuously from the
date hereof until the principal and interest on all Mortgage Loans are paid in
full, the Servicer will proceed diligently to collect all payments due under
each of the Mortgage Loans when the same shall become due and payable and shall,
to the extent such procedures shall be consistent with this Agreement, follow
such collection procedures as it follows with respect to conventional mortgage
loans held in its own portfolio. Any such arrangements shall not diminish or
otherwise affect the Servicer's obligation to make Advances pursuant to Section
6.03.
Section 5.08. Establishment of Collection Account; Deposit in Collection
Account. With respect to all of the Mortgage Loans, the Servicer shall segregate
and hold all funds collected and received pursuant to a Mortgage Loan separate
and apart from any of its own funds and general assets and shall establish and
maintain one or more Collection Accounts for the benefit of the
Certificateholders (collectively, the "Collection Account") which are Eligible
Accounts, in the form of a trust account, in the name of "Norwest Bank
Minnesota, National Association, as Trustee, in trust for and for the benefit of
the Certificateholders of Multi-Class Mortgage Pass-Through Certificates,
HomeSide Mortgage Securities, Series 1998-2 - Collection Account." Such
Collection Account shall be established with a commercial bank, a savings bank
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or a savings and loan association. The Servicer may invest, or cause the
institution maintaining the Collection Account to invest, moneys in the
Collection Account in Eligible Investments, which shall mature not later than
the Business Day next preceding the Servicer Remittance Date next following the
date of such investment and shall not be sold or disposed of prior to its
maturity. All income and gain realized from any such investment shall be for the
benefit of the Servicer as additional compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses incurred in
respect of any such investments (to the extent not offset by income from other
such investments) shall be deposited in the Collection Account by the Servicer
out of its own funds immediately as realized; provided, however, that if the
Trustee becomes Servicer, the Trustee shall not be required to deposit the
amount of any loss incurred prior to it becoming Servicer.
The Servicer shall deposit or cause to be deposited in the Collection
Account on a daily basis (and not later than the second Business Day following
receipt), and retain therein:
(i) All payments which were received after the Cut-off Date on account
of principal of the Mortgage Loans (other than the principal portion of
Monthly Payments due on or before the Cut-off Date), and all Principal
Prepayments collected on or after the Cut-off Date;
(ii) All payments which were received after the Cut-off Date on
account of interest on the Mortgage Loans (net of the Servicing Fee)(other
than the interest portion of Monthly Payments due on or before the Cut-off
Date);
(iii) Net Liquidation Proceeds;
(iv) All Insurance Proceeds received by the Servicer under any title,
hazard or other insurance policy, including amounts required to be
deposited pursuant to Sections 5.16 and 5.20, other than proceeds to be
held in the Escrow Account or applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the
Servicer's normal servicing procedures or otherwise applied or held as
required by applicable law;
(v) All awards or settlements in respect of condemnation proceedings
affecting any Mortgaged Property which are not released to the Mortgagor in
accordance with the Servicer's normal servicing procedures;
(vi) All Repurchase Proceeds;
(vii) All Advances made by the Servicer pursuant to Section 6.03;
(viii) All amounts representing revenues under the insurance provided
pursuant to Section 5.19 to the extent of any losses borne by any
Certificateholder;
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(ix) All revenues from any Mortgaged Property acquired by the Servicer
by foreclosure or deed in lieu of foreclosure net of any Servicing Advances
with respect to such Mortgaged Property; and
(x) Any other amounts required to be deposited therein pursuant to
this Agreement.
The Servicer shall maintain accounting records on a loan-by-loan basis with
respect to the Collection Account. The Servicer shall give notice to the Trustee
and the Depositor and each Rating Agency of any change in the location of the
Collection Account, prior to the use thereof. Notwithstanding anything to the
contrary herein, no Monthly Payment or any portion thereof shall be permitted to
remain in the Collection Account for more than 12 months. Any Monthly Payment or
any portion thereof that has remained in the Collection Account for 12 months
shall be deemed a Principal Prepayment and distributed to Certificateholders
pursuant to the provisions of this Agreement on the Distribution Date
immediately following the end of such 12 month period.
Section 5.09. Permitted Withdrawals from the Collection Account. The
Servicer may, from time to time, withdraw funds from the Collection Account for
the following purposes:
(i) to reimburse itself for Advances made pursuant to Section 6.03
(including amounts to reimburse the related Sub-Servicer for advances made
pursuant to the applicable Sub-Servicing Agreement), the Servicer's and the
Sub-Servicer's right to receive reimbursement pursuant to this subclause
(i) being limited to amounts received on particular Mortgage Loans which
represent Late Collections (net of the Servicing Fees) with respect to
those particular Mortgage Loans;
(ii) to pay itself the Servicing Fee;
(iii) to reimburse itself for unreimbursed Servicing Advances, or to
pay the related Sub-Servicer any unreimbursed Servicing Advances, the
Servicer's right to receive reimbursement or make payments to the
Sub-Servicer pursuant to this subclause (iii) with respect to any Mortgage
Loan being limited to related Liquidation Proceeds, Insurance Proceeds, and
condemnation awards;
(iv) to reimburse itself (or the related Sub-Servicer) or the
Depositor for expenses incurred by and recoverable by or reimbursable to it
pursuant to Section 5.01 or 5.16;
(v) to reimburse itself (or the related Sub-Servicer) for any
Nonrecoverable Advances;
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(vi) to pay to itself (or the related Sub-Servicer) income earned on
the investment of funds deposited in the Collection Account;
(vii) to make deposits into the Certificate Account in the amounts and
in the manner provided for herein;
(viii) to make payments to itself or others pursuant to any provision
of this Agreement, and to clear and terminate the Collection Account upon
the termination of this Agreement; and
(ix) to withdraw amounts deposited in error.
Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account.
With respect to those Mortgage Loans on which the Servicer or any Sub-Servicer
collects Escrow Payments, if any, the Servicer shall, and shall cause the
Sub-Servicer to, segregate and hold all funds collected and received pursuant to
each such Mortgage Loan which constitute Escrow Payments separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Escrow Accounts, in the form of trust accounts. Such Escrow Accounts shall
be established with a commercial bank, a mutual savings bank or a savings and
loan association the deposits of which are insured by the FDIC in a manner which
shall provide maximum available insurance thereunder, and which may be drawn on
by the Servicer. The Servicer shall give notice to the Trustee of the location
of any Escrow Account, and of any change thereof, prior to the use thereof.
Nothing in this paragraph shall be deemed to require the Servicer to collect
Escrow Payments in the absence of a provision in the related Mortgage requiring
such collection.
The Servicer shall deposit, or cause to be deposited, in any
Escrow Account or Accounts on a daily basis, and retain therein, (i) all Escrow
Payments collected on account of any Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Agreement and (ii) all amounts representing proceeds of any hazard insurance
policy which are toi be applied to the restoration or repair of any Mortgaged
Property. The Servicer shall make withdrawals therefrom only to effect such
payments as are required under this Agreement, and for such other purposes as
are set forth in Section 5.11. The Servicer shall be entitled to retain any
interest paid on funds deposited in the Escrow Account by the depository
institution other than interest on escrowed funds required by law to be paid to
the related Mortgagor and, to the extent required by law, the Servicer shall pay
interest on escrowed funds to the related Mortgagor notwithstanding that the
Escrow Account is non-interest-bearing or that interest paid thereon is
insufficient for such purposes.
Section 5.11. Permitted Withdrawals from Escrow Account.
Withdrawals from any Escrow Account or Accounts may be made by the Servicer only
(i) to effect timely payments of ground rents, taxes, assessments, water rates,
Standard Hazard Policy premiums, or other items constituting Escrow Payments for
the related Mortgagei, (ii) to reimburse the Servicer for
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any Servicing Advance made by the Servicer, with respect to a related Mortgage
Loan but only from amounts received on the related Mortgage Loan which represent
late payments or collections of Escrow Payments thereunder, (iii) to refund to
any Mortgagor any funds found to be in excess of the amounts required under the
terms of the related Mortgage Loan or under applicable law, (iv) for application
to restoration or repair of the property subject to the related Mortgage, (v) to
pay to the Servicer, or to the Mortgagor to the extent required by law, any
interest paid on the funds deposited in the Escrow Account, (vi) to clear and
terminate the Escrow Account on the termination of this Agreement or (vii) to
withdraw amounts deposited in error.
Section 5.12. Payment of Taxes, Insurance and Other Charges. With respect
to each Mortgage Loan, the Servicer shall maintain, or cause to be maintained,
accurate records reflecting any delinquencies or nonpayments with regard to
taxes, assessments and Standard Hazard Policy premiums. The Servicer assumes
full responsibility for ensuring the payment of all such bills and shall effect
payments of all such bills irrespective of each Mortgagor's faithful performance
in the payment of same or the making of the Escrow Payments and shall make
advances from its own funds to effect such payments.
Section 5.13. Transfer of Accounts. The Servicer may transfer the
Collection Account or Escrow Account to an Eligible Account maintained with a
different depository institution from time to time.
Section 5.14. Year 2000 Compliance. The Servicer covenants that its
computer and other systems used in servicing the Mortgage Loans will be modified
to operate in a manner such that on and after January 1, 2000 (i) the Servicer
can service the Mortgage Loans in accordance with the terms of this Agreement
and (ii) the Servicer can operate its business in the same manner as it is
operating on the date hereof. The Servicer shall certify in writing to the
Trustee no later than June 30, 1999 that it is in compliance with this Section
5.14.
Section 5.15. Maintenance of the Primary Insurance Policies. The Servicer
shall not take, or permit any Sub-Servicer to take, any action which would
result in non-coverage under any applicable Primary Insurance Policy of any loss
which, but for the actions of the Servicer or Sub-Servicer, would have been
covered thereunder. Except as otherwise required by applicable law, to the
extent coverage is available and until the Loan-to-Value Ratio of the related
Mortgage Loan is reduced to 80%, the Servicer shall keep or cause to be kept in
full force and effect each such Primary Insurance Policy in an amount equal to
the amount by which the unpaid principal balance of the related Mortgage Loan
exceeds 75% of the value (as described in the definition of Loan-to-Value Ratio)
of the related Mortgaged Property. The Servicer shall not cancel or refuse to
renew any such Primary Insurance Policy or consent to any Sub-Servicer canceling
or refusing to renew any such Primary Insurance Policy applicable to a Mortgage
Loan subserviced by it, that is in effect at the date of the initial issuance of
the Certificates and is required to be kept in force hereunder unless the
replacement Primary Insurance Policy for such canceled or non-renewed policy is
maintained with an insurer whose claims-paying ability is
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rated at least as high as the original insurer or is acceptable to each Rating
Agency as confirmed in writing by each such Rating Agency, unless otherwise
required by law.
Section 5.16. Maintenance of Standard Hazard Policies. (a) The Servicer
shall cause to be maintained for each Mortgage Loan a Standard Hazard Policy
with extended coverage as is prudent in the area where the Mortgaged Property is
located in an amount which is equal to the greater of (i) the lesser of (A) 100%
of the maximum insurable value of the improvements securing such Mortgage Loan
or (B) the principal balance owing on such Mortgage Loan, or (ii) such amount
required to prevent the Mortgagor or mortgagee from becoming a co-insurer. If
the Mortgaged Property is in an area identified at the time of origination in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance has been made available) the
Servicer will cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the least of (i) the outstanding Principal Balance of the
Mortgage Loan, (ii) the full insurable value or (iii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973.
The Servicer shall also maintain on property acquired upon foreclosure, or by
deed in lieu of foreclosure, of any Mortgage Loan, fire and hazard insurance
with extended coverage in an amount which is not less than the lesser of (i) the
outstanding principal balance of the Mortgage Loan or (ii) the maximum insurable
value of the improvements which are a part of such property, liability
insurance, and, to the extent available, flood insurance in an amount as
provided above. Any amounts collected by the Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the property
subject to the related Mortgage or property acquired in liquidation of the
Mortgage Loan, or released to the Mortgagor in accordance with the Servicer's
normal servicing procedures) shall be deposited, subject to applicable law, in
the Collection Account. It is understood and agreed that no earthquake or other
additional insurance need be required by the Servicer of any Mortgagor or
maintained 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. All such Standard Hazard
Policies and other policies shall be endorsed with standard mortgagee clauses
with loss payable to the Servicer or its designee. Any such Standard Hazard
Policies or other policies may be in the form of blanket policies; provided,
however, that in the event of any claim arising in connection with a hazard loss
the Servicer shall be obligated, in the case of blanket insurance policies, to
deposit in the Certificate Account any amount not payable under such blanket
policy because of a deductible clause in such policy and not otherwise payable
under an individual policy. The Servicer shall not interfere with the
Mortgagor's freedom of choice in selecting either his insurance carrier or
agent; provided, however, that the Servicer shall not accept any such insurance
policies from insurance companies unless such companies are acceptable insurers
in the discretion of the Servicer.
(b) Any cost incurred by the Servicer in maintaining any of the foregoing
insurance shall not, for the purpose of calculating monthly distributions to
Certificateholders, be
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added to the amount owing under the Mortgage Loan, notwithstanding that the
terms of the Mortgage Loan so permit. Such costs (other than the costs of
maintaining a blanket hazard insurance policy not attributable to a specific
Mortgaged Property) shall be recoverable by the Servicer from the Mortgagor or
out of Insurance Proceeds or Liquidation Proceeds or to the extent permitted by
Section 5.09.
Section 5.17. Reports of Foreclosures and Abandonment of Mortgaged
Properties. On or before February 28 of each year beginning in 1999, the
Servicer shall file the reports of foreclosures and abandonments of any
Mortgaged Property required by Code Section 6050J with the Internal Revenue
Service and provide a copy of such filing to the Trustee. The reports from the
Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by such Section 6050J.
Section 5.18. [Reserved]
Section 5.19. Fidelity Bond and Errors and Omissions Insurance. The
Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies on all officers, employees or other persons acting on behalf of the
Servicer in any capacity with regard to the Mortgage Loans to handle funds,
money, documents and papers relating to the Mortgage Loans. Any such fidelity
bond and errors and omissions insurance shall protect and insure the Servicer
against losses, including forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of such persons and shall be maintained at a level
acceptable to FNMA. No provision of this Section 5.19 requiring such fidelity
bond and errors and omissions insurance shall diminish or relieve the Servicer
from its duties and obligations as set forth in this Agreement. Upon request of
the Trustee, the Servicer shall cause to be delivered to the Trustee a
certification evidencing coverage under such fidelity bond and insurance policy.
Promptly upon receipt of any notice from the surety or the insurer that such
fidelity bond or insurance policy has been terminated or modified in a
materially adverse manner, the Servicer shall notify the Trustee and each Rating
Agency of any such termination or modification.
Section 5.20. Collections under Insurance Policies; Enforcement of
Due-On-Sale Clauses; Assumption Agreements. (a) In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to present, on behalf of itself, the Trustee and the Certificateholders,
claims to the insurer under any Standard Hazard Policies and, in this regard, to
take such reasonable action as shall be necessary to permit recovery under any
insurance policies. Pursuant to Section 5.08, the Servicer shall deposit
Insurance Proceeds in the Collection Account.
(b) When any Mortgaged Property is conveyed by the Mortgagor, the Servicer
shall enforce any due-on-sale clause contained in any Mortgage Note or Mortgage,
to the extent permitted by such Mortgage Note or Mortgage, applicable law and
governmental regulations. Subject to the foregoing, the Servicer is authorized
to take or enter into an assumption or
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substitution agreement from or with the Person to whom such property has been or
is about to be conveyed. In connection with such assumption or substitution, the
Servicer shall apply such underwriting standards and follow such practices and
procedures as shall be normal and usual and as it applies to mortgage loans
owned solely by it.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any conveyance by the
Mortgagor of the Mortgaged Property or any assumption of a Mortgage Loan by
operation of law which the Servicer in good faith determines it may be
restricted by law from preventing, for any reason whatsoever.
(c) Subject to the Servicer's duty to enforce any due-on-sale clause to the
effect set forth in Section 5.20(b), in any case in which a Mortgaged Property
is to be conveyed to a Person by a Mortgagor, and such Person is to enter into
an assumption agreement or modification agreement or supplement to the Mortgage
Note or Mortgage, the Servicer shall so notify the Trustee by forwarding to the
Trustee the original copy of such assumption or substitution agreement, which
copy shall be added by the Trustee to the related Mortgage File and shall, for
all purposes, be considered a part of such Mortgage File to the same extent as
all other documents and instruments constituting a part thereof. In connection
with any such assumption, modification agreement or substitution agreement, the
interest rate of the related Mortgage Note shall not be changed, the principal
amount of the Mortgage Note shall not be increased or decreased and the maturity
of the Mortgage Note shall not be extended, nor shall it be shortened by more
than one year. Any fee collected by the Servicer for entering into an assumption
or substitution of liability agreement with respect to such Mortgage Loan shall
be retained by the Servicer as additional servicing compensation.
Section 5.21. Income and Realization from Defaulted Mortgage Loans. The
Servicer, on behalf of the Trustee, shall foreclose upon or otherwise comparably
convert the ownership of Mortgaged Properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 5.07, shall manage, conserve, protect and operate such Mortgaged
Properties for the purposes of their prompt disposition and sale, and shall
dispose of such Mortgaged Properties on such terms and conditions as it deems in
the best interests of the Certificateholders. The Servicer shall sell such
property prior to the close of the third calendar year beginning after the year
in which such foreclosure or conversion occurs or such longer period as would
not prevent such Mortgaged Property from constituting "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code. In connection with such
activities, the Servicer shall follow such practices and procedures as it shall
deem necessary or advisable, as shall be normal and usual in its general
mortgage servicing activities, including its management of foreclosed properties
for a temporary period as contemplated herein. The foregoing is subject to the
provisions of Section 5.28 of this Agreement and to the proviso that the
Servicer shall not be required to expend its own funds in connection with any
management, foreclosure or towards the restoration of any property unless it
shall determine that such management, restoration or
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foreclosure will increase the Liquidation Proceeds of the Mortgage Loan to
Certificateholders after reimbursement to itself for such expenses (respecting
which it shall have priority for purposes of withdrawals from the Collection
Account pursuant to Section 5.09). The income earned from the management of such
Mortgaged Properties, net of reimbursement to the Servicer for expenses
(including any taxes) incurred in connection with such management, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing and principal amortizing as though such
Mortgage Loans were still current) and all such income shall be deemed, for all
purposes in this Agreement, to be payments on account of principal and interest
on the related Mortgage Notes and shall be deposited into the Collection
Account. To the extent the income received is in excess of the amount
attributable to amortizing principal and accrued interest at the Net Mortgage
Rate on the related Mortgage Loan, such excess shall be deposited in the
Collection Account. In lieu of foreclosure, the Servicer may (but is not
obligated to) purchase any Defaulted Mortgage Loan at the Purchase Price. In the
event of such purchase, the Purchase Price for the purchased Mortgage Loan shall
be paid by the Servicer and shall be deposited by the Servicer in the Collection
Account promptly upon receipt and, upon receipt by the Trustee of written
notification of such deposit signed by a Servicing Officer, the Trustee shall
promptly release to the Servicer the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment as may be
provided to it by the Servicer, without recourse, as shall be necessary to vest
in the Servicer or its designee, as the case may be, any Mortgage Loan released
pursuant hereto, and the Trustee shall have no further responsibility with
regard to such Mortgage Loan.
The Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes, as such terms are defined in the
Comprehensive Environmental Response Compensation and Liability Act, the
Resources Conservation and Recovery Act of 1976, or other federal, state or
local environmental legislation, on a Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such property.
To the extent that the Servicer has actual knowledge of any such substance or
waste, it shall consult with the Trustee regarding the appropriate course of
action. The Servicer shall not institute foreclosure actions with respect to a
property containing substance or waste as described above if it reasonably
believes that such action would not be consistent with its servicing standards,
and in no event shall the Servicer manage, operate or take any other action with
respect thereto which the Servicer in good faith believes will result in
"clean-up" or other liability under applicable law. The net income from the
rental or sale of a REO property shall be deposited in the Collection Account
within two (2) Business Days after receipt thereof by the Servicer.
The Servicer may enter into a special servicing agreement with an
unaffiliated holder of 100% Percentage Interest of a Class B Certificate or a
holder of a class of securities representing interests in such Class B
Certificate and/or other subordinate mortgage pass-through certificates, such
agreement to be (i) substantially in the form of Exhibit J hereto or (ii)
subject to each Rating Agency's acknowledgment that the ratings of the
Certificates in effect immediately prior to the entering into of such agreement
would not be qualified, downgraded or withdrawn and the Certificates wold not be
placed on credit review status (except for possible upgrading) as
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a result of such agreement. Any such agreement may contain provisions whereby
such holder may instruct the Servicer to commence or delay foreclosure
proceedings with respect to delinquent Mortgage Loans and will contain
provisions for the deposit of cash by the holder that would be available for
distribution to Certificateholders if Liquidation Proceeds are less than they
otherwise may have been had the Servicer acted in accordance with its normal
procedures.
Section 5.22. Trustee to Cooperate; Release of Mortgage Files. (a) Upon
becoming aware of the payment in full of any Mortgage Loan, or upon the receipt
by the Servicer of a notification that payment in full will be made in a manner
customary for such purposes, the Servicer shall immediately notify the Trustee
(if the Trustee holds the related Mortgage File) by a certification (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 Collection Account pursuant to Section 5.08 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, within five
Business Days the Trustee shall release the related Mortgage File to the
Servicer and execute and deliver to the Servicer the request for reconveyance,
deed of reconveyance or release or satisfaction of mortgage or such other
instruments releasing the lien of the Mortgage as have been provided by the
Servicer to the Trustee, together with the Mortgage Note with written evidence
of cancellation thereon, and the Trustee shall have no further responsibility
with respect to said Mortgage File. Upon any such payment in full, or the
receipt of such notification, the Servicer is authorized to procure from the
Trustee under the deed of trust which secured the Mortgage Note, if any, a deed
of full reconveyance covering the property encumbered by such deed of trust,
which assignment of deed of trust, except as otherwise provided by any
applicable law, shall be recorded by the Servicer in the appropriate land
records in the jurisdiction in which the assignment of deed of trust is
recorded, or, as the case may be, to procure from the Trustee an instrument of
satisfaction or, if the Mortgagor so requests, an assignment without recourse,
which deed of reconveyance, instrument of satisfaction or assignment shall be
delivered by the Servicer to the Person or Persons entitled thereto. No expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or to the Trustee.
(b) From time to time as is appropriate for the servicing or foreclosure of
any Mortgage Loan, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that possession of the Mortgage File be released to
the Servicer and certifying as to the reason for such release and that such
release will not invalidate any insurance coverage provided in respect of the
Mortgage Loan under any of the insurance policies required by this Agreement.
With such certificate, the Servicer shall require that the Trustee release the
Mortgage File, and, within five Business Days, the Trustee shall deliver the
Mortgage File or any document therein to the Servicer. The Servicer shall cause
each Mortgage File so released to be returned to the Trustee when the need
therefor by the Servicer no longer exists, unless (i) the Mortgage Loan has been
liquidated and the Net Liquidation Proceeds relating to the Mortgage Loan have
been deposited in the Collection Account or (ii) the Mortgage File has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of
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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 Trustee a certificate of a Servicing Officer in the form of
Exhibit L hereto certifying as to the name and address of the Person to which
such Mortgage File was delivered and the purpose or purposes of such delivery.
(c) Upon written request of the Servicer, the Trustee shall execute and
deliver to the Servicer any court pleadings, requests for trustee's sale or
other documents prepared by and delivered by the Servicer to the Trustee
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Mortgage Note or Mortgage
or otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such pleadings or documents be executed by the
Trustee and certifying as to the reason such documents or pleadings are required
and that the execution and delivery thereof by the Trustee will not invalidate
any insurance coverage under the insurance policies required under this
Agreement or invalidate or otherwise affect the lien of the Mortgage, except for
the termination of such a lien upon completion of the foreclosure or trustee's
sale.
Section 5.23. Servicing and Other Compensation. The Servicer, as
compensation for its activities hereunder, shall be entitled to receive, on or
prior to each Distribution Date, the amounts provided for as the Servicing Fee
and as reimbursement for Nonrecoverable Advances, Servicing Advances and
reimbursement for Advances, all as specified by Section 5.09. The amount of
compensation or reimbursement provided for shall be accounted for on a Mortgage
Loan-by-Mortgage Loan basis.
Additional servicing compensation in the form of assumption fees,
prepayment fees and late payment charges shall be retained by the Servicer, to
the extent permitted by applicable law. The Servicer shall be required to pay
all expenses incurred by it in connection with its servicing activities
hereunder (including the fees and expenses of the Trustee and any Sub-Servicer)
and shall not be entitled to reimbursement therefor except as specifically
provided in Sections 5.09 and 5.21.
Section 5.24. [Reserved]
Section 5.25. Annual Statement as to Compliance.
The Servicer will deliver to the Depositor and the Trustee on or before May
31 of each year, beginning with May 31 in the year which begins not less than
three months after the Closing Date, an Officers' Certificate stating, as to
each signer thereof, that (i) a review of the activities of the Servicer during
the preceding calendar year and of performance under this Agreement has been
made under such officer's supervision, (ii) to the best of such officer's
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knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof and (iii) to the best of such
officer's knowledge, each Sub-Servicer has fulfilled its obligations under its
Sub-Servicing Agreement in all material respects, or if there has been a
material default in the fulfillment of such obligations, specifying such default
known to such officers and the nature and status thereof. Copies of such
statement shall be provided to each Rating Agency by the Servicer. Copies of
such statement shall also be provided by the Servicer to any Certificateholder
upon request. If the Servicer shall fail to provide such copies and a
Responsible Officer of the Trustee is aware that the Servicer has not so
provided copies, the Trustee shall provide such copies at the Servicer's expense
if the Trustee has received such statement.
Section 5.26. Annual Independent Public Accountants' Servicing Report. On
or before May 31 of each year, beginning with May 31 in the year which begins
not less than three months after the Closing Date, 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 statement to the
Depositor and the Trustee to the effect that such firm has examined certain
documents and records relating to the servicing of the Mortgage Loans and that,
on the basis of such examination conducted substantially in compliance with the
Uniform Single Audit Program for Mortgage Bankers, such servicing has been
conducted in compliance with the manner of servicing set forth in pooling and
servicing agreements substantially similar to this Agreement, except for (i)
such exceptions as such firm shall believe to be immaterial and (ii) such other
exceptions as shall be set forth in such statement. Copies of such statement
shall be provided to each Rating Agency, and, upon request, to the
Certificateholders, by the Servicer, or by the Trustee at the Servicer's expense
if the Trustee has received such statement and the Servicer shall fail to
provide such copies and the Trustee is aware that the Servicer has not so
provided copies. In the event such firm requires the Trustee to agree to the
procedures performed by such firm, the Servicer shall direct the Trustee in
writing to so agree; it being understood and agreed that the Trustee will
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and the Trustee shall not make any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency validity or correctness of such procedures.
Section 5.27. Access to Certain Documentation; Rights of the Depositor in
Respect of the Servicer. The Servicer shall provide access to the Trustee,
Certificateholders which are savings and loan associations, banks or insurance
companies or examiners of any federal or state banking or insurance regulatory
authority to the documentation regarding the Mortgage Loans if so required by
applicable regulations of any regulatory authority, such access to be afforded
subject to reimbursement for expenses without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer under this Agreement and may, but is not obligated
to, appoint and cause a designee to perform, any
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defaulted obligations of the Servicer hereunder or exercise the rights of the
Servicer hereunder; provided that the Servicer shall not be relieved of any of
its obligations hereunder by virtue of the appointment of a designee by the
Depositor or its designee. The Depositor shall not assume any responsibility or
liability for any action or failure to take action by the Servicer and is not
obligated to supervise the performance of the Servicer under this Agreement or
otherwise.
Section 5.28. REMIC-Related Covenants. For as long as either REMIC Pool
shall exist, the Servicer and the Trustee shall act in accordance herewith to
assure continuing treatment of each REMIC Pool as a REMIC. In particular:
(a) Neither the Trustee nor the Servicer shall create, or permit the
creation of, any "interests" in either REMIC Pool within the meaning of Section
860G(a) of the Code other than the "regular interests" in each REMIC Pool
designated as such in Section 2.04(a) and the Residual Interest.
(b) As of all times as may be required by the Code, the Servicer and the
Trustee each will ensure that substantially all of the assets of each REMIC Pool
will consist of "qualified mortgages" as defined in section 860G(a)(3) of the
Code and "permitted investments" as defined in section 860G(a)(5) of the Code.
The Trustee also will maintain records that are sufficient to indicate each
REMIC Pool's compliance with applicable requirements of the Code (and applicable
Proposed, Temporary or final Treasury Regulations) relating to the assets held
by such REMIC Pool. Further, the Trustee shall not accept the transfer or
substitution of any Mortgage Loan other than pursuant to Section 3.04, 5.01 or
5.21 of this Agreement, and the Trustee shall, in any case, not permit
substitution later than two years from the Closing Date unless the Trustee has
received an Opinion of Counsel, which will not be an expense of the Trust Fund,
that such transfer or substitution would not adversely affect the REMIC status
of each REMIC Pool or would not otherwise be prohibited by this Agreement;
(c) The Trustee shall ensure that neither REMIC Pool receives a fee or
other compensation for services and that neither REMIC Pool receives any income
from assets other than "qualified mortgages" within the meaning of section
860G(a)(3) of the Code or "permitted investments" within the meaning of section
860G(a)(5) of the Code, and shall take whatever action it deems necessary to
avoid any material tax imposed by the Code on either REMIC Pool; provided,
however, that neither REMIC Pool shall be prohibited from recognizing its "net
income from foreclosure property," as provided in section 860G(c) of the Code
with respect to any Mortgage Loan foreclosed upon as provided in Section 5.21;
(d) The Trustee shall not sell or permit the sale of all or any portion of
the Mortgage Loans or of any Eligible Investment unless such sale is as a result
of a repurchase of the Mortgage Loans pursuant to this Agreement or the Trustee
has received an Opinion of Counsel, which will not be an expense of the Trust
Fund or the Trustee, to the effect that such sale (i) is pursuant to a
"qualified liquidation" as defined in section 860F(a)(4) of the Code and as
described in Section 11.01 hereof, or (ii) would not be treated as a "prohibited
transaction"
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within the meaning of section 860F(a)(2) of the Code that results in the
realization of a material amount of gain or loss for federal income tax
purposes;
(e) The Trustee shall not accept any contribution to either REMIC Pool
after the Startup Day without an Opinion of Counsel (which shall not be an
expense of the Trustee) that such contribution is included within the exceptions
provided in Section 860G(d)(2) of the Code and, therefore, will not be subject
to the tax imposed by Section 860G(d)(1) of the Code; and
(f) Notwithstanding anything to the contrary in this Agreement, the
Servicer and the Trustee shall take any other action or refuse to take any
action otherwise required (including adjusting the Purchase Price for any
Mortgage Loan) where the Servicer or the Trustee deems such action or inaction
reasonably necessary to ensure the REMIC status of each REMIC Pool under the
Code and applicable regulations or to avoid the imposition of any material tax
liability on either REMIC Pool that will affect amounts distributable to the
Certificateholders.
[End of Article V]
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01. Distributions. (a) On each Distribution Date, the Trustee
shall apply an amount equal to the Available Distribution Amount in the
following order of priority:
(i) to the Trustee, the Trustee Fee with respect to such Distribution
Date;
(ii) to the Non-PO Class A Certificateholders, all distributable
amounts up to the sum of (A) the Aggregate Class A Interest Accrual Amount
and (B) the Aggregate Class A Interest Shortfall;
(iii) the balance, if any, of the Available Distribution Amount shall
be allocated, first pro rata (in accordance with the maximum amounts
distributable in accordance with this clause (iii)) between (A)(1) the
Non-PO Class IA Certificateholders, the amounts distributable pursuant to
(b)(ii)(A) and (b)(iv) below, up to the Non-PO Class IA Optimal Principal
Amount and (2) the IIA-1 Certificateholders, the amounts distributable
pursuant to (b)(ii)(C) and (b)(v) below, up to the Non-PO Class IIA Optimal
Principal Amount, and (B)(1) Class IA-1 Component Four, the Class IA-1
Component Four Distribution Amount, in accordance with (b)(ii)(B) below,
and (2) the Class IIA-P Certificateholders, the Class IIA-P Distribution,
in accordance with (b)(ii)(D) below and second, (A) to Class IA-1 Component
Four, the Class IA-1 Component Four Shortfall
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Amount, in accordance with (b)(iii)(A) below and (B) to the Class IIA-P
Certificates, the Class IIA-P Shortfall Amount, in accordance with
(b)(iii)(B) below;
(iv) to the Class M Certificateholders, the balance, if any, of the
Available Distribution Amount after making the distributions provided for
in paragraphs (i), (ii) and (iii) above, in accordance with, and up to the
amount calculated pursuant to, Section 6.01(c) below;
(v) to the Class B Certificateholders, the balance, if any, of the
Available Distribution Amount after making the distributions provided for
in paragraphs (i) through (iv) above, in accordance with, and up to the
amounts calculated pursuant to, Section 6.01(d) below; and
(vi) to the Class A-R Certificateholders the balance, if any, of the
Available Distribution Amount remaining after the distributions provided
for in paragraphs (i) through (v) above.
(b) Amounts payable to the Class A Certificateholders on any
Distribution Date shall be distributed as follows:
(i) to the extent the amounts available for distribution pursuant to
(a)(ii) are sufficient:
(A) to Class IA-1 Component Two, (1) the Class IA-1 Component Two
Interest Accrual Amount plus (2) the Class IA-1 Component Two
Shortfall from the preceding Distribution Date;
(B) to Class IA-1 Component Three, (1) the Class IA-1 Component
Three Interest Accrual Amount plus (2) the Class IA-1 Component Three
Shortfall from the preceding Distribution Date; provided, however,
that on each Distribution Date prior to the Class IA-1 Component Three
Accretion Termination Date, amounts calculated pursuant to this clause
(B) will be added to the Outstanding Certificate Principal Balance of
Class IA-1 Component Three and distributed, as principal, in
accordance with Section 6.01(b)(i)(N);
(C) to Class IA-1 Component Five, (1) the Class IA-1 Component
Five Interest Accrual Amount plus (2) the Class IA-1 Component Five
Shortfall from the preceding Distribution Date;
(D) to the Class IA-2 Certificateholders, (1) the Class IA-2
Interest Accrual Amount plus (2) the Class IA-2 Shortfall from the
preceding Distribution Date;
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(E) to the Class IA-3 Certificateholders, (1) the Class IA-3
Interest Accrual Amount plus (2) the Class IA-3 Shortfall from the
preceding Distribution Date;
(F) to the Class IA-4 Certificateholders, (1) the Class IA-4
Interest Accrual Amount plus (2) the Class IA-4 Shortfall from the
preceding Distribution Date; provided, however, that on each
Distribution Date prior to the Class IA-4 Accretion Termination Date,
amounts calculated pursuant to this clause (F) will be added to the
Outstanding Certificate Principal Balance of the Class IA-4
Certificates and distributed, as principal, in accordance with Section
6.01(b)(i)(O);
(G) to the Class IA-5 Certificateholders, (1) the Class IA-5
Interest Accrual Amount plus (2) the Class IA-5 Shortfall from the
preceding Distribution Date;
(H) to the Class IA-6 Certificateholders, (1) the Class IA-6
Interest Accrual Amount plus (2) the Class IA-6 Shortfall from the
preceding Distribution Date;
(I) to the Class IA-7 Certificateholders, (1) the Class IA-7
Interest Accrual Amount plus (2) the Class IA-7 Shortfall from the
preceding Distribution Date;
(J) to the Class IA-X Certificateholders, (1) the Class IA-X
Interest Accrual Amount plus (2) the Class IA-X Shortfall from the
preceding Distribution Date;
(K) to the Class A-R Certificateholders, (1) the Class A-R
Interest Accrual Amount plus (2) the Class A-R Shortfall from the
preceding Distribution Date;
(L) to the Class IIA-1 Certificateholders, (1) the Class IIA-1
Interest Accrual Amount plus (2) the Class IIA-1 Shortfall from the
preceding Distribution Date;
(M) to the Class IIA-X Certificateholders, (1) the Class IIA-X
Interest Accrual Amount plus (2) the Class IIA-X Shortfall from the
preceding Distribution Date;
(N) on each Distribution Date prior to the Class IA-1 Component
Three Accretion Termination Date, the Class IA-1 Component Three
Interest Accrual Amount will be distributed, as principal, as follows:
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first, to the Class IA-3 Certificates, to the extent necessary to
reduce the Outstanding Certificate Principal Balance of such Class to its
Targeted Principal Balance for such Distribution Date;
second, 10.00% to Class IA-1 Component Three and 90.00% to the Class
IA-3 Certificates, without regard to their respective Targeted Principal
Balances, until the Outstanding Certificate Principal Balance of the Class
IA-3 Certificates has been reduced to zero; and
third, to Class IA-1 Component Three; and
(O) on each Distribution Date prior to the Class IA-4 Accretion
Termination Date, the Class IA-4 Interest Accrual Amount will be
distributed, as principal, as follows:
first, to the Class IA-3 Certificates, to the extent necessary to
reduce the Outstanding Certificate Principal Balance of such Class to its
Targeted Principal Balance for such Distribution Date;
second, to Class IA-1 Component Three, to the extent necessary to
reduce the Outstanding Certificate Principal Balance of such Component to
its Targeted Balance for such Distribution Date; and
third, to the Class IA-4 Certificates;
(ii) concurrently, (A) to the Non-PO Class IA Certificateholders,
solely from the Available Distribution Amount with respect to Mortgage
Group One, up to the Non-PO Class IA Optimal Principal Amount, allocated
among the Non-PO Class IA Certificates in accordance with the Non-PO Class
IA Principal Payment Rules, (B) to Class IA-1 Component Four, the Class
IA-1 Component Four Distribution Amount, (C) to the Class IIA-1
Certificateholders, solely from the Available Distribution Amount with
respect to Mortgage Group Two, up to the Non-PO Class IIA Optimal Principal
Amount and (D) to the Class IIA-P Certificateholders, the Class IIA-P
Distribution Amount;
(iii) concurrently, (A) to Class IA-1 Component Four, solely from the
Available Distribution Amount with respect to Mortgage Group One, the Class
IA-1 Component Four Shortfall Amount and (B) to the Class IIA-P
Certificateholders, solely from the Available Distribution Amount with
respect to Mortgage Group Two, the Class IIA-P Shortfall Amount; provided,
however, that any amounts distributed pursuant to this Section 6.01(b)(iii)
shall not cause a further reduction in the Outstanding Certificate
Principal Balance of Class IA-1 Component Four or the Class IIA-P
Certificates.
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(iv) to the extent that the Available Distribution Amount with respect
to Mortgage Group One remaining after giving effect to the distributions in
(b)(i) above is insufficient to distribute in full amounts described in
(b)(ii)(A) and (B) and (b)(iii)(A) above (such shortfall, the "Class IA
Deficiency Amount") and the Available Distribution Amount with respect to
Mortgage Group Two remaining after giving effect to the distributions in
(b)(i) above exceeds the amount required to distribute in full the amounts
described in (b)(ii)(C) and (D) and (b)(iii)(B) above, such excess shall be
distributed in reduction of the Class IA Deficiency Amount;
(v) to the extent that the Available Distribution Amount with respect
to Mortgage Group Two remaining after giving effect to the distributions in
(b)(i) above is insufficient to distribute in full amounts described in
(b)(ii)(C) and (D) and (b)(iii)(B) above (such shortfall, the "Class IIA
Deficiency Amount") and the Available Distribution Amount with respect to
Mortgage Group One remaining after giving effect to the distributions in
(b)(i) above exceeds the amount required to distribute in full the amounts
described in (b)(ii)(A) and (B) and (b)(iii)(A) above, such excess shall be
distributed in reduction of the Class IIA Deficiency Amount;
(vi) If the Available Distribution Amount is insufficient to make the
distributions set forth in (b)(i) above, the Trustee shall distribute the
Available Distribution Amount to the Non-PO Class A Certificateholders pro
rata in accordance with the amounts otherwise distributable to them
pursuant to (b)(i)(A)-(O) above.
(vii) In addition to the foregoing distributions, the Class IA or
Class IIA Certificates may receive additional principal distributions on
any Distribution Date prior to the Credit Support Depletion Date under the
circumstances specified in (A) and (B) below:
(A) On any Distribution Date on or after the date on which the
aggregate Outstanding Certificate Principal Balance of the Non-PO Class IA
Certificates or the Outstanding Certificate Principal Balance of the Class
IIA-1 Certificates has been reduced to zero, all principal (in excess of
that needed to reduce the aggregate Outstanding Certificate Principal
Balance of the Non-PO Class IA Certificates or the Outstanding Certificate
Principal Balance of the Class IIA-1 Certificates to zero) on the Mortgage
Loans in the Mortgage Group relating to such Class A Certificates that are
no longer outstanding, other than the portion thereof distributable to
Class IA-1 Component Four or the Class IIA-P Certificates, as the case may
be, will be paid as principal to the remaining Class A Certificates (other
than Class IA-1 Component Four or the Class IIA-P Certificates, as the case
may be) in accordance with Section 6.01(b)(ii)(A) or 6.01(b)(ii)(C), as
applicable, in reduction of the Outstanding Certificate Principal Balances
thereof, provided that on such Distribution Date either (a) the Aggregate
Subordinated Percentage for such Distribution Date is less than 200% of the
initial Aggregate Subordinate Percentage, or (b) the average outstanding
principal balance of the
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Mortgage Loans in either Mortgage Group delinquent 60 days or more over the
prior six months, as a percentage of the corresponding Group One or Group
Two Subordinated Amount, is greater than or equal to 50%. For purposes of
the foregoing, the "Aggregate Subordinated Percentage" for any Distribution
Date is equal to the aggregate Outstanding Certificate Principal Balance of
the Subordinated Certificates immediately prior to such Distribution Date
divided by the aggregate Scheduled Principal Balance of all of the Mortgage
Loans immediately prior to such Distribution Date.
(B) If on any Distribution Date on which the aggregate Outstanding
Certificate Principal Balance of the Non-PO Class IA or Non-PO Class IIA
Certificates would be greater than the related Non-PO Allocated Amount (the
"Undercollateralized Group"), after giving effect to distributions to be
made on such Distribution Date, the portion of the Available Distribution
Amount in respect of principal on the Mortgage Loans in other Mortgage
Group (the "Overcollateralized Group") otherwise allocable to the
Subordinated Certificates will be distributed to the Classes of Non-PO
Class A Certificates relating to the Undercollateralized Group (in
accordance with the priorities set forth herein), in reduction of the
principal balances thereof, until the aggregate principal balance of the
Certificates included in the Undercollateralized Group is equal to the
Scheduled Principal Balance of the Mortgage Loans in the related Mortgage
Group. Moreover, the Available Distribution Amount with respect to the
Overcollateralized Group will be further reduced (after distributions of
interest to the Non-PO Class A Certificates included in the
Undercollateralized Group) in an amount equal to one month's interest on
the amount by which the Undercollateralized Group is undercollateralized at
6.75% per annum (if Mortgage Group One is the Undercollateralized Group) or
6.50% per annum (if Mortgage Group Two is the Undercollateralized Group),
plus any shortfall of such amounts from prior Distribution Dates, with
accrued interest thereon; provided, however, that in no event shall the
Available Distribution Amount with respect to the Overcollateralized Group
on any Distribution Date be reduced by more than the sum of (i) the
overcollateralized amount with respect to the Overcollateralized Group and
(ii) interest thereon at the applicable Remittance Rate. Such amounts will
be distributed to the applicable Classes of Certificates in the priority of
interest payable on such Distribution Date.
(c) Amounts payable on any Distribution Date to the Class M
Certificateholders shall be distributed up to an amount equal to (A) the Class M
Interest Accrual Amount plus (B) the Class M Shortfall from the preceding
Distribution Date plus (C) the portion of the Subordinated Optimal Principal
Amount allocable (pursuant to Section 6.01(e)) to the Class M Certificates plus
(D) any Carry-over Subordinated Principal Amounts with respect to the Class M
Certificates.
(d) Amounts payable on any Distribution Date to the Class B
Certificateholders pursuant to Section 6.01(a)(v) shall be distributed in the
following priority:
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(1) first, to the Class B-1 Certificateholders, up to an amount equal to
(A) the Class B-1 Interest Accrual Amount plus (B) the Class B-1 Shortfall from
the preceding Distribution Date plus (C) the pro rata portion, if any, of the
Subordinated Optimal Principal Amount allocable to the Class B-1 Certificates in
accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal
Amounts with respect to the Class B-1 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class M Certificates in
excess of the Outstanding Certificate Principal Balance of such Class;
(2) second, to the Class B-2 Certificateholders, up to an amount equal to
(A) the Class B-2 Interest Accrual Amount plus (B) the Class B-2 Shortfall from
the preceding Distribution Date plus (C) the pro rata portion, if any, of the
Subordinated Optimal Principal Amount allocable to the Class B-2 Certificates in
accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal
Amounts with respect to the Class B-2 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-1 Certificates in
excess of the Outstanding Certificate Principal Balance of such Class;
(3) third, to the Class B-3 Certificateholders, up to an amount equal to
(A) the Class B-3 Interest Accrual Amount plus (B) the Class B-3 Shortfall from
the preceding Distribution Date plus (C) the pro rata portion, if any, of the
Subordinated Optimal Principal Amount allocable to the Class B-3 Certificates in
accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal
Amounts with respect to the Class B-3 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-2 Certificates in
excess of the Outstanding Certificate Principal Balance of such Class;
(4) fourth, to the Class B-4 Certificateholders, up to an amount equal to
(A) the Class B-4 Interest Accrual Amount plus (B) the Class B-4 Shortfall from
the preceding Distribution Date plus (C) the pro rata portion, if any, of the
Subordinated Optimal Principal Amount allocable to the Class B-4 Certificates in
accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal
Amounts with respect to the Class B-4 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-3 Certificates in
excess of the Outstanding Certificate Principal Balance of such Class; and
(5) fifth, to the Class B-5 Certificateholders, up to an amount equal to
(A) the Class B-5 Interest Accrual Amount plus (B) the Class B-5 Shortfall from
the preceding Distribution Date plus (C) the pro rata portion, if any, of the
Subordinated Optimal Principal Amount allocable to the Class B-5 Certificates in
accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal
Amounts with respect to the Class B-5 Certificates plus (E) any portion of the
Subordinated Optimal Principal Amount allocated to the Class B-4 Certificates in
excess of the Outstanding Certificate Principal Balance of such Class.
(e) On each Distribution Date, the Subordinated Optimal Principal Amount
shall be allocated among the Classes of Subordinated Certificates pro rata based
upon the Outstanding Certificate Principal Balances of such Classes; provided,
however, that the portion
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of the Subordinated Optimal Principal Amount consisting of the Subordinated
Lock-out Amount will be allocated only among those Classes of Subordinated
Certificates entitled, pursuant to the next succeeding sentence, to an
allocation of the Subordinated Lock-out Amount on such Distribution Date. With
respect to the Subordinated Certificates, on each Distribution Date, the
Subordinated Lock-out Amount shall be distributable to (1) any Class of
Subordinated Certificates which has current Credit Support (before giving effect
to any distribution of principal and any Realized Losses allocable on such
Distribution Date) greater than or equal to the Original Credit Support for such
Class; (2) the Class having the lowest numerical class designation of any
outstanding Class of Subordinated Certificates which does not meet the criteria
in (1) above; and (3) the Class B-5 Certificates if all other outstanding
Classes of Subordinated Certificates meet the criteria in (1) above or if no
other Class of Subordinated Certificates is outstanding; provided, however, that
no Class of Subordinated Certificates shall receive any distributions with
respect to the Subordinated Lock-out Amount if any Class of Subordinated
Certificates having a lower numerical class designation than such Class fails to
meet the criteria in (1) above. For purposes of this paragraph, the Class M
Certificates shall be deemed to have a lower numerical class designation than
each Class of Class B Certificates.
(f) Based on the information received from the Servicer pursuant to Section
6.02, the Trustee shall make all calculations necessary to make the
distributions described in this Section 6.01. All distributions made to
Certificateholders of any Class on each Distribution Date will be made to the
Certificateholders of the respective Class of record on the next preceding
Record Date, except that the final distribution with respect to each Class shall
be made as provided in the forms of Certificates. All distributions made to
Certificateholders shall be based on the Percentage Interest of the Class
represented by their respective Certificates, and shall be made either by wire
transfer in immediately available funds to the account of such Holder at a bank
or other financial or depository institution having appropriate facilities
therefor, if such Holder has so notified the Trustee in writing at least 10
Business Days prior to the first Distribution Date for which distribution by
wire transfer is to be made and such Holder's Certificates of such Class in the
aggregate evidence an original denomination of not less than $5,000,000 or such
Holder holds a 100% Percentage Interest of such Class or, if not, by check
mailed to the address of the Person entitled thereto as it appears on the
Certificate Register, except that the final distribution in retirement of the
Certificates will be made only upon presentation and surrender of the
Certificates at the Corporate Trust Office or such other agency of the Trustee
specified in the final distribution notice to Certificateholders. If on any
Determination Date, the Trustee determines that there are no Mortgage Loans
outstanding and no other funds or assets in the Trust Fund other than the funds
in the Certificate Account, the Trustee shall promptly send the final
distribution notice to each Certificateholder specifying the manner in which the
final distribution will be made.
Section 6.02. Statements to the Certificateholders. (a) Not later than the
second Business Day following each Determination Date, the Servicer shall send
to the Trustee (by such electronic or other means as the Servicer and the
Trustee shall agree from time to time) the information specified in items (iii),
(iv), (v), (vi), (vii), (viii), (ix), (xi) and (xiv) below. Not later
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than each Distribution Date, the Trustee shall send to each Certificateholder,
the Depositor, the Servicer, any co-trustee, and each Rating Agency a statement
setting forth the following information, after giving effect to the
distributions to be made by the Trustee pursuant to Section 6.01 on or as of
such Distribution Date:
(i) with respect to each Class and Component of Certificates the
amount of such distribution to Holders of such Class and Component
allocable to principal;
(ii) with respect to each Class and Component of Certificates the
amount of such distribution to Holders of such Class and Component
allocable to interest;
(iii) the aggregate amount of any Principal Prepayments and Repurchase
Proceeds included in the distributions to Certificateholders, in each case,
in the aggregate and by Mortgage Group;
(iv) the aggregate amount of any Advances by the Servicer pursuant to
Section 6.03, both in the aggregate and by Mortgage Group;
(v) the number of Outstanding Mortgage Loans, both in the aggregate
and by Mortgage Group, and the Mortgage Pool Principal Balance, both in the
aggregate and by Mortgage Group, as of the close of business as of the end
of the related Principal Prepayment Period;
(vi) the related amount of the Servicing Fees (as adjusted pursuant to
Section 6.05) retained or withdrawn from the Collection Account by the
Servicer;
(vii) the number and aggregate principal amounts of Mortgage Loans (A)
delinquent (1) one Monthly Payment, (2) two Monthly Payments and (3) three
or more Monthly Payments and (B) in foreclosure, in each case, as of the
end of the related Principal Prepayment Period, in each case, both in the
aggregate and by Mortgage Group;
(viii) the number and the principal balance of Mortgage Loans with
respect to any real estate acquired through foreclosure or grant of a deed
in lieu of foreclosure, in each case, both in the aggregate and by Mortgage
Group;
(ix) the aggregate amount of all Advances recovered during the related
Due Period;
(x) with respect to the following Distribution Date, the Class A
Percentage, the Class IA Percentage, the Class IIA Percentage, the Class M
Percentage, the Class B Percentage, the Class A Principal Balance, the
Class IA Principal Balance, the Class IIA Principal Balance, the Class M
Principal Balance, the Class B Principal Balance, the Non-PO Class A
Percentage, the Non-PO Class IA Percentage, the Non-PO Class IIA
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Percentage, the Non-PO Class A Prepayment Percentage, the Non-PO Class IA
Prepayment Percentage, the Non-PO Class IIA Prepayment Percentage and the
level of Credit Support, if any, with respect to each class of Subordinated
Certificates;
(xi) the aggregate amount of Realized Losses during the related Due
Period and the aggregate amount of Realized Losses since the Cut-off Date,
both in the aggregate and by Mortgage Group;
(xii) the allocation to each Class and Component of Certificates of
any Realized Losses during the related Due Period;
(xiii) the Outstanding Certificate Principal Balance of each Class and
Component of Certificates after giving effect to the distributions to each
Class and Component on such Distribution Date; and
(xiv) the amount of any Compensating Interest Shortfalls on such
Distribution Date.
The Trustee's responsibility for sending the above information to the
Certificateholders is limited to the availability, timeliness and accuracy of
the information derived from the Servicer.
Upon reasonable advance notice in writing if required by federal
regulation, the Trustee will provide to each Certificateholder which is a
savings and loan association, bank or insurance company certain reports and
access during business hours to information and documentation regarding the
Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of regulatory authorities with respect to investment in
the Certificates; provided, that the Trustee shall be entitled to be reimbursed
by each such Certificateholder for the Trustee's actual expenses incurred in
providing such reports and access.
The Trustee shall make available each month, to any Certificateholder, the
above information via the Trustee's website, electronic bulletin board and its
fax-on-demand service. The Trustee's website will be located at
"www.ctslink.com." The Trustee's electronic bulletin board may be accessed by
calling (301) 815-6620, and its fax-on-demand service may be accessed by calling
(301) 815-6610.
(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 Certificateholder, 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 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
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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) Upon request to the Trustee by any Certificateholder who is a Holder
thereof at the time of making such request (an "Eligible Certificateholder"),
the Trustee shall provide, in the form of a computer-readable tape or disk, loan
by loan data with respect to the payment experience on the Mortgage Loans
containing at least the fields of information listed on Annex 1 hereto (based on
information provided by the Servicer). In addition, upon the written request of
any Eligible Certificateholder, the Trustee shall provide similar loan by loan
data with respect to any prior monthly remittance report to the
Certificateholders pursuant to this Agreement (as and when such information
becomes available). The expense of providing any tape or disk pursuant to this
subsection shall be the expense of the Eligible Certificateholder. The Trustee
shall include in each monthly remittance report pursuant to Section 6.02(a) a
statement that the monthly loan by loan information described in this subsection
is available upon the request and at the expense of any Eligible
Certificateholder directed to the Trustee.
Section 6.03. Advances by the Servicer. If, on any Determination Date, the
Servicer determines that any Monthly Payments due on the immediately preceding
Due Date have not been received, the Servicer shall, unless it determines in its
sole discretion that such amounts will not be recoverable from Late Collections,
Liquidation Proceeds or otherwise, make an Advance on or before the related
Servicer Remittance Date in an amount equal to the amount of such delinquent
Monthly Payments, after adjustment of any delinquent interest payment for the
Servicing Fee. For purposes of this Section 6.03, the delinquent Monthly
Payments referred to in the preceding sentence shall be deemed to include an
amount equal to the Monthly Payments that would have been due on Mortgage Loans
which have been foreclosed or otherwise terminated and in connection with which
the Servicer acquired and continues to own the Mortgaged Properties on behalf of
the Certificateholders. If the Servicer makes an Advance, it shall on or prior
to the related Servicer Remittance Date either (i) deposit in the Collection
Account an amount equal to such Advance, (ii) cause to be made an appropriate
entry in the records of the Collection Account that funds in such account being
held for future distribution or withdrawal have been, as permitted by this
Section 6.03, used by the Servicer to make such Advance or (iii) make Advances
in the form of any combination of clauses (i) and (ii) aggregating the amount of
such Advance. Any funds being held in the Collection Account for future
distribution to Certificateholders and so used pursuant to clause (ii) or (iii)
above shall be replaced by the Servicer from its own funds by deposit into the
Collection Account on or before any subsequent Servicer Remittance Date to the
extent that funds in the Collection Account on such Servicer Remittance Date
shall be less than the amount of payments required to be made to
Certificateholders on the related Distribution Date. Any such Advance shall be
included with the distribution to the Certificateholders on the related
Distribution Date. If the Servicer determines not to make a Nonrecoverable
Advance, it shall on the related Servicer Remittance Date furnish to the
Trustee, any co-trustee, and each Rating Agency notice of such determination.
The Servicer shall be entitled to be reimbursed from the Collection Account for
all Advances and Nonrecoverable Advances as provided in Section 5.09.
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Section 6.04. Allocation of Realized Losses. (a) Prior to each
Determination Date, the Servicer shall determine (i) the total amount of
Realized Losses, if any, incurred during the related Principal Prepayment
Period; (ii) whether and to what extent such Realized Losses constitute Excess
Losses; and (iii) the respective portions of such Realized Losses allocable to
interest and to principal.
(b) The principal portion of any Realized Losses other than Excess Losses
shall be allocated as follows: first, to the Class B-5 Certificates until the
Outstanding Certificate Principal Balance of the Class B-5 Certificates has been
reduced to zero; second, to the Class B-4 Certificates until the Outstanding
Certificate Principal Balance of the Class B-4 Certificates has been reduced to
zero; third, to Class B-3 Certificates until the Outstanding Certificate
Principal Balance of the Class B-3 Certificates has been reduced to zero;
fourth, to the Class B-2 Certificates until the Outstanding Certificate
Principal Balance of the Class B-2 Certificates has been reduced to zero; fifth,
to the Class B-1 Certificates until the Outstanding Certificate Principal
Balance of the Class B-1 Certificates has been reduced to zero; sixth, to the
Class M Certificates until the Outstanding Certificate Principal Balance of the
Class M Certificates has been reduced to zero; and seventh, (X) if the Realized
Loss has occurred with respect to a Group One Mortgage Loan, to the Non-PO Class
A Certificates on a pro rata basis until the Outstanding Certificate Principal
Balance of the Non-PO Class A Certificates has been reduced to zero or (Y) if
the Realized Loss has occurred with respect to a Group Two Mortgage Loan, to the
Class IIA-1 Certificates, until the Outstanding Certificate Principal Balance of
the Class IIA-1 Certificates has been reduced to zero; provided, however, that
if a Realized Loss occurs with respect to a Discount Mortgage Loan (A) the
amount of such Realized Loss equal to the product of (i) the amount of such
Realized Loss and (ii) the PO Percentage with respect to such Discount Mortgage
Loan will be allocated (X) to Class IA-1 Component Four (if the Realized Loss
has occurred with respect to a Group One Mortgage Loan) or (Y) to the Class
IIA-P Certificates (if the Realized Loss has occurred with respect to a Group
Two Mortgage Loan) and (B) the remainder of such Realized Loss will be allocated
as described above. The principal portion of any Excess Losses shall be
allocated without priority among (i) all Classes of Subordinated Certificates
and (ii) (a) the Classes or Components of Non-PO Class IA Certificates (if the
Excess Loss occurred with respect to a Group One Mortgage Loan), or (b) the
Class IIA-1 Certificates (if the Excess Loss occurred with respect to a Group
Two Mortgage Loan), pro rata based upon their respective Outstanding Certificate
Principal Balances; provided, however, that (i) the applicable PO Percentage of
any Excess Losses on the Discount Mortgage Loans in Mortgage Group One will be
allocated to Class IA-1 Component Four and (ii) the applicable PO Percentage of
any Excess Losses on the Discount Mortgage Loans in Mortgage Group Two will be
allocated to the Class IIA-P Certificates. For purposes of the foregoing
sentence, each Class of Subordinated Certificates will be deemed to have an
Outstanding Certificate Principal Balance (and to accrue interest thereon) equal
to the actual Outstanding Certificate Principal Balance thereof times a
fraction, the numerator of which is the Group One Subordinated Amount (for a
loss on a Group One Mortgage Loan) or the Group Two Subordinated Amount (for a
loss on a Group Two Mortgage Loan), and the denominator of which is the
aggregate of the Group One Subordinated Amount and the Group Two Subordinated
Amount.
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(c) As used herein, an allocation of a Realized Loss on a "pro rata basis"
among two or more specified Classes of Certificates means an allocation on a pro
rata basis, among the various Classes so specified, to each such Class of
Certificates on the basis of their then Outstanding Certificate Principal
Balances, prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
(d) In the event that a recovery is made with respect to any Realized Loss,
the amount of such recovery shall be distributed on the next Distribution Date
first to the Class A Certificateholders, up to the amount to which such Realized
Loss was allocated to the Class A Certificateholders; second to the Class M
Certificateholders, up to the amount to which such Realized Loss was allocated
to the Class M Certificateholders; third to the Class B-1 Certificateholders, up
to the amount to which such Realized Loss was allocated to the Class B-1
Certificateholders; fourth to the Class B-2 Certificateholders, up to the amount
to which such Realized Loss was allocated to the Class B-2 Certificateholders;
fifth to the Class B-3 Certificateholders, up to the amount to which such
Realized Loss was allocated to the Class B-3 Certificateholders; sixth to the
Class B-4 Certificateholders, up to the amount to which such Realized Loss was
allocated to the Class B-4 Certificateholders; and seventh to the Class B-5
Certificateholders, up to the amount to which such Realized Loss was allocated
to the Class B-5 Certificateholders.
Section 6.05. Compensating Interest; Allocation of Certain Interest
Shortfalls.
(a) Upon a Principal Prepayment of a Mortgage Loan, the Servicer shall
deposit into the Collection Account from its own funds, as a reduction of its
servicing compensation hereunder, an amount, if any, by which the amount of the
interest that would otherwise accrue with respect to such Mortgage Loan from the
date of prepayment to the Due Date in the related Due Period at the Net Mortgage
Rate exceeds the amount of the interest (adjusted to the Net Mortgage Rate)
collected from the Mortgagor with respect to such period (such amount,
"Compensating Interest"); provided, however, that the Servicer's obligation to
deposit any such amount is limited to the aggregate Servicing Fees (without
regard to the entitlement of the Servicer to a Servicing Fee with respect to the
Mortgage Loan being prepaid) received by the Servicer for the related
Distribution Date.
(b) On any Distribution Date, the excess, if any, of (X) Compensating
Interest with respect to such Distribution Date over (Y) the amount deposited in
the Collection Account pursuant to (a) above for such Distribution Date shall
equal the "Compensating Interest Shortfall" with respect to such Distribution
Date. On any Distribution Date, the Compensating Interest Shortfall shall be
allocated pro rata among the outstanding Classes and Components of Class A,
Class M and Class B Certificates based on the amount of interest to which each
such Class or Component would otherwise be paid (or, in the case of Class IA-1
Component Three
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and the Class IA-4 Certificates, have added to the Outstanding Certificate
Principal Balance thereof) on such Distribution Date had there been no such
Compensating Interest Shortfall.
(c) The interest portion of any Realized Losses ("Realized Loss Interest
Shortfall") shall be allocated as follows: first, to the Class B-5 Certificates,
second, to the Class B-4 Certificates, third, to the Class B-3 Certificates,
fourth, to the Class B-2 Certificates, fifth, to the Class B-1 Certificates,
sixth, to the Class M Certificates, in each case until the Outstanding
Certificate Principal Balance thereof has been reduced to zero, and seventh, the
remainder thereof shall be allocated to the Non-PO Class A Certificates pro rata
among the outstanding Classes and Components of Non-PO Class A Certificates
based on the amount of interest to which each such Class or Component would
otherwise be paid (or, in the case of Class IA-1 Component Three and the Class
IA-4 Certificates, have added to the Outstanding Certificate Principal Balance
thereof) on such Distribution Date had there been no such Realized Loss Interest
Shortfall.
Section 6.06. Subordination. The rights of the Class B Certificateholders
to receive distributions in respect of the Class B Certificates on any
Distribution Date shall be subordinated to the rights of the Class A and Class M
Certificateholders to receive distributions in respect of the Class A and Class
M Certificates. The rights of the Class M Certificateholders to receive
distributions in respect of the Class M Certificates on any Distribution Date
shall be subordinated to the rights of the Class A Certificateholders to receive
distributions in respect of the Class A Certificates. The rights of the Class
B-1 Certificateholders to receive distributions in respect of the Class B-1
Certificates on any Distribution Date shall be subordinate to the rights of the
Class A and Class M Certificateholders to receive distributions in respect of
such Class A and Class M Certificates. Each Class of Class B Certificates (other
than the Class B-1 Certificates) is subordinated to the Class A Certificates,
the Class M Certificates and each Class of Class B Certificates having a lower
numerical class designation than such Class of Class B Certificates. The rights
of the Servicer, as servicer, to receive funds from the Collection Account,
pursuant to Section 5.09, on account of the Servicing Fee (except as provided in
Section 6.05) in respect of each Mortgage Loan, assumption fees, late payment
charges and other mortgagor charges, reimbursement of Advances and expenses or
otherwise, shall not be subordinated to the rights of the Class A, Class M or
Class B Certificateholders. Amounts held by the Servicer or the Trustee for
future distribution to the Class M or Class B Certificateholders, including,
without limitation, in the Collection Account or the Certificate Account, shall
not be distributed in respect of the Class M or Class B Certificates except in
accordance with the terms of this Agreement. The Class B Certificateholders are
deemed to have granted a security interest in such amounts to the Class A and
Class M Certificateholders to secure the rights of the Class A and Class M
Certificateholders to receive distributions in priority over the Class B
Certificateholders. The Class M Certificateholders are deemed to have granted a
security interest in such amounts to the Class A Certificateholders to secure
the rights of the Class A Certificateholders to receive distributions in
priority over the Class A Certificateholders.
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ARTICLE VII
[RESERVED]
ARTICLE VIII
THE DEPOSITOR AND THE SERVICER
Section 8.01. Indemnification; Third Party Claims. The Servicer agrees to
indemnify the Depositor and the Trustee and hold the Depositor and the Trustee,
their officers, directors, employees and agents harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Depositor or the
Trustee may sustain in any way related to failure of the Servicer to perform its
duties and service the Mortgage Loans in compliance with the terms of this
Agreement; provided that no such indemnification shall be required with respect
to acts of a prior Servicer. The Servicer shall immediately notify the Depositor
and the Trustee if a claim is made by a third party with respect to this
Agreement or the Mortgage Loans, assume (with the consent of the Depositor and
the Trustee) the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it, the Depositor or the Trustee
in respect of such claim. This right to indemnification shall survive the
termination of this Agreement.
Section 8.02. Merger or Consolidation of the Depositor or the Servicer. The
Depositor and the Servicer will each keep in full effect its existence, rights
and franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its duties under this Agreement. The Servicer will not sell all
or substantially all of its assets without the prior written consent of the
Depositor and the Trustee, it being expressly understood and agreed that no such
consent shall be required in connection with the sale to National Australia Bank
Limited of the Servicer's parent, HomeSide, Inc.
Any person into which the Depositor or the Servicer may be merged or
consolidated, or to whom the Depositor or the Servicer has sold substantially
all of its assets, or any corporation resulting from any merger, conversion or
consolidation to which the Depositor or the Servicer shall be a party, or any
Person succeeding to the business of the Depositor or the Servicer, shall be the
successor of the Depositor or the Servicer 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 or surviving Person to the Servicer shall satisfy the requirements of
Section 8.05 with respect to the qualifications of a successor to the Servicer.
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Notwithstanding anything else in this Section 8.02 and Section 8.04 to the
contrary, the Servicer may assign its rights and delegate its duties and
obligations under this Agreement; provided that the Person accepting such
assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is approved in advance in writing by
the Trustee and the Depositor, is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustee an agreement, in form and
substance reasonably satisfactory to the Depositor and the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Servicer under this Agreement; provided further that each Rating Agency's rating
of any of the Classes of Certificates that have been rated in effect immediately
prior to such assignment and delegation will not be qualified or reduced or
withdrawn as a result of such assignment and delegation. In the case of any such
assignment and delegation, the Servicer shall be released from its obligations
as Servicer under this Agreement, except that the Servicer shall remain liable
for all liabilities and obligations incurred by it as Servicer hereunder prior
to the satisfaction of the conditions to such assignment and delegation set
forth in the next preceding sentence.
Section 8.03. Limitation on Liability of the Depositor, the Servicer, the
Trustee and Others. Neither the Depositor, the Servicer nor any of the
directors, officers, employees or agents of the Depositor or the Servicer shall
be under any liability to the Trustee or the Certificateholders for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor or the Servicer against any breach of
warranties or representations made herein, or failure to perform its obligations
in strict compliance with this Agreement, or any liability which would otherwise
be imposed by reason of any breach of the terms and conditions of this
Agreement. The Depositor, the Servicer, the Trustee, and any director, officer,
employee or agent of the Depositor, the Servicer or the Trustee 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. Neither the Depositor, the
Trustee nor the Servicer shall be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its respective duties to
service the Mortgage Loans in accordance with this Agreement and which in its
opinion may cause it to incur any expenses or liability; provided, however, that
the Depositor, the Trustee or the Servicer may in its discretion (and, in the
case of the Depositor or the Servicer, with the consent of the Trustee, which
consent shall not be unreasonably withheld) undertake any such action which it
may deem necessary or desirable with respect to this Agreement and the rights
and duties of the parties hereto. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities payable from the Certificate Account and the Depositor, the Servicer
or the Trustee shall be entitled to be reimbursed therefor out of the
Certificate Account as provided by Section 4.06; provided that no such right of
reimbursement shall exist with respect to the Servicer when such claim relates
to the failure of the Servicer to service the Mortgage Loans in strict
compliance with the terms of this Agreement or to a breach of a representation
or warranty made by the Servicer hereunder.
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Section 8.04. Depositor and Servicer Not to Resign. Except as described in
Section 8.02, neither the Depositor nor the Servicer shall assign this Agreement
or resign from the obligations and duties hereby imposed on it except by mutual
consent of the Depositor, the Servicer and all of the Certificateholders unless
the determination is made that its duties hereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the Depositor or the
Servicer. Any such determination permitting the resignation of the Depositor or
the Servicer shall be evidenced by an opinion of independent counsel to such
effect delivered to the Trustee which opinion of counsel shall be in form and
substance acceptable to the Trustee. Upon any such assignment or resignation,
the Depositor or the Servicer, as appropriate, shall send notice to all
Certificateholders of the effect of such assignment or resignation upon the then
current rating of the Class of Certificates by each Rating Agency whose rating
on such Class is then in effect. No such resignation shall become effective
until a successor shall have assumed the Depositor's or the Servicer's
responsibilities and obligations hereunder in the manner provided in Section
8.05. Any purported assignment or resignation which does not comply with the
requirements of this Section shall be of no effect.
Section 8.05. Successor to the Servicer. In connection with the termination
of the Servicer's responsibilities and duties under this Agreement pursuant to
Section 8.04 or 9.01, the Trustee shall (i) succeed to and assume all of the
Servicer's responsibilities, rights, duties and obligations as Servicer (but not
in any other capacity) under this Agreement (except that the Trustee shall not
be obligated to make Advances if prohibited by applicable law nor to effectuate
repurchases or substitutions of Mortgage Loans pursuant to Section 2.02 and
except that the Trustee makes no representations and warranties pursuant to
Sections 3.01, 3.02 and 3.03). Prior to the termination of the Servicer's
responsibilities, duties and liabilities under this Agreement, the Trustee may
appoint a successor having a net worth of not less than $15,000,000 and which is
a FNMA or FHLMC approved seller/servicer in good standing and which shall
succeed to all rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement, except as aforesaid, if the
Trustee receives a letter from each Rating Agency that such appointment would
not result in a reduction or withdrawal of the current rating of any Class of
Certificates that is rated by a Rating Agency. Any co-trustee appointed pursuant
to Section 10.10 for purposes of this Section 8.05 shall have an obligation to
make Advances pursuant to Section 6.03 during such time as the Trustee is the
Servicer, which obligation shall be joint and several with that of the Trustee
as Servicer. If the Trustee has become the successor to the Servicer in
accordance with this Section or Section 9.03, then notwithstanding the above,
the Trustee may, if it shall be unwilling to so act, or shall, if it is unable
to so act, appoint, or petition a court of competent jurisdiction to appoint,
any established housing and home finance institution having a net worth of not
less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in
good standing as the successor to the Servicer hereunder in the assumption of
all of the responsibilities, duties or liabilities of the Servicer hereunder. In
connection with any such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree or such court shall determine;
provided, however, that no such compensation shall be in excess of that
permitted under this Agreement without the consent of all
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of the Certificateholders. If the Servicer's duties, responsibilities and
liabilities under this Agreement should be terminated pursuant to Section 8.02,
8.04 or 9.01, the Servicer shall discharge such duties and responsibilities
during the period from the date it acquires knowledge of such termination until
the effective date thereof with the same degree of diligence and prudence which
it is obligated to exercise under this Agreement, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition of
its successor or the Trust Fund. The resignation or removal of the Servicer
pursuant to Section 8.02, 8.04 or 9.01 shall not become effective until a
successor shall be appointed pursuant to this Section and shall in no event
relieve the Servicer of liability for breach of the representations and
warranties made pursuant to Section 3.03.
Any successor appointed as provided herein shall execute, acknowledge and
deliver to the Servicer and to the Trustee an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer, with like effect as if originally named as a party to this Agreement
and the Certificates. Any termination or resignation of the Servicer or this
Agreement pursuant to Section 8.02, 8.04, 9.01 or 11.01 shall not affect any
claims that the Trustee may have against the Servicer for events or actions
taken or not taken by the Servicer arising prior to any such termination or
resignation.
The Servicer shall timely deliver to the successor the funds that were, or
were required to be, in the Certificate Account and the Escrow Account, if any,
and all Mortgage Files and related documents, statements and recordkeeping held
by it hereunder and the Servicer shall account for all funds and shall execute
and deliver such instruments and do such other things as may reasonably be
required to more fully and definitely vest and confirm in the successor all such
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer. The Servicer shall pay the reasonable expenses of the successor
Servicer relating to the transfer of servicing hereunder to such successor.
Upon a successor's acceptance of appointment as such, the Servicer shall
notify, in writing, the Trustee, the Certificateholders and each Rating Agency
of such appointment.
Section 8.06. Maintenance of Ratings. The Servicer shall cooperate with the
Depositor and take any action that may be reasonably necessary to maintain the
current rating or ratings on the Certificates.
[End of Article VIII]
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ARTICLE IX
DEFAULT
Section 9.01. Events of Default. If one or more of the following Events of
Default shall occur and be continuing, that is to say:
(i) any failure by the Servicer to remit to the Trustee any payment
required to be made or distributed under the terms of this Agreement which
continues unremedied for a period of three Business Days after the date
upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or the
Depositor or to the Servicer, the Trustee and the Depositor by the Holders
of Certificates of any Class evidencing, as to such Class, Percentage
Interests aggregating not less than 25%; or
(ii) a breach by the Servicer in a material respect of any
representation or warranty set forth in Section 3.03, or failure on the
part of the Servicer duly to observe or perform in any material respect any
other of the covenants or agreements on the part of the Servicer set forth
in this Agreement, which continues unremedied for a period of 60 days after
the date on which written notice of such breach or failure, requiring the
same to be remedied, shall have been given to the Servicer by the Trustee
or the Depositor or to the Servicer, the Trustee and the Depositor by the
Holders of Certificates of any Class evidencing, as to such Class,
Percentage Interests aggregating not less than 25%; or
(iii) the Servicer shall notify the Trustee in writing that it is
unable to make an Advance required to be made in accordance with Section
6.03; or;
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(v) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property; or
(vi) 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.
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then, and in each and every such case, so long as an Event of Default shall
not have been remedied, the Trustee shall notify the Certificateholders and
each Rating Agency of such Event of Default. The Trustee may, and at the
written direction of the Holders of Certificates evidencing Percentage
Interests aggregating more than 50%, shall, by notice in writing to the
Servicer, terminate all the rights and obligations of the Servicer under
this Agreement and in and to the Mortgage Loans and the proceeds thereof.
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 Mortgage Loans or otherwise, shall pass to and be vested in
the successor appointed pursuant to Section 8.05. Upon written request from
the Trustee, the Servicer shall prepare, execute and deliver, any and all
documents and other instruments, place in such successor's possession all
Mortgage Files, and 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 or assignment of the Mortgage
Loans and related documents, or otherwise, at the Servicer's sole expense.
The Servicer agrees to cooperate with the Trustee and any co-trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to such successor
for administration by it of all cash amounts which shall at the time be
credited or should have been credited by the Servicer to the Certificate
Account or Escrow Account or thereafter received with respect to the
Mortgage Loans. The Trustee will have no obligation to take any action or
institute, conduct or defend any litigation under this Agreement at the
request, order or direction of any of the Holders of Certificates unless
such Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which the Trustee may
incur.
Section 9.02. Waiver of Defaults. The Trustee may waive any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except that a default in the making of any required distribution on any of the
Certificates may only be waived by the holders of a majority of the Percentage
Interests of the affected Certificateholders. Upon any such 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 thereon except to the extent expressly so waived.
Section 9.03. Trustee to Act; Appointment of Successor. On and after the
time the Servicer receives a notice of termination pursuant to Section 9.01, the
Trustee or its appointed agent shall be the successor in all respects to the
Servicer to the extent provided in Section 8.05.
Section 9.04. Notification to Certificateholders and the Rating Agencies.
(a) Upon any such termination pursuant to Section 9.01, the Trustee shall
give prompt written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register and to each Rating Agency.
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(b) Within 60 days of a Responsible Officer of the Trustee having received
written notice of the occurrence of any Event of Default, the Trustee shall
transmit by mail to all Holders of Certificates notice of each such Event of
Default hereunder known to the Trustee, unless such Event of Default shall have
been cured or waived.
[End of Article IX]
ARTICLE X
CONCERNING THE TRUSTEE
Section 10.01. Duties of Trustee. 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, and is empowered to, perform such duties and only such
duties as are specifically set forth in this Agreement. Any permissive right of
the Trustee as enumerated in this Agreement shall not be construed as a duty;
provided that in case an Event of Default has occurred (which has not been
cured), 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 such
man's own affairs.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, and, if the Trustee is acting as the successor
Servicer pursuant to Section 8.05 or 9.03, its own willful misconduct with
respect to its servicing obligations; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) The Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of
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Certificateholders of any Class holding Certificates which evidence, as to
such Class, Percentage Interests aggregating not less than 25% as to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Agreement.
Section 10.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 10.01:
(a) The Trustee may rely upon and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) The Trustee may consult with counsel, and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement or to institute, conduct or
defend 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; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to exercise
such of the rights and powers vested in it by this Agreement, and to use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of such man's own
affairs;
(d) Neither the Trustee nor any of its directors, officers, employees
or agents shall be personally liable for any action taken, suffered or
omitted by it in good faith and believed by it or any of them to be
authorized or within the discretion or rights or powers conferred upon the
Trustee by this Agreement;
(e) Prior to the occurrence of an Event of Default hereunder and after
the curing of all Events of Default which may have occurred, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing to do so by Holders of Certificates
of any Class evidencing, as to such Class, Percentage Interests aggregating
not less than 25% (in the case of conflicting requests by two or more 25%
or greater Percentage
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Interests, the Trustee shall act in accordance with the first such
request); provided, however, that if the payment within a reasonable time
to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Agreement, the Trustee may require reasonable
indemnity against such expense or liability as a condition to such
proceeding. The reasonable expense of every such examination shall be paid
by the Servicer, if an Event of Default shall have occurred and is
continuing, and otherwise by the Certificateholder requesting the
investigation;
(f) 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; and
(g) Nothing in this Agreement shall be construed to require the
Trustee (acting in its capacity as Trustee) to expend its own funds.
Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the authentication
of the Certificates by an authorized signatory of the Trustee) shall be taken as
the statements of the Depositor or the Servicer, as the case may be, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations or warranties as to the validity or sufficiency of this
Agreement or of the Certificates (except that the Certificates shall be duly and
validly executed and authenticated by it) or of any Mortgage Loan or related
document. The Trustee shall not be accountable for the use or application by the
Depositor or the Servicer of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Depositor
or the Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Certificate Account by the Depositor or the Servicer.
Section 10.04. 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 it would have if it were not Trustee.
Section 10.05. Fees and Expenses. On each Distribution Date, the Trustee
shall be entitled to receive, as compensation for all services rendered by it in
the execution of the trust hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee, the Trustee Fee with
respect to such Distribution Date, payable in accordance with Section
6.01(a)(i). The Servicer agrees to indemnify the Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
arising in respect of this Agreement or the Certificates, other than those
resulting from the negligence, bad faith or intentional misconduct of the
Trustee.
Section 10.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be an entity having its principal office in a state and city
acceptable to the
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Depositor and organized and doing business under the laws of such state or
the United States of America, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority. The Trustee
shall not be an affiliate of either Seller or the Depositor. If such entity
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 10.07.
Section 10.07. Resignation and Removal of the Trustee. The Trustee, and any
co-trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Depositor, the Servicer and each
Rating Agency. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee or co-trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee; provided that such appointment
does not result in a reduction or withdrawal of the rating of any of the Classes
of Certificates that have been rated. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time, the Trustee shall cease to be eligible in accordance with
the provisions of Section 10.06 and shall fail to resign after written request
therefor by the Depositor, or if at any time the Trustee shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Depositor may remove
the Trustee and appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee.
The Holders of Certificates evidencing in the aggregate more than 50% of
Percentage Interest may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Depositor, one complete set to the Trustee
so removed and one complete set to the successor so appointed.
Any resignation or removal of the Trustee or any resignation of any
co-trustee and appointment of a successor trustee or co-trustee pursuant to any
of the provisions of this Section shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 10.08, or upon
acceptance of appointment by a co-trustee, as applicable, unless with respect to
a co-trustee, the Trustee receives written notice from each Rating Agency that
the failure to appoint a successor co-trustee would not result in a withdrawal
or reduction of the
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rating of any of the Classes of Certificates that have been rated, in which case
the resignation of any co-trustee shall be effective upon receipt of such
written notice. Any co-trustee may not be removed unless the Depositor and the
Trustee each receive written notice from each Rating Agency that such removal
would not result in a withdrawal or reduction of the rating of any of the
Classes of Certificates that have been rated, in which case the removal of any
co-trustee shall be effective upon receipt of such written notice.
Section 10.08. Successor Trustee. Any successor trustee appointed as
provided in Section 10.07 shall execute, acknowledge and deliver to the
Depositor 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 shall
become effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Depositor, the Servicer and the predecessor trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 10.06. Prior to the appointment of any successor
trustee becoming effective, the Depositor shall have received from each Rating
Agency written confirmation that such appointment would not result in a
reduction of the rating of the Class A or Class M Certificates.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register, to the Servicer, any Sub-Servicer and to each Rating
Agency. If the Depositor fails to mail such notice within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Depositor.
Section 10.09. Merger or Consolidation of Trustee. Any entity into which
the Trustee may be merged or converted or with which it may be consolidated or
any entity resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any entity succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 10.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 10.10. Appointment of Co-Trustee or Separate Trustee. At any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the
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Trust Fund or property securing the same may at the time be located, the
Depositor 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, of any
part of the Trust Fund, and to vest in such Person or Persons, in such capacity,
such title to the Trust Fund, or any part thereof, and, subject to the other
provisions of this Section 10.10, such powers, duties, obligations, rights and
trusts as the Depositor and the Trustee may consider necessary or desirable. If
the Depositor shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in case an Event of Default shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 10.06,
hereunder, and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 10.08
hereof.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 10.10, all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly and
severally, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
Every instrument appointing any separate trustee or co-trustee shall refer
to this Agreement and the conditions of this Article X. 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.
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.
Section 10.11. Appointment of Office or Agency. The Trustee may appoint an
office or agency in The City of New York where Certificates may be surrendered
for registration of transfer or exchange. The Trustee will maintain an office at
the address stated in Section 12.07 hereof where notices and demands to or upon
the Trustee in respect of the Certificates may be served.
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Section 10.12. 1934 Act Reports. (a) The Trustee shall, on behalf of the
Trust, make all filings ("Periodic Reports") required to be made by the
Depositor or the Trust (other than the filings relating to the closing of this
transaction) with respect to the Class A Certificates, the Class M Certificates,
the Class B-1 Certificates and the Class B-2 Certificates pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations of the Securities and Exchange Commission (the "Commission")
thereunder.
(b) Within 30 days after the beginning of the first fiscal year during
which the Trust's obligation to file Periodic Reports pursuant to the Exchange
Act shall have been suspended, the Trustee shall prepare, or cause to be
prepared, a notice on Commission Form 15 ("Form 15") and is hereby authorized to
and shall execute such Form 15 on the Trust's behalf; provided, however, that
the Trustee shall be under no obligation to prepare such notice if the number of
Certificateholders exceeds 300. The Trustee shall file any notice on Form 15
with the Commission in accordance with the provisions of Rule 15d-6 under the
Exchange Act.
[End of Article X]
ARTICLE XI
TERMINATION
Section 11.01. Termination. The respective obligations and responsibilities
of the Depositor, the Servicer (except the duty to pay the Trustee's fees and
expenses and indemnification hereunder) and the Trustee shall terminate upon (i)
the later of the final payment or other liquidation (or any Advance with respect
thereto) of the last Mortgage Loan or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due hereunder; or (ii) at the option of the Servicer, on
any Distribution Date which occurs in the month next following a Due Date on
which the aggregate unpaid Principal Balance of all Outstanding Mortgage Loans
is less than 5% of the aggregate unpaid Principal Balance of the Mortgage Loans
on the Cut-off Date, so long as the Servicer deposits or causes to be deposited
in the Collection Account during the Principal Prepayment Period related to such
Distribution Date (and provides notice to the Trustee of its intention to so
deposit on or before the 20th day of such Principal Prepayment Period) an amount
equal to the Purchase Price for each Outstanding Mortgage Loan, less any
unreimbursed Advances made with respect to any Mortgage Loan (which amount shall
offset completely any unreimbursed Advances for which the Servicer is otherwise
entitled to reimbursement), and, with respect to all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the
fair market value of such property, as determined by an appraisal to be
conducted by an appraiser selected by the Trustee, less unreimbursed Advances
made with respect to any Mortgage Loan with respect to which property has been
acquired; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James's, living on the date hereof.
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Notwithstanding the foregoing, a termination may be effected by the making of
such optional repurchases only if the Trustee has received an Opinion of Counsel
that the termination of the Trust Fund will constitute a "qualified liquidation"
of each REMIC Pool within the meaning of Section 860F(a)(4) of the Code and that
the purchases of the Outstanding Mortgage Loans pursuant to the Section 11.01
will not constitute "prohibited transactions" within the meaning of Section
860F(a)(2) of the Code.
Notice of any termination, specifying the Distribution Date upon which all
Certificateholders may surrender their Certificates to the Trustee for payment
and cancellation, shall be given promptly by the Trustee (upon direction by the
Depositor 10 days prior to the date such notice is to be mailed) by signed
letter to Certificateholders and each Rating Agency mailed no later than the
25th day of the month preceding the month of such final distribution specifying
(i) the Distribution Date upon which final payment on 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 payment and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. The
Trustee shall indicate the date of adoption of the plan of qualified liquidation
(such plan having been prepared by the Servicer or its designee) in a statement
attached to the final federal income tax return of each REMIC Pool. After giving
such notice, the Trustee shall not register the transfer or exchange of any
Certificates. If such notice is given in connection with the Servicer's election
to purchase the Outstanding Mortgage Loans, the Servicer shall deposit in the
Collection Account after adoption of the plan during the applicable Principal
Prepayment Period an amount equal to the purchase price as determined as
provided in clause (ii) of the preceding paragraph and on the Distribution Date
on which such termination is to occur, Certificateholders will be entitled to
the amount of such purchase price but not amounts in excess thereof, all as
provided herein. Upon presentation and surrender of the Certificates, the
Trustee shall distribute to Certificateholders an amount equal to (a) the amount
otherwise distributable on such Distribution Date, if not in connection with a
purchase; or (b) if the Servicer elected to so purchase, the purchase price
determined as provided in clause (ii) of the preceding paragraph. Following such
final deposit the Trustee shall promptly release to the Servicer the Mortgage
Files for the remaining Mortgage Loans, and the Trustee shall execute all
assignments, endorsements and other instruments necessary to effectuate such
transfer and shall have no further responsibility with regard to said Mortgage
Files.
If all of the Certificateholders shall not surrender their Certificates for
cancellation within three months after the time specified in the above-mentioned
written notice, at the close of the 90 day period beginning after the written
notice is given, each remaining Certificateholder will be credited with an
amount that would have been otherwise distributed to such Certificateholder, and
the Trustee 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 three months after the
second notice all the Certificates shall not have been surrendered for
cancellation, the Trustee shall appoint an agent to take appropriate and
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reasonable steps to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets which remain in the Trust Fund hereunder.
[End of Article XI]
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. 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.
Section 12.02. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding-up of the Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision 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 the Holders of Certificates
of any Class evidencing in the aggregate not less than 25% of the Percentage
Interests of such Class shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
(in the case of conflicting requests by two or more 25% or greater Percentage
Interests, the Trustee shall act in accordance with the first such request) 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
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Certificateholder and the Trustee, that no one or more Holders of Certificates
of any Class shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates of such Class or any other Class, 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 common benefit of Certificateholders of such Class
or all Classes, as the case may be. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 12.03. Amendment. This Agreement may be amended from time to time
by the Depositor, the Servicer and the Trustee, without the consent of any of
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, to
ensure continuing treatment of each REMIC Pool as a REMIC, to avoid or minimize
the risk of imposition of any tax on either REMIC Pool pursuant to the Code or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be materially inconsistent with the provisions of
this Agreement, provided that such actions shall not, as evidenced by an Opinion
of Counsel, adversely affect in any material respect the interests of any
Certificateholder of a Class having an Outstanding Certificate Principal Balance
of greater than zero or cause either REMIC Pool to fail to qualify as a REMIC.
This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of
each Class of Certificates having an Outstanding Certificate Principal Balance
greater than zero and affected thereby for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01, without the consent of the Holders
of all Certificates of such Class then outstanding.
Promptly after the execution of any such amendment the Trustee shall
furnish written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under this
Section 12.03 to approve the particular form of any proposed amendment but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of
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evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.
Section 12.04. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 12.05. Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 12.06. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 12.07. Notices. 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 first class or registered mail, postage prepaid, to
(i) in the case of the Depositor, HomeSide Mortgage Securities, Inc., 7301
Baymeadows Way, Jacksonville, Florida 32256, Attention: General Counsel, (ii) in
the case of the Servicer, HomeSide Lending, Inc., 7301 Baymeadows Way,
Jacksonville, Florida 32256, Attention: General Counsel, (iii) in the case of
the Trustee, Norwest Bank Minnesota, National Association, Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attn: Corporate Trust
Services - HomeSide 1998-2 with a copy to the Trustee at 11000 Broken Land
Parkway, Columbia, Maryland 21044 Attn: HomeSide 1998-2, (iv) in the case of
S&P, Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., 25 Broadway, New York, New York, 10004, (v) in the case of
Fitch, Fitch IBCA, Inc., 1 State Street Plaza, New York, New York 10004, and
(vi) in the case of any of the foregoing persons, such other addresses as may
hereafter be furnished by any such persons to the other parties to this
Agreement.
[End of Article XII]
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IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
HOMESIDE MORTGAGE SECURITIES, INC.
By: /s/ G. Alan Howard
---------------------------------
Name: G. Alan Howard
Title: Vice President
HOMESIDE LENDING, INC.
By: /s/ G. Alan Howard
---------------------------------
Name: G. Alan Howard
Title: First Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ Peter J. Masterman
--------------------------------
Name: Peter J. Masterman
Title: Vice President
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EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT B
CONTENTS OF MORTGAGE FILE
(A) (I) Original Mortgage Note (or a lost note affidavit (including a copy
of the original Mortgage Note)) or (II) original Consolidation, Extension and
Modification Agreement (or a lost note affidavit (including a copy of the
original Consolidation, Extension and Modification Agreement), in either case
endorsed, "Pay to the order of Norwest Bank Minnesota, National Association, as
trustee, without recourse."
(B) The original Mortgage (including all riders thereto) with evidence of
recording thereon, or a copy thereof certified by the public recording office in
which such mortgage has been recorded or, if the original Mortgage has not been
returned from the applicable public recording office, a true certified copy,
certified by the Seller, of the original Mortgage together with a certificate of
the Seller certifying that the original Mortgage has been delivered for
recording in the appropriate public recording office of the jurisdiction in
which the Mortgaged Property is located.
(C) The original or certified to be true copy, certified by the Seller, of
the Primary Insurance Policy, if required.
(D) The original Assignment of Mortgage to "Norwest Bank Minnesota,
National Association, as trustee," which assignment shall be in form and
substance acceptable for recording, or a copy certified by the Seller as a true
and correct copy of the original Assignment which has been sent for recordation.
Subject to the foregoing, such assignments may, if permitted by law, be by
blanket assignments for Mortgage Loans covering Mortgaged Properties situated
within the same county. If the Assignment of Mortgage is in blanket form, a copy
of the Assignment of Mortgage shall be included in the related individual
Mortgage File.
(E) The original policy of title insurance, including riders and
endorsements thereto, or if the policy has not yet been issued, a written
commitment or interim binder or preliminary report of title issued by the title
insurance or escrow company.
(F) Originals of all recorded intervening Assignments of Mortgage, or
copies thereof, certified by the public recording office in which such
Assignments or Mortgage have been recorded showing a complete chain of title
from the originator to the Depositor, with evidence of recording, thereon, or a
copy thereof certified by the public recording office in which such Assignment
of Mortgage has been recorded or, if the original Assignment of Mortgage has not
been returned from the applicable public recording office, a true certified
copy, certified by the Seller of the original Assignment of Mortgage together
with a certificate of the Seller certifying that the original
<PAGE>
Assignment of Mortgage has been delivered for recording in the appropriate
public recording office of the jurisdiction in which the Mortgaged Property is
located.
(G) Originals, or copies thereof certified by the public recording office
in which such documents have been recorded, of each assumption, extension,
modification, written assurance or substitution agreements, if applicable, or if
the original of such document has not been returned from the applicable public
recording office, a true certified copy, certified by the Seller, of such
original document together with certificate of Seller certifying the original of
such document has been delivered for recording in the appropriate recording
office of the jurisdiction in which the Mortgaged Property is located.
(H) If the Mortgaged Note or Mortgage or any other material document or
instrument relating to the Mortgaged Loan has been signed by a person on behalf
of the Mortgagor, the original power of attorney or other instrument that
authorized and empowered such person to sign bearing evidence that such
instrument has been recorded, if so required in the appropriate jurisdiction
where the Mortgaged Property is located (or, in lieu thereof, a duplicate or
conformed copy of such instrument, together with a certificate of receipt from
the recording office, certifying that such copy represents a true and complete
copy of the original and that such original has been or is currently submitted
to be recorded in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located), or if the original power
of attorney or other such instrument has been delivered for recording in the
appropriate public recording office of the jurisdiction in which the Mortgaged
Property is located.
<PAGE>
EXHIBIT C
FORMS OF CLASS A CERTIFICATES
<PAGE>
SOLELY FOR 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.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN HOMESIDE
MORTGAGE SECURITIES, INC., THE SERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY
OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST
REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED
BY HOMESIDE MORTGAGE SECURITIES, INC., HOMESIDE LENDING, INC., THE TRUSTEE OR BY
ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 1998-2 CLASS IA-1
Number 98-2-IA-1 Original Denomination:
$
---------------------
Cut-off Date: May 1, 1998 Final Scheduled Distribution
Date:
------------------------
First Distribution Date:
June 25, 1998 Approximate Aggregate Original
Denomination of all Class IA-1
Certificate Rate: Variable Rate Certificates: $
----------------
evidencing an interest in distributions allocable to the Class IA-1 Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
HOMESIDE MORTGAGE SECURITIES, INC. CUSIP: ______________
<PAGE>
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Trustee for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
This certifies that [Cede & Co.] is the registered owner of the ownership
interest evidenced by this Certificate (obtained by dividing the Original
Denomination of this Certificate by the aggregate Original Denomination of all
Class IA-1 Certificates) in certain monthly distributions with respect to a pool
(the "Mortgage Pool") of conventional one- to four-family adjustable rate
mortgage loans (the "Mortgage Loans") formed and sold by HomeSide Mortgage
Securities, Inc. (the "Company"), which Mortgage Loans are secured by Mortgaged
Properties, and in certain other property held in trust for the benefit of the
Certificateholders (collectively, the "Trust Fund"). The Mortgage Loans are
serviced by HomeSide Lending, Inc. (in such capacity, the "Servicer"). The Trust
Fund was created pursuant to a Pooling and Servicing Agreement dated as of May
1, 1998 (the "Agreement") among the Company, the Servicer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not defined herein, the capitalized terms used herein shall have the meanings
assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
Class A (the "Class A Certificates") and 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. Also issued under the Agreement are Certificates designated as
Multi-Class Mortgage Pass-Through Certificates, Series 1998-2, Class M (the
"Class M Certificates") and Class B (the "Class B Certificates"). The Class A
Certificates, the Class M Certificates and the Class B Certificates are
collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Trustee will distribute from
funds in the Certificate Account the amount as described on the reverse hereof
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on June
25, 1998. Such distributions will be made to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month in which such payment is made, or if such last day
is not a Business Day, the Business Day immediately preceding such last day (the
"Record Date").
Distributions on this Certificate will be made either by check mailed to
the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a
<PAGE>
bank or other financial or depository institution having appropriate
facilities therefor, if such Holder has so notified the Paying Agent in writing
at least 10 Business Days prior to the first Distribution Date for which
distribution by wire transfer is to be made, and such Holder's Certificates
evidence an aggregate original principal balance of not less than $5,000,000.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office of the
Trustee or agency appointed by the Trustee for the purpose and specified in such
notice of final distribution.
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.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: May 27, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Trustee
By
---------------------------------
Certificate of Authentication
This is one of the Class [A-1] Certificates
referred to in the within-mentioned
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Authenticating Agent
By
---------------------------------
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 1998-2
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
issued in twelve Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the Principal Balance
of this Certificate will be different from the Original Denomination shown
above. Anyone acquiring this Certificate may ascertain its current Principal
Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that it will look
solely to the Trust Fund and certain amounts resulting from credit enhancements
for payment hereunder and that the Trustee is not liable to the Holders 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 hereby, and the rights, duties and
immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust Office in
Minneapolis, Minnesota, or at the office of its designated agent, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Trustee will provide for the registration of Certificates and of transfers
and exchanges of Certificates. Upon surrender for registration of transfer of
any Certificate at any office or agency of the Trustee maintained for such
purpose, the Trustee will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Trustee.
No service charge will be made to the Holder for any transfer or exchange
of the Certificate, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of the Certificate. Prior to due presentation of a
Certificate for registration of transfer, the Company, the Servicer and the
Trustee may treat the person in whose name any Certificate is registered as the
<PAGE>
owner of such Certificate and the Percentage Interest in the Trust Fund
evidenced thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Company, the
Servicer nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the Servicer
and the Trustee, without the consent of any of the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions therein which may be
inconsistent with the other provisions therein, to ensure continuing treatment
of each REMIC Pool as a REMIC, to avoid or minimize the risk of imposition of
any tax on either REMIC Pool pursuant to the Code or to make any other
provisions with respect to matters or questions arising under the Agreement
which are not materially inconsistent with the provisions of the Agreement,
provided that such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Company, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the Company, the
Servicer and the Trustee under the Agreement will terminate upon (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon the
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less
than 5% of the aggregate unpaid Principal Balance of the Mortgage Loans on the
Cut-off Date, so long as the Servicer deposits or causes to be deposited in the
Certificate Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the Purchase Price for each Mortgage Loan,
less any unreimbursed Advances made with respect to any Mortgage Loan, and with
respect to all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years after
the Closing Date and (ii) the expiration of 21 years from the death of
<PAGE>
the last survivor of the descendants of Joseph P. Kennedy, the late ambassador
of the United States to the Court of St. James's, living on the date hereof.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty)
_______________________________
NOTICE: The signature to
this assignment must
correspond with the name as
it appears upon the face of
the within Certificate in
every particular, without
alteration or enlargement
or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT D
FORM OF CLASS M CERTIFICATE
THIS CLASS M CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
SOLELY FOR 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.
[THIS CERTIFICATE WAS ISSUED ON MAY 27, 1998 AND IS TREATED AS HAVING BEEN
ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES.
ASSUMING THAT THIS CERTIFICATE PAYS IN ACCORDANCE WITH PROJECTED CASH FLOWS
BASED ON CERTAIN ASSUMPTIONS USED IN PRICING THE CERTIFICATES: (I) THE AMOUNT OF
OID IS APPROXIMATELY [ ] PER [ ] OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS
CERTIFICATE, (II) THE ANNUAL YIELD OF THIS CERTIFICATE FOR PURPOSES OF COMPUTING
OID IS APPROXIMATELY [ ] PER ANNUM (COMPOUNDED MONTHLY) AND (III) THE AMOUNT OF
OID ALLOCABLE TO THE INITIAL SHORT PERIOD IS [ ] PER $1,000 OF THE ORIGINAL
PRINCIPAL AMOUNT OF THIS CERTIFICATE USING THE EXACT METHOD. THE ACTUAL YIELD TO
MATURITY AND OID ON THIS CERTIFICATE MAY DIFFER FROM THE PROJECTED AMOUNTS. THE
PREPAYMENT ASSUMPTION USED IN DETERMINING THE ANNUAL YIELD FOR FEDERAL INCOME
TAX PURPOSES IS [ ] OF THE PREPAYMENT MODEL.]
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR
<PAGE>
REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE
PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY
OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH
ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO
BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET
FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND
WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES
UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN HOMESIDE
MORTGAGE SECURITIES, INC., THE SERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY
OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST
REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED
BY HOMESIDE MORTGAGE SECURITIES, INC., HOMESIDE LENDING, INC., THE TRUSTEE OR BY
ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 1998-2, CLASS M
Number 98-2-M-1 Original Denomination
$
------------------
Cut-off Date: May 1, 1998 Final Scheduled Distribution
Date:
------------------
First Distribution Date:
June 25, 1998 Approximate Aggregate Original
Denomination of all Class M
Certificate Rate: Variable Rate Certificates: $
------------------
evidencing an interest in distributions allocable to the Class M Certificates
with respect to a pool of conventional one- to four-family mortgage loans formed
and sold by
HOMESIDE MORTGAGE SECURITIES, INC. CUSIP: ____________
This certifies that _______________________________ is the registered owner
of the ownership interest evidenced by this Certificate (obtained by dividing
the Original Denomination of this Certificate by the aggregate Original
Denomination of all Class M Certificates) in certain monthly distributions with
respect to a pool (the "Mortgage Pool") of conventional one- to four-family
adjustable rate mortgage loans (the "Mortgage Loans") formed and sold by
HomeSide Mortgage Securities, Inc. (the "Company"), which Mortgage Loans are
secured by Mortgaged Properties, and in certain other property held in trust for
the benefit of the Certificateholders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by HomeSide Lending, Inc. (in such capacity, the
"Servicer"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of May 1, 1998 (the "Agreement") among the Company, the
Servicer and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not defined herein, the capitalized terms used herein
shall have the meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
Class M (the "Class M Certificates") and 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. Also issued under the Agreement are Certificates designated as
Multi-Class Mortgage Pass-Through Certificates, Series 1998-2, Class A (the
"Class A Certificates") and Class B (the "Class B Certificates"). The Class A
Certificates are senior to, and the Class B Certificates are subordinate to, the
Class M Certificates in right of payment to the extent described herein and in
the Agreement. The Class A Certificates, Class M Certificates and Class B
Certificates are collectively referred to as the "Certificates".
<PAGE>
Pursuant to the terms of the Agreement, the Trustee will distribute from
funds in the Certificate Account the amount as described on the reverse hereof
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on June
25, 1998. Such distributions will be made to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month in which such payment is made, or if such last day
is not a Business Day, the Business Day immediately preceding such last day (the
"Record Date").
Distributions on this Certificate will be made either by check mailed to
the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, or by wire transfer in immediately available
funds to the account of such Holder at a bank or other financial or depository
institution having appropriate facilities therefor, if such Holder has so
notified the Paying Agent in writing at least 10 Business Days prior to the
first Remittance Date for which distribution by wire transfer is to be made, and
such Holder's Certificates evidence an aggregate original principal balance of
not less than $5,000,000. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office of the Trustee or agency appointed by the Trustee for the purpose
and specified in such notice of final distribution.
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.
Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: May 27, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Trustee
By:
---------------------------------
Certificate of Authentication
This is one of the Class M Certificates
referred to in the within-mentioned
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Authenticating Agent
By:
----------------------------------
Authorized Signatory
<PAGE>
REVERSE OF CERTIFICATE
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 1998-2
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
issued in twelve Classes of Class A Certificates, one Class of Class M
Certificates and five Classes of Class B Certificates, each evidencing an
interest in certain distributions with respect to a pool of adjustable rate one-
to four-family first Mortgage Loans formed and sold by the Company and certain
other property conveyed by the Company to the Trustee. The Class A Certificates
evidence in the aggregate the Class A Percentage of distributions relating to
repayments of principal and interest on such Mortgage Loans. The Class M
Certificates evidence in the aggregate the Class M Percentage of distributions
relating to repayments of principal and interest on such Mortgage Loans.
Following the initial issuance of the Certificates, the Principal Balance
of this Certificate will be different from the Original Denomination shown
above. Anyone acquiring this Certificate may ascertain its current Principal
Balance by inquiry of the Trustee.
The Holder, by its acceptance of this Certificate, agrees that it will look
solely to the Trust Fund and certain amounts resulting from credit enhancements
for payment hereunder and that the Trustee is not liable to the Holders 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 hereby, and the rights, duties and
immunities of the Trustee.
The Trustee will cause to be kept at its Corporate Trust Office in
Minneapolis, Minnesota, or at the office of its designated agent, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Trustee will provide for the registration of Certificates and of transfers
and exchanges of Certificates. Upon surrender for registration of transfer of
any Certificate at any office or agency of the Trustee maintained for such
purpose, the Trustee will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like Class and dated the date of authentication
by the Trustee.
No service charge will be made to the Holder for any transfer or exchange
of the Certificate, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of the Certificate. Prior to due presentation of a
Certificate for registration of transfer, the Company, the Servicer and the
Trustee may treat the person in whose name any Certificate is registered as the
<PAGE>
owner of such Certificate and the Percentage Interest in the Trust Fund
evidenced thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Company, the
Servicer nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Company, the Servicer
and the Trustee, without the consent of any of the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions therein which may be
inconsistent with the other provisions therein, to ensure continuing treatment
of each REMIC Pool as a REMIC, to avoid or minimize the risk of imposition of
any tax on either REMIC Pool pursuant to the Code or to make any other
provisions with respect to matters or questions arising under the Agreement
which are not materially inconsistent with the provisions of the Agreement,
provided that such action does not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Company, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
The respective obligations and responsibilities of the Company, the
Servicer and the Trustee under the Agreement will terminate upon (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon the
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month following a Due Date on which
the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less
than 5% of the aggregate unpaid Principal Balance of the Mortgage Loans on the
Cut-off Date, so long as the Servicer deposits or causes to be deposited in the
Certificate Account during the Principal Prepayment Period related to such
Distribution Date an amount equal to the Purchase Price for each Mortgage Loan,
less any unreimbursed Advances made with respect to any Mortgage Loan, and with
respect to all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years after
the Closing Date and (ii) the expiration of 21 years from the death of
<PAGE>
the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James's, living on the date
hereof.
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty)
_______________________________
NOTICE: The signature to
this assignment must
correspond with the name as
it appears upon the face of
the within Certificate in
every particular, without
alteration or enlargement
or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT E
FORMS OF CLASS B CERTIFICATES
THIS CLASS B-1 CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS
A CERTIFICATES AND THE CLASS M CERTIFICATES AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS B-1 CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS SOLD OR TRANSFERRED IN
TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR UNDER
APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
CLASS B-1 CERTIFICATE
Original Denomination
$
---------------------------------
Aggregate Original Principal
Balance of all Class B-1
Certificates: $
------------------
Cut-off Date: May 1, 1998 Number 98-2-B-1-1
First Distribution Date:
June 25, 1998
Certificate Rate: Variable Rate
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series 1998-2
evidencing an ownership interest in distributions allocable to a pool of
conventional one- to four-family mortgage loans formed and sold by
HOMESIDE MORTGAGE SECURITIES, INC.
<PAGE>
This Certificate does not represent an obligation of or interest in
HomeSide Mortgage Securities, Inc. ("HSMSI"), the Servicer or the Trustee
referred to below or any of their affiliates. Neither this Certificate, the
REMIC regular interest represented hereby nor the underlying Mortgage Loans are
guaranteed or insured by HSMSI, HomeSide Lending, Inc., the Trustee or by any of
their affiliates or by any governmental agency or instrumentality.
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN
ABOVE. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL
BALANCE BY INQUIRY OF THE TRUSTEE.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE
SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY
(INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE)
RELATING TO THE CERTIFICATES.
<PAGE>
This certifies that _____________________________ is the registered owner
of the ownership interest (the "Ownership Interest") evidenced by this
Certificate (obtained by dividing the Original Denomination of this Certificate
by the aggregate Original Denomination of all Class B-1 Certificates) in certain
distributions with respect to a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by HomeSide Mortgage
Securities, Inc. (hereinafter called the "Depositor"), and certain other
property held in trust for the benefit of Certificateholders (collectively, the
"Trust Fund"). The Mortgage Loans are serviced by HomeSide Lending, Inc. (the
"Servicer") and are secured by first mortgages on Mortgaged Properties. The
Trust Fund was created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of May 1, 1998 among the Depositor, the Servicer and
Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
Class B-1 (the "Class B-1 Certificate") and 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 Agreement such Holder is bound. Also issued under the Agreement are
Certificates designated as Multi-Class Mortgage Pass-Through Certificates Series
1998-2, Class A (the "Class A Certificates"), which are senior to the Class B-1
Certificates in right of payment, and Multi-Class Mortgage Pass Through
Certificates, Series 1998-2, Class M (the "Class M Certificates"), which are
also senior to the Class B-1 Certificates in right of payment, each to the
extent described herein and in the Agreement. The Class A Certificates, the
Class M Certificates, the Class B Certificates and the Class A-R Certificates
are collectively referred to as the "Certificates".
Pursuant to the terms of the Agreement, the Paying Agent will distribute
from funds in the Certificate Account created pursuant to the Agreement on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on June 25,
1998, to the Person in whose name this Certificate is registered at the close of
business on the last Business Day of the month preceding the month in which such
payment is made (the "Record Date"), an amount equal (with certain exceptions
set forth in the Agreement) to the balance of the Available Distribution Amount
remaining after distributions of Excess Interest and to the Class A and Class M
Certificateholders on such Distribution Date.
The rights of the Class B Certificateholders to receive distributions in
respect of the Class B Certificates on any Distribution Date are subordinated to
the rights of the Class A and Class M Certificateholders to receive
distributions in respect of the Class A and Class M Certificates to the extent,
and only to the extent, set forth in the Agreement. Amounts properly distributed
to the Class B Certificateholders pursuant to the Agreement will be deemed
released from the Trust Fund, and the Class B Certificateholders will not in any
event be required to refund any such distributed amounts. The final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the
<PAGE>
office or agency appointed by the Trustee for that purpose and specified in such
notice of final distribution.
The Trustee will cause to be kept at its Corporate Trust Office in
Minneapolis, Minnesota, or at the office of its designated agent, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Trustee will provide for the registration of Certificates and of transfers
and exchanges of Certificates. Upon surrender for registration of transfer of
any Certificate at any office or agency of the Trustee maintained for such
purpose, the Trustee will, subject to the limitations set forth in the
Agreement, authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate of a like class and dated the date of authentication
by the Trustee.
No service charge will be made to the Holder for any transfer or exchange
of the Certificate, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of the Certificate. Prior to due presentation of a
Certificate for registration of transfer, the Depositor, the Servicer and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Ownership Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the Agreement and
for all other purposes whatsoever, and neither the Depositor, the Servicer nor
the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein, which
may be inconsistent with any other provisions therein, to ensure continuing
treatment of each REMIC Pool or its assets as a REMIC and to avoid the
imposition of certain tax liabilities, or to make any other provisions with
respect to matters or questions arising under the Agreement which are not
materially inconsistent with the provisions of the Agreement, provided that such
action does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
the Mortgage Loans which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
<PAGE>
The respective obligations and responsibilities of the Depositor, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month next following a Due Date on
which the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans
is less than 5% of the aggregate unpaid Principal Balance of the Mortgage Loans
on the Cut-off Date, so long as the Servicer deposits or causes to be deposited
in the Certificate Account during the Principal Prepayment Period related to
such Distribution Date an amount equal to the Purchase Price for each Mortgage
Loan, less any unreimbursed Advances made with respect to any Mortgage Loan and,
with respect to all property acquired in respect of any Mortgage Loan remaining
in the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with
respect to which property has been acquired; provided, however, that in no event
shall the trust created hereby continue beyond the earlier of (i) 32 years after
the Closing Date and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James's, living on the date hereof.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: May 27, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as trustee
By:
--------------------------------
Authorized Officer
This is one of the Class B-1
Certificates referred to
in the within-mentioned
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Authenticating Agent
By
-----------------------------
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty)
_______________________________
NOTICE: The signature to
this assignment must
correspond with the name as
it appears upon the face of
the within Certificate in
every particular, without
alteration or enlargement
or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT F
FORM OF CLASS A-R CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS SOLD OR TRANSFERRED IN TRANSACTIONS
WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW
AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
AS MORE FULLY PROVIDED BY SECTION 4.02(i) OF THE AGREEMENT, CERTAIN
SPECIFIED ENTITIES INCLUDING (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR
ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN
INSTRUMENTALITY THAT IS A CORPORATION ALL OF WHOSE ACTIVITIES ARE SUBJECT TO TAX
UNDER CHAPTER 1 OF SUBTITLE A OF THE CODE AND (EXCEPT IN THE CASE OF FHLMC) A
MAJORITY OF WHOSE BOARD OF DIRECTORS IS NOT SELECTED BY THE UNITED STATES, OR
ANY STATE OR POLITICAL SUBDIVISION THEREOF), (B) ANY ORGANIZATION THAT IS EXEMPT
FROM TAX IMPOSED BY CHAPTER 1 OF SUBTITLE A OF THE CODE, OTHER THAN (X) A
TAX-EXEMPT FARMERS' COOPERATIVE WITHIN THE MEANING OF SECTION 521 OF THE CODE OR
(Y) AN ORGANIZATION THAT IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE
CODE ON "UNRELATED BUSINESS INCOME", (C) A CORPORATION OPERATING ON A
COOPERATIVE BASIS THAT IS ENGAGED IN FURNISHING ELECTRIC ENERGY OR PROVIDING
TELEPHONE SERVICE TO PERSONS IN RURAL AREAS (WITHIN THE MEANING OF SECTION
1381(a)(2)(C) OF THE CODE) AND (D) CERTAIN FOREIGN PERSONS ARE PROHIBITED FROM
ACQUIRING BENEFICIAL OWNERSHIP OF A CLASS R CERTIFICATE.
CLASS A-R CERTIFICATE
Cut-off Date: May 1, 1998 Original Denomination
$100.00
First Distribution Date: Aggregate Original Principal
June 25, 1998 Balance of all Class A-R
Certificates: $100.00
Number 98-2-R-1
Certificate Rate: 6.75%
<PAGE>
MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE
Series 1998-2
evidencing an ownership interest in distributions allocable to
the Residual Interest Certificates with respect to a pool of
conventional one- to four-family first mortgage loans formed
and sold by
HOMESIDE MORTGAGE SECURITIES, INC.
This Certificate does not represent an obligation of or interest in
HomeSide Mortgage Securities, Inc., the Servicer or the Trustee referred to
below or any of their affiliates. Neither this Certificate nor the underlying
Mortgage Loans are guaranteed or insured by HomeSide Mortgage Securities, Inc.,
HomeSide Lending, Inc., the Trustee or by any of their affiliates or by any
governmental agency or instrumentality.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE
BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT
DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT
MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN
THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT
SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES
IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12,
1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR
(ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN
SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE
ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE
ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE
DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101
AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE
PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN
A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF
ERISA OR SECTION 4975 OF THE CODE, AND WILL
<PAGE>
NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO
ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR
SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES.
This certifies that ____________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool (the
"Mortgage Pool) of conventional one- to four-family first mortgage loans (the
"Mortgage Loans") formed and sold by HomeSide Mortgage Securities, Inc.
(hereinafter called the "Depositor", which term includes any successor entity
under the Agreement referred to below) and certain other property held in trust
for the benefit of Certificateholders (collectively, the "Trust Fund"). The
Mortgage Loans are serviced by HomeSide Lending, Inc. (the "Servicer") and are
secured by first mortgages on Mortgaged Properties. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement (the "Agreement") dated as of
January 1, 1998 among the Depositor, the Servicer and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as Multi-Class Mortgage Pass-Through Certificates, Series 1998-2,
Class A-R (the "Class A-R Certificate") and 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 Agreement such Holder is bound. All payments made under this Certificate
will be made in accordance with the terms of the Agreement. Also issued under
the Agreement are Certificates designated as Multi-Class Mortgage Pass-Through
Certificates Series 1998-2, Class A, Class M, Class B-1, Class B-2, Class B-3,
Class B-4 and Class B-5 Certificates. The Class A Certificates, the Class M
Certificates, the Class B Certificates and the Class A-R Certificates are
collectively referred to as the "Certificates".
The rights of the Class A-R Certificateholders to receive distributions in
respect of the Class A-R Certificates on any Distribution Date are governed by
the terms of the Agreement and are subordinated to the rights of the Class A,
Class M and Class B Certificateholders to receive distributions in respect of
the Class A and Class M Certificates to the extent, and only to the extent, set
forth in the Agreement. Amounts properly distributed to the Class A-R
Certificateholders pursuant to the Agreement will be deemed released from the
Trust Fund, and the Class A-R Certificateholders will not in any event be
required to refund any such distributed amounts. The final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose and specified in such
notice of final distribution.
The Trustee will cause to be kept at its Corporate Trust Office in
Minneapolis, Minnesota, or at the office of its designated agent, a Certificate
Register in which, subject to such
<PAGE>
reasonable regulations as it may prescribe, the Trustee will provide for the
registration of Certificates and of transfers and exchanges of Certificates.
Upon surrender for registration of transfer of any Certificate at any office or
agency of the Trustee maintained for such purpose, the Trustee will, subject to
the limitations set forth in the Agreement, authenticate and deliver, in the
name of the designated transferee or transferees, a Certificate of a like class
and dated the date of authentication by the Trustee.
No service charge will be made to the Holder for any transfer or exchange
of the Certificate, but the Trustee may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of the Certificate. Prior to due presentation of a
Certificate for registration of transfer, the Depositor, the Servicer and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Ownership Interest in the Trust Fund evidenced
thereby for the purpose of receiving distributions pursuant to the Agreement and
for all other purposes whatsoever, and neither the Depositor, the Servicer nor
the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions therein, which
may be inconsistent with any other provisions therein, to ensure continuing
treatment of the Trust Fund or its assets as a REMIC and to avoid the imposition
of certain tax liabilities, or to make any other provisions with respect to
matters or questions arising under the Agreement which are not materially
inconsistent with the provisions of the Agreement, provided that such action
does not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or of modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received on
the Mortgage Loans which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii) reduce the aforesaid
percentage of Certificates of any Class the Holders of which are required to
consent to any such amendment or (iii) change the percentage specified in clause
(ii) of the first paragraph of Section 11.01 of the Agreement, without the
consent of the Holders of all Certificates of such Class then outstanding.
An election will be made to treat the Trust Fund as a REMIC for federal
income tax purposes. The Class A Certificates, the Class M Certificates, the
Class B Certificates will represent regular interests in the REMIC. The Class
A-R Certificates constitute the Residual Interest in the REMIC.
<PAGE>
The respective obligations and responsibilities of the Depositor, the
Servicer and the Trustee under the Agreement will terminate upon: (i) the later
of the final payment or other liquidation (or any Advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Servicer,
on any Distribution Date which occurs in the month next following a Due Date on
which the aggregate unpaid Principal Balance of all Outstanding Mortgage Loans
is less than 5% of the aggregate unpaid Principal Balance of the Mortgage Loans
on the Cut-off Date, so long as the Servicer deposits or causes to be deposited
in the Certificate Account during the Principal Prepayment Period related to
such Distribution Date an amount equal to the Purchase Price for each Mortgage
Loan, less unreimbursed Advances made with respect to any Mortgage Loan and,
with respect to all property acquired in respect of any Mortgage Loan remaining
in the Trust Fund, an amount equal to the fair market value of such property, as
determined by an appraisal to be conducted by an appraiser selected by the
Trustee, less any Advances made with respect to the Mortgage Loan with respect
to which property has been acquired; provided, however, that in no event shall
the trust created hereby continue beyond the earlier of (i) 32 years after the
Closing Date and (ii) the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the
United States to the Court of St. James's, living on the date hereof.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: May 27, 1998 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
not in its individual capacity,
but solely as Trustee
By:
--------------------------------
Authorized Officer
This is the Class A-R
Certificate referred to
in the within-mentioned
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Authenticating Agent
By
--------------------------------
Authorized Signatory
<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
- ---------------------
- ---------------------
- -------------------------------------------------------------
(Please Print or Type Name and Address of Assignee)
- -------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
__________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty)
_______________________________
NOTICE: The signature to
this assignment must
correspond with the name as
it appears upon the face of
the within Certificate in
every particular, without
alteration or enlargement
or any change whatever.
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
<PAGE>
EXHIBIT G
FORM OF TRUSTEE CERTIFICATION
[date]
HomeSide Mortgage Securities, Inc.
7301 Baymeadows Way
Jacksonville, FL 32256
Re: Pooling and Servicing Agreement dated as of May 1, 1998 among
HomeSide Mortgage Securities, Inc., HomeSide Lending, Inc. and
Norwest Bank Minnesota, National Association, as trustee, Multi-
Class Mortgage Pass-Through Certificates, Series 1998-2
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in
the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that:
(i) All documents in the Mortgage File required to be delivered to the
Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are in
its possession;
(ii) In connection with each Mortgage Loan or Assignment thereof as to
which documentary evidence of recording was not received on the Closing Date, it
has received evidence of such recording; and
(iii) Such documents have been reviewed by it and such
documents do not contain any material omissions or defects within the meaning of
Section 2.01 or 2.02.
The Trustee further certifies that as to each Mortgage Loan, the Trustee
holds the Mortgage Note without any Responsible Officer of the Trustee having
received written notice (a) of any adverse claims, liens or encumbrances, (b)
that any Mortgage Note was overdue or has been dishonored, (c) of evidence on
the face of any Mortgage Note or Mortgage of any security interest therein, or
(d) of any defense against or claim to the Mortgage Note by any other party.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond confirming (i) that the Mortgage Loan number and
the name of the Mortgagor in each Mortgage File conform to the respective
Mortgage Loan number and name listed
<PAGE>
on the Mortgage Loan Schedule and (ii) the existence in each Mortgage File of
each of the documents listed in subparagraphs (i)(A) through (H), inclusive, of
Section 2.01 in the Agreement. The Trustee makes no representations or
warranties as to the validity, legality, sufficiency, enforceability or
genuineness of any of the documents contained in each Mortgage Loan or 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.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT H
FORM OF INVESTMENT LETTER
(Accredited Investor)
[date]
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Norwest Bank Minnesota, National Association
as Trustee
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Re: HomeSide Mortgage Securities, Inc.,
Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2, [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2, [Class B- ] (the "Certificates"), issued pursuant
to a pooling and servicing agreement, dated as of May 1, 1998 (the "Pooling and
Servicing Agreement"), among HomeSide Mortgage Securities, Inc. (the
"Depositor"), HomeSide Lending, Inc., as Servicer (the "Servicer"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee"). [The Purchaser
intends to register the Transferred Certificate in the name of
____________________, as nominee for __________________.] All terms used and not
otherwise defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Purchaser certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends,
<PAGE>
to so register or qualify the Certificates, (c) the Certificates cannot be
resold unless (i) they are registered and qualified under the Securities Act and
the applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.
2. The Certificates will bear a legend to the following effect:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT,
DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION UNDER THE ACT,
THE 1940 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND SUCH TRANSFER
ALSO COMPLIES WITH THE OTHER PROVISIONS OF SECTION 4.02 OF THE POOLING AND
SERVICING AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS
THE TRUSTEE SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE
SERVICER AND THE TRUSTEE (A) AN INVESTMENT LETTER FROM THE PROSPECTIVE
INVESTOR; AND (B) REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE
OFFERING AND SALE OF THE CERTIFICATES.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE
RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN
EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND
IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS
INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS
OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY
SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR
THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT"
WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE
95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH
IN SECTION I AND SECTION III OF PTCE 95- 60 ARE SATISFIED WITH RESPECT TO
THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE
IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF
ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
<PAGE>
AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT
ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS
USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF
COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL
NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS"
PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29
C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY
PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE,
WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE,
AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR
AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR
LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE
CERTIFICATES.
3. The Purchaser is acquiring the Transferred Certificates for its own
account [for investment only]*/ and not with a view to or for sale or other
transfer in connection with any distribution of the Transferred Certificates in
any manner that would violate the Securities Act or any applicable state
securities laws, subject, nevertheless, to the understanding that disposition of
the Purchaser's property shall at all times be and remain within its control.
4. The Purchaser (a) is a substantial, sophisticated institutional investor
having such knowledge and experience in financial and business matters, and in
particular in such matters related to securities similar to the Certificates,
such that it is capable of evaluating the merits and risks of investment in the
Certificates, (b) is able to bear the economic risks of such an investment and
(c) is an "accredited investor" within the meaning of Rule 501(a) promulgated
pursuant to the Securities Act.
5. The Purchaser will not nor has it authorized nor will it authorize any
person to (a) offer, pledge, sell, dispose of or otherwise transfer any
Certificate, any interest in any Certificate or any other similar security to
any person in any manner, (b) solicit any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that
- -----------------
*/ Not required of a broker/dealer purchaser.
<PAGE>
would render the disposition of any Certificate a violation of Section 5 of the
Securities Act or any state securities law, or that would require registration
or qualification pursuant thereto. Neither the Purchaser nor anyone acting on
its behalf has offered the Certificates for sale or made any general
solicitation by means of general advertising or in any other manner with respect
to the Certificates. The Purchaser will not sell or otherwise transfer any of
the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
6. [This paragraph may be deleted if the Purchaser provides the Opinion of
Counsel referred to in clause (ii) of Section 4.02(d) of the Pooling and
Servicing Agreement.] The Purchaser either (A) is not an employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or a plan within the meaning of Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code") (each, a "Plan"),
and is not directly or indirectly purchasing any Certificate on behalf of, as
investment manager of, as named fiduciary of, as trustee of or with assets of a
Plan or directly or indirectly purchasing any certificates with the assets of
any insurance company separate account or of any Plan or (B) is an insurance
company and the source of funds for the purchase of the certificates is an
"insurance company general account" within the meaning of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and
the conditions set forth in Section I and III of PTCE 95-60 are satisfied with
respect to the purchase and holding of the Certificates.
7. Prior to the sale or transfer by the Purchaser of any of the
Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit I to the Pooling and Servicing Agreement.
8. The Purchaser agrees to indemnify the Trustee, the Servicer and the
Depositor against any liability that may result from any misrepresentation made
herein.
Very truly yours,
[Purchaser]
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT I
FORM OF RULE 144A INVESTMENT LETTER
(Qualified Institutional Buyer)
[date]
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Norwest Bank Minnesota, National Association,
as trustee
Northstar West Building
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Re: HomeSide Mortgage Securities, Inc.,
Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2, [Class B- ]
Ladies and Gentlemen:
______________ (the "Purchaser") intends to purchase from
_________________________ (the "Transferor") $_______ by original principal
balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2, [Class B- ] (the "Certificates"), issued pursuant
to a pooling and servicing agreement, dated as of May 1, 1998 (the "Pooling and
Servicing Agreement"), among HomeSide Mortgage Securities, Inc. (the
"Depositor"), HomeSide Lending, Inc., as Servicer (the "Servicer"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee"). [The Purchaser
intends to register the Transferred Certificate in the name of
____________________, as nominee for __________________.] All terms used and not
otherwise defined herein shall have the meanings set forth in the Trust
Agreement.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Purchaser certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:
<PAGE>
HomeSide Lending, Inc.
Norwest Bank Minnesota, National Association,
as trustee
[date]
Page 2
In connection with our acquisition of the above Transferred 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
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 Transferred Certificates and all
matters relating thereto or any additional information deemed necessary to our
decision to purchase the Transferred Certificates, (d) we are not an employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, or a plan within the meaning of Section
4975 of the Internal Revenue Code of 1986, as amended (each, a "Plan"), nor are
we directly or indirectly purchasing any Certificate on behalf of, as investment
manager of, as named fiduciary of, as trustee of or with assets of a Plan or
directly or indirectly purchasing any certificates with the assets of any
insurance company separate account or of any Plan [or alternatively, in the case
of an insurance company, is an insurance company and the source of funds for the
purchase of the certificates is an "insurance company general account" within
the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 50
Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and
Section III of PTCE 95-60 are satisfied with respect to the purchase and holding
of the Certificates, (e) 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 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, (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed one of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale of the Transferred Certificates to us is being made in
reliance on Rule 144A. We are acquiring the Transferred 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
<PAGE>
HomeSide Lending, Inc.
Norwest Bank Minnesota, National Association,
as trustee
[date]
Page 3
reasonably believed by us, based upon certifications of such purchaser or
information we have in our possession, 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.
We agree to indemnify the Trustee, the Servicer and the Depositor against
any liability that may result from any misrepresentation made herein.
Very truly yours,
[Purchaser]
By:
--------------------------------
Name:
Title:
<PAGE>
ANNEX 1
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:
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.
2. In connection with the 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 $____________*/ 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 Federal, State or territorial banking
commission or similar official or is a foreign bank
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.
____ 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
such institution or is a foreign savings and loan
- -------------------
* 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.
<PAGE>
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,
as amended.
____ 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 the 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, as amended.
____ Investment Advisor. The Buyer is an investment advisor
registered under the Investment Advisors Act of 1940, as
amended.
____ 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, as amended.
____ Business Development Company. Buyer is a business
development company as defined in Section 202(a)(22) of
the Investment Advisors Act of 1940, as amended.
3. The term "securities" as used for purposes of the calculation of the
dollar amount in paragraph 2 excludes: (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.
4. 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)
<PAGE>
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.
5. 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.
6. 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 as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
By:
-----------------------------
Name:
Title:
Date:
---------------------------
<PAGE>
ANNEX 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:
1. 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.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in 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.
____ 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).
3. 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).
<PAGE>
4. 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.
5. The Buyer is familiar with Rule 144A and understands 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.
6. 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.
By:
------------------------------
Name:
Title:
IF AN ADVISER:
----------------------------------
Print Name of Buyer
Date:
----------------------------
<PAGE>
EXHIBIT J
FORM OF SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement") is
made and entered into as of [DATE], between HomeSide Lending, Inc., (the
"Company") and _____________________ (the "Purchaser").
PRELIMINARY STATEMENT
__________________ (the "Owner") is the holder of the entire interest in
HomeSide Mortgage Securities, Inc. Multi-Class Mortgage Pass-Through
Certificates, Series 1998-2, Class B- 5 (the "Class B-5 Certificates"). The
Class B-5 Certificates were issued pursuant to a Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement") among HomeSide Mortgage Securities,
Inc., the Company, as servicer thereunder (the "Servicer") and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee").
The Owner intends to resell all of the Class B-5 Certificates directly to
the Purchaser on or promptly after the date hereof.
In connection with such sale, the parties hereto have agreed that the
Company, as Servicer, will engage in certain special servicing procedures
relating to foreclosures for benefit of the Purchaser, and that the Purchaser
will deposit funds in a collateral fund to cover any losses attributable to such
procedures as well as all advances and costs in connection therewith, as set
forth herein.
In consideration of the mutual agreements herein contained, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
agree to the following:
ARTICLE I.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
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 are required or
authorized by law or executive order to be closed.
<PAGE>
Collateral Fund: The fund established and maintained pursuant to Section
3.01 hereof.
Collateral Fund Permitted Investments: Either: (i) obligations of, or
obligations fully guaranteed as to principal and interest by, the United States,
or any agency or instrumentality thereof, provided such obligations are backed
by the full faith and credit of the United States, (ii) a money market fund
rated in the highest rating category by a nationally recognized rating agency
selected by the Company, (iii) cash, (iv) mortgage pass-through certificates
issued or guaranteed by GNMA, FNMA or FHLMC, (v) commercial paper (including
both non-interest bearing discount obligations and interest bearing obligations
payable on demand or on a specified date), the issuer of which may be an
affiliate of the Company, having at the time of such investment a rating of at
least A-1 by Standard and Poor's Corporation ("S&P") or at least P-1 by Moody's
Investors Service, Inc. ("Moody's") and (vi) demand and time deposits in,
certificates of deposit of, any depository institution or trust company (which
may be an affiliate of the Company) incorporated under the laws of the United
States of America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, so long as at the time
of such investment either (x) the long-term debt obligations of such depository
institution or trust company have a rating of at least Aa2 by Moody's or AA by
S&P or (y) the certificate of deposit or other unsecured short-term debt
obligations of such depository institution or trust company have a rating of at
least P-1 by Moody's or A-1 by S&P and, for each of the preceding clauses (i),
(iv), (v) and (vi), the maturity thereof shall be not later than the earlier to
occur of (A) 30 days from the date of the related investment and (B) the next
succeeding Distribution Date.
Commencement of Foreclosure: The first official action required under local
law in order to commence foreclosure proceedings or to schedule a trustee's sale
under a deed of trust, including (i) in the case of a mortgage, any filing or
service of process necessary to commence an action to foreclose, or (ii) in the
case of a deed of trust, the posting, publishing, filing or delivery of a notice
of sale, but not including in either case (x) any notice of default, notice of
intent to foreclose or sell or any other action prerequisite to the actions
specified in (i) or (ii) above and upon the consent of the Purchaser which will
be deemed given unless expressly withheld within two Business Days of
notification, (y) the acceptance of a deed-in-lieu of foreclosure (whether in
connection with a sale of the related property or otherwise) or (z) initiation
and completion of a short pay-off.
Current Appraisal: With respect to any Mortgage Loan as to which the
Purchaser has made an Election to Delay Foreclosure, an appraisal of the related
Mortgaged Property obtained by the Purchaser at its expense from an appraiser
(which shall not be an affiliate of the Purchaser) acceptable to the Company as
nearly contemporaneously as practicable to the time of the Purchaser's election,
prepared based on the Company's customary requirements for such appraisals.
Election to Delay Foreclosure: Any election by the Purchaser to delay the
Commencement of Foreclosure, made in accordance with Section 2.02(b).
<PAGE>
Election to Foreclose: Any election by the Purchaser to proceed with the
Commencement of Foreclosure, made in accordance with Section 2.03(a).
Required Collateral Fund Balance: As of any date of determination, an
amount equal to the aggregate of all amounts previously required to be deposited
in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all
withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after
adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and
Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section
2.02(g) and Section 2.03(d).
Section 1.02. Definitions Incorporated by Reference.
All capitalized terms not otherwise defined in this Agreement shall have
the meanings assigned in the Pooling and Servicing Agreement.
ARTICLE II.
SPECIAL SERVICING PROCEDURES
Section 2.01. Reports and Notices.
(a) In connection with the performance of its duties under the Pooling
and Servicing Agreement relating to the realization upon defaulted Mortgage
Loans, the Company, as Servicer, shall provide to the Purchaser the following
notices and reports:
(i) Within five Business Days after each Distribution Date (or
included in or with the monthly statement to Certificateholders
pursuant to the Pooling and Servicing Agreement), the Company shall
provide to the Purchaser a report indicating for the Trust the number
of Mortgage Loans that are (A) thirty days, (B) sixty days, (C) ninety
days or more delinquent or (D) in foreclosure, and indicating for each
such Mortgage Loan the outstanding principal balance.
(ii) Prior to the Commencement of Foreclosure in connection with
any Mortgage Loan, the Company shall provide the Purchaser with a
notice (sent by telecopier) of such proposed and imminent foreclosure,
stating the loan number and the aggregate amount owing under the
Mortgage Loan.
(b) If requested by the Purchaser, the Company shall make its servicing
personnel available (during their normal business hours) to respond to
reasonable inquiries by the Purchaser in connection with any Mortgage Loan
identified in a report under subsection (a)(i)(B), (a)(i)(C), (a)(i)(D) or
(a)(ii) which has been given to the Purchaser; provided, that (1) the Company
shall only be required to provide information that is readily accessible to its
servicing personnel and
<PAGE>
is non-confidential and (2) the Company shall not be required to provide any
written information under this subsection.
(c) In addition to the foregoing, the Company shall provide to the
Purchaser such information as the Purchaser may reasonably request concerning
each Mortgage Loan that is at least sixty days delinquent and each Mortgage Loan
which has become real estate owned, through the final liquidation thereof;
provided that the Company shall only be required to provide information that is
readily accessible to its servicing personnel and is non-confidential.
(d) With respect to all Mortgage Loans which are serviced at any time by
the Company through a Subservicer, the Company shall be entitled to rely for all
purposes hereunder, including for purposes of fulfilling its reporting
obligations under this Section 2.01 on the accuracy and completeness of any
information provided to it by the applicable Subservicer.
Section 2.02. Purchaser's Election to Delay Foreclosure Proceedings.
(a) The Purchaser directs the Company that in the event that the Company
does not receive written notice of the Purchaser's election pursuant to
subsection (b) below within 24 hours (exclusive of any intervening non-Business
Days) of transmission of the notice provided by the Company under Section
2.01(a)(ii), subject to extension as set forth in Section 2.02(b), the Company
shall proceed with the Commencement of Foreclosure in respect of such Mortgage
Loan in accordance with its normal foreclosure policies without further notice
to the Purchaser. Any foreclosure that has been initiated may be discontinued
(i) without notice to the Purchaser, if the Mortgage Loan has been brought
current or if a refinancing or prepayment occurs with respect to the Mortgage
Loan (including by means of a short payoff approved by the Company) (ii) with
notice to the Purchaser if the Company has reached the terms of a forbearance
agreement with the borrower. In such latter case the Company may complete such
forbearance agreement unless instructed otherwise by the Purchaser within one
Business Day of notification.
(b) In connection with any Mortgage Loan with respect to which a notice
under Section 2.01(a)(ii) has been given to the Purchaser, the Purchaser may
elect, for reasonable cause as determined by the Purchaser, to instruct the
Company to delay the Commencement of Foreclosure until such term as the
Purchaser determines that the Company may proceed with the Commencement of
Foreclosure. Such election must be evidenced by written notice received within
24 hours (exclusive of any intervening non-Business Days) of transmission of the
notice provided by the Company under Section 2.01(a)(ii). Such 24 hour period
shall be extended for no longer than an additional four Business Days after the
receipt of the information if the Purchaser requests additional information
related to such foreclosure; provided, however that the Purchaser will have at
least one Business Day to respond to any requested additional information. Any
such additional information shall (i) not be confidential in nature and (ii) be
obtainable by the Company from existing reports, certificates or statements or
otherwise be readily accessible to its servicing personnel. The Purchaser agrees
that it has no right to deal with the mortgagor. If the Company's
<PAGE>
normal foreclosure policy includes acceptance of a deed-in-lieu of foreclosure
or short payoff, the Purchaser will be notified and given one Business Day to
respond.
(c) With respect to any Mortgage Loan as to which the Purchaser has made
an Election to Delay Foreclosure, the Purchaser shall obtain a Current Appraisal
as soon as practicable, and shall provide the Company with a copy of such
Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Purchaser shall remit by wire transfer to the Company, for
deposit in the Collateral Fund, an amount, as calculated by the Company, equal
to the sum of (i) 125% of the greater of the outstanding Principal Balance of
the Mortgage Loan and the value shown in the Current Appraisal referred to in
subsection (c) above (or, if such Current Appraisal has not yet been obtained,
the Company's estimate thereof, in which case the required deposit under this
subsection shall be adjusted upon obtaining of such Current Appraisal), and (ii)
three months' interest on the Mortgage Loan at the applicable Mortgage Rate. If
any Election to Delay Foreclosure extends for a period in excess of three months
(such excess period being referred to herein as the "Excess Period"), the
Purchaser shall remit by wire transfer in advance to the Company for deposit in
the Collateral Fund the amount, as calculated by the Company, equal to interest
on the Mortgage Loan at the applicable Mortgage Rate for the Excess Period. The
terms of this Agreement shall no longer apply to the servicing of any Mortgage
Loan upon the failure of the Purchaser to deposit the above amounts relating to
the Mortgage Loan within two Business Days of the Election to Delay Foreclosure.
(e) With respect to any Mortgage Loan as to which the Purchaser has made
an Election to Delay Foreclosure, the Company may withdraw from the Collateral
Fund from time to time amounts necessary to reimburse the Company for all
Advances and Liquidation Expenses thereafter made by the Company as Servicer in
accordance with the Pooling and Servicing Agreement. To the extent that the
amount of any such Liquidation Expense is determined by the Company based on
estimated costs, and the actual costs are subsequently determined to be higher,
the Company may withdraw the additional amount from the Collateral Fund. In the
event that the Mortgage Loan is brought current by the Mortgagor and the
foreclosure action is discontinued, the amounts so withdrawn from the Collateral
Fund shall be redeposited therein as and to the extent that reimbursement
therefor from amounts paid by the Mortgagor is not prohibited pursuant to the
Pooling and Servicing Agreement. Except as provided in the preceding sentence,
amounts withdrawn from the Collateral Fund to cover Advances and Liquidation
Expenses shall not be redeposited therein or otherwise reimbursed to the
Purchaser. If and when any such Mortgage Loan is brought current by the
Mortgagor, all amounts remaining in the Collateral Fund in respect of such
Mortgage Loan (after adjustment for all withdrawals and deposits pursuant to
this subsection) shall be released to the Purchaser.
(f) With respect to any Mortgage Loan as to which the Purchaser has made
an Election to Delay Foreclosure, the Company shall continue to service the
Mortgage Loan in accordance with its customary procedures (other than the delay
in Commencement of Foreclosure
<PAGE>
as provided herein). If and when the Purchaser shall notify the Company that it
believes that it is appropriate to do so, the Company shall proceed with the
Commencement of Foreclosure. In any event, if the Mortgage Loan is not brought
current by the mortgagor by the time the loan becomes 6 months delinquent, the
Purchaser's election shall no longer be effective and at the Purchaser's option,
either (i) the Purchaser shall purchase the Mortgage Loan from the Trust Fund at
a purchase price equal to the fair market value as shown on the Current
Appraisal, to be paid by (x) applying any balance in the Collateral Fund to such
purchase price, and (y) to the extent of any deficiency, by wire transfer of
immediately available funds to the Company or Trustee; or (ii) the Company shall
proceed with the Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Delay Foreclosure and as to
which the Company proceeded with the Commencement of Foreclosure in accordance
with subsection (f) above, the Company shall calculate the amount, if any, by
which the value shown on the Current Appraisal obtained under subsection (c)
exceeds the actual sales price obtained for the related Mortgaged Property (net
of Liquidation Expenses and accrued interest related to the extended foreclosure
period), and the Company shall withdraw the amount of such excess from the
Collateral Fund, shall remit the same to the Trust Fund and in its capacity as
Servicer shall apply such amount as additional Liquidation Proceeds pursuant to
the Pooling and Servicing Agreement. After making such withdrawal, all amounts
remaining in the Collateral Fund in respect of such Mortgage Loan (after
adjustment for all withdrawals and deposits pursuant to subsection (e)) shall be
released to the Purchaser.
Section 2.03. Purchaser's Election to Commence Foreclosure Proceedings.
(a) In connection with any Mortgage Loan identified in a report under
Section 2.01(a)(i)(B), the Purchaser may elect, for reasonable cause as
determined by the Purchaser, to instruct the Company to proceed with the
Commencement of Foreclosure as soon as practicable. Such election must be
evidenced by written notice received by the Company by 5:00 p.m., New York City
time, on the third Business Day following the delivery of such report under
Section 2.01(a)(i).
(b) Within two Business Days of making any Election to Foreclose, the
Purchaser shall remit to the Company, for deposit in the Collateral Fund, an
amount, as calculated by the Company, equal to 125% of the current Principal
Balance of the Mortgage Loan and three months' interest on the Mortgage Loan at
the applicable Mortgage Rate. If and when any such Mortgage Loan is brought
current by the Mortgagor, all amounts in the Collateral Fund in respect of such
Mortgage Loan shall be released to the Purchaser. The terms of this Agreement
shall no longer apply to the servicing of any Mortgage Loan upon the failure of
the Purchaser to deposit the above amounts relating to the Mortgage Loans within
two Business Days at the Election to Foreclose.
(c) With respect to any Mortgage Loan as to which the Purchaser has made
an Election to Foreclose, the Company shall continue to service the Mortgage
Loan in
<PAGE>
accordance with its customary procedures (other than to proceed with the
Commencement of Foreclosure as provided herein). In connection therewith, the
Company shall have the same rights to make withdrawals for Advances and
Liquidation Expenses from the Collateral Fund as are provided under Section
2.02(e), and the Company shall make reimbursements thereto to the limited extent
provided under such subsection. The Company shall not be required to proceed
with the Commencement of Foreclosure if (i) the same is stayed as a result of
the Mortgagor's bankruptcy or is otherwise barred by applicable law, or to the
extent that all legal conditions precedent thereto have not yet been complied
with or (ii) the Company believes there is a breach of representation or
warranties by the Company, which may result in a repurchase or substitution of
such Mortgage Loan, or (iii) the Company reasonably believes the Mortgaged
Property may be contaminated with or affected by hazardous wastes or hazardous
substances (and the Company supplies the Purchaser with information supporting
such belief). The Company will repurchase or substitute a Mortgage Loan pursuant
to the preceding clause (ii) within the time period specified in the Pooling and
Servicing Agreement. Any foreclosure that has been initiated may be discontinued
(i) without notice to the Purchaser if the Mortgage Loan has been brought
current or if a refinancing or prepayment occurs with respect to the Mortgage
Loan (including by means of a short payoff approved by the Company), or (ii)
with notice to the Purchaser if the Company has reached the terms of a
forbearance agreement unless instructed otherwise by the Purchaser within two
Business Days of notification.
(d) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Foreclose and as to which the
Company proceeded with the Commencement of Foreclosure in accordance with
subsection (c) above, the Company shall calculate the amount, if any, by which
the Principal Balance of the Mortgage Loan at the time of liquidation (plus all
unreimbursed Advances and Liquidation Expenses in connection therewith other
than those paid from the Collateral Fund) exceeds the actual sales price
obtained for the related Mortgaged Property, and the Company shall withdraw the
amount of such excess from the Collateral Fund, shall remit the same to the
Trust Fund and in its capacity as Servicer shall apply such amount as additional
Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After
making such withdrawal, all amounts remaining in the Collateral Fund (after
adjustment for all withdrawals and deposits pursuant to subsection (c)) in
respect of such Mortgage Loan shall be released to the Purchaser.
Section 2.04. Termination.
(a) With respect to all Mortgage Loans included in the Trust Fund, the
Purchaser's rights to make any Election to Delay Foreclosure or any Election to
Foreclose and the Company's obligations under Section 2.01 shall terminate (i)
at such time as the Certificate Principal Balance of the Class B-5 Certificates
has been reduced to zero, (ii) if the greater of (x) 43% (or such lower or
higher percentages that represents the Company's actual historical loss
experience with respect to the Mortgage Loans in the related pool) of the
aggregate principal balance of all Mortgage Loans that are in foreclosure or are
more than 90 days delinquent on a contractual basis and REO properties or if the
aggregate amount that the Company estimates will be
<PAGE>
required to be withdrawn from the Collateral Fund with respect to Mortgage Loans
as to which the Purchaser has made an Election to Delay Foreclosure or an
Election to Foreclose exceeds (z) the Outstanding Certificate Principal Balance
of the Class B-5 Certificates, or (iii) upon any transfer by the Purchaser of
any interest (other than the minority interest therein, but only if the
transferee provides written acknowledgment to the Company of the Purchaser's
right hereunder and that such transferee will have no rights hereunder) in the
Class B-5 Certificates (whether or not such transfer is registered under the
Pooling and Servicing Agreement), including any such transfer in connection with
a termination of the Trust Fund. Except as set forth above, this Agreement and
the respective rights, obligations and responsibilities of the Purchaser and the
Company hereunder shall terminate upon the later to occur of (i) the final
liquidation of the last Mortgage Loan as to which the Purchaser made any
Election to Delay Foreclosure or any Election to Foreclose and the withdrawal of
all remaining amounts in the Collateral Fund as provided herein and (ii) ten
(10) Business Day's notice.
(b) Purchaser's rights pursuant to Section 2.02 or 2.03 of this
Agreement shall terminate with respect to a Mortgage loan as to which the
Purchaser has exercised its rights under Section 2.02 or 2.03 hereof, upon
Purchaser's failure to deposit any amounts required pursuant to Section 2.02(d)
or 2.03(b).
(c) Neither the Servicer nor any of its directors, officers, employees
or agents shall be under any liability for any action taken or for refraining
from the taking of any action in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Servicer and any director, officer, employee or agent
thereof may rely in good faith on any document of any kind prima facie properly
executed and submitted by an Person respecting any matters arising hereunder.
ARTICLE III.
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund.
Upon receipt from the Purchaser of the initial amount required to be
deposited in the Collateral Fund pursuant to Article 11, the Company shall
establish and maintain with itself as a segregated account on its books and
records an account (the "Collateral Fund"), entitled "HomeSide Lending, Inc., as
Servicer, for the benefit of registered holders of HomeSide Mortgage Securities,
Inc. Multi-Class Mortgage Pass-Through Certificates, Series 1998-2, Class B-5."
Amounts in the Collateral Fund shall continue to be the property of the
Purchaser, subject to the first priority
<PAGE>
security interest granted hereunder for the benefit of the Certificateholders,
until withdrawn from the Collateral Fund pursuant to Section 2.02 or 2.03
hereof.
Upon the termination of this Agreement and the liquidation of all Mortgage
Loans as to which the Purchaser has made any Election to Delay Foreclosure or
any Election to Foreclose pursuant to Section 2.04 hereof, the Company shall
distribute to the Purchaser all amounts remaining in the Collateral Fund
together with any investment earnings thereon.
In no event shall the Purchaser (i) take or cause the Trustee or the
Company to take any action that could cause any REMIC established under the
Trust Agreement to fail to qualify as a REMIC or cause the imposition on any
such REMIC of any "prohibited transaction" or "prohibited contribution" taxes or
(ii) cause the Trustee or the Company to fail to take any action necessary to
maintain the status of any such REMIC as a REMIC.
Section 3.02. Collateral Fund Permitted Investments.
The Company shall, at the written direction of the Purchaser invest the
funds in the Collateral Fund in Collateral Fund Permitted Investments. Such
direction shall not be changed more frequently than quarterly. In the absence of
any direction, the Company shall select such investments in accordance with the
definition of Collateral Fund Permitted Investments in its discretion.
All income and gain realized from any investment as well as any interest
earned on deposits in the Collateral Fund (net of any losses on such
investments) and any payments of principal made in respect of any Collateral
Fund Permitted Investment shall be deposited in the Collateral Fund upon
receipt. All costs and realized losses associated with the purchase and sale of
Collateral Fund Permitted Investments shall be borne by the Purchaser and the
amount of net realized losses shall be deposited by the Purchaser in the
Collateral Fund. The Company shall periodically (but not more frequently than
monthly) distribute to the Purchaser upon request an amount of cash, to the
extent cash is available therefor in the Collateral Fund, equal to the amount by
which the balance of the Collateral Fund, after giving effect to all other
distributions to be made from the Collateral Fund on such date, exceeds the
Required Collateral Fund Balance. Any amounts so distributed shall be released
from the lien and security interest of this Agreement.
Section 3.03. Grant of Security Interest.
The Purchaser grants to the Company and the Trustee for the benefit of the
Certificateholders a security interest in and lien on all of the Purchaser's
right, title and interest, whether now owned or hereafter acquired, in and to:
(1) the Collateral Fund, (2) all amounts deposited in the Collateral Fund and
Collateral Fund Permitted Investments in which such amounts are invested (and
the distributions and proceeds of such investments) and (3) all cash and
non-cash proceeds of any of the foregoing, including proceeds of the voluntary
or involuntary conversion thereof (all of the foregoing collectively, the
"Collateral").
<PAGE>
The Purchaser acknowledges the lien on and security interest in the
Collateral for the benefit of the Certificateholders. The Purchaser shall take
all actions requested by the Company or the Trustee as may be reasonably
necessary to perfect the security interest created under this Agreement in the
Collateral and cause it to be prior to all other security interests and liens,
including the execution and delivery to the Company for filing of appropriate
financing statements in accordance with applicable law. The Company shall file
appropriate continuation statements, or appoint an agent on its behalf to file
such statements, in accordance with applicable law.
Section 3.04. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Fund at any time are
insufficient to cover any withdrawals therefrom that the Company or the Trustee
is then entitled to make hereunder, the Purchaser shall be obligated to pay such
amounts to the Company or the Trustee immediately upon demand. Such obligation
shall constitute a general corporate obligation of the Purchaser.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
This Agreement may be amended from time to time by the Company and the
Purchaser by written agreement signed by the Company and the Purchaser.
Section 4.02. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 4.03. Governing Law.
This Agreement shall be construed in accordance with the laws of the State
of New York and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
<PAGE>
Section 4.04. Notices.
All demands, notices and direction hereunder shall be in writing or by
telecopy and shall be deemed effective upon receipt to:
(a) in the case of the Company,
HomeSide Lending, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Attn: _________________
Phone: ________________
or such other address as may hereafter be furnished in writing by the
Company, or
(b) in the case of the Purchaser, with respect
to notices pursuant to Section 2.01,
[Purchaser]
[Address]
Attn: ________________
Phone: _______________
Fax: _________________
with respect to all other notices pursuant
to this Agreement,
---------------------------
[Address]
Attn: _________________
Phone: ________________
Fax: __________________
or such other address as may hereafter be furnished in writing by the
Purchaser.
Section 4.05. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever, including regulatory, 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.
<PAGE>
Section 4.06. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the Certificateholders; provided,
however, that the rights under this Agreement cannot be assigned by the
Purchaser without the consent of the Company.
Section 4.07. Article and Section Headings.
The article and section headings herein are for convenience of reference
only, and shall not limit or otherwise affect the meaning hereof.
Section 4.08. Confidentiality.
The Purchaser agrees that all information supplied by or on behalf of the
Company pursuant to Sections 2.01 or 2.02, including individual account
information, is the property of the Company and the Purchaser agrees to hold
such information confidential and not to disclose such information.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused their names
to be signed hereto by their respective officers thereunto duly authorized, all
as of the day and year first above written.
HOMESIDE LENDING, INC.
By:
--------------------------
Name:
-----------------------
Title:
----------------------
------------------
By:
--------------------------
Name:
-----------------------
Title:
----------------------
<PAGE>
EXHIBIT K
FORM OF TRANSFEREE'S LETTER
HOMESIDE MORTGAGE SECURITIES, INC. SERIES 1998-2
[DATE]
HomeSide Mortgage Securities, Inc.
7301 Baymeadows Way
Jacksonville, Florida 32256
Ladies and Gentlemen:
We propose to purchase HomeSide Mortgage Securities, Inc.'s Multi-Class
Mortgage Pass-Through Certificates, Series 1998-2, Class A-R, described in the
Prospectus Supplement, dated May __, 1998, and Prospectus, dated May __, 1998.
1. We certify that (a) we are not a disqualified organization and (b) we
are not purchasing such Class A-R Certificates on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.
2. We certify that (a) we have historically paid our debts as they became
due, (b) we intend, and believe that we will be able, to continue to pay our
debts as they become due in the future, (c) we understand that, as beneficial
owner of the Class A-R Certificates, we may incur tax liabilities in excess of
any cash flows generated by the Class A-R Certificates, and (d) we intend to pay
any taxes associated with holding the Class A-R Certificates as they become due.
3. We acknowledge that we will be the beneficial owner of the Class A-R
Certificates and:*/
- ------------------
*/ Check appropriate box and if necessary fill in the name
of the Transferee's nominee.
<PAGE>
______ The Class A-R Certificates will be registered
in our name.
______ The Class A-R Certificates will be held in the
name of our nominee,
____________________, which is not a disqualified
organization.
4. Unless HomeSide Mortgage Securities, Inc. ("HSMSI") has consented to the
transfer to us by executing the form of Consent affixed hereto as Appendix B, we
certify that we are a U.S. person; for this purpose the term "U.S. person" means
a citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof or an estate or trust that is subject to United
States federal income tax regardless of the source of its income. We agree that
any breach by us of this certification shall render the transfer of any interest
in the Class A-R Certificates to us absolutely null and void and shall cause no
rights in the Class A-R Certificates to vest in us.
5. We agree that in the event that at some future time we wish to transfer
any interest in the Class A-R Certificates, we will transfer such interest in
the Class A-R Certificates only (a) to a transferee that (i) is not a
disqualified organization and is not purchasing such interest in the Class A-R
Certificates on behalf of a disqualified organization, (ii) is a U.S. person and
(iii) has delivered to HSMSI a letter in the form of this letter (including the
affidavit appended hereto) and, if requested by HSMSI, an opinion of counsel (in
a form acceptable to HSMSI) that the proposed transfer will not cause the
interest in the Class A-R Certificates to be held by a disqualified organization
or a person who is not a U.S. person or (b) with the written consent of HSMSI.
6. We hereby designate Norwest Bank Minnesota, National Association as our
fiduciary to act as the tax matters person for the Series 1998-2 REMIC.
Very truly yours,
[PURCHASER]
By:
----------------------------
Name:
Title:
Accepted as of __________ __, 199_
HOMESIDE MORTGAGE SECURITIES, INC.
By:
------------------------------
Name:
Title:
<PAGE>
APPENDIX A
Affidavit pursuant to (i) Section
860E(e)(4) of the Internal Revenue Code
of 1986, as amended, and (ii) certain
provisions of the Pooling and Servicing
Agreement
Under penalties of perjury, the undersigned declares that the following is
true:
(1) He or she is an officer of _________________________ (the
"Transferee"),
(2) the Transferee's Employee Identification number is __________,
(3) the Transferee is not a "disqualified organization" (as defined
below), has no plan or intention of becoming a disqualified
organization, and is not acquiring any of its interest in the HomeSide
Mortgage Securities, Inc., Multiclass Mortgage Pass-Through
Certificates, Series 1998-2, Class A-R on behalf of a disqualified
organization or any other entity,
(4) unless HomeSide Mortgage Securities, Inc. ("HSMSI") has consented to
the transfer to the Transferee by executing the form of Consent
affixed as Appendix B to the Transferee's Letter to which this
Certificate is affixed as Appendix A, the Transferee is a "U.S.
person" (as defined below),
(5) that no purpose of the transfer is to avoid or impede the assessment
or collection of tax,
(6) the Transferee has historically paid its debts as they became due,
(7) the Transferee intends, and believes that it will be able, to continue
to pay its debts as they become due in the future,
(8) the Transferee understands that, as beneficial owner of the Class A-R
Certificates, it may incur tax liabilities in excess of any cash flows
generated by the Class A-R Certificates,
(9) the Transferee intends to pay any taxes associated with holding the
Class A-R Certificates as they become due, and
(10) The Transferee consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by HSMSI (upon advice of
counsel) to constitute a reasonable arrangement to ensure that the
Class A-R Certificates will not be owned directly or indirectly by a
disqualified organization;
<PAGE>
For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. person" means a person that is a citizen or resident of the United States,
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust that is subject to United States federal income tax regardless of the
source of its income.
---------------------------------
By:
----------------------------------
Address of Investor for receipt of distribution:
Address of Investor for receipt of tax information:
(Corporate Seal)
Attest:
------------------
________________________, 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 Investor, and acknowledged to
me that he executed the same as his free act and deed and the free act
and deed of the Investor.
Subscribed and sworn before me this day of
____, 19 .
<PAGE>
Notary Public
County of ______
State of _______
My commission expires the _______ day of ________
BY: _________________________
Name: _________________
Title: _________________
<PAGE>
Dated: _____________
APPENDIX B
CONSENT
_________________________ (Transferee)
_________________________
_________________________
Ladies and Gentlemen:
HomeSide Mortgage Securities, Inc. ("HSMSI") hereby consents to the
transfer to, and registration in the name of, the Transferee (or, if applicable,
registration in the name of such Transferee's nominee of the Multiclass Mortgage
Pass-Through Certificates, Series 1998-2, Class A-R described in the
Transferee's Letter to which this Consent is appended, notwithstanding HSMSI's
knowledge that the Transferee is not a U.S. person (as defined in such
Transferee's Letter).
HOMESIDE MORTGAGE SECURITIES, INC.
Dated:___________________ By:________________________________
<PAGE>
EXHIBIT L
REQUEST FOR RELEASE OF DOCUMENTS
To: Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0067
Attn: Inventory Control
Re:
In connection with the administration of the Mortgage Loans held by you, as
Trustee, pursuant to the above-captioned Pooling and Servicing Agreement, we
request the release, and hereby acknowledge receipt, of the Mortgage File for
the Mortgage Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_______ 1. Mortgage Paid in Full
_______ 2. Foreclosure
_______ 3. Substitution
_______ 4. Other Liquidation
_______ 5. Nonliquidation Reason: ________________________
By: ___________________________
authorized signer)
Issuer: _______________________
Address: _______________________
_______________________
Date: _______________________
Trustee
- -------
Norwest Bank Minnesota, National Association
Please acknowledge the execution of the above request by your signature and date
below:
- ---------------------------- -----------------
Signature Date
<PAGE>
Documents returned to Trustee:
- ---------------------------- -----------------
Trustee Date
