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As filed with the Securities and Exchange Commission on August 25, 1997
Registration No. 333-4387
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITYSCAPE CORP.
(Originator and Servicer of the Trusts described herein)
(Exact Name of Registrant as Specified in its Charter)
NEW YORK 13-3430697
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523-5200
(914) 592-6677
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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JONAH L. GOLDSTEIN, ESQ.
GENERAL COUNSEL
CITYSCAPE CORP.
565 TAXTER ROAD
ELMSFORD, NEW YORK 10523-5200
(914) 592-6677
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
SEAN P. GRIFFITHS, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-4000
(FACSIMILE) (212) 351-4035
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Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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=======================================================================================================================
TITLE OF EACH CLASS OF Amount to be Proposed Maximum Proposed Maximum Amount of
SECURITIES REGISTERED Registered Aggregate Price Aggregate Offering Registration Fee
Per Unit(1) Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities........ $1,000,000,000 100% $1,000,000,000 $344,827.59
=======================================================================================================================
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
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CITYSCAPE CORP.
CROSS REFERENCE SHEET
(PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K)
<TABLE>
<CAPTION>
Item Location in Prospectus
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<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus .................. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus**
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................... Inside Front and Outside Back Cover Pages**
3. Summary Information and Risk Factors and
Ratio of Earnings to Fixed Charges*...................... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.......................... *
6. Dilution................................................. *
7. Selling Security Holders................................. *
8. Plan of Distribution..................................... Underwriting**
9. Description of Securities to be Registered............... Outside Front Cover Page; Prospectus Summary; The
Trust Fund; Description of Certificates**
10. Interests of Named Experts and Counsel................... *
11. Material Changes......................................... **
12. Incorporation of Certain Information by
Reference................................................ Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities........... *
</TABLE>
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* Answer negative or item inapplicable.
** To be completed from time to time by Prospectus Supplement
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[PRINT WITH RED HERRING LEGEND IN LEFT MARGIN]
SUBJECT TO COMPLETION DATED AUGUST 25, 1997
PROSPECTUS
CITYSCAPE CORP.
ORIGINATOR AND SERVICER
ASSET BACKED SECURITIES
(ISSUABLE IN SERIES)
This Prospectus relates to Asset Backed Certificates (the
"Certificates") and Asset Backed Notes (the "Notes" and, together with the
Certificates, the "Securities"), issuable in series (each, a "Series"), that may
be sold from time to time by Cityscape Corp. (in its capacity as originator or
purchaser of the Mortgage Loans referred to below, the "Originator"; in its
capacity as servicer of the Mortgage Loans, the "Servicer") on terms determined
at the time of sale and described in the related prospectus supplement (each, a
"Prospectus Supplement"). Each Series of Securities will represent a beneficial
interest in, or be secured by the assets of, a separate trust fund (each, a
"Trust"). The primary assets of each Trust will consist of one or more pools
(each, a "Mortgage Pool") of mortgage loans (collectively, the "Mortgage Loans")
secured by first or junior liens on one- to four-family residential or small
multi-family or mixed-use properties. The Mortgage Loans will be originated or
purchased by the Originator and will be conveyed to the Trust by the Originator
or may be sold or assigned directly, or indirectly through a wholly-owned
subsidiary of the Originator (the "Transferor"), to a separate entity formed by
the Originator solely for the purpose of forming such Trust and conveying the
Mortgage Loans thereto (either such entity, in its capacity as depositor to the
Trust, the "Depositor"). A Trust may include, in addition to the Mortgage Loans,
insurance policies, cash accounts, letters of credit, financial guaranty
insurance policies, third party guarantees or other forms of credit enhancement,
to the extent described in the related Prospectus Supplement.
Each Series of Securities will be issued in one or more classes (each,
a "Class"). Each Class of Certificates will evidence a beneficial ownership
interest of a specified percentage (which may be 0%) or portion of future
interest payments and a specified percentage (which may be 0%) or portion of
future principal payments on the Mortgage Loans in the related Trust. A Series
of Securities may include one or more senior Classes that receive certain
preferential treatment with respect to one or more other Classes of Securities
of such Series. One or more Classes of Securities of a Series may be entitled to
receive distributions of principal, interest or any combination thereof prior to
one or more other Classes of Securities of such Series or after the occurrence
of specified events, or may be required to absorb one or more types of losses
prior to one or more other Classes of Securities, in each case as specified in
the related Prospectus Supplement.
Distributions to holders of Securities ("Securityholders") will be
made on certain dates specified in the related Prospectus Supplement (each, a
"Distribution Date"), which may occur at monthly, quarterly, semi-annual or at
such other intervals as are specified therein.
The Notes of a Series will constitute non-recourse obligations of the
Depositor. The Securities will not represent an obligation of or interest in the
Originator or any affiliates thereof, the Depositor, the Servicer, or any other
person, except as set forth above or to the limited extent specified in the
related Prospectus Supplement. The obligations of the Originator and the
Depositor with respect to a Series of Securities will be limited to those
arising in respect of certain representations and warranties on the Mortgage
Loans and to any additional obligations specified in the related Prospectus
Supplement. The principal obligations of the Servicer will be limited to
obligations pursuant to certain representations and warranties and to its
contractual servicing obligations under the Pooling and Servicing Agreement,
with respect to Certificates, or a servicing agreement (each, a "Servicing
Agreement") to be entered into among the Servicer, the Depositor and the
Trustee, with respect to Notes, including any obligation it may have to advance
delinquent payments on the Mortgage Loans in the related Trust.
THE YIELD ON EACH CLASS OF SECURITIES MAY BE AFFECTED BY, AMONG OTHER
THINGS, THE RATE OF PAYMENT OF PRINCIPAL (INCLUDING PREPAYMENTS) OF THE MORTGAGE
LOANS IN THE RELATED TRUST AND THE TIMING OF RECEIPT OF SUCH PAYMENTS AS
DESCRIBED HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT. A TRUST MAY BE
SUBJECT TO EARLY TERMINATION UNDER THE CIRCUMSTANCES DESCRIBED HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT. THE NOTES OF ANY SERIES MAY BE SUBJECT TO
OPTIONAL REDEMPTION UNDER THE CIRCUMSTANCES DESCRIBED HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT. SEE "RISK FACTORS -- YIELD, MATURITY AND PREPAYMENT
CONSIDERATIONS" AND "MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS" HEREIN.
If specified in a Prospectus Supplement, one or more elections may be
made to treat each Trust or specified portions thereof as a "real estate
mortgage investment conduit" ("REMIC") for federal income tax purposes.
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THE SECURITIES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
ORIGINATOR, THE SERVICER, THE DEPOSITOR, THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES EXCEPT AS SET FORTH HEREIN AND IN THE RELATED PROSPECTUS
SUPPLEMENT. NEITHER THE SECURITIES NOR THE UNDERLYING MORTGAGE LOANS WILL BE
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
ORIGINATOR, THE SERVICER, THE DEPOSITOR, THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES OR BY ANY OTHER PERSON, EXCEPT AS SET FORTH IN THE
RELATED PROSPECTUS SUPPLEMENT.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Offers of the Securities may be made through one or more different
methods, including offerings through underwriters as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement. Prior
to issuance, there will have been no market for the Securities of any Series,
and there can be no assurance that a secondary market for the Securities will
develop, or if it does develop, that it will continue. THIS PROSPECTUS MAY NOT
BE USED TO CONSUMMATE SALES OF A SERIES OF SECURITIES UNLESS ACCOMPANIED BY A
PROSPECTUS SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS ________ __, 1997
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UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES COVERED BY SUCH PROSPECTUS SUPPLEMENT,
WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE REQUIRED TO
DELIVER SUCH PROSPECTUS SUPPLEMENT AND THIS PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS AND PROSPECTUS SUPPLEMENT WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be
offered hereunder, among other things, will set forth with respect to such
Series of Securities: (i) a description of the Class or Classes of such
Securities; (ii) the rate of interest, the "Pass-Through Rate" or other
applicable rate (or the manner of determining such rate) and authorized
denominations of each Class of such Securities; (iii) certain information
concerning the Mortgage Loans and insurance policies, cash accounts, letters of
credit, financial guaranty insurance policies, third party guarantees or other
forms of credit enhancement, if any, relating to one or more Mortgage Pools or
all or part of the related Securities; (iv) the specified interest of each
Class of Certificates in, and manner and priority of, the distributions on the
Mortgage Loans; (v) information as to the nature and extent of subordination
with respect to such Series of Securities, if any; (vi) the Distribution
Dates; (vii) the circumstances, if any under which each Trust may be subject to
early termination or a Series of Notes may be subject to redemption; (viii)
whether a REMIC election will be made and the designation of the regular and
residual interest therein; and (ix) additional information with respect to
the plan of distribution of such Securities.
AVAILABLE INFORMATION
The Originator has filed a Registration Statement under the Securities
Act of 1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") with respect to the Securities. The Registration
Statement and amendments thereof and the exhibits thereto are available for
inspection without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade
Center, New York, New York 10048; and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission.
No person has been authorized to give any information or to make any
representation regarding the Series of Securities referred to in the
accompanying Prospectus Supplement other than those contained or incorporated by
reference in this Prospectus and such Prospectus Supplement with respect to such
Series and, if given or made, such information or representations must not be
relied upon. This Prospectus and the accompanying Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Securities offered hereby and thereby nor an offer of the
Securities to any person in any state or other jurisdiction in which such
offer would be unlawful. The delivery of this Prospectus at any time does not
imply that information herein is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed with the Commission by or on behalf of
the Trust referred to in the accompanying Prospectus Supplement pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
termination of any offering of Securities issued by such Trust shall be deemed
to be incorporated by reference in this Prospectus and to be part of this
Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein (or in the
accompanying Prospectus Supplement) or in any other subsequently filed document
which also is or is deemed to be incorporated by reference modifies or replaces
such statement. Any such
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statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Trustee on behalf of any Trust will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that may be
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Such requests should be directed to the Corporate Trust Office of
the Trustee specified in the accompanying Prospectus Supplement.
No information that relates to any Series of Securities other than
the Series referred to in the accompanying Prospectus Supplement shall be deemed
to be incorporated by reference in this Prospectus.
REPORTS TO SECURITYHOLDERS
Periodic and annual reports concerning any Securities and the related Trust
will be provided to the Securityholders. See "Description of the Securities
- -- Reports to Securityholders" herein. If the Securities of a Series are to
be issued in book-entry form (as specified in the related Prospectus
Supplement), such reports will be provided to the Securityholder of record
and beneficial owners of such Securities will have to rely on the procedures
described herein under "Description of the Securities -- Form of Securities
- -- Book-Entry Registration."
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TABLE OF CONTENTS
Caption Page
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SUMMARY.......................................... 7
RISK FACTORS..................................... 19
Limited Liquidity........................... 19
Limited Sources of Payment on Securities.... 19
Risks Associated with the Mortgage Loans.... 19
Nature of the Security for Mortgage Loans... 19
Legal Considerations; Limitation on
Enforcement of Remedies................... 21
Yield, Maturity and Prepayment
Considerations............................ 22
Underwriting Standards, Limited Operating
History and Potential Delinquencies....... 24
The Status of the Mortgage Loans in the
Event of Bankruptcy of the Originator..... 24
Limitations on Interest Payments and
Foreclosures.............................. 25
Funds Available for Redemptions at the
Request of Noteholders.................... 25
Security Rating Related to Rating of
Credit Enhancement Provider............... 25
Book-Entry Registration..................... 25
Lack of Control by Securityholders.......... 25
THE TRUSTS....................................... 26
The Mortgage Loans--General................. 26
Pre-Funding Accounts........................ 28
Home Equity Loans........................... 28
Multifamily and Mixed Use Loans............. 29
FHA Loans................................... 29
Sav*-A-Loans(R)............................. 29
JUMBO LOANS...................................... 30
USE OF PROCEEDS.................................. 30
THE ORIGINATOR................................... 30
General..................................... 30
Home Equity Loan Underwriting............... 30
Underwriting Guidelines for
Multi-Family Loans and Mixed-Use Loans.... 32
Underwriting Guidelines for FHA Loans....... 32
Underwriting Guidelines for
Sav*-A-Loans(R)........................... 32
Underwriting Guidelines for Jumbo Loans..... 32
Representations by Originator............... 32
DESCRIPTION OF THE SECURITIES.................... 33
General..................................... 33
Form of Securities.......................... 34
Distributions on Securities................. 36
Reports to Securityholders.................. 38
CREDIT ENHANCEMENT............................... 40
Subordination............................... 40
Reserve Accounts............................ 41
Financial Guaranty Insurance Policies....... 41
Mortgage Pool Insurance Policies............ 42
Special Hazard Insurance Policies........... 43
Bankruptcy Bonds............................ 43
Cross Support............................... 43
Spread Amount............................... 44
Supplemental Interest Payments.............. 44
Maturity Protection......................... 44
FHA Insurance............................... 44
Other Insurance, Guarantees and Similar
Instruments or Agreements................. 45
Maintenance of Credit Enhancement........... 45
MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS.... 46
THE POOLING AND SERVICING AGREEMENT.............. 48
Assignment of the Mortgage Loans............ 48
Payments on the Mortgage Loans.............. 51
Investment of Accounts...................... 52
Permitted Investments....................... 52
Monthly Advances and Compensating
Interest.................................. 53
Realization upon Defaulted Mortgage
Loans..................................... 54
General Servicing Procedures................ 55
Sub-Servicers............................... 55
Servicing and Other Compensation and
Payment of Expenses....................... 55
Maintenance of Hazard Insurance............. 56
Enforcement of Due-on-Sale Clauses.......... 57
Voting...................................... 57
Amendments.................................. 57
Events of Default........................... 58
Rights Upon Certificate Events of Default... 58
Termination; Optional Termination........... 59
Evidence as to Compliance................... 59
Indemnification of Officers and Directors
of the Originator......................... 60
The Trustee................................. 60
THE INDENTURE.................................... 61
General..................................... 61
Modification of Indenture................... 61
Note Events of Default...................... 62
Rights upon Note Events of Default.......... 62
List of Noteholders......................... 63
Annual Compliance Statement................. 64
Trustee's Annual Report..................... 64
Satisfaction and Discharge of Indenture..... 64
Redemption of Notes......................... 64
Reports by Trustee to Noteholders........... 64
Limitation on Suits......................... 64
CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS AND RELATED MATTERS...................... 66
Nature of Mortgage Loans.................... 66
Foreclosure/Repossession.................... 66
Rights of Redemption........................ 67
Anti-Deficiency Legislation, Bankruptcy
Laws and Other Limitations................ 68
Enforceability of Due-on-Sale Clauses....... 68
Prepayment Charges.......................... 69
Applicability of Usury Laws................. 69
Soldiers' and Sailors' Civil Relief Act..... 69
Environmental Considerations................ 69
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......... 70
General..................................... 70
Tax Status as a REMIC....................... 70
Grantor Trust Status........................ 82
Federal Income Tax Consequences of Notes.... 90
STATE TAX CONSIDERATIONS......................... 90
ERISA CONSIDERATIONS............................. 90
LEGAL INVESTMENT CONSIDERATIONS.................. 92
SMMEA....................................... 92
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Caption Page
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FFIEC Policy Statement...................... 92
General..................................... 94
METHOD OF DISTRIBUTION........................... 94
LEGAL MATTERS.................................... 94
FINANCIAL INFORMATION............................ 94
RATING........................................... 95
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SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement. Reference is made to the Index of Principal Terms for the location
in this Prospectus of the definitions of certain capitalized terms.
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Securities Offered.............................. Asset Backed Certificates and Asset Backed Notes (issuable in series).
The Originator and Servicer..................... Cityscape Corp., a New York corporation. The principal
office of the Originator and Servicer is located in Elmsford,
New York. See "The Originator" and "The Pooling and
Servicing Agreement -- General Servicing Procedures"
herein.
Sub-Servicers................................... The Servicer may appoint one or more mortgage servicing
institutions (each, a "Sub-Servicer") to service and
administer the Mortgage Loans in a Mortgage Pool if so
indicated in the related Prospectus Supplement.
The Trustee..................................... The Trustee for each Series of Certificates will be specified
in the related Prospectus Supplement.
The Securities.................................. Each Series of Certificates will be issued by a separate Trust created pursuant
to an agreement (each, a "Pooling and Servicing Agreement") among the
Originator or a separate entity formed by Cityscape Corp. solely for the
purpose of forming such Trust (either such entity, the "Depositor"), the
Servicer, the Trustee and Cityscape Corp. Each Certificate will represent a
beneficial ownership interest in the assets of the related Trust which will
consist primarily of the Mortgage Loans.
Each Series of Notes will be issued pursuant to an indenture (each, an
"Indenture") between the related Depositor and the Trustee, will be
non-recourse obligations of such Depositor and will be payable
solely from the assets of the Trust pledged to secure such Series.
The Securities of any Series may be issued in
one or more Classes, as specified in the related
Prospectus Supplement. A Series of Securities
may include one or more Classes of senior
Securities (collectively, "Senior Securities")
which receive certain preferential treatment
specified in the related Prospectus Supplement
with respect to one or more Classes of subordinated
Securities (collectively, the "Subordinated
Securities"). Certain Series or Classes of
Securities may be covered by a Financial
Guaranty Insurance Policy (as defined herein), a
Mortgage Pool Insurance Policy (as defined
herein), a Special Hazard Insurance Policy (as
defined herein), a Bankruptcy Bond (as defined
herein) or other insurance policies, cash
accounts, letters of credit, financial guaranty
insurance policies, third party guarantees or
other forms of credit enhancement, as described
herein and in the related Prospectus Supplement.
See "Credit Enhancement" herein.
Each Class of Securities within a Series will
evidence the interests specified in the related
Prospectus Supplement, which may (i) include the
right to receive distributions
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<TABLE>
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allocable only to principal, only to interest or
to any combination thereof; (ii) include the right
to receive distributions only of prepayments of
principal throughout the lives of the Certificates
or during specified periods; (iii) be subordinated
in the right to receive distributions of scheduled
payments of principal, prepayments of principal,
interest or any combination thereof to one or more
other Classes of Securities of such Series
throughout the lives of the Securities or during
specified periods or may be subordinated with
respect to certain losses or delinquencies; (iv)
include the right to receive such distributions
only after the occurrence of events specified in
the related Prospectus Supplement; (v) include the
right to receive distributions in accordance with
a schedule or formula or on the basis of
collections from designated portions of the assets
in the related Trust; (vi) include, as to
Securities entitled to distributions allocable
to interest, the right to receive interest at a
fixed rate or an adjustable rate; and (vii)
include, as to Securities entitled to
distributions allocable to interest, the right to
distributions allocable to interest only after the
occurrence of events specified in the related
Prospectus Supplement, and in each case, may
accrue interest until such events occur, as
specified in such Prospectus Supplement. The
timing and amount of such distributions may vary
among Classes as specified in the related
Prospectus Supplement.
Except to the extent that the related Prospectus
Supplement specifies that the Securities will be
issuable in bearer form, the Securities will be
issuable in fully registered form, in the minimum
denominations set forth in such Prospectus
Supplement. See "Description of Securities"
herein.
The Mortgage Loans....... The primary assets of each Trust will consist of
one or more pools of first and junior lien
mortgage loans or deeds of trust, including any
note or other instrument of indebtedness (each, a
"Mortgage Note"). The Mortgage Loans may be (i)
conventional one- to four-family residential
mortgage loans ("Home Equity Loans"), (ii) small
multi-family residential mortgage loans ("Multi-
Family Loans"), (iii) mixed-use mortgage loans
("Mixed Use Loans"), (iv) loans to make home
improvements or for debt consolidation under the
Originator's Sav*-A-Loan Program(R)
("Sav*-A-Loans(R)"), (v) loans to make home
improvements originated under the Title I credit
insurance program created under the National
Housing Act of 1934 by the Federal Housing
Administration ("FHA Loans") or (vi) one- to four-
family residential mortgage loans with initial
balances equal to or greater than $500,000
("Jumbo Loans"). The properties securing the
Mortgage Loans may include townhouses,
condominiums and manufactured housing
(which is permanently affixed to and treated as
real property under local law), but shall exclude
cooperatives and mobile homes.
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<TABLE>
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The Mortgage Loans to be included in any
Mortgage Pool will be described in the related
Prospectus Supplement. The Mortgage Loans will
have interest payable thereon at (i) fixed rates
specified in the related Prospectus Supplement,
(ii) at adjustable rates computed as specified in
the related Prospectus Supplement or (iii)
graduated or other variable rates described in the
related Prospectus Supplement. Each Mortgage Loan
will generally require monthly payment of
principal and interest; any Mortgage Loan not
requiring monthly payments will be noted in the
related Prospectus Supplement. Scheduled payments
of principal on any Mortgage Loan may be computed
(i) on a level debt service basis that will result
in full amortization over the stated term of such
Mortgage Loan, (ii) in the case of a Balloon Loan
(as defined herein), on the basis of an assumed
amortization schedule that is significantly longer
than the original term of maturity of such
Mortgage Loan and will require payment of a
substantial amount of principal at the stated
maturity specified in the related Mortgage Note or
(iii) such other basis as is specified in the
related Prospectus Supplement.
The property securing a Mortgage Loan (each, a
"Mortgaged Property") may be located in any one of
the fifty states or the District of Columbia. All
of the Mortgage Loans will generally be covered by
standard hazard insurance policies ("Standard
Hazard Insurance Policies") insuring against
losses due to fire and various other causes; any
Mortgage Loans not so covered will be noted in the
related Prospectus Supplement. As set forth in the
related Prospectus Supplement, certain of the
Mortgage Loans underlying a given Series of
Securities may have been originated by the
Originator and certain of such Mortgage Loans may
have been purchased by the Originator from its
correspondents or other third parties.
Certain of the Mortgage Loans may be partially
insured by the Federal Housing Administration
("FHA"), an agency of the United States Department
of Housing and Urban Development ("HUD"), pursuant
to the Title I credit insurance program (the
"Title I Loan Program") of the National Housing
Act of 1934. Several types of loans may be made
under the Title I Loan Program, including (1)
property improvement loans; (2) manufactured home
purchase loans; (3) manufactured home lot loans;
and (4) combination loans (to purchase a
manufactured home and a lot). Only home
improvement loans on one- to four-family
residences and condominiums may be included in the
Mortgage Loans. The Title I Loan Program is a
coinsurance program. The lender initially is at
risk for 10% of the principal balance of each
loan. The FHA will insure the remaining 90% of the
principal balance of each loan, subject
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to certain limits. Such FHA insurance is accorded
the full faith and credit of the United States of
America.
The Prospectus Supplement for each Series of
Securities will specify with respect to all
Mortgage Loans included in each related Mortgage
Pool, among other things, (i) the aggregate
outstanding principal balance and the average
outstanding principal balance of the Mortgage
Loans in such Pool as of the date specified in the
Prospectus Supplement (the "Cut-off Date"), (ii)
the largest principal balance of any of the
Mortgage Loans, (iii) the types of Mortgaged
Properties securing the Mortgage Loans, (iv) the
original terms to maturity of the Mortgage Loans,
(v) the weighted average term to maturity of the
Mortgage Loans as of the Cut-off Date and the
range of the terms to maturity, (vi) the ranges of
the Combined Loan-to-Value Ratios (as defined
herein) at origination, (vii) the weighted average
rate of interest (each such rate, a "Mortgage
Rate") and ranges of Mortgage Rates borne by the
Mortgage Loans and (viii) the geographic
distribution of the Mortgaged Properties on a
state-by-state basis.
Pre-Funding Account....... If provided in the related Prospectus Supplement,
the original principal amount of a Series of
Securities may exceed the principal balance of
the Mortgage Loans initially being delivered to
the Trustee. Cash in an amount equal to such
difference (such amount, the "Pre-Funded Amount")
will be deposited into a separate trust account
(the "Pre-Funding Account") maintained with the
Trustee for the benefit of the Securityholders.
During the period set forth in the related
Prospectus Supplement (the "Funding Period"), the
Pre-Funded Amount in the Pre-Funding Account may
be used to purchase additional Mortgage Loans for
the related Trust subject to the satisfaction of
certain conditions specified under the related
Pooling and Servicing Agreement.
For a Trust that elects to be characterized as
either a REMIC or a grantor trust under federal
income tax laws, the maximum length of the related
Funding Period will not exceed three calendar
months or 90 days, respectively, from the date of
issuance of the Securities and otherwise the
maximum length of the Funding Period will not
exceed the period set forth in the related
Prospectus Supplement. The amount of the initial
Pre-Funded Amount is intended not to exceed the
aggregate principal balance of additional Mortgage
Loans that the Originator anticipates will be
acquired and conveyed to the Trust during the
applicable Funding Period.
Prior to the conveyance of any additional Mortgage
Loans to the Trust, the Originator will be
required to give notice of
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the additional Mortgage Loan to be conveyed to
the Trust, to the Trustee and any third-party
credit enhancement provider. Upon the
satisfaction of the conditions set forth in the
related Pooling and Servicing Agreement, the
Trustee will release from the Pre-Funding
Account the necessary funds to purchase the
additional Mortgage Loans to be conveyed to the
Trust on such date. If any Pre-Funded Amount
remains on deposit in the Pre-Funding Account
at the end of the Funding Period, such amount,
in the amounts and in the manner specified in
the related Prospectus Supplement, will be used
to prepay some or all Classes of the related
Series of Securities.
Credit Enhancement........ The Mortgage Loans in a Trust or the
Securities of one or more Classes in the
related Series may have the benefit of one or
more types of credit enhancement, as described
in the related Prospectus Supplement. The
protection against losses afforded by any such
credit support will be limited. Such credit
enhancement may include one or more of the
following types or another type of credit
enhancement as specified in the Prospectus
Supplement:
A. Subordinated Securities.... The rights of the holders of any Subordinated
Securities of a Series to receive
distributions with respect to the related Trust
will be subordinated to the rights of the
holders of the Senior Securities of the same
Series to receive distributions to the extent
described in the related Prospectus Supplement.
This subordination is intended to enhance the
likelihood of regular receipt by holders of
Senior Securities of the full amount of
payments which such holders would be entitled
to receive if there had been no losses;
however, there can be no assurance that the
Senior Securities will receive the full
amount of payments to which they are entitled
as a result of such subordination or the
existence of the Reserve Accounts described
below. The protection afforded to the holders
of Senior Securities through subordination
may be accomplished by the preferential right
of such Securityholders to receive, prior to
any distribution being made in respect of the
related Subordinated Securities, the amounts
of principal and interest due to them on each
Distribution Date (as defined herein) out of
the funds available for distribution on such
date in the related Distribution Account (as
defined herein) to the extent described in the
related Prospectus Supplement. The protection
afforded to the holders of Senior Securities
through subordination also may be accomplished
by allocating certain types of losses or
delinquencies to the related Subordinated
Securities to the extent described in the
related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, a Subordinated Class of
Securities may be senior to other
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Classes of Securities with respect to the right to
receive certain types of payments or with respect
to allocation of certain losses or delinquencies.
If so specified in the related Prospectus
Supplement, subordination may apply only in the
event of certain types of losses not covered by
other forms of credit enhancement, such as hazard
losses not covered by Standard Hazard Insurance
Policies or losses due to the bankruptcy of the
borrower under a Mortgage Loan (the "Mortgagor")
not covered by a Bankruptcy Bond. The related
Prospectus Supplement will set forth information
concerning the amount of subordination of a Class
or Classes of Subordinated Securities in a Series,
the circumstances in which such subordination will
be applicable and the manner, if any, in which the
amount of subordination will decrease over time.
B. Reserve Account..... If so specified in the related Prospectus
Supplement, one or more reserve or spread accounts
(each, a "Reserve Account") may be established and
maintained, in whole or in part, by the deposit
therein of distributions allocable to the holders
of specified Classes of Securities for a
specified time or until a specified level is
reached. The related Prospectus Supplement will
set forth information concerning the manner of
funding any Reserve Account, and the conditions
under which amounts in any such Reserve Account
will be used to make distributions to holders of
certain Classes of Securities or released to
holders of certain Classes of Securities, the
Servicer, the Originator, the Depositor or
another entity.
C. Financial Guaranty
Insurance Policy..... If so specified in the related Prospectus
Supplement, a financial guaranty insurance
policy or policies (each, a "Financial Guaranty
Insurance Policy") may be obtained and maintained
for a Class or Series of Securities. A
Financial Guaranty Insurance Policy generally
will unconditionally and irrevocably guarantee
that the full amount of principal and interest
distributable to Securityholders on any
Distribution Date, as well as any other amounts
specified in the related Prospectus Supplement
(the "Insured Amount"), will be available for
distribution to Securityholders on such
Distribution Date. A Financial Guaranty
Insurance Policy may have certain limitations set
forth in the related Prospectus Supplement,
including but not limited to limitations on the
insurer's obligation to guarantee the Originator's
obligation to repurchase or substitute for any
Mortgage Loans, to guarantee any specified rate of
prepayments or to provide funds to redeem
Securities on any specified date.
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D. Mortgage Pool Insurance
Policy.................... If so specified in the related Prospectus
Supplement, a mortgage pool insurance policy or
policies (each, a "Mortgage Pool Insurance
Policy") may be obtained and maintained for all
or certain of the Mortgage Loans in the related
Trust, limited in scope, covering losses on the
related Mortgage Loans up to a maximum amount.
The terms of any such Mortgage Pool Insurance
Policy will be described in the related
Prospectus Supplement.
E. Special Hazard Insurance
Policy.................... If so specified in the related Prospectus
Supplement, certain physical risks with respect
to the related Mortgage Properties that would
not otherwise be insured against by Standard
Hazard Insurance Policies may be covered by a
special hazard insurance policy or policies
(each, a "Special Hazard Insurance Policy").
Each Special Hazard Insurance Policy will be
limited in scope and will cover losses up to a
maximum amount. The terms of any such Special
Hazard Insurance Policy will be described in
the related Prospectus Supplement.
F. Bankruptcy Bond........... If so specified in the related Prospectus
Supplement, a mortgagor bankruptcy bond or
bonds (each, a "Bankruptcy Bond") may be
obtained to cover certain losses resulting from
a reduction by a bankruptcy court of scheduled
payments of principal or interest on a Mortgage
Loan or a reduction by such court of the
principal amount of a Mortgage Loan. The level
of coverage and other terms of each Bankruptcy
Bond will be specified in the related
Prospectus Supplement.
G. Cross Support............ If so specified in the related Prospectus
Supplement, the ownership interests of separate
Trusts or separate groups of assets in a single
Trust may be evidenced by separate Classes of
the related Series of Securities. In such
case, credit support may be provided by a
cross-support feature which requires that
distributions be made with respect to certain
Securities evidencing interests in one or
more Trusts or asset groups prior to
distributions to other Securities evidencing
interests in other Trusts or asset groups. If
specified in the related Prospectus Supplement,
the coverage provided by one or more other
forms of credit support, such as Reserve
Accounts or Financial Guaranty Insurance
Policies, may apply concurrently to two or more
separate Trusts, without priority among such
Trusts, until the credit support is exhausted.
If applicable, the Prospectus Supplement will
identify the Trusts or asset groups to which
such credit support relates and the manner of
determining the amount of the coverage provided
thereby and of the application of such coverage
to the identified Trusts or asset groups.
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H. Spread Amount................... If so specified in the related Prospectus
Supplement, certain Classes of Securities may be
entitled to receive limited acceleration of
principal relative to the amortization of the
related Mortgage Loans. The accelerated amortization
will be achieved by applying certain excess interest
collected on the Mortgage Loans to the payment of
the principal on such Classes of Securities. This
acceleration feature is intended to create an amount
(the "Spread Amount"), resulting from, and generally
equal to, the excess of the aggregate principal
balances of the applicable Mortgage Loans over the
principal balances of the applicable Classes of
Securities. Once the required Spread Amount is
reached, and subject to the provisions described in
the next sentence and in the related Prospectus
Supplement, the acceleration feature will cease,
unless necessary to maintain the required level of
the Spread Amount. The applicable Pooling and
Servicing Agreement or Indenture will provide that,
subject to certain floors, caps and triggers, the
required level of the Spread Amount may increase or
decrease over time. An increase would result in a
temporary period of accelerated amortization of the
applicable Classes of Securities to increase the
actual level of the Spread Amount to its required
level; a decrease would result in a temporary period
of decelerated amortization to reduce the actual
level of the Spread Amount to its required level. A
Pooling and Servicing Agreement also may provide
that after one or more Classes of Securities have
been paid to the required level of the Spread
Amount, excess interest, together with certain other
excess amounts, may be applied to make-up shortfalls
in, or accelerate the amortization of, other Classes
of Securities.
I. Supplemental Interest Payments.. If so specified in the related Prospectus
Supplement, one or more Classes of Securities may
be entitled to receive supplemental interest
payments ("Supplemental Interest Payments") under
specified circumstances. Supplemental interest
payments will be available to fund some or all of
the difference, if any, between the interest owed to
a Class of Securities on a Distribution Date and
the interest that would be available to pay such
interest assuming no defaults or delinquencies on
the Mortgage Loans. Such differences may result if
the interest rates on the applicable Classes of
Securities are based upon an index that differs
from the index used in determining the interest
rates on the Mortgage Loans. Except as otherwise
provided in a Prospectus Supplement, supplemental
interest payments will not be available to fund
shortfalls resulting from delinquencies or defaults
on the Mortgage Loans.
J. Maturity Protection............. If so specified in the Prospectus Supplement, one or
more Classes of Securities may be entitled to
third-party payments to help provide that the
holders of such
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Securities receive their unpaid principal on or
prior to a specified date.
K. FHA Insurance............. To the extent specified in the related Prospectus
Supplement, all or a portion of the Mortgage Loans
may be FHA Loans subject to FHA insurance.
L. Other Credit Enhancement.. Other credit enhancement arrangements, including,
but not limited to, letters of credit or third party
guarantees, may be used to provide coverage for
certain risks of losses on the Mortgage Loans in a
given Trust. These arrangements may be in addition
to or in lieu of any forms of credit support
described in this Prospectus. The related Prospectus
Supplement will describe any such arrangements,
including information as to the extent of coverage
and any conditions or limitations thereto. Any such
arrangement must be acceptable to each nationally
recognized rating agency that is engaged by the
Originator to provide a rating for any Class of
Securities of the related Series (each, a "Rating
Agency").
Advances..................... Unless otherwise specified in the related Prospectus
Supplement, the Servicer and, if applicable, each
Sub-Servicer will be obligated each month (or at
such other intervals specified in the related
Prospectus Supplement) to advance amounts
corresponding to all or a portion of delinquent
interest payments on each Mortgage Loan until the
date on which such Mortgaged Property is sold at a
foreclosure sale or such related Mortgage Loan is
otherwise liquidated or charged off. Any such
obligation to make advances may be limited to
amounts due to holders of Senior Securities, to
amounts deemed to be recoverable from late payments
or liquidation proceeds, for specified periods or
any combination thereof, in each case as specified
in the related Prospectus Supplement. See "The
Pooling and Servicing Agreement -- Monthly Advances
and Compensating Interest" herein.
Compensating Interest........ With respect to each Mortgage Loan as to which the
Servicer receives a principal payment in full in
advance of the final scheduled due date (a
"Principal Prepayment"), the Servicer will generally
be required to remit to the Trustee, from amounts
otherwise payable to the Servicer as servicing
compensation, an amount generally representing the
excess of interest on the principal balance of such
Mortgage Loan prior to such Principal Prepayment
over the amount of interest actually received on the
related Mortgage Loan during the applicable period.
If the Servicer is not required to remit such amounts,
the Prospectus Supplement will describe the Servicer's
obligations, if any, with respect to Principal
Prepayments. See "The Pooling and Servicing Agreement
-- Monthly Advances and Compensating Interest" herein.
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Optional Termination
with Respect to
Certificates.............. The Originator, the Servicer, the holders of REMIC
Residual Certificates (as defined herein), certain
insurers or certain other entities specified in the
related Prospectus Supplement may have the option to
effect early retirement of a Series of Certificates
through the purchase, at a price no less than is
sufficient to allow payment from the Trust of the
aggregate unpaid principal amount of such Series
plus accrued and unpaid interest on the Series to
the termination date, of the Mortgage Loans in the
Trust, subject to the aggregate principal balance of
the related Mortgage Loans being less than the
percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the
Mortgaged Loans at the Cut-off Date for the related
Series. Typically, the Originator, the Servicer or
such other entity will cause the retirement of a
Series of Certificates when servicing of the then
remaining amount of Mortgage Loans becomes
inefficient. See "The Pooling and Servicing
Agreement -- Termination; Optional Termination"
herein.
Redemption of Notes....... To the extent provided in the Prospectus Supplement
relating to a Series of Notes, the Notes of any
Series may be (i) redeemed at the option of the
related Depositor or another party specified in the
related Prospectus Supplement; or (ii) subject to
special redemption under certain circumstances. The
circumstances and terms under which the Notes of a
given Series may be redeemed will be described in
the related Prospectus Supplement. See "The
Indenture -- Redemption of Notes" herein.
Mandatory Termination .... The Trustee, the Servicer or certain other entities
specified in the related Prospectus Supplement may
be required to effect early retirement of a Series
of Securities under the circumstances and in the
manner specified in the related Prospectus
Supplement and herein under "The Pooling and
Servicing Agreement -- Termination; Optional
Termination."
Risk Factors ............. See "Risk Factors" beginning on page 19 for a
description of certain risks relevant to an
investment in the Securities, including the
following: the limited market for the Securities,
the limited sources of payment on the Securities,
the possibility of a decline in the value of the
Mortgaged Properties, the risks associated with
Mortgage Loans secured by junior liens, the
possibility of the bankruptcy of the Mortgagors,
environmental concerns, limitations on enforcement
of remedies with respected to defaulted Mortgage
Loans, risks associated with prepayments of
Mortgage Loans, the limited operating history of
the Servicer and the underwriting standards of the
Originator.
Certain Federal Income
Tax Consequences ......... Different federal income tax consequences will
obtain for holders of Certificates and of Notes.
The federal income tax consequences of the purchase,
ownership and disposition of the Certificates of
each Series will depend on, among other things,
whether an election is made to treat the
corresponding Trust (or certain assets of the Trust)
as a "real estate mortgage investment conduit" under
the Internal Revenue Code of 1986, as amended (the
"Code").
I. Certificates
A. REMIC ............. If an election is to be made to treat the Trust (or
certain assets of the Trust) for a Series of
Certificates as a REMIC for federal income tax
purposes, the related Prospectus Supplement will
specify which Class or Classes thereof will be
designated as regular interests in the REMIC
("Regular Certificates") and which Class of
Certificates will be designated as the residual
interest in the REMIC ("Residual Certificates"). To
the extent provided herein and in the related
Prospectus Supplement, Certificates representing an
interest in the REMIC will be considered "real
estate assets" for purposes of Section 856(c)(6)(B)
of the Code and assets described in Section
7701(a)(19)(C) of the Code.
For federal income tax purposes, Regular
Certificates generally will be treated as debt
obligations of the Trust with payment terms
equivalent to the terms of such Certificates.
Holders of Regular Certificates will be required to
report income with respect to such Certificates
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under the accrual method, regardless of their normal
tax accounting method. Original issue discount, if
any, on Regular Certificates will be includible in
the income of the holders thereof as it
accrues, in advance of receipt of the cash
attributable thereto, which rate of accrual will be
determined based on a reasonable assumed prepayment
rate of the Mortgage Loans held by the Trust. The
Residual Certificates generally will not be treated
as evidences of indebtedness for federal income tax
purposes, but instead, as representing rights to the
taxable income or net loss of the REMIC.
B. Grantor Trust...... If no election is to be made to treat the Trust (or
any portion thereof) for a Series of Certificates
("Non-REMIC Certificates") as a REMIC, the Trust
will be classified as a grantor trust for federal
income tax purposes and not as an association
taxable as a corporation. Holders of Non-REMIC
Certificates will be treated for such purposes,
subject to the possible application of the stripped
bond rules, as owners of undivided interests in the
related Mortgage Loans and generally will be
required to report as income their pro rata share of
the entire gross income (including amounts paid as
reasonable servicing compensation) from the Mortgage
Loans and will be entitled, subject to certain
limitations, to deduct their pro rata share of
expenses of the Trust.
To the extent provided herein and in the related
Prospectus Supplement, Non-REMIC Certificates will
represent interests in "real estate assets" within
the meaning of Section 856(c)(6)(B) of the Code and
"Loans ... principally secured by an interest in
real property" within the meaning of Section
7701(a)(19)(C)(v) of the Code.
II. Notes................ For federal income tax purposes, Notes generally
will be treated as debt obligations of the related
Depositor. Holders of Notes will not be required to
report stated interest with respect to such Notes
under an accrual method, unless the Noteholders
otherwise use the accrual method of accounting for
tax purposes. Notes will not represent interests
in "real estate assets" within the meaning of
Section 856(c)(6)(B) of the Code or "Loans . . .
principally secured by an interest in real
property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code.
Investors are advised to consult their tax advisors
and to review "Material Federal Income Tax
Consequences" herein and, if applicable, in the
related Prospectus Supplement.
ERISA Considerations..... Fiduciaries of employee benefit plans subject to
Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), should consider
the ERISA fiduciary investment standards before
authorizing an investment by a plan in a Series of
Securities. In addition, fiduciaries of employee
benefit plans subject to Title I of ERISA, as well
as certain plans not subject to ERISA, but which are
subject to Section 4975 of the Code, such as
individual retirement accounts and Keogh plans
covering only a sole proprietor or partners
(collectively, "Plan(s)"), should consult with their
legal counsel to determine whether an investment in
a Series of Securities will cause the Mortgage Loans
of the Trust to
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be considered plan assets pursuant to the plan
asset regulations set forth in 29 C.F.R.
Section 2510.3-101 (the "Plan Asset
Regulations"), thereby subjecting the Plan to
the prohibited transaction rules with respect
to the Mortgage Loans and the Trustee or the
Servicer to the fiduciary investment standards
of ERISA, or cause the excise tax provisions of
Section 4975 of the Code to apply to the
Mortgage Loans unless some exemption granted by
the Department of Labor applies to the
purchase, sale, transfer or holding of a Series
of Securities. See "ERISA Considerations"
herein.
Rating.................. At the date of issuance, each Class of
Securities offered pursuant to the related
Prospectus Supplement will be rated in one of
the four highest rating categories by one or
more nationally recognized Rating Agencies. See
"Rating" herein.
Legal Investment........ As disclosed in the related Prospectus
Supplement, certain Classes of Securities may
not constitute "mortgage-related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA") and, if so,
will not be legal investments for certain types
of institutional investors under SMMEA.
Institutions whose investment activities are
subject to legal investment laws and
regulations or to review by certain regulatory
authorities may be subject to additional
restrictions on investment in certain Classes
of Securities. Any such institution should
consult its own legal advisors in determining
whether and the extent to which a Class of
Securities constitutes legal investments for
such investors. See "Legal Investment" herein.
Registration of Securities..... Except to the extent that the Prospectus
Supplement specifies that the Securities will
be issuable in bearer form, the Securities
will be issued as physical certificates
("Definitive Securities") in fully registered
form in the denominations specified in the
Prospectus Supplement. Securities may,
however, be represented by global certificates
registered in the name of Cede & Co. ("Cede"),
as nominee of The Depository Trust Company
("DTC"), or another nominee if so specified in
the related Prospectus Supplement. In such
case, Securityholders will not be entitled
to receive Definitive Securities representing
such Securityholders' interests, except in
certain circumstances described in the related
Prospectus Supplement. See "Description of the
Securities -- Form of Securities --
Book-Entry Registration" herein.
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RISK FACTORS
LIMITED LIQUIDITY
Prior to issuance, there will have been no market for the Securities
of any Series. There can be no assurance that a secondary market for the
Securities will develop or, if a secondary market does develop, that it will
provide Securityholders with liquidity of investment or that it will continue
for the lives of the Securities. Certain Classes of the Securities may not
constitute "mortgage related securities" under SMMEA, and certain investors may
be subject to legal restrictions that preclude their purchase of any such
non-SMMEA Securities. In addition, certain Classes of Securities may be
restricted as to transferability to certain entities if so specified in the
related Prospectus Supplement. Any restrictions on the purchase or
transferability of the Classes of a given Series of Securities may have a
negative effect on the development of a secondary market in such Securities.
LIMITED SOURCES OF PAYMENT ON SECURITIES
Proceeds of the assets of any Trust, including the Mortgage Loans, any
Reserve Account and any Financial Guaranty Insurance Policy, will be the sole
source of funds for the payment of the required distributions on the
Securities of the related Series and there will be no recourse to the
Originator or any other entity in the event that such proceeds are insufficient
or otherwise unavailable to make any such required distributions on such
Securities. The Certificates of any Series represent beneficial ownership
interests in the related Trust only. The Notes of any Series will be
non-recourse obligations of the related Depositor, and the assets of the
related Trust will be the sole source of payment on the Notes. The Securities do
not represent interests in or other obligations of the Originator, the
Servicer, the Depositor, any Sub-Servicer, the Trustee or any other person.
Neither the Securities nor the Mortgage Loans, except any FHA Loans, are
insured or guaranteed by any governmental agency or instrumentality. Any FHA
insurance on FHA Loans will not protect against all contingencies with respect
to such loans and will cover certain contingencies only to a limited extent.
The only obligations of the foregoing entities with respect to the Securities
or the Mortgage Loans will be the obligations (if any) of the Originator, the
Depositor, the Servicer and any Sub-Servicer pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, and
the servicing obligations of the Servicer and any Sub-Servicer under the
related Agreement (including their respective limited obligations to make
certain advances in the event of delinquencies on the Mortgage Loans, but only
to the extent deemed recoverable). Except as described in the related
Prospectus Supplement, neither the Securities nor the underlying Mortgage
Loans will be guaranteed or insured by the Originator, the Servicer, the
Depositor,the Trustee, any Sub-Servicer or any of their respective affiliates.
Notwithstanding the foregoing, and as specified in the related Prospectus
Supplement, certain types of credit enhancement, such as a Financial Guaranty
Insurance Policy or a letter of credit, may constitute a full recourse
obligation of the issuer of such credit enhancement.
RISKS ASSOCIATED WITH THE MORTGAGE LOANS
Risks Associated with any Decline in Value of Mortgaged Properties. An
overall decline in the market value of residential real estate, the general
condition of a Mortgaged Property, or other factors, including acts of nature
such as hurricanes, floods, tornadoes or earthquakes, could adversely affect the
values of the Mortgaged Properties such that the outstanding balances of the
Mortgage Loans, together with any other liens on the Mortgaged Properties, equal
or exceed the value of the Mortgaged Properties. Such a decline could, in
certain circumstances, result in the interest of the related Trust in the
Mortgaged Property being extinguished. In addition, certain areas of the country
may from time to time experience significant declines in real estate values. The
Originator will not be able to quantify the impact of any such declines in the
value of any Mortgaged Properties or predict whether, to what extent or how long
such declines may continue. Because certain Mortgage Loans may have been
underwritten pursuant to standards that rely primarily on the value of the
related Mortgaged Properties rather than the creditworthiness of the borrowers
under such Mortgage, the actual rates of delinquencies, foreclosures and losses
on such Mortgage Loans, particularly in periods during which the value of
19
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the related Mortgaged Properties has declined, could be higher than those
historically experienced by the mortgage lending industry in general.
Risks Associated with Junior Loans. Certain of the Mortgage Loans will
be mortgage loans secured by junior liens (each, a "Junior Loan") subordinate to
the rights of the mortgagees under the related senior mortgages (each, a "Senior
Loan"). As a result, the proceeds from any liquidation, insurance or
condemnation proceedings will be available to satisfy the principal balance of a
Junior Loan only to the extent that the claims, if any, of each such Senior Loan
are satisfied in full, including any related foreclosure costs. In addition, a
junior mortgagee may not foreclose on the Mortgaged Property securing the
related Junior Loan unless it forecloses subject to the related Senior Loan, in
which case it must either pay the entire amount of each Senior Loan to the
applicable mortgagee at or prior to the foreclosure sale or undertake the
obligation to make payments on each Senior Lien in the event of a default
thereunder. Generally, a servicer will satisfy each such Senior Loan at or prior
to the foreclosure sale only to the extent it determines that any amounts so
paid will be recoverable from future payments and collections on the Junior Loan
or otherwise. The Trusts will not have any source of funds (and may not be
permitted under the REMIC provisions of the Code) to satisfy any such Senior
Loan or make payments due under any Senior Lien. See "Certain Legal Aspects of
the Mortgage Loans -- Foreclosure/ Repossession" herein.
Risks Associated with Balloon Loans. Certain of the Mortgage Loans may
constitute "Balloon Loans." Balloon Loans are loans originated with a term to
stated maturity that is shorter than the period on which the corresponding
amortization schedule is based. As a result, upon the maturity of a Balloon
Loan, the Mortgagor will be required to make a "balloon payment" which will be
significantly larger than the previous monthly payments due on such Balloon
Loan. The ability of such Mortgagor to repay a Balloon Loan at maturity
frequently will depend on such Mortgagor's ability to refinance the Mortgage
Loan. The ability of a Mortgagor to refinance such a Mortgage Loan will be
affected by a number of factors, including the prevailing level of mortgage
rates at the time, the value of the related Mortgaged Property, the Mortgagor's
equity in the related Mortgaged Property, the financial condition of the
Mortgagor, the tax laws and general economic conditions at the time.
Although a low interest rate environment may facilitate the refinancing
of a Balloon Loan, the receipt and reinvestment by Securityholders of the
proceeds in such an environment may produce a lower return than that previously
received in respect of the related Mortgage Loan. Conversely, a high interest
rate environment may make it more difficult for the Mortgagor to accomplish a
refinancing and may result in delinquencies or defaults. None of the Originator,
the Depositor, the Servicer, the Originator, the Trustee or any other entity
will be obligated to provide funds to refinance any Balloon Loan.
Risks Associated with Bankruptcy of the Mortgagor. General economic
conditions and other factors (which may not affect real property values) have an
impact on the ability of Mortgagors to repay Mortgage Loans. Loss of earnings,
illness, divorce and other similar factors may lead to an increase in
delinquencies, defaults and bankruptcy filings by Mortgagors. In the event of
personal bankruptcy of a Mortgagor, it is possible that a Trust could experience
a loss with respect to such Mortgagor's Mortgage Loan. In conjunction with a
Mortgagor's bankruptcy, a bankruptcy court may suspend or reduce the payments of
principal and interest to be paid with respect to such Mortgage Loan or
permanently reduce the principal balance of such Mortgage Loan, thus either
delaying or permanently limiting the amount received by the Trust with respect
to such Mortgage Loan. Moreover, in the event a bankruptcy court prevents the
transfer of the related Mortgaged Property to a Trust, any remaining balance on
such Mortgage Loan may not be recoverable.
Risks Associated with Defaulted Mortgage Loans. Even assuming that the
Mortgaged Properties provide adequate security for the Mortgage Loans,
substantial delays could be encountered in connection with the liquidation of
defaulted Mortgage Loans and corresponding delays in the distribution of related
proceeds to the Securityholders could occur. An action to foreclose on a
Mortgaged Property securing a Mortgage Loan is regulated by state statutes and
rules and is subject to many of the delays and expenses of other lawsuits if
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defenses or counterclaims are interposed, sometimes requiring several years to
complete. Furthermore, in some states an action to obtain a deficiency judgment
is not permitted following a nonjudicial sale of a Mortgaged Property. In the
event of a default by a Mortgagor, these restrictions, among other things, may
impede the ability of the Servicer, or any Sub-Servicer, to foreclose on or sell
the Mortgaged Property or to obtain Liquidation Proceeds (as defined under
"Description of the Securities -- Distributions on Securities -- Available
Funds" herein) (net of expenses) sufficient to repay all amounts due on the
related Mortgage Loan. The Servicer, or any Sub-Servicer, will be entitled to
deduct from Liquidation Proceeds all expenses reasonably incurred in attempting
to recover amounts due on the related Liquidated Mortgage Loan and not yet
repaid, including unreimbursed Monthly Advances and Servicing Advances,
payments to prior lienholders, legal fees and costs of legal action, real
estate taxes, and maintenance and preservation expenses. In the event that any
of the Mortgaged Properties fail to provide adequate security for the related
Mortgage Loans, and the credit enhancement for the related Series is not
available to cover resulting shortfalls, Securityholders could experience a
loss on their investment.
Liquidation expenses with respect to defaulted Mortgage Loans do not
vary directly with the outstanding principal balance of the Mortgage Loans at
the time of default. Therefore, assuming that the Servicer or any Sub-Servicer
took the same steps in realizing upon a defaulted Mortgage Loan having a small
remaining principal balance as it would in the case of a defaulted Mortgage Loan
having a larger principal balance, the amount realized after expenses of
liquidation would be smaller as a percentage of the outstanding principal
balance of the smaller Mortgage Loan than would be the case with a larger
Mortgage Loan. Because the average outstanding principal balances of Mortgage
Loans that are Junior Liens generally are smaller relative to the average
outstanding principal balances of Mortgage Loans that are first mortgage loans,
realizations net of liquidation expenses on defaulted Mortgage Loans that are
Junior Liens may also be smaller as a percentage of the principal amount of such
Mortgage Loans than would be the case if such mortgage loans were secured by
first mortgages.
Environmental Concerns. Under environmental legislation and case law
applicable in various states, a secured party that takes a deed in lieu of
foreclosure, acquires a Mortgaged Property at a foreclosure sale or, prior to
foreclosure, has been involved in decisions or actions that may lead to
contamination of a Mortgaged Property may be liable for the costs of cleaning up
a contaminated site. Although such costs could be substantial, it is unclear
whether they would be imposed on a Trust, in its capacity as holder of any
related Mortgage Note, since under the terms of the related Pooling and
Servicing Agreement, a Trust is not required to take an active role in operating
the related Mortgaged Properties. See "Certain Legal Aspects of the Mortgage
Loans and Related Matters -- Environmental Considerations" herein.
Risks Associated with Non-Owner Occupied Properties. Certain of the
Mortgaged Properties relating to Mortgage Loans may not be owner-occupied. It is
possible that the rates of delinquencies, foreclosures and losses on Mortgage
Loans secured by non-owner-occupied properties could be higher than such rates
on Mortgage Loans secured by the primary residence of the borrower.
LEGAL CONSIDERATIONS; LIMITATION ON ENFORCEMENT OF REMEDIES
State and Federal Regulations. Applicable state laws generally regulate
interest rates and other charges, require certain disclosures, and require
licensing of the Originator, the Servicer and any Sub-Servicer. In addition,
most states have other laws, public policies and general principles of equity
relating to the protection of consumers, unfair and deceptive practices and
practices which may apply to the origination, servicing and collection of the
Mortgage Loans. See "Certain Legal Aspects of the Mortgage Loans and Related
Matters" herein.
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The Mortgage Loans may also be subject to federal laws, including: (i)
the Truth in Lending Act and Regulation Z promulgated thereunder, which require
certain disclosures to the borrowers regarding the terms of the Mortgage Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated thereunder,
which prohibit discrimination on the basis of age, race, color, sex, religion,
marital status, national origin, receipt of public assistance or the exercise of
any right under the Consumer Credit Protection Act, in the extension of credit;
(iii) the Real Estate Settlement Procedures Act and Regulation X promulgated
thereunder, which require certain disclosures to borrowers regarding the
settlement and servicing of the Mortgage Loans; (iv) the Fair Credit Reporting
Act, which regulates the use and reporting of information related to the
borrower's credit experience; and (v) the Federal Trade Commission Preservation
of Consumer's Claims and Defenses Rule, 16 C.F.R. Part 433, regarding the
preservation of a consumer's rights.
Depending on the provisions of the applicable law and the specific
facts and circumstances involved, violations of these laws, policies and
principles may limit the ability of the Servicer, or any Sub-Servicer, to
collect all or part of the principal of or interest on the Mortgage Loans, may
entitle the borrower to a refund of amounts previously paid and, in addition,
could subject the Servicer, or any Sub-Servicer, to damages and administrative
sanctions. If the Servicer, or any Sub-Servicer, is unable to collect all or
part of the principal or interest on any Mortgage Loans because of a violation
of the aforementioned laws, public policies or general principles of equity,
then the Trust may be delayed from repaying, or may be unable to repay, all
amounts owed to Securityholders. Furthermore, depending upon whether damages
and sanctions are assessed against the Servicer or the Originator, such
violations may have a material impact upon the financial ability of the Servicer
to continue to act in such capacity or the ability of the Originator to
repurchase or replace Mortgage Loans if such violation breaches a representation
or warranty contained in the related Pooling and Servicing Agreement or
Indenture.
Certain additional provisions under the Federal Truth-in-Lending Act
became effective on October 1, 1995. These provisions apply to certain types of
mortgage loans, generally as a result of such loan's coupon rate being 10% or
more greater than the yield on United States Treasury Securities of comparable
maturity, or if the "total points and fees" payable to the obligor exceed a
specified level. If the requirements are triggered, certain additional
disclosures are required to be made to the obligor and certain other
restrictions on the loan and its terms apply (e.g., restrictions relating to
prepayment penalties and balloon maturities). These provisions further require
persons who sell or assign mortgages which are subject to these requirements to
furnish a notice to such effect to the purchaser or assignee. Such purchasers or
assignees may under certain circumstances be liable for the failure of the
originating lender to provide the required disclosures or for the inclusion in
the loan of any prohibited terms.
YIELD, MATURITY AND PREPAYMENT CONSIDERATIONS
The yield to maturity of any Class of Securities will be affected by
the amount and timing of principal payments on the related Mortgage Loans, the
manner of allocation of available funds and/or losses to such Class, the
interest rates or amounts of interest payable on such Class and the purchase
price paid for such Class. The interaction of the foregoing factors may have
different effects on, and create different risks for, the various Classes of
Securities, and the effects and/or risks for any one Class may vary over the
life of such Class. The related Prospectus Supplement may include additional
prepayment considerations with respect to different Classes of Securities of a
Series. Investors should carefully consider the different consequences of such
risks as may be described in the related Prospectus Supplement.
The Mortgage Loans may generally be prepaid in full or in part at any
time; however, a prepayment penalty or premium may still be imposed in
connection therewith. The rate of prepayments of the Mortgage Loans cannot be
predicted and may be affected by a wide variety of economic, social and other
factors, including prevailing interest rates, the availability of alternative
financing and homeowner mobility. Therefore, no assurance can be given as to the
level of prepayments that may be experienced on Mortgage Loans included in any
Trust.
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Although published statistical data regarding the effects of interest
rates on prepayment rates for Mortgage Loans of the type typically made or
acquired by the Originator are limited, a number of factors suggests that the
prepayment behavior of a pool including Mortgage Loans may be significantly
different from that of a pool composed entirely of conforming, non-conforming,
"jumbo" or government-insured (i.e., "traditional") first mortgage loans with
equivalent interest rates and maturities. One such factor is the smaller average
principal balance of Mortgage Loans that may result in a higher prepayment rate
than that of a traditional first mortgage loan with a larger average balance,
regardless of the interest rate environment. A small principal balance, however,
also may make refinancing Mortgage Loans at a lower interest rate less
attractive to the borrower relative to refinancing a larger balance first
mortgage loan, as the perceived impact to the borrower of lower interest rates
on the amount of the monthly payment for a Mortgage Loan may be less than for a
traditional first mortgage loan with a larger balance. Other factors that might
be expected to affect the prepayment rate of a pool of Mortgage Loans include
the amounts of, and interest rates on, the underlying Senior Liens, if any, and
the use of first mortgage loans as long-term financing for home purchase and
home equity loans as shorter-term financing for a variety of purposes, including
debt consolidation, home improvement, education expenses and purchases of
consumer durables such as automobiles. Accordingly, Mortgage Loans may
experience a higher rate of prepayments than traditional first mortgage loans.
In addition, any future limitations on the deductibility of interest payments on
the Mortgage Loans for federal income tax purposes may further increase the rate
of prepayments on the Mortgage Loans.
In addition, certain of the Mortgage Loans comprising the Mortgage Pool
may have adjustable Mortgage Rates ("ARM Loans"). The Originator is not aware of
any publicly available statistics that set forth principal prepayment experience
or prepayment forecasts of ARM Loans over an extended period of time, and its
experience with respect to ARM Loans is insufficient to draw any conclusions
with respect to the expected prepayment rates on ARM Loans that may be included
in a Mortgage Pool. As is the case with conventional fixed-rate mortgage loans,
ARM Loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment. For example, if prevailing interest rates
fall significantly, ARM Loans could be subject to higher prepayment rates than
if prevailing interest rates remain constant because the availability of
fixed-rate mortgage loans at competitive interest rates may encourage mortgagors
to refinance their ARM Loans to "lock in" a lower fixed interest rate.
Conversely, if prevailing interest rates rise significantly, ARM Loans may
prepay at lower rates than if prevailing rates remain at or below those in
effect at the time such ARM Loans were originated. There can be no certainty as
to the rate of prepayments on the ARM Loans in stable or changing interest rate
environments. See "Maturity, Prepayment and Yield Considerations" herein.
Prepayments may result from voluntary early payments by borrowers
(including payments in connection with refinancings of any related Senior
Liens), sales of Mortgaged Properties subject to due-on-sale provisions and
liquidations due to default, as well as the receipt of proceeds from physical
damage, credit life and disability insurance policies. In addition, repurchases
or purchases of Mortgage Loans from a Trust required to be made by the
Originator or the Servicer under the related Pooling and Servicing Agreement
will have the same effect on the Securityholders as a prepayment of such
Mortgage Loans. All of the Mortgage Loans contain due-on-sale provisions, and
the Servicer will be required to enforce such provisions unless (i) such
enforcement would materially increase the risk of default or delinquency on, or
materially decrease the security for, such Mortgage Loan or (ii) such
enforcement is not permitted by applicable law, in which case the Servicer is
authorized to permit the purchaser of the related Mortgaged Property to assume
the Mortgage Loan. Additionally, should the Originator solicit refinancings from
existing borrowers, the rate of prepayments on the Mortgage Loans may increase
due to any resulting refinancings.
Prepayments on the Mortgage Loans for a Series generally will result in
a faster rate of distributions of principal on the Securities. Thus, the
prepayment experience of the Mortgage Loans will affect the average life and
yield to investors of each Class and the extent to which each such Class is paid
prior to its final scheduled Distribution Date. A Series may include Classes of
Securities which pay "interest only" or are entitled to receive a
disproportionately high level of interest distributions as compared to the
amount of principal to which
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such Classes of Securities are entitled (each, an "Interest Weighted Class")
or Classes of Securities which pay "principal only" or are entitled to receive
a disproportionately high level of principal distributions compared to the
amount of interest to which such Classes of Securities are entitled (each, a
"Principal Weighted Class"). A Series may include an Interest Weighted Class
offered at a significant premium or a Principal Weighted Class offered at a
substantial discount. Yields on such Classes of Securities will be extremely
sensitive to prepayments on the Mortgage Loans for such Series. In general if a
Security, including a Security of an Interest Weighted Class, is purchased
at a premium and principal distributions on the Mortgage Loans occur at a rate
faster than anticipated at the time of purchase, the investor's actual yield to
maturity could be significantly lower than that assumed at the time of purchase.
Where the amount of interest allocated with respect to an Interest Weighted
Class is extremely disproportionate to principal, a Securityholder could,
under some such prepayment scenarios, fail to recoup its original investment.
Conversely, if a Security, including a Security of a Principal Weighted
Class, is purchased at a discount and principal distributions thereon occur at a
rate slower than assumed at the time of purchase, the investor's actual yield to
maturity could be significantly lower than that originally anticipated.
See "Maturity Prepayment and Yield Considerations" herein.
Any rating assigned to the Securities by a Rating Agency will reflect
only such Rating Agency's assessment of the likelihood that timely distributions
will be made with respect to such Securities in accordance with the related
Pooling and Servicing Agreement or Indenture. Such rating will not constitute
an assessment of the likelihood that principal prepayments on the Mortgage
Loans will be made by Mortgagors or of the degree to which the rate of such
prepayments might differ from that originally anticipated. As a result, such
rating will not address the possibility that prepayment rates higher or lower
than anticipated by an investor may cause such investor to experience a lower
than anticipated yield, or that an investor purchasing an Interest Weighted
Security at a significant premium might fail to recoup its initial investment.
Collections on the Mortgage Loans may vary due to the level of
incidence of delinquent payments and of prepayments. Collections on the Mortgage
Loans may also vary due to seasonal purchasing and payment habits of Mortgagors.
UNDERWRITING STANDARDS, LIMITED OPERATING HISTORY AND POTENTIAL DELINQUENCIES
As described herein, the Originator's underwriting standards generally
are less stringent than those of the Federal National Mortgage Association
("FNMA") or the Federal Home Mortgage Corporation ("FHLMC") with respect to a
borrower's credit history and in certain other respects. A borrower's tarnished
credit history may not preclude the Originator from making a loan; however, it
may reduce the size (and consequently the Combined Loan-to-Value Ratio) of the
loan that the Originator is willing to make. As a result of this approach to
underwriting, the Mortgage Loans in the Mortgage Pool may experience higher
rates of delinquencies, defaults and foreclosures than mortgage loans
underwritten in a manner which is more similar to the FNMA and FHLMC guidelines.
The Mortgage Loans originated under the non-income verification
program of the Originator may experience higher rates of delinquency, defaults
and foreclosures than the Mortgage Loans originated under the full
documentation program of the Originator.
The Servicer commenced servicing portfolios of mortgage loans in 1994.
Accordingly, neither the Originator nor the Servicer has representative
historical delinquency, bankruptcy, foreclosure or default experience that may
be referred to for purposes of estimating the future delinquency and loss
experience of the Mortgage Loans.
Occasionally, the Originator purchases Mortgage Loans not underwritten
in accordance with its usual underwriting standards in bulk from third parties.
To the extent any Trust includes loans purchased in bulk by the Originator, the
Prospectus Supplement will disclose the portion of such Trust consisting of
such Mortgage Loans and whether or not the Originator has re-underwritten such
loans according to its usual underwriting standards.
THE STATUS OF THE MORTGAGE LOANS IN THE EVENT OF BANKRUPTCY OF THE ORIGINATOR
In the event of the bankruptcy of the Originator, a trustee in
bankruptcy of the Originator or its creditors could attempt to recharacterize
the sale of the Mortgage Loans to the Depositor or the related Trust as a
borrowing by the Originator or an affiliate. If such recharacterization were
to be upheld, the related Securityholders could be deemed to be creditors of
the Originator or such affiliate, with the Mortgage Loans constituting security
for such debt, and thus, the Mortgage Loans might be subject to the automatic
stay of the Bankruptcy Court having jurisdiction over the Originator's or its
affiliate's bankruptcy estate and a trustee in bankruptcy could elect to
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accelerate payment of the Securities and liquidate the Mortgage Loans, with the
Securityholders entitled to the then outstanding principal amount thereof
together with accrued interest. Thus, the Securityholders could lose the right
to future payments of interest, and might suffer reinvestment loss in a lower
interest rate environment. Even if such recharacterization were not upheld,
Securityholders may be subject to substantial delays in distributions due to the
bankruptcy proceedings.
LIMITATIONS ON INTEREST PAYMENTS AND FORECLOSURES
Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act"), or similar state legislation, a
mortgagor who enters military service after the origination of the related
mortgage loan (including a mortgagor who is a member of the National Guard or is
in reserve status at the time of the origination of the mortgage loan and is
later called to active duty) may not be charged interest (including fees and
charges) above an annual rate of 6% during the period of such mortgagor's active
duty status, unless a court orders otherwise upon application of the lender. It
is possible that such action could affect, for an indeterminate period of time,
the ability of the Servicer to collect full amounts of interest on certain of
the Mortgage Loans. In addition, the Relief Act imposes limitations which would
impair the ability of the Servicer to foreclose on an affected Mortgage Loan
during the Mortgagor's period of active duty status. Thus, in the event that
such a Mortgage Loan goes into default, there may be delays and losses
occasioned by the inability to realize upon the Mortgaged Property in a timely
fashion.
FUNDS AVAILABLE FOR REDEMPTIONS AT THE REQUEST OF NOTEHOLDERS
With respect to any Series of Notes for which the related Prospectus
Supplement provides for redemptions of such Notes at the request of
Noteholders, there can be no assurance that amounts available for such
redemptions of such Notes will be sufficient to permit such Notes to be
redeemed within a reasonable time after redemption is requested, for reasons
including the following:
(i) Scheduled principal payments on the related Mortgage Loans
generally will be minimal in the early years and will increase in the later
years of such Mortgage Loans. As a result, funds available to be applied to
redemptions at the request of Noteholders, may be expected to be limited in the
early years and to increase during the later years of each Series. Accordingly,
the availability of funds for redemptions of Notes of any Series at the request
of Noteholders will depend largely upon the rates of prepayment of the related
Mortgage Loans.
(ii) Prepayments of principal on Mortgage Loans are less likely to
occur during periods of higher interest rates when it is more likely that
requests for redemption by Noteholders will be made. During periods in which
prevailing interest rates are higher than the interest rates paid on Notes that
may be redeemed at the request of Noteholders, greater numbers of such Notes
are expected to be tendered for redemption in order to take advantage of the
higher interest rates payable on other investments then available. During such
periods, there will likely also be a reduction in the rate of prepayments on
the related Mortgage Loans, thus limiting the funds available to satisfy
requested redemption by Noteholders.
(iii) As specified in the related Prospectus Supplement, certain
Noteholders, such as personal representatives of deceased Noteholders, may have
certain priorities as to redemption at the request of Noteholders.
SECURITY RATING RELATED TO RATING OF CREDIT ENHANCEMENT PROVIDER
Depending on the structure of the related transaction, the rating of a
Series or Class of Securities the credit of which is enhanced through external
means such as a letter of credit, Financial Guaranty Insurance Policy or
mortgage pool insurance may depend primarily on the creditworthiness of the
issuer of such external credit enhancement device. Any reduction or withdrawal
of the rating assigned to the claims-paying ability of the credit enhancement
issuer below the rating initially given to such Securities would likely result
in a reduction in the rating of such Securities and, in such event, the market
price of such Securities could be adversely affected. See "Rating" herein.
BOOK-ENTRY REGISTRATION
Effect on Liquidity. If so specified in the related Prospectus
Supplement, the Securities may initially be registered in book-entry form.
Issuance of the Securities in book-entry form may reduce the liquidity of such
Securities in the secondary market since investors may be unwilling to purchase
Securities for which they cannot obtain physical certificates.
Difficulty in Pledging. Since transactions in Securities will, in most
cases, be able to be effected only through Participants, Indirect Participants
(both Participants and Indirect Participants are defined under "Description of
the Securities -- Form of Securities -- Book-Entry Registration" herein) and
certain banks, the ability of a Securityholder to pledge a Security to persons
or entities that do not participate in the DTC system, or otherwise to take
actions in respect of such Securities, may be impaired since physical
certificates representing the Securities will not generally be available.
Potential Delays in Receipt of Distributions. Securityholders may
experience some delay in their receipt of distributions of interest on and
principal of the Securities since distributions may be required to be forwarded
by the Trustee to DTC and, in such a case, DTC will be required to credit such
distributions to the accounts of its Participants which thereafter will be
required to credit them to the accounts of the applicable Securityholders either
directly or indirectly through Indirect Participants. See "Description of the
Securities -- Form of Securities -- Book-Entry Registration" herein.
LACK OF CONTROL BY SECURITYHOLDERS
The servicing of the Mortgage Loans will be carried out by the
Servicer. The Securityholders will only have the right to consent to, or
approve of, certain limited actions set forth in the related Pooling and
Servicing Agreement or Indenture. See "The Pooling and Servicing Agreement --
Voting" and "-- Rights upon Certificate Events of Default" and "The Indenture --
Rights Upon Note Events of Default."
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THE TRUSTS
A Trust for any Series of Securities will include a Mortgage Pool that
may consist of Mortgage Loans together with payments in respect thereof and
certain other accounts, obligations or agreements, in each case as specified in
the related Prospectus Supplement.
The Securities will be entitled to payment only from the assets of
the related Trust and any other assets specified in the related Prospectus
Supplement and will not be entitled to payments in respect of the assets of any
other Trust established by the related Depositor, the Originator or any of its
affiliates. If specified in the related Prospectus Supplement, certain
Securities will evidence the entire fractional undivided ownership interest
in, or be secured by, a Trust which will contain a beneficial ownership
interest in another Trust which will contain all or some of the Mortgage Loans.
Certain of the Mortgage Loans may have been originated by the
Originator. Other Mortgage Loans may have been acquired by the Originator in the
open market or in privately negotiated transactions, including transactions with
entities affiliated with the Originator. See "Mortgage Loan Program --
Underwriting Criteria."
The following is a brief description of the Mortgage Loans expected to
be included in the Trusts. The related Prospectus Supplement will set forth
detailed information respecting the Mortgage Loans proposed to be included in
the related Mortgage Pool. Information regarding the actual composition of the
Mortgage Loans in the related Mortgage Pool will be set forth in a report on
Form 8-K to be filed with the Commission within 15 days after such Mortgage Pool
is complete (the "Detailed Description"). A schedule of the Mortgage Loans
relating to each Trust will be attached to the related Pooling and Servicing
Agreement or Indenture delivered to the Trustee in connection with the issuance
of the Securities.
If so specified in the Prospectus Supplement relating to a Series of
Securities, the Mortgage Pool may be divided into two or more groups based on
certain characteristics of the related Mortgage Loans (such as type or amount
of Mortgage Rate, remaining term to maturity or type of Mortgaged Property) and
amounts received, collected or recovered in respect of any such group will be
the primary source from which distributions on certain Classes of Securities
will be derived.
THE MORTGAGE LOANS--GENERAL
The real properties (including condominiums and townhouses) which
secure repayment of the Mortgage Loans may be located in any one of the fifty
states or the District of Columbia. All of the Mortgage Loans will generally be
covered by Standard Hazard Insurance Policies; any Mortgage Loans not so covered
will be noted in the related Prospectus Supplement. The existence and extent of
any such coverage will be described in the related Prospectus Supplement. The
Mortgage Loans, except the FHA Loans, will not be insured or guaranteed by any
governmental agency or covered wholly or partially by primary mortgage insurance
policies.
All of the Mortgage Loans in a Mortgage Pool generally will generally
provide for payments to be made monthly on due dates occurring throughout the
month. If any Mortgage Loan does not require monthly payments, it will be noted
in the related Prospectus Supplement.
The Mortgage Loans to be included in any Mortgage Pool will be
described in the related Prospectus Supplement. The Mortgage Loans will have
interest payable thereon at (i) fixed rates specified in the related Prospectus
Supplement, (ii) adjustable rates computed as specified in the related
Prospectus Supplement or (iii) graduated or other variable rates described in
the related Prospectus Supplement. Scheduled payments of principal on any
Mortgage Loan may be computed (i) on a level debt service basis that will result
in full amortization over the stated term of such Mortgage Loan, (ii) in the
case of a Balloon Loan, on the basis of an assumed amortization schedule that is
significantly longer than the original term to maturity of such Mortgage Loan
and will require payment of a substantial amount of principal at the stated
maturity specified in the related Mortgage Note or (iii) on such other basis as
is specified in the related Prospectus Supplement.
Certain of the Mortgage Loans may have been originated pursuant to
underwriting standards that rely primarily on the value and adequacy of the
Mortgaged Property as collateral and, to a much lesser extent, on the
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creditworthiness of the related Mortgagor. Accordingly, the rates of
delinquencies, foreclosures and losses on such Mortgage Loans, particularly in
periods during which the value of the related Mortgaged Properties has declined,
may be higher than those historically experienced by the mortgage lending
industry in general. See "The Originator -- Underwriting Guidelines" herein.
Prepayments of principal may be subject to a prepayment fee, which may
be fixed for the life of the Mortgage Loan or may decline over time, and may be
prohibited for the life of the Mortgage Loan or for certain periods ("lockout
periods"). Certain Mortgage Loans may permit prepayments after expiration of the
applicable lockout period and may require the payment of a prepayment fee in
connection with any such subsequent prepayment. Other Mortgage Loans may permit
prepayments without payment of a fee unless the prepayment occurs during
specified time periods. The Mortgage Loans may include due-on-sale clauses which
permit the mortgagee to demand payment of the entire Mortgage Loan in connection
with the sale or certain transfers of the related Mortgaged Property. Other
Mortgage Loans may be assumable by persons meeting the then applicable
underwriting standards of the applicable Originator.
The Prospectus Supplement for each Series of Securities will contain
information, as of the date of such Prospectus Supplement and to the extent then
specifically known to the Originator, with respect to the Mortgage Loans
contained in the related Mortgage Pool, including (i) the expected aggregate
outstanding principal balance and the average outstanding principal balance of
the Mortgage Loans as of the applicable Cut-off Date, (ii) the largest expected
principal balance and the smallest principal balance of any of the Mortgage
Loans, (iii) the types of Mortgaged Properties securing the Mortgage Loans, (iv)
the original terms to maturity of the Mortgage Loans, (v) the expected weighted
average term to maturity of the Mortgage Loans as of the related Cut-off Date
and the range of the terms to maturity, (vi) the ranges of Combined
Loan-to-Value Ratios at origination, (vii) the weighted average Mortgage Rate
and ranges of Mortgage Rates borne by the Mortgage Loans and (viii) the
geographical distribution of the Mortgaged Properties on a state-by-state basis.
If specific information respecting the Mortgaged Loans is not known to the
Originator at the time the related Securities are initially offered, more
general information of the nature described above will be provided in the
related Prospectus Supplement and specific information will be set forth in the
Detailed Description. To the extent a significant portion of the Mortgage Loans
underlying a given Series of Securities consist of FHA Loans, the related
Prospectus Supplement will describe the material provisions of such Mortgage
Loans and the programs under which they were originated. A Prospectus Supplement
will include a breakdown of Mortgage Loans by origination type, i.e., full
documentation program versus non-income verification program.
The "Combined Loan-to-Value Ratio" of a Mortgage Loan at any given time
is the ratio, expressed as a percentage, determined by dividing (x) the sum of
the original principal balance of such Mortgage Loan plus the current principal
balance of any Senior Loan on the related Mortgaged Property, by (y) the
Appraised Value of such Mortgaged Property. "Appraised Value" is the appraised
value of a Mortgaged Property based upon the lesser of (i) the appraisal or
valuation made at the time of the origination of the related Mortgage Loan, and
(ii) in the case where such Mortgage represents a purchase money instrument, the
sales price of the related Mortgaged Property at such time of origination.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding principal
balances of the Mortgage Loans (plus any additional financing by other lenders
secured by the same Mortgaged Properties) in a particular Mortgage Pool become
equal to or greater than the value of such Mortgaged Properties or if the
general condition of a Mortgaged Property declines, the actual rates of
delinquencies, foreclosures and losses on the related Mortgage Loans could be
higher than those now generally experienced in the mortgage lending industry.
Any overall decline in the market value of residential real estate, the general
condition of the Mortgaged Properties or other factors could adversely affect
the values of the Mortgaged Properties such that the
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outstanding principal balance of such Mortgage Loans, together with any
additional liens on the Mortgaged Properties, equals or exceeds the value of
such Mortgaged Properties and give rise to the consequences discussed in the
preceding sentence.
The related Depositor will cause the Mortgage Loans comprising each
Mortgage Pool to be assigned to the Trustee named in the related Prospectus
Supplement for the benefit of the Securityholders of the related Series. The
Servicer will service the Mortgage Loans either directly, or through the
Sub-Servicers, pursuant to the Pooling and Servicing Agreement or Servicing
Agreement, as applicable (each an "Agreement") and will receive a fee for such
services. See "The Pooling and Servicing Agreement -- General Servicing
Procedures" herein. With respect to Mortgage Loans serviced through a
Sub-Servicer, the Servicer will remain liable for its servicing obligations
under the related Agreement as if the Servicer alone were servicing such
Mortgage Loans.
The only obligations of the Originator and the related Depositor with
respect to a Series of Securities will generally be to provide (or, where the
Originator acquired a Mortgage Loan from another originator, obtain from such
originator) certain representations and warranties concerning the Mortgage
Loans and to assign to the Trustee for such Series of Securities the
Originator's or Depositor's rights with respect to such representations and
warranties. A Prospectus Supplement may specify additional obligations of the
Originator. See "The Agreement -- Assignment of Mortgage Loans."
The obligations of the Servicer with respect to the Mortgage Loans will
consist principally of its contractual servicing obligations under the related
Agreement (including its obligations to make Servicing Advances and to enforce
the obligations of the Sub-Servicers) and its obligation to make certain Monthly
Advances in the event of delinquencies in payments on or with respect to the
Mortgage Loans in the amounts described herein under "The Pooling and Servicing
Agreement -- Monthly Advances and Compensating Interest." The obligations of the
Servicer to make Monthly Advances may be subject to limitations, to the extent
provided herein and in the related Prospectus Supplement.
PRE-FUNDING ACCOUNTS
If so specified in the related Prospectus Supplement, the original
principal amount of a Series of Securities may exceed the principal balance of
the Mortgage Loans initially being delivered to the Trustee. Cash in an amount
equal to such difference will be deposited into a Pre-Funding Account maintained
with the Trustee. During the Funding Period set forth in the related Prospectus
Supplement, amounts on deposit in the Pre-Funding Account may be used to
purchase additional Mortgage Loans for the related Trust subject to the
satisfaction of certain conditions specified under the related Pooling and
Servicing Agreement. Any amounts remaining in the Pre-Funding Account at the end
of such period will be distributed as a principal prepayment to the holders of
the related Series of Securities at the time and in the manner set forth in
the related Prospectus Supplement.
HOME EQUITY LOANS
Home Equity Loans will consist of mortgage loans, deeds of trust or
participation or other beneficial interests therein, secured by first or more
junior liens on one- to four-family residential properties. If so specified, the
Home Equity Loans may include loans secured by mortgages or deeds of trust
on condominium units in condominium buildings together with such condominium
units' appurtenant interests in the common elements of the condominium
buildings.
The Mortgaged Properties relating to Home Equity Loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units in
condominium buildings, individual units in planned unit developments, and
certain mixed use and other dwelling units. Such Mortgaged Properties may
include vacation and second homes or investment properties.
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MULTI-FAMILY AND MIXED-USE LOANS
Multi-family and Mixed-Use Loans will consist of mortgage loans, deeds
of trust or participation or other beneficial interests therein, secured by
first liens on rental apartment buildings, mixed-use properties or projects
containing five or more residential units. Mortgaged Properties which secure
Multi-family Loans may include high-rise, mid-rise and garden apartments. The
mixed use properties which might be included in the pools are buildings with
multiple residential units and generally one to three commercial units. The
majority of mixed use properties contain four to six residential units.
Generally non-residential income will not exceed 50% of the gross residential
income.
FHA LOANS
The FHA Loans will consist of home improvement loans originated under
Title I of the National Housing Act of 1934 (the "NHA Act"). Under the NHA Act,
the FHA, an agency of HUD, is authorized and empowered to insure qualified
lending institutions against losses on eligible loans. Loan processing and
credit determinations are done by an approved financial institution. Each lender
is required to use prudent lending standards in underwriting individual loans.
The FHA Loans may only be used by the Mortgagors for property improvements that
protect or improve the basic livability or utility of the property.
Under the Title I Loan Program, the FHA does not review individual
loans at the time of approval (as is typically the case with some other federal
loan programs), except when the amount of a Title I Property Improvement Loan
would result in any borrower having a total unpaid principal obligation on such
loans in excess of certain specified amounts, currently $25,000, in which case
HUD approval must be obtained.
The Title I Loan Program is a coinsurance program. The lender initially
is at risk for 10% of the principal balance of each loan. The FHA will insure
the remaining 90% of the principal balance of each loan, subject to the limits
of the reserve amount discussed below. Such FHA insurance is accorded the full
faith and credit of the United States of America. Thus, a lender under the
program risks the loss of up to 10% of the principal balance on every loan
submitted to the FHA for an insurance claim (or a greater amount if the lender's
reserve amount is diminished or exhausted), plus a portion of the interest on
such loans.
At the time the FHA receives a new loan origination or transfer of note
report from an approved lender, the FHA adds to the balance in the reserve
amount established by the FHA for the lender originating or purchasing such loan
an amount equal to 10% of the amount disbursed, advanced or expended by the
lender in originating or purchasing the loan. The balance in the reserve amount
limits the amount of claims the FHA is required to pay.
The reserve amount established by the FHA for each lender will be
reduced by the amount of all insurance claims approved for payment in
conjunction with losses on such loans. The lender's reserve amount will be
increased based upon additions made pursuant to the origination or purchase of
eligible loans registered for insurance.
The FHA charges a fee of 0.50% per annum of the original balance of
each loan it insures, on a non-declining basis. The FHA bills the lender
annually (on the anniversary date of origination) for the insurance premium,
unless the loan has a maturity of 25 months or less, in which case the insurance
charge is payable in one lump sum. If a loan is prepaid during the year, the FHA
will not rebate the insurance premium nor reduce the balance in the lender's
insurance coverage reserve account. The unused insurance charge will, however,
be rebated when a Title I loan is refinanced.
SAV*-A-LOANS(R)
The Sav*-A-Loans(R) will consist of secured home loans, the proceeds
of which generally will be used for debt consolidation and/or property
improvements.
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JUMBO LOANS
The Jumbo Loans will have minimum principal balances at origination
of $500,000 and will be secured by First Liens on one- to four-family
residences, including condominium units, rowhouses and townhomes, but
excluding cooperatives. Such Mortgages Properties may include vacation or
second homes and investment properties. The Jumbo Loans will generally bear
interest at adjustable rates.
USE OF PROCEEDS
The Originator intends to use the net proceeds to be received from the
sale of the Securities of each Series to acquire, or to repay loans incurred to
finance the extension or purchase of, the Mortgage Loans to be deposited in the
related Trust, and to pay legal, accounting, rating agency, printing and trustee
fees and expenses connected with the pooling of Mortgage Loans and the issuing
of Securities. Any amounts remaining after such payments may be used for general
corporate purposes. The timing and amount of offerings of Securities by the
Originator will be influenced by a number of factors, including volume of
Mortgage Loans purchased by the Originator, prevailing interest rates,
availability of funds and general market conditions.
THE ORIGINATOR
GENERAL
The Mortgage Loans will have been originated or acquired by Cityscape
Corp. Cityscape Corp. will act as the Servicer of the Mortgage Loans. Except for
certain representations and warranties relating to the Mortgage Loans and
certain other matters, the obligations of Cityscape Corp. with respect to the
Mortgage Loans will be limited to contractual servicing obligations. Cityscape
Corp. may act as the Depositor or may sell or assign the Mortgage Loans
directly, or indirectly through the Transferor, to another entity formed by
Cityscape Corp. solely for the purpose of acting as Depositor for a given
Trust and Series of Securities at or prior to the time of the issuance
of such Securities.
Cityscape Corp. was incorporated in the State of New York in 1985 and
is a wholly-owned subsidiary of Cityscape Financial Corp. (the "Parent"). The
Originator is a consumer finance company engaged in the business of originating,
purchasing, selling and servicing mortgage loans secured primarily by
one- to four-family residences. The majority of the Originator's loans are made
to owners of single family residences who use the loan proceeds for such
purposes as debt consolidation and financing of home improvements and
educational expenditures, among others. The Originator is licensed or registered
to do business in 42 states and the District of Columbia. The Originator
maintains its principal offices at 565 Taxter Road, Elmsford, New York
10523-2300. Its telephone number is (914) 592-6677. Neither the Originator, the
Depositor nor any of their affiliates will insure or guarantee distributions on
the Securities of any Series.
The Originator originates Mortgage Loans in accordance with the
underwriting standards set forth below. In addition, it regularly purchases
Mortgage Loans underwritten pursuant to such standards from a group of licensed
mortgage bankers with whom it has entered into master purchase and sale
agreements. All such mortgage bankers must have received a satisfactory review
by the Originator of their operating procedures and must have agreed to
originate mortgage loans in accordance with the applicable underwriting
standards. Occasionally, the Originator purchases Mortgage Loans not
underwritten in accordance with the following standards in bulk from third
parties. To the extent any Trust includes Mortgage Loans purchased in bulk by
the Originator, the Prospectus Supplement will disclose the portion of such
Trust consisting of such Mortgage Loans and whether or not the Originator has
re-underwritten such loans according to the following standards. The Originator
generally intends to sell all loans which it originates or purchases. The
Originator currently acts as Servicer for all Mortgage Loans which it
originates or purchases.
CHANNELS OF LOAN ORIGINATIONS AND PURCHASES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
-------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Independent Mortgage Brokers:
Principal balance ................. $149,724 $291,907 $ 548,242
Number of loans ................... 1,947 4,161 9,173
Average principal balance per loan $ 76.9 $ 70.2 $ 59.8
Wholesale Loan Acquisition Program:
Principal balance ................. $ 4,686 $125,957 $ 612,049
Number of loans ................... 60 1,847 9,431
Average principal balance per loan $ 78.1 $ 68.2 $ 64.9
Bulk Purchases:
Principal balance ................. -- -- $ 129,064
Number of loans ................... -- -- 2,259
Average principal balance per loan -- -- $ 57.1
Total Loan Originations and Purchases:
Principal balance ................. $154,410 $417,864 $1,289,355
Number of loans ................... 2,007 6,008 20,863
Average principal balance per loan $ 76.9 $ 69.6 $ 61.8
</TABLE>
Independent Mortgage Brokers. A significant portion of the Originator's
loan origination and purchase volume is currently derived from independent
mortgage brokers. During 1995 and 1996, $291.9 million or 69.9% and $548.2
million or 42.5%, respectively, of the Originator's loan originations and
purchases were sourced through the independent mortgage broker network. All
independent mortgage brokers submitting loan applications to the Originator must
be registered or licensed as required by the jurisdiction in which they operate.
During 1995 and 1996, the single highest producing independent
mortgage broker accounted for 6.4% and 1.9%, respectively, of the Originator's
loan originations and purchases, and the ten highest producing independent
mortgage brokers accounted for 21.0% and 7.8%, respectively, of the
Originator's loan originations and purchases. The Originator periodically
reviews the performance of the loans produced by each independent broker and
any pattern of higher than expected delinquency or documentation deficiencies
will result in the elimination of that broker from the Originator's approved
list.
Wholesale Loan Acquisition Program. In addition to originating loans
through its network of independent mortgage brokers, the Originator purchases
loans on a flow basis through its Wholesale Loan Acquisition Program. These loan
purchases are in the form of complete loan packages originated by loan
correspondents. Commenced in 1994, the Wholesale Loan Acquisition Program
accounted for $4.7 million (3.0%), $126.0 million (30.1%) and $612.0 million
(47.5%) of the Originator's total loan origination and purchase volume for 1994,
1995 and 1996, respectively.
The Originator purchases loans on a flow basis under the Wholesale Loan
Acquisition Program. The correspondent follows the Originator's underwriting
guidelines and lends to the borrower in accordance with these guidelines. After
the correspondent has made the loan, the Originator purchases the loan from the
correspondent. Loan correspondents must be registered or licensed as required by
the jurisdiction in which they operate and must be approved by the Originator.
Prior to approving a financial institution or mortgage banker as a loan
correspondent, the Originator performs an extensive investigation of, among
other things, the proposed loan correspondent's licensing or registration and
the performance of its previously originated loans. The investigation includes
contacting the agency that licenses or registers such loan correspondent, as
well as other purchasers of loans originated by it, and reviewing such loan
correspondent's financial statements. Following approval, the Originator
requires each loan correspondent to enter into a purchase and sale agreement
with customary representations and warranties regarding the loans sold to the
Originator. Each purchase and sale agreement gives the Originator the right to
put a loan back to the correspondent if a representation or warranty with
respect to a loan was untrue. No single financial institution or other mortgage
banker in the Wholesale Loan Acquisition Program accounted for more than 6.4% or
7.4% of the Originator's loan originations and purchases during 1995 or 1996,
respectively.
Bulk Purchase Program. In June 1996, the Originator first participated
in the secondary market for loans offered on a bulk basis by other originators.
The Originator completed bulk purchases of $129.1 million in loans as of
December 31, 1996. Bulk purchases accounted for 10.0% of the Originator's total
loan origination and purchase volume in 1996. Under the bulk purchase program,
loan correspondents originate numerous loans without seeking the Originator's
preapproval. The loans are packaged in a large portfolio and presented to the
Originator for review and possible purchase. The Originator re-underwrites the
loans in each package and purchases those loans that meet its underwriting
standards.
The following is a description of the underwriting guidelines
customarily and currently employed by the Originator with respect to mortgage
loans which it originates or purchases from others. The Originator revises such
guidelines from time to time in connection with changing economic and market
conditions.
HOME EQUITY LOAN UNDERWRITING
The Originator specializes in mortgage loans that do not conform to the
underwriting standards of FNMA, FHLMC, banks and other primary lending
institutions, particularly as such standards relate to a prospective borrower's
credit history. In analyzing loan applications, the Originator analyzes both the
borrower's credit and the value of the underlying property which will secure the
loan, including the characteristics of the underlying first lien, if any.
The Originator considers factors pertaining to the borrower's current
employment, stability of employment and income, financial resources, and
analysis of credit, reflecting not only the ability to pay, but also the
willingness to repay contractual obligations. The property's age, condition,
location, value and continued marketability are additional factors considered in
each risk analysis.
The Originator's underwriting standards are designed to provide a
program for all qualified applicants in an amount and for a period of time
consistent with their ability to repay. All of the Originator's underwriting
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determinations are made without regard to sex, marital status, race, color,
religion, age or national origin. Each application is evaluated on its
individual merits, applying the guidelines set forth below, to ensure that each
application is considered on an equitable basis.
The Originator originates mortgage loans with different credit
characteristics depending on the credit profiles of individual borrowers. Except
for Balloon Loans, the mortgage loans originated by the Originator generally
have amortization schedules ranging from 15 years to 30 years, bear interest at
fixed or adjustable rates and require equal monthly payments which are due as of
a scheduled day of each month which is fixed at the time of origination. The
Originator also originates Balloon Loans, which generally provide for scheduled
amortization over 30 years with a due date and a balloon payment at the end of
the fifteenth year. The collateral securing loans acquired or originated by the
Originator are generally one- to four-family residences, including condominiums,
manufactured housing and townhomes and such properties may or may not be
occupied by the owner. It is the Originator's policy not to accept mobile or
commercial properties (other than mixed-use properties) or unimproved land as
collateral. However, the Originator will accept small multi-family properties
which consist of more than four residential units.
The Originator's mortgage loan program includes a full documentation
program and a non-income verification program. Under the full documentation
program, the borrower's total monthly debt obligations (which include principal
and interest on the new loan and all other mortgages, loans, charge accounts and
scheduled indebtedness) generally cannot exceed 50% of the borrower's monthly
gross income. Loans to borrowers who are salaried employees must be supported by
current employment information in addition to employment history. This
information for full documentation programs is generally verified based on
written confirmation from employers, one or more pay-stubs, recent W-2 tax
forms, recent tax returns or telephone confirmation from the employer. For the
Originator's non-income verification program, proof of self-employment is
required, and recent tax returns must be submitted by borrower to the
Originator. Except as set forth in this paragraph, the Originator's full
documentation program and its non-income verification program have identical
requirements, e.g., with respect to appraisals, insurance and review of credit
reports.
The Originator requires that a full appraisal of the property used as
collateral for any loan that it acquires or originates be performed in
connection with the origination of the loan. All appraisals are performed by
third party, fee-based appraisers and generally conform to current FNMA/FHLMC
secondary market requirements for residential property appraisals. Each such
appraisal generally includes, among other things, an inspection of the exterior
and interior of the subject property and, where available, data from sales
within the preceding 12 months of similar properties within the same general
location as the subject property.
A credit report by an independent, nationally recognized credit
reporting agency reflecting the applicant's complete credit history is required.
The credit report typically contains information reflecting delinquencies,
repossessions, judgments, foreclosures, bankruptcies and similar instances of
adverse credit that can be discovered by a search of public records. An
applicant's recent credit performance weighs heavily in the evaluation of risk
by the Originator. The credit report is used to evaluate the borrower's record
and must be current at the time of application. A lack of credit history will
not necessarily preclude a loan if the borrower has sufficient equity in the
property. Slow payments on the borrower's credit report must be satisfactorily
explained and will normally reduce the amount of the loan for which the
applicant can be approved.
The Originator requires title insurance coverage issued by an approved
ALTA title insurance company on all property securing Home Equity Loans it
originates or purchases. The Originator and its assignees are generally named as
the insured. Title insurance policies indicate the lien position of the mortgage
loan and protect the Originator against loss if the title or lien position is
not as indicated. The applicant is also required to secure hazard and, in
certain instances, flood insurance in an amount sufficient to cover the lesser
of (a) the new loan and any senior mortgage and (b) an amount sufficient to
cover replacement costs of the Mortgaged Property.
The Originator has established classifications with respect to the
credit profiles of loans based on certain of the borrower's characteristics.
Each loan applicant is placed into one of four letter ratings ("A"
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through "D," with subratings within those categories), depending upon a number
of factors including the applicant's credit history, based on credit bureau
reports and employment status. Terms of loans made by the Originator, as well as
the maximum loan-to-value ratio and debt service to income coverage (calculated
by dividing fixed monthly debt payments by gross monthly income), vary depending
upon the classification of the borrower. Borrowers with lower credit ratings
generally pay higher interest rates and loan origination fees. The Prospectus
Supplement will include a table showing the distribution of Mortgage Loans by
Mortgage Rate, but will not include a breakdown of Mortgage Loans by credit
classification.
The Originator has limited historical experience with mortgage loan
originations. Each Prospectus Supplement will contain information relating to
the delinquency and foreclosure and charge-off experience of the Originator for
its servicing portfolio of mortgage loans (including mortgage loans serviced
for others).
UNDERWRITING GUIDELINES FOR MULTI-FAMILY LOANS AND MIXED-USE LOANS
The Originator originates mortgage loans secured by residential
properties consisting of more than four units as well as mortgage loans secured
by mixed-use properties. A potential mortgagor of such a property must have
established credit and excessive judgment liens or bankruptcies generally would
disqualify the application. If a potential mortgagor is attempting to obtain a
mortgage on a small mixed-use property with two to six units, then such small
mixed-use property should have net income at least equal to debt service. If a
potential mortgagor is attempting to obtain a mortgage on a multi-family or
mixed-use property with seven units or more, then such multi-family or
mixed-use property should have net income of at least 120% of debt service. The
maximum Loan-to-Value Ratio the Originator allows for a small mixed-use
property is usually no greater than 70%. The Originator requires a Phase I
Environmental Report for mortgage loans secured by properties with seven or
more units and may require a phase I Environmental Report on other property
depending on the use or prior use of the subject property and if there is any
indication in the related appraisal of a potential environmental problem.
Appraisal and title insurance requirements with respect to
Multi-Family Loans and Mixed Use Loans are the same as those for Home Equity
Loans.
UNDERWRITING GUIDELINES FOR FHA LOANS
Borrowers of FHA Loans are evaluated primarily based upon the ratio of
their total monthly debt obligations to monthly gross income which, by Company
policy, generally cannot exceed 45% (however, monthly income-to-debt ratios up
to 50% are accepted by HUD), rather than the loan-to-value ratio on the
underlying property. All FHA Loans require a title search. The borrower must
have at least a one-half interest in the property and furnish the Originator
with a detailed description of the improvements to be financed. In accordance
with the government requirements, the home improvements financed by the FHA
Loans are inspected within six months of their funding date.
Specified loan underwriting requirements must be satisfied prior to
loan approval and disbursement of funds. For secured FHA Loans, the lender must
verify that the borrower has at least a one-half interest in the mortgaged
property. Additionally, the Company requires that all owners in fee simple have
signed the lien instrument. In addition, the loan file must contain the
promissory note, lien instrument and other documents required by regulation.
The borrower's current paying habits and previous credit history must be
ascertained by obtaining a consumer credit report and by other credit
investigation. For FHA Loans, a two-year written verification of income and
employment is also required, whereas conventional home improvement loans
require only oral confirmation of the two-year income and employment history
plus the applicant's latest pay stub. This may include review of any one of the
following: (i) recent payroll stubs (year-to-date plus current); (ii)
verification of employment forms; (iii) signed tax returns (self-employed);
(iv) financial statements (self-employed); or (v) W-2 forms.
The loan proceeds from FHA Loans are disbursed directly to the
borrower. Costs incurred by the mortgagor for loan origination, including
origination points, legal and title fees, are often included in the amount
financed. Under Title I, the discount fee, if any, must be paid outside of
closing.
Within six months of their Completion, the Originator conducts an
inspection of all improvements financed by FHA Loans.
UNDERWRITING GUIDELINES FOR SAV*-A-LOANS(R)
The Company's Sav*-A-Loan(R) program is designed for homeowners who
may have little or no equity in their property, but who possess good to
excellent credit histories and provable income, who use the proceeds for home
improvements or debt consolidation. Under the Sav*-A-Loan(R) program, the
Originator obtains credit information with respect to each applicant from two
sources and generally does not permit the ratio of total monthly debt
obligations to monthly gross income to exceed 45%. The borrower must generally
fall within one of the two highest credit classifications established by the
Originator. The principal amount of the Sav*-A-Loans(R) purchased or
originated by the Originator generally ranged from a minimum of $10,000 to a
maximum of $75,000. Under current policy, the majority of the mortgage loans the
Originator acquires or originates have loan-to-value ratios which do not exceed
125%. The loan may be secured by a first, second or third lien on the related
property. The property must be a completed and owner-occupied one- or two-family
property and must have been occupied for at least six months or such other
period may be specified in the related Prospectus Supplement.
The Originator generally requires one of the following to be obtained
for each Sav*-A-Loan(R): (i) a Uniform Residential Appraisal Report in
compliance with FNMA or FHLMC guidelines (a "Full Appraisal"), or (ii) a Second
Mortgage Property Value Analysis Report, typically referred to as a "Drive-By
Appraisal Report" which consists exclusively of an exterior inspection of the
property without examination of the interior. A Drive-By Appraisal Report is
required if the borrower has held the Mortgaged Property for more than one year
and the related Mortgage is a first or second mortgage; if the Mortgage is a
third mortgage, a Full Appraisal is required. The Originator does not require
an appraisal if the borrower has owned the Mortgaged Property for one year or
less; provided, however, the Originator uses the purchase price set forth on
the HUD 1 form relating to the purchase of the Mortgaged Property to ascertain
the value of the Mortgaged Property.
The Originator requires title insurance coverage issued by an approved
ALTA title insurance company on all property securing loans it originates or
purchases which are greater than or equal to $25,000. The loan originator and
its assignees are generally named as the insured. Title insurance policies
indicate the lien position of the mortgage loan and protect the Originator
against loss if the title or lien position is not as indicated. With respect to
loans of less than $25,000, the Originator requires that a title report be
completed. The applicant is also required to secure hazard and, in certain
instances, flood insurance in an amount sufficient to cover the replacement
costs of the Mortgaged Property.
UNDERWRITING GUIDELINES FOR JUMBO LOANS
A borrower's total monthly debt obligations (which include principal
and interest on the new loan and all other mortgages, loans, charge accounts
and scheduled indebtedness) generally cannot exceed 60% of the borrower's
monthly gross income. Loans to borrowers who are salaried employees must be
supported by current employment information in addition to employment history.
A financial statement prepared by an accountant must be submitted by a borrower
who is self-employed. Copies of two years signed federal tax returns are
required from all applicants.
The Originator requires that two full appraisals of the property used
as collateral for any Jumbo Loan that it originates be performed in connection
with the origination of the loan. At least one appraisal must be performed by a
third party appraiser selected by the Originator. Each such appraisal generally
includes, among other things, an inspection of the exterior and interior of the
subject property and, where available, data from sales within the preceding 12
months of similar properties within the same general location as the
subject property.
A credit report with information from three independent, nationally
recognized credit reporting agencies reflecting the applicant's complete
credit history is required. Each credit report typically contains information
reflecting delinquencies, repossessions, judgments, foreclosures, bankruptcies
and similar instances of adverse credit that can be discovered by a search of
public records. An applicant's recent credit performance weighs heavily in the
evaluation of risk by the Originator. The credit report is used to evaluate the
borrower's record and must be current at the time of application. Slow payments
on the borrower's credit report must be satisfactorily explained and will
normally reduce the amount of the loan for which the applicant can be approved.
The Originator requires title insurance coverage issued by an approved
ALTA title insurance company on all property securing Jumbo Loans it
originates or purchases. The Originator is named as the insured. Title
insurance policies indicate the lien position of the mortgage loan and protect
the Originator against loss if the title or lien position is not as indicated.
The applicant is also required to secure hazard and, in certain instances,
flood insurance in an amount sufficient to cover the lesser of (a) the new loan
and (b) an amount sufficient to cover replacement costs of the
Mortgaged Property.
The Originator has established classifications with respect to the
credit profiles of Jumbo Loans. Each loan applicant is placed into one of two
letter ratings ("A" through "B," with subratings within those categories),
depending upon a number of factors including the applicant's credit history,
based on credit bureau reports and employment status. Terms of loans made by the
Originator, as well as the maximum loan-to-value ratio and debt service to
income coverage (calculated by dividing fixed monthly debt payments by gross
monthly income), vary depending upon the classification of the borrower.
Borrowers with lower credit ratings generally pay higher interest rates and loan
origination fees.
REPRESENTATIONS BY ORIGINATOR OR TRANSFEROR
The Originator or, where there is a Transferor, the Transferor will make
certain representations and warranties with respect to the Mortgage Loans under
the related Pooling and Servicing Agreement or the Sale and Servicing Agreement
entered into in connection with the related Indenture.
Such representations and warranties generally include, among other things,
that at the time of the conveyance by the Originator or Transferor, as
applicable, of each Mortgage Loan to the Depositor or the Trust: (i) the
information with respect to each Mortgage Loan set forth in the Loan Schedule
(as defined herein) and delivered upon conveyance of the Mortgage Loan is true
and correct as of the related Cut-off Date; (ii) the proceeds of each Mortgage
Loan have been fully disbursed and there are no obligations to make further
disbursements with respect to any Mortgage Loan; (iii) each Mortgaged Property
is improved by a single (one- to four-) family residential dwelling, which may
include a condominium, townhouse or manufactured home which is permanently
affixed to and treated as real property under local law or a small multi-family
or mixed-use property; (iv) each Mortgage Loan had, at the time of origination,
either an attorney's certification of title or a title search or title policy;
(v) as of the related Cut-off Date, each Mortgage Loan is secured by a valid and
subsisting lien of record on the Mortgaged Property having the priority
indicated on the related Loan Schedule and subject in all cases to exceptions to
title set forth in the title insurance policy, if any, with respect to the
related Mortgage Loan; (vi) the Originator or Transferor, as applicable, held
good and indefeasible title to, and was the
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sole owner of, each Mortgage Loan conveyed by the Originator or Transferor;
(vii) each Mortgage Loan was originated in accordance with law and is the valid,
legal and binding obligation of the related Mortgagor; and (viii) any FHA Loan
has been serviced in compliance with FHA regulations and FHA insurance with
respect thereto is in full force and effect.
All of the representations and warranties of the Originator or
Transferor, as applicable, in respect of a Mortgage Loan will be made as of the
date on which the Originator or Transferor conveys such Mortgage Loan to the
related Depositor or into the related Trust or such other date as may be
specified on the related Prospectus Supplement.
Upon a breach of a representation and/or warranty made by the
Originator or Transferor, as applicable, with respect to a
Mortgage Loan, the Originator or Transferor may be required to
repurchase such Mortgage Loan from such Trust or remove such Mortgage Loan from
the Trust and convey a substantially similar mortgage loan to the Trust in
substitution therefor. The Servicer will be required under the applicable
Agreement to enforce such repurchase or substitution obligations for the benefit
of the Trustee and the Securityholders, following the practices it would employ
in its good faith business judgment if it were the owner of such Mortgage Loan.
Under the master purchase and sale agreements with the mortgage correspondents
from whom the Originator regularly purchases mortgage loans, the sellers of the
mortgage loans make certain representations and warranties to the Originator. If
there is a breach of such representations and warranties, the Originator
generally has the right to require the seller to repurchase the related mortgage
loan.
DESCRIPTION OF THE SECURITIES
Each Series of Certificates will be issued in classes (each, a "Class")
pursuant to a pooling and servicing agreement, dated as of the related Cut-off
Date, among the Originator, the related Depositor, the Servicer and the Trustee,
for the benefit of the holders of the Certificates ("Certificateholders") of
such Series. Each Series of Notes will be issued in Classes pursuant to an
indenture (each, an "Indenture") dated as of the related Cut-Off Date between
the related Depositor and the Trustee, for the benefit of the holders of the
Notes (the "Noteholders") of each Series. The provisions of each Pooling and
Servicing Agreement or Indenture will vary depending upon the nature of the
Securities to be issued thereunder and the nature of the related Trust. A form
of a Pooling and Servicing Agreement and an Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summaries describe the material provisions relating to the Securities
which may appear in the Pooling and Servicing Agreement or Indenture. The
Prospectus Supplement for a Series of Securities will describe any material
provision of the Pooling and Servicing Agreement or Indenture relating to such
Series that materially differs from the description thereof contained in this
Prospectus. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Pooling and Servicing Agreement or Indenture for each Series of Securities and
the applicable Prospectus Supplement. A copy of the Pooling and Servicing
Agreement or Indentures (without exhibits) relating to any Series of Securities
will be provided to Securityholders, without charge, upon written request to the
Originator at: Cityscape Corp., 565 Taxter Road, Elmsford, New York 10523,
Attention: Corporate Secretary.
GENERAL
Each Class of Certificates of a Series will evidence undivided
beneficial ownership interests in the assets of the related Trust specified in
the related Prospectus Supplement. The Notes of a Series will represent
non-recourse obligations of the related Depositor secured by the assets in the
related Trust, and the proceeds of such assets will be the sole source of
payments on such Notes. A Series of Securities may include one or more Classes
of senior Securities that receive certain preferential treatment with respect to
one or more subordinated Classes (collectively, "Subordinated Classes") of
Securities of such Series. Certain Series or Classes of Securities may be
covered by or entitled to the benefits of a Financial Guaranty Insurance Policy,
a Mortgage Pool Insurance Policy, a Special Hazard Insurance Policy, a
Bankruptcy Bond or other insurance policies, cash accounts, letters of credit,
financial guaranty insurance policies, third party guarantees or other forms of
credit enhancement, in each case as described herein and in the related
Prospectus Supplement. Distributions on one or more Classes of a Series of
Securities may be made: (i) prior to one or more other Classes, (ii) after the
occurrence of specified events, (iii) in accordance with a schedule or formula,
(iv) on the basis of collections from designated portions of the Mortgage Loans
in the related Trust or (v) on a different basis, in each case as specified in
the related Prospectus Supplement. The timing and amounts of such distributions
may vary among Classes or over time as specified in the related Prospectus
Supplement.
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Distributions on Securities will be made only from the assets of the
related Trust and any other assets specified in the related Prospectus
Supplement, and the Securities (except for the Notes, which will constitute
non-recourse obligations of the Depositor) will not represent interests in or
obligations of the Originator, the Servicer, the Depositor, the Trustee or any
other person. The assets of each Trust will consist of one or more of the
following, to the extent set forth in the related Prospectus Supplement, (i) the
Mortgage Loans that from time to time are subject to the related Pooling and
Servicing Agreement or Indenture; (ii) the assets of the Trust that from time to
time are required by the Pooling and Servicing Agreement or Indenture to be
deposited in the Distribution Account, the Collection Account and any other
accounts established pursuant to the related Pooling and Servicing Agreement or
Indenture (collectively, the "Accounts"), or to be invested in Permitted
Investments (the Distribution Account, the Collection Account and Permitted
Investments, all being defined herein); (iii) property and any proceeds thereof
acquired by foreclosure, deed in lieu of foreclosure or a comparable conversion
of the Mortgage Loans in the related Mortgage Pool; (iv) any Financial Guaranty
Insurance Policy; (v) any Mortgage Pool Insurance Policy; (vi) any Special
Hazard Insurance Policy; (vii) any Bankruptcy Bond; (viii) any funds on deposit
from time to time in any Reserve Account; and (ix) all rights under any other
insurance policies, guarantees, surety bonds, letters of credit or other credit
enhancement covering any Certificates, any Mortgage Loan in the related Mortgage
Pool or any related Mortgaged Property required pursuant to the related Pooling
and Servicing Agreement or Indenture.
FORM OF SECURITIES
General. Except to the extent that the Prospectus Supplement specifies
that the Securities will be issuable in bearer form, the Securities of each
Series will be issued as physical certificates in fully registered form only in
the denominations specified in the related Prospectus Supplement. Definitive
Securities, if issued, will be transferable and exchangeable at the corporate
trust office of the Trustee or, at the election of the Trustee, the office of a
Registrar appointed by the Trustee, in either case as named in the related
Prospectus Supplement. No service charge will be incurred for any registration
of exchange or transfer, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge. If provided in the related
Pooling and Servicing Agreement or Indenture, a certificate administrator may
perform certain duties in connection with the administration of the
Certificates.
Book-Entry Registration. If so specified in the related Prospectus
Supplement, the Securities may initially be registered in the name of Cede &
Co., the nominee of the DTC. DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in their accounts, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as brokers,
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participant").
Under a book-entry format, Securityholders that are not Participants or
Indirect Participants but desire to purchase, sell or otherwise transfer
ownership of Certificates registered in the name of Cede, as nominee of DTC, may
do so only through Participants and Indirect Participants. In addition, such
Securityholders will receive all distributions of principal of and interest on
the Securities from the Trustee through DTC and its Participants. Under a
book-entry format, Securityholders will receive payments after the related
Distribution Date because, while payments are required to be forwarded to Cede,
as nominee for DTC, on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or Securityholders. Under a book-entry format, it is anticipated
that the only Securityholder will be Cede, as nominee of DTC, and that the
beneficial holders of Securities will not be recognized by the Trustee as
Securityholders under the Pooling and Servicing Agreement or Indenture. The
beneficial holders of such Securities will only be permitted to exercise the
rights of Securityholders under the Pooling
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and Servicing Agreement or Indenture indirectly through DTC and its
Participants who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit payments of principal of and interest on the
Securities. Participants and Indirect Participants with which Securityholders
have accounts with respect to the Securities similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of such
Securityholders. Accordingly, although Securityholders will not possess physical
certificates, such rules, regulations and procedures provide a mechanism by
which Securityholders will receive distributions and will be able to transfer
their interests.
Securityholders who are not Participants may transfer ownership of
Securities only through Participants by instructing such Participants to
transfer Securities, by book-entry transfer, through DTC for the account of
the purchasers of such Securities, which account is maintained with their
respective Participants. Under the rules and in accordance with DTC's normal
procedures, transfers of ownership of Securities will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the respective Participants will make debits or credits, as
the case may be, on their records on behalf of the selling and purchasing
Securityholders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC in general advises that it will take any action permitted to be
taken by a Securityholder under a Pooling and Servicing Agreement or an
Indenture only at the direction of one or more Participants to whose account the
Securities are credited. Additionally, DTC in general advises that it will take
such actions with respect to specified percentages of the Securityholders only
at the direction of and on behalf of Participants whose holdings include current
principal amounts of outstanding Securities that satisfy such specified
percentages. DTC may take conflicting actions with respect to other current
principal amounts of outstanding Securities to the extent that such actions are
taken on behalf of Participants whose holdings include such current principal
amounts of outstanding Securities.
Any Securities initially registered in the name of Cede, as nominee of
DTC, will be issued in fully registered form as Definitive Securities to
Securityholders or their nominees, rather than to DTC or its nominee only under
the events specified in the related Pooling and Servicing Agreement or Indenture
as described in the related Prospectus Supplement. Upon the occurrence of any of
the events specified in the related Pooling and Servicing Agreement or Indenture
and Prospectus Supplement, DTC will be required to notify all Participants of
the availability through DTC of Definitive Securities. Upon surrender by DTC of
the physical certificates representing the Securities and instruction for
re-registration, the Trustee will issue the Securities in the form of Definitive
Securities, and thereafter the Trustee will recognize the holders of such
Definitive Securities as Securityholders. Thereafter, payments of principal of
and interest on the Securities will be made by the Trustee directly to
Securityholders in accordance with the procedures set forth herein and in the
Pooling and Servicing Agreement or Indenture. The final distribution of any
Security (whether Definitive Securities or Securities registered in the name of
Cede), however, will be made only upon presentation and surrender of such
Securities on the final Distribution Date at such office or agency as is
specified in the notice of final payment to Securityholders.
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DISTRIBUTIONS ON SECURITIES
General. Distributions of principal and interest (or, if applicable, of
principal only or interest only) on the related Securities will be made by the
Trustee on each Distribution Date or other date specified in the related
Prospectus Supplement, in the amounts specified in the related Prospectus
Supplement. Distributions will be made to the persons in whose names the
Securities are registered at the close of business on the record dates specified
in the Prospectus Supplement. Distributions will be made by check mailed to the
persons entitled thereto at the address appearing in the register maintained for
Securityholders (the "Register") or, to the extent described in the related
Prospectus Supplement, by wire transfer or by such other means as are described
therein, except that the final distribution in retirement of the Securities will
be made only upon presentation and surrender of the Securities at the office or
agency of the Trustee or other person specified in the final distribution notice
to Securityholders.
Each Class of Securities within a Series will evidence the interests
specified in the related Prospectus Supplement, which may include, among other
things, (i) the right to receive distributions allocable only to principal, only
to interest or to any combination thereof; (ii) the right to receive
distributions only of prepayments of principal throughout the lives of the
Securities or during specified periods; (iii) interests that are subordinated in
their right to receive distributions of scheduled payments of principal,
prepayments of principal, interest or any combination thereof to one or more
other Classes of Securities of such Series throughout the lives of the
Securities or during specified periods or interests that are subordinated with
respect to certain losses or delinquencies; (iv) the right to receive
distributions only after the occurrence of events specified in the related
Prospectus Supplement; (v) the right to receive distributions in accordance with
a schedule or formula or on the basis of collections from designated portions of
the assets in the related Trust; (vi) as to Securities entitled to distributions
allocable to interest, the right to receive interest at a fixed rate or an
adjustable rate; (vii) as to Securities entitled to distributions allocable to
interest, the right to distributions allocable to interest only after the
occurrence of events specified in the related Prospectus Supplement; and (viii)
as to Securities entitled to distributions allocable to interest only after the
occurrence of certain events, the accrual but deferment of payment of interest
until such events occur, in each case as specified in such Prospectus
Supplement.
In general, the method of determining the amount of distributions on a
particular Series of Securities will depend on the type of credit support, if
any, that is used with respect to such Series. See "Credit Enhancement" herein.
Set forth below is a general description of certain methods that may be used to
determine the amount of distributions on the Securities of a particular Series.
The Prospectus Supplement for each Series of Securities will describe the method
to be used in determining the amount of distributions on the Securities of such
Series.
Distributions allocable to principal and interest on the Securities of
a Series will be made by the Trustee out of, and only to the extent of, funds in
a segregated account established and maintained by the Trustee for the deposits
of such amounts (the "Distribution Account"). The Distribution Account may
include funds transferred from any Reserve Account and funds received as a
result of any other form of credit enhancement. As between Securities of
different Classes and as between distributions of interest and principal and, if
applicable, between distributions of prepayments of principal and scheduled
payments of principal, distributions made on any Distribution Date will be
applied as specified in the Prospectus Supplement. Distributions to any Class;
any distribution to any Class of Securities which will not be made pro rata will
be noted in the related Prospectus Supplement of Securities will generally be
made pro rata to all Securityholders of that Class.
Available Funds. All distributions on the Securities of each Series on
any Distribution Date will be made from the funds available for distribution on
such Distribution Date as described below ("Available Funds"), in accordance
with the terms described in the related Prospectus Supplement. Available Funds
for each Distribution Date will generally equal the sum of the following
amounts:
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(i) the aggregate of all previously undistributed payments on
account of principal (including principal prepayments, if any, and
prepayment penalties, if so provided in the related Prospectus
Supplement) and interest on the Mortgage Loans in the related Trust,
received by the Servicer during the related collection period (the
"Collection Period") except:
(a) all payments which were due before the Cut-off
Date;
(b) amounts received on particular Mortgage Loans as
late payments of principal or interest and, unless otherwise
specified in the related Prospectus Supplement, other amounts
required to be paid by the Mortgagors which are to be retained
by the Servicer (including any Sub-Servicer) as additional
compensation;
(c) amounts representing reimbursement, to the extent
permitted as described under "The Pooling and Servicing
Agreement --Monthly Advances and Compensating Interest" and "
-- Servicing and Other Compensation and Payment of Expenses,"
for advances made by the Servicer or any Sub-Servicers that
were deposited into the Distribution Account, and amounts
representing reimbursement for certain other losses and
expenses incurred by the Servicer or any Sub-Servicer as
permitted under the related Pooling and Servicing Agreement or
Servicing Agreement;
(d) that portion of each collection of interest on a
particular Mortgage Loan in such Trust representing servicing
compensation payable to the Servicer that is to be retained
from such collection or is permitted to be retained from
related Insurance Proceeds, Liquidation Proceeds or proceeds
of Mortgage Loans purchased pursuant to the related Pooling
and Servicing Agreement or Servicing Agreement; and
(e) Trustee fees and other expenses or fees payable
by the related Trust as specified in the related Prospectus
Supplement;
(ii) all amounts received and retained, if any, in connection
with the liquidation of defaulted Mortgage Loans ("Liquidation
Proceeds"), net of unreimbursed liquidation expenses and insured
expenses incurred and unreimbursed advances made by the Servicer or any
Sub-Servicer ("Net Liquidation Proceeds"), including all proceeds (net
of unreimbursed Servicing Advances) of title insurance, hazard
insurance and primary mortgage insurance, if any ("Insurance
Proceeds"), all Principal Prepayments (as defined herein), all proceeds
received in connection with the condemnation of a Mortgaged Property or
the release of part of a Mortgaged Property and all proceeds of any
Mortgage Loan purchased by the Originator or any other entity pursuant
to the Pooling and Servicing Agreement, the Indenture or Servicing
Agreement;
(iii) the amount of any Monthly Advance (as defined herein) or
Compensating Interest Payment (as defined herein) made by the Servicer
or any Sub-Servicer, as deposited by such in the Distribution Account;
and
(iv) if applicable, amounts withdrawn from a Reserve Account
or received in connection with other credit enhancement.
Any variation in the definition of Available Funds will be stated in
the related Prospectus Supplement.
Distributions of Interest. Each Class of Securities may bear interest
at a different rate which may be fixed or adjustable ("Interest Rate"). Interest
will accrue on the Principal Balance (as defined herein) (or, in the case of
Securities entitled only to distributions allocable to interest, the aggregate
notional principal balance) of each Class of Securities entitled to interest,
at the Interest Rate and for the periods specified in the Prospectus
Supplement. To the extent funds are available therefor, interest accrued during
each such specified period on each Class of Securities entitled to interest
(other than a Class of Securities that provides for interest that
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accrues, but is not currently payable, referred to hereafter as "Accrual
Securities") will be distributable on the Distribution Dates specified in the
Prospectus Supplement until the aggregate Principal Balance of the Securities of
such Class has been distributed in full or, in the case of Securities entitled
only to distributions allocable to interest, until the aggregate notional
principal balance of such Securities is reduced to zero or for the period of
time designated in the Prospectus Supplement.
Distributions allocable to interest on each Security that is not
entitled to distributions allocable to principal will be calculated based on the
notional principal balance of such Security or on such other amount as may be
specified in the related Prospectus Supplement. The notional principal balance
of a Security will not evidence an interest in or entitlement to distributions
allocable to principal but will be used solely for convenience in expressing the
calculation of interest and for certain other purposes.
With respect to any Class of Accrual Securities, if specified in the
Prospectus Supplement, any interest that has accrued but is not paid on a given
Distribution Date will be added to the aggregate Principal Balance of such
Class of Securities on that Distribution Date. Distributions of interest on
each Class of Accrual Securities will commence only after the occurrence of the
events specified in the Prospectus Supplement. Prior to such time, the
beneficial ownership interest of such Class of Accrual Securities in the Trust,
as reflected in the aggregate Principal Balance of such Class of Accrual
Securities, will increase on each Distribution Date by the amount of interest
that accrued on such Class during the preceding interest accrual period but that
was not required to be distributed to such Class on such Distribution Date. Any
such Class of Accrual Securities will thereafter accrue interest on its
outstanding Principal Balance as so adjusted.
Distributions of Principal. The aggregate principal balance amount of
any Class of Securities entitled to distributions of principal will be the
aggregate original Principal Balance of such Class of Securities specified in
the Prospectus Supplement, less all amounts previously distributed to such
Securities as allocable to principal ("Principal Balance"). In the case of
Accrual Securities, the original Principal Balance will generally be increased
by all interest accrued but not then distributable on such Accrual Securities.
The Prospectus Supplement will specify the method by which the amount of
principal payments on the Securities will be calculated and the manner in
which such amount will be allocated among the Classes of Securities entitled
to distributions of principal. The amount of principal to be distributed with
respect to any period of time will generally be a function of all scheduled
installments of principal and all unscheduled collections and recoveries of
principal on the Loans during such period and on payments of excess interest
made to achieve a desired level of overcollateralization.
The Prospectus Supplement may provide that one or more Classes of
Senior Securities will be entitled to receive all or a disproportionate
percentage of any principal payments made by a Mortgagor which are received in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments in the
percentages and under the circumstances or for the periods specified in the
Prospectus Supplement. Any such allocation of Principal Prepayments to such
Class or Classes of Securities will have the effect of accelerating the
amortization of such Senior Securities while increasing the interests evidenced
by Subordinated Securities in the Trust. Increasing the interests of
Subordinated Securities relative to that of the Senior Securities is intended to
preserve the availability of the subordination provided by the Subordinated
Securities. See "Credit Enhancement -- Subordination" herein. The timing and
amounts of distributions allocable to interest and principal and, if applicable,
Principal Prepayments and scheduled payments of principal, to be made on any
Distribution Date, may vary among Classes over time, or otherwise, as specified
in the Prospectus Supplement.
REPORTS TO SECURITYHOLDERS
The related Pooling and Servicing Agreement or Indenture will generally
require that, on or before each Distribution Date, either the Servicer, any
Sub-Servicer or the Trustee forward to each Securityholder of record of the
related Series of Securities a statement setting forth,
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to the extent applicable to such Series, the following information with respect
to the distribution for such Distribution Date:
(i) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of any Principal
Prepayments and, if so specified in the related Prospectus Supplement,
any prepayment penalties included therein;
(ii) the amount of such distribution allocable to interest;
(iii) if applicable, the aggregate amount (a) otherwise
allocable to the Subordinated Securityholders on such Distribution
Date, and (b) withdrawn from a Reserve Account, if any, that is
included in the amounts distributed with respect to Senior
Securities;
(iv) the total amount of the Insured Payment (as defined
herein) included in the amount distributed on such Distribution Date;
(v) the Pool Balance (as defined herein) and the Pool Factor
(as defined herein) of the Mortgage Loans for the following
Distribution Date;
(vi) if applicable, the percentage of principal payments on
the Mortgage Loans, if any, which each Class will be entitled to
receive on the following Distribution Date;
(vii) unless the Interest Rate is a fixed rate, the Interest
Rate applicable to the distribution on the Distribution Date;
(viii) the number and aggregate principal balance of Mortgage
Loans in the related Mortgage Pool contractually delinquent (a) 30 to
59 days, (b) 60 to 89 days and (c) 90 days or more as of the end of the
related Collection Period;
(ix) the number and aggregate principal balance of all
Mortgage Loans in foreclosure or other similar proceedings, and the
book value of any real estate acquired through foreclosure or grant of
a deed in lieu of foreclosure;
(x) if applicable, the amount remaining in any Reserve Account
or the amount remaining of any other credit support, after giving
effect to the distribution on the Distribution Date; and
(xii) the amount of Monthly Advances and/or Servicing
Advances, if any, made since the preceding Distribution Date.
The related Prospectus Supplement will specify any differences from
the above in the information required to be forwarded pursuant to the related
Pooling and Servicing Agreement.
Where applicable, any amount set forth above may be expressed as a
dollar amount per single Security of the relevant Class having the denomination
or interest specified either in the related Prospectus Supplement or in the
report to Securityholders. The report to Securityholders for any Class or Series
of Securities may include additional or other information of a similar nature to
that specified above.
The "Pool Balance" means the aggregate outstanding principal balance of
a Class and the "Pool Factor" is the percentage obtained by dividing the Pool
Balance after giving effect to the distribution of principal on such
Distribution Date by the Cut-off Date Pool Balance.
In addition, within a reasonable period of time after the end of each
calendar year, the Servicer or the Trustee will mail to each person who was a
Securityholder of record at any time during such calendar year (a) a report as
to the aggregate of amounts reported pursuant to clauses (i) and (ii) for such
calendar year or, in the event such person was a Securityholder of record during
a portion of such calendar year, for the applicable
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portion of such year and (b) such other customary information as may be deemed
necessary or desirable for Securityholders to prepare their tax returns.
CREDIT ENHANCEMENT
Credit enhancement may be provided with respect to one or more Classes
of a Series of Securities or with respect to the Mortgage Loans in the related
Trust. Credit enhancement may be in the form of (i) the subordination of one or
more Classes of the Securities of such Series, (ii) the use of a Financial
Guaranty Insurance Policy, a Mortgage Pool Insurance Policy, a Special Hazard
Insurance Policy, a Bankruptcy Bond, a Reserve Account, Supplemental Interest
Payments or other insurance policies, cash accounts, letters of credit, a
limited financial guaranty insurance policies, third party guarantees, or other
forms of credit enhancement described in the related Prospectus Supplement, or
the use of a cross-support feature, or (iii) any combination of the foregoing.
The protection against losses afforded by any credit enhancement will be limited
and will not guarantee repayment of the entire principal balance of the
Securities and interest thereon. If losses occur which exceed the maximum
amount covered by the credit enhancement or which are not covered by the credit
enhancement, Securityholders will bear their allocable share of such
deficiency. If a form of credit enhancement applies to several Classes of
Securities, and if principal payments of certain Classes will be distributed
prior to such distributions to other Classes, the Classes which receive
distributions at a later time are more likely to bear any losses which exceed
the amount covered by credit enhancement.
Coverage under any credit enhancement may be cancelled or reduced by
the Originator without the consent of Securityholders, if such cancellation
or reduction would not adversely affect the rating or ratings of the related
Securities.
SUBORDINATION
If so specified in the related Prospectus Supplement, scheduled
principal, Principal Prepayments, interest or any combination thereof that
otherwise would have been distributable to one or more Classes of Subordinated
Securities of a Series will instead be distributed to holders of one or more
Classes of Senior Securities, under the circumstances and to the extent
specified in such Prospectus Supplement. If specified in the related Prospectus
Supplement, the holders of Senior Securities will receive the amounts of
principal and interest due to them on each Distribution Date, out of the funds
available for distribution on such date in the related Distribution Account,
prior to any such distribution being made to holders of the related Subordinated
Securities, in each case under the circumstances and subject to the
limitations specified in such Prospectus Supplement. The protection afforded to
the holders of Senior Securities through subordination also may be
accomplished by first allocating certain types of losses or delinquencies to the
related Subordinated Securities, to the extent described in the related
Prospectus Supplement. If aggregate losses and delinquencies in respect of such
Mortgage Loans were to exceed the total amounts otherwise available for
distribution to holders of Subordinated Securities or, if applicable, were to
exceed the specified maximum amount, holders of Senior Securities would
experience losses on such Securities.
If so specified in the Prospectus Supplement, the same Class of
Certificates may be Senior Securities with respect to the right to receive
certain types of payments or with respect to the allocation of certain types of
losses or delinquencies, and Subordinated Securities with respect to the right
to receive other types of payments or with respect to the allocation of certain
types of losses or delinquencies. If specified in the Prospectus Supplement,
various Classes of Senior Securities and Subordinated Securities may
themselves be subordinate in their right to receive certain distributions to
other Classes of Senior and Subordinated Securities, respectively, through a
cross-support mechanism or otherwise. As between Classes of Senior Securities
and as between Classes of Subordinated Securities, distributions may be
allocated among such Classes (i) in the order of their scheduled final
distribution dates, (ii) in accordance with a schedule or formula, (iii) in
relation to the occurrence of certain events or (iv) otherwise, in each case as
specified in the related Prospectus Supplement.
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The related Prospectus Supplement will set forth information concerning
the amount of subordination of a Class or Classes of Subordinated Securities
in a Series, the circumstances in which such subordination will be applicable,
the manner, if any, in which the amount of subordination will decrease over
time, the manner of funding any Reserve Account, and the conditions under which
amounts in any such Reserve Account will be used to make distributions to Senior
Securityholders or released to Subordinated Securityholders from the related
Trust.
RESERVE ACCOUNTS
If so specified in the related Prospectus Supplement, cash, United
States Treasury securities, instruments evidencing ownership of principal or
interest payments thereon, demand notes, certificates of deposit or a
combination thereof in the aggregate amount specified in such Prospectus
Supplement may be deposited by the Originator or the Servicer, as applicable, on
the date specified in the related Prospectus Supplement in one or more Reserve
Accounts established with the Trustee. In addition to or in lieu of the
foregoing, if so specified in such Prospectus Supplement, all or any portion of
amounts otherwise distributable to holders of Subordinated Securities on any
Distribution Date may instead be deposited into a Reserve Account. Such deposits
may be made on the date specified in the related Prospectus Supplement, which
may include each Distribution Date, each Distribution Date for specified periods
or until the balance in the Reserve Account has reached a specified amount. See
" -- Subordination" above.
The cash and other assets in a Reserve Account will be used to enhance
the likelihood of timely payment of principal of, and interest on, or, if so
specified in the related Prospectus Supplement, to provide additional protection
against losses in respect of, the assets in the related Trust, to pay the
expenses of the Trust or for such other purposes specified in such Prospectus
Supplement. Any cash in a Reserve Account and the proceeds upon maturity or
liquidation of any other asset or instrument therein will be invested, to the
extent acceptable to the applicable Rating Agency, in Permitted Investments (as
defined herein), including obligations of the United States and certain agencies
thereof, certificates of deposit, certain commercial paper, time deposits and
bankers acceptances sold by eligible commercial banks, certain repurchase
agreements of United States government securities with eligible commercial banks
and certain other instruments acceptable to the applicable Rating Agency. Any
asset or instrument deposited in any Reserve Account will name the Trustee, in
its capacity as trustee for the Securityholders, or such other person as may
be specified in the related Prospectus Supplement as beneficiary and will be
issued by an entity acceptable to the applicable Rating Agency.
Any amounts on deposit in a Reserve Account will be available for
withdrawal from such Reserve Account for distribution to holders of certain
Classes of Securities or release to holders of certain Classes of
Securities, the Originator, the Servicer or another entity for the purposes,
in the manner and at the times specified in the related Prospectus Supplement.
FINANCIAL GUARANTY INSURANCE POLICIES
If so specified in the related Prospectus Supplement, a financial
guaranty insurance policy or policies may be obtained and maintained for a Class
or Series of Certificates. The issuer of any Financial Guaranty Insurance
Policy (a "Financial Insurer") will be described in the related Prospectus
Supplement. A copy of any such Financial Guaranty Insurance Policy will be
attached as an exhibit to the related Pooling and Servicing Agreement.
A Financial Guaranty Insurance Policy will unconditionally and
irrevocably guarantee to Securityholders that a certain amount will be
available for distribution to Securityholders on a related Distribution Date.
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The specific terms of any Financial Guaranty Insurance Policy will be
as set forth in the related Prospectus Supplement. A Financial Guaranty
Insurance Policy may have limitations including, but not limited to, limitations
on a Financial Insurer's obligation to guarantee the Servicer's obligation to
repurchase or substitute for any Mortgage Loans, to guarantee any specified rate
of prepayments or to provide funds to redeem Certificates on any specified date.
Subject to the terms of the related Pooling and Servicing Agreement or
Indenture, a Financial Insurer may be subrogated to the rights of
Securityholders to receive payments under the Securities to the extent of any
payments by such Financial Insurer under the related Financial Guaranty
Insurance Policy that were not previously reimbursed. However, any such
subrogation rights of a Financial Insurer may not result in a reduction of the
amount otherwise distributable on any Distribution Date to holders of the
Securities covered by such Financial Guaranty Insurance Policy.
MORTGAGE POOL INSURANCE POLICIES
If so specified in the related Prospectus Supplement, a Mortgage Pool
Insurance Policy issued by the insurer (the "Mortgage Pool Insurer") named in
such Prospectus Supplement will be obtained and maintained for all or certain of
the Mortgage Loans. A Mortgage Pool Insurance Policy will, subject to the
limitations described below, cover losses on the related Mortgage Loans up to a
maximum amount specified in the related Prospectus Supplement. A Mortgage Pool
Insurance Policy, however, is not a blanket policy against loss, since claims
thereunder may only be made respecting losses on certain Mortgage Loans and only
upon satisfaction of certain conditions precedent described below. A Mortgage
Pool Insurance Policy will not cover losses due to a failure to pay or denial of
a claim under a primary mortgage insurance policy.
A Mortgage Pool Insurance Policy generally will not insure (and many
primary mortgage insurance policies do not insure) against loss sustained by
reason of a default arising from, among other things, (i) fraud or negligence in
the origination or servicing of a Mortgage Loan, including misrepresentation by
the Mortgagor, the Originator or persons involved in the origination thereof, or
(ii) failure to construct a Mortgaged Property in accordance with plans and
specifications. If so specified in the related Prospectus Supplement, an
endorsement to a Mortgage Pool Insurance Policy, a bond or other credit support
may cover fraud in connection with the origination of Mortgage Loans. If so
specified in the related Prospectus Supplement, a failure of coverage
attributable to an event specified in clause (i) or (ii) above might result in a
breach of the Originator's representations and, in such event, might give rise
to an obligation on the part of the Originator to repurchase the defaulted
Mortgage Loan if the breach cannot be cured by the Originator. No Mortgage Pool
Insurance Policy will cover losses in respect of a defaulted Mortgage Loan
occurring when the Servicer of such Mortgage Loan, at the time of default or
thereafter, was not approved by the applicable Mortgage Pool Insurer.
The original amount of coverage under a Mortgage Pool Insurance Policy
will be reduced over the life of the related Securities by the aggregate
dollar amount of claims paid by the Servicer less the aggregate of the net
amounts realized by the Mortgage Pool Insurer upon disposition of all foreclosed
properties. The amount of claims paid will include certain expenses incurred by
the Servicer, as well as accrued interest on delinquent Mortgage Loans to the
date of payment of the claim. Accordingly, if aggregate net claims paid under a
Mortgage Pool Insurance Policy reach the maximum amount, coverage under the
Mortgage Pool Insurance Policy will be exhausted and any further losses will be
borne by the related Securityholders.
The terms of any Mortgage Pool Insurance Policy will be described in
the related Prospectus Supplement.
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SPECIAL HAZARD INSURANCE POLICIES
If so specified in the related Prospectus Supplement, a Special Hazard
Insurance Policy or policies will be obtained for the related Mortgage Pool and
will be issued by the insurer (the "Special Hazard Insurer") named in such
Prospectus Supplement. Each Special Hazard Insurance Policy will, subject to
limitations described below, protect the related Securityholders from (i)
loss by reason of damage to Mortgaged Properties caused by certain hazards
(including earthquakes and, to a limited extent, tidal waves and related water
damage) not insured against under the standard form of hazard insurance policy
for the respective states in which the Mortgaged Properties are located or under
a flood insurance policy if the Mortgaged Property is not located in a federally
designated flood area, and (ii) loss caused by reason of the application of the
coinsurance clause contained in a hazard insurance policy. See "The Pooling and
Servicing Agreement --Hazard Insurance" herein. A Special Hazard Insurance
Policy will not cover losses occasioned by war, civil insurrection, certain
governmental action, errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear reaction, flood (if the Mortgaged Property
is located in a federally designated flood area), chemical contamination and
certain other risks. The amount of coverage under any Special Hazard Insurance
Policy will be specified in the related Prospectus Supplement. A Special Hazard
Insurance Policy will provide that no claim may be paid unless hazard and, if
applicable, flood insurance on the related Mortgaged Property securing the
Mortgage Loan has been kept in force and other protection and preservation
expenses have been paid.
The terms of any Special Hazard Insurance Policy will be described in
the related Prospectus Supplement.
Since each Special Hazard Insurance Policy will be designed to permit
full recovery under the Mortgage Pool Insurance Policy in circumstances in which
such recoveries would otherwise be unavailable because property has been damaged
by a cause not insured against by a standard hazard policy and thus would not be
restored, each Pooling and Servicing Agreement and Servicing Agreement will
provide that, if the related Mortgage Pool Insurance Policy shall have been
terminated or been exhausted through payment of claims, the Servicer will be
under no further obligation to maintain such Special Hazard Insurance Policy.
BANKRUPTCY BONDS
If so specified in the related Prospectus Supplement, a bankruptcy bond
or bonds for proceedings under the federal Bankruptcy Code will be issued by an
insurer named in such Prospectus Supplement. A Bankruptcy Bond will cover
certain losses resulting from a reduction by a bankruptcy court of scheduled
payments of principal and interest on a Mortgage Loan or a reduction by such
court of the principal amount of a Mortgage Loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the filing
of a bankruptcy petition. The level of coverage and other terms of a Bankruptcy
Bond will be set forth in the related Prospectus Supplement. To the extent
specified in an applicable Prospectus Supplement, the Servicer may deposit cash,
an irrevocable letter of credit or any other instrument acceptable to each
nationally recognized rating agency rating the Securities of the related
Series in the Trust to provide protection in lieu of or in addition to that
provided by a Bankruptcy Bond.
CROSS SUPPORT
If so specified in the related Prospectus Supplement, the beneficial
ownership of separate Trusts or separate groups of assets in a single Trust may
be evidenced by separate Classes of the related Series of Securities. In such
case, credit support may be provided by a cross-support feature which requires
that distributions be made with respect to Securities evidencing a beneficial
ownership interest in other asset groups within the same Trust. The Prospectus
Supplement for a Series of Securities which includes a cross-support feature
will describe the manner and conditions for applying such cross-support feature.
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If so specified in the related Prospectus Supplement, the coverage
provided by one or more other forms of credit enhancement, such as Financial
Guaranty Insurance Policies or Reserve Accounts, may apply concurrently to two
or more separate Trusts without priority among such Trust, until the credit
support is exhausted. If applicable, the Prospectus Supplement will identify the
Trusts to which such credit enhancement relates and the manner of determining
the amount of the coverage provided hereby and of the application of such
coverage to the identified Trusts or asset groups.
SPREAD AMOUNT
If so specified in the related Prospectus Supplement, certain Classes
of Securities may be entitled to receive limited acceleration of principal
relative to the amortization of the related Mortgage Loans. The accelerated
amortization will be achieved by applying certain excess interest collected on
the Mortgage Loans to the payment of principal on such Classes of Securities.
This acceleration feature is intended to create a Spread Amount, resulting from,
and generally equal to, the excess of the aggregate principal balances of the
applicable Mortgage Loans over the principal balances of the applicable Classes
of Securities. Once the required Spread Amount is reached, and subject to the
provisions described in the next sentence and in the related Prospectus
Supplement, the acceleration feature will cease, unless necessary to maintain
the required level of the Spread Amount. The applicable Pooling and Servicing
Agreement or Indenture will provide that, subject to certain floors, caps and
triggers, the required level of the Spread Amount may increase or decrease
over time. An increase would result in a temporary period of accelerated
amortization of the applicable Classes of Securities to increase the actual
level of the Spread Amount to its required level; a decrease would result in a
temporary period of decelerated amortization to reduce the actual level of the
Spread Amount to its required level. A Pooling and Servicing Agreement or
Indenture also may provide that after one or more Classes of Securities have
been paid to the required level of the Spread Amount, excess interest,
together with certain other excess amounts, may be applied to make-up
shortfalls in, or accelerate the amortization of, other Classes of Securities.
SUPPLEMENTAL INTEREST PAYMENTS
If so specified in the Prospectus Supplement, one or more Classes of
Securities may be entitled to receive supplemental interest payments under
specified circumstances. Supplemental interest payments will be available to
fund some or all of the difference, if any, between the interest owed to a Class
of Certificates on a Distribution Date and the interest that would be available
to pay such interest assuming no defaults or delinquencies on the Mortgage
Loans. Such differences may result if the interest rates on the applicable
Classes of Securities are based upon an index that differs from the index used
in determining the interest rates on the Mortgage Loans. Except as otherwise
provided in a Prospectus Supplement, supplemental interest payments will not be
available to fund shortfalls resulting from delinquencies or defaults on the
Mortgage Loans.
MATURITY PROTECTION
If so specified in the Prospectus Supplement, one or more Classes of
Certificates may be entitled to third-party payments to help provide that the
holders of such Certificates receive their unpaid principal on or prior to a
specified date.
FHA INSURANCE
The FHA Loans, if any, included in a Trust, as specified in the related
Prospectus Supplement, will be FHA-insured. The nature of any such FHA insurance
is described generally below.
The regulations governing FHA insurance provide that insurance benefits
are payable upon the repossession and resale of the collateral and assignment of
the loan to HUD. With respect to a defaulted FHA Loan, the Servicer must follow
applicable regulations before initiating repossession procedures as a
prerequisite to payment. The regulations include requirements that the lender
arrange a face-to-face meeting with the
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borrower, initiate a modification or repayment plan, if feasible, and give the
borrower 30 days' notice of default prior to any repossession. The insurance
claim is paid in cash by HUD. The amount of insurance benefits generally paid by
the FHA currently is equal to 90% of the sum of (1) the unpaid principal amount
of the loan at the date of default and uncollected interest earned to the date
of default computed at the applicable loan interest rate, after deducting the
best price obtainable for the collateral (based in part on a HUD-approved
appraisal) and all amounts retained or collected by the lender from other
sources with respect to the loan; (2) accrued and unpaid interest on the unpaid
amount of the loan from the date of default to the date of submission of the
claim plus 15 calendar days (but in no event more than nine months) computed at
a rate of 7.00% per annum; (3) costs paid to a dealer or other third party to
repossess or preserve the related property; (4) the amount of any sales
commission paid to a dealer or other third party for the resale of the property;
(5) property taxes, special assessments and other similar charges and hazard
insurance premiums, prorated to the date of disposition of the property; (6)
uncollected court costs; (7) legal fees, not to exceed $1,000; and (8) expenses
for recording the assignment of the lien on the collateral to the United States,
in each case subject to applicable caps as set by regulations governing the FHA
from time to time.
The insurance available to a lender under FHA Title I insurance is
subject to the limit of a reserve amount equal to 10% of the original principal
balance of all Title I insured loans originated by the lender, which amount is
reduced by all claims paid to the lender, and which is increased by an amount
equal to 10% of the original principal balance of additional insured loans
originated by the lender. If the Originator were replaced as Servicer of the
Mortgage Loans in a Trust in accordance with the applicable Agreement, it is
not clear from the FHA regulations what portion of this reserve amount would
be available for claims in respect of the FHA Loans included in the related
Trust Estate. The obligation to pay insurance premiums to the FHA is the
obligation of the Originator, as the Servicer of the FHA Loans.
OTHER INSURANCE, GUARANTEES AND SIMILAR INSTRUMENTS OR AGREEMENTS
If so specified in the related Prospectus Supplement, a Trust may
include, in addition to or in lieu of some or all of the foregoing, letters of
credit, third party guarantees, and other arrangements for maintaining timely
payments or providing additional protection against losses on the assets
included in such Trust, paying administrative expenses, or accomplishing such
other purpose. The related Prospectus Supplement will describe any such
arrangements, including information as to the extent of coverage and any
conditions or limitations thereto. The Trust may include a guaranteed investment
contract or reinvestment agreement pursuant to which funds held in one or more
accounts will be invested at a specified rate. Any such arrangement must be
acceptable to each Rating Agency named in the related Prospectus Supplement.
MAINTENANCE OF CREDIT ENHANCEMENT
To the extent that the related Prospectus Supplement expressly provides
for credit enhancement and maintenance arrangements, the following paragraphs
shall apply.
If a form of credit enhancement has been obtained for a Series of
Securities, the Depositor or the Servicer will be obligated to exercise its
reasonable efforts to keep or cause to be kept such form of credit support in
full force and effect throughout the term of the related Pooling and Servicing
Agreement or Indenture, unless coverage thereunder has been exhausted through
payment of claims or otherwise, or substitution therefor is made as described
below.
In lieu of the obligation to maintain a particular form of credit
enhancement, the Depositor or the Servicer may obtain a substitute or alternate
form of credit enhancement. If the Originator obtains such a substitute form of
credit enhancement, such form of credit enhancement will be maintained and kept
in full force and effect as provided herein. Prior to its obtaining any
substitute or alternate form of credit enhancement, the Depositor or the
Servicer will obtain written confirmation from each applicable Rating Agency
that the
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substitute or alternate form of credit enhancement for the existing credit
enhancement will not adversely affect the then current ratings assigned to such
Securities by each applicable Rating Agency.
The Servicer will provide the Trustee information required for the
Trustee to draw under a Financial Guaranty Insurance Policy or any letter of
credit, will present claims to any Mortgage Pool Insurer, any Special Hazard
Insurer, or any issuer of a Bankruptcy Bond and will take such reasonable steps
as are necessary to permit recovery under such Financial Guaranty Insurance
Policy, letter of credit, Bankruptcy Bond, Special Hazard Insurance Policy,
Mortgage Pool Insurance Policies or other applicable forms of credit
enhancement. Additionally, the Servicer will present such claims and take such
steps as are reasonably necessary to provide for the performance by another
party of its purchase obligations. All collections by the Servicer under any
Mortgage Pool Insurance Policy or any Bankruptcy Bond and, where the related
property has not been restored, any Special Hazard Insurance Policy are to be
deposited initially in the Collection Account and ultimately in the Distribution
Account, subject to withdrawal. All draws under any Financial Guaranty
Insurance Policy or letter of credit will be deposited directly in the
Distribution Account.
If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy or any applicable
Special Hazard Insurance Policy are insufficient to restore the damaged property
to a condition sufficient to permit recovery under any applicable form of credit
enhancement, the Servicer is not required to expend its own funds to restore the
damaged property unless it determines (i) that such restoration will increase
the proceeds to one or more Classes of Securityholders on liquidation of the
Mortgage Loan after reimbursement to the Servicer for its expenses and (ii) that
such expenses will be recoverable out of related Liquidation Proceeds or
Insurance Proceeds. If recovery under any applicable form of credit enhancement
is not available because the Servicer has been unable to make the above
determinations or has made such determinations incorrectly or recovery is not
available for any other reason, the Servicer is nevertheless obligated to follow
such normal practices and procedures (subject to the preceding sentence) as it
deems necessary or advisable to realize upon the defaulted Mortgage Loan and, in
the event such determination has been incorrectly made, is entitled to
reimbursement of its expenses in connection with such restoration.
MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS
The yields to maturity of the Securities will be affected by the
amount and timing of principal payments on or in respect of the Mortgage Loans
included in the related Trusts, the allocation of available funds to various
Classes of Securities, the Interest Rate for various Classes of Securities
and the purchase price paid for the Securities.
The original terms to maturity of the Mortgage Loans in a given
Mortgage Pool will vary depending upon the type of Mortgage Loans included
therein. Each Prospectus Supplement will contain information with respect to the
type and maturities of the Mortgage Loans in the related Mortgage Pool. Unless
otherwise specified in the related Prospectus Supplement, Mortgage Loans may be
prepaid without penalty in full or in part at any time, although a prepayment
fee or penalty may be imposed in connection therewith.
The rate of prepayments with respect to mortgage loans has fluctuated
significantly in recent years. In general, if prevailing rates fall below the
Mortgage Rates borne by the Mortgage Loans, such Mortgage Loans are likely to be
subject to higher prepayment rates than if prevailing interest rates remain at
or above such Mortgage Rates. Conversely, if prevailing interest rates rise
appreciably above the Mortgage Rates borne by the Mortgage Loans, such Mortgage
Loans are likely to experience a lower prepayment rate than if prevailing rates
remain at or below such Mortgage Rates. However, there can be no assurance that
such will be the case.
Prepayments are influenced by a variety of economic, geographical,
social, tax, legal and additional factors. Prepayments on Mortgage Loans may
also result from changes in mortgagors' housing needs, job transfers,
unemployment, Mortgagors' net equity in the related Mortgaged Properties, the
enforcement of due-on-sale clauses and other servicing decisions. Adjustable
rate mortgage loans, bi-weekly mortgage loans,
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graduated payment mortgage loans, growing equity mortgage loans, reverse
mortgage loans, buy-down mortgage loans and mortgage loans with other
characteristics may experience a rate of principal prepayments which is
different from that of fixed rate, monthly pay, fully amortizing mortgage loans.
Generally, mortgage loans secured by junior liens have smaller average
principal balances than senior or first mortgage loans and are not viewed by
borrowers as permanent financing. Accordingly, such mortgage loans may
experience a higher rate of prepayment than mortgage loans which represent first
liens. In addition, any future limitations on the right of borrowers to deduct
interest payments on second mortgage loans for federal income tax purposes may
result in a higher rate of prepayment of such mortgage loans. The obligation of
the Servicer to enforce due-on-sale provisions of the mortgage loans may also
increase prepayments. The prepayment experience of the Mortgage Pools may be
affected by a wide variety of factors, including general and local economic
conditions, mortgage market interest rates, the availability of alternative
financing and homeowner mobility. The Originator is unaware of any reliable
studies that would accurately project the prepayment risks associated with the
Mortgage Loans.
All of the Mortgage Loans will generally contain due-on-sale provisions
permitting the mortgagee to accelerate the maturity of the Mortgage Loan upon
sale or certain transfers by the Mortgagor of the underlying Mortgaged Property;
any Mortgage Loans not containing such provisions will be noted in the related
Prospectus Supplement. The Servicer generally will enforce any due-on-sale or
due-on-encumbrance clause, to the extent it has knowledge of the conveyance or
further encumbrance or the proposed conveyance or proposed further encumbrance
of the Mortgaged Property and reasonably believes that it is entitled to do so
under applicable law; provided, however, that the Servicer will not take any
enforcement action that would materially increase the risk of default or
delinquency on, or materially decrease the security for, such Mortgage Loan. See
"The Pooling and Servicing Agreement -- Enforcement of Due-on-Sale Clauses"
herein.
The weighted average lives of Securities will also be affected by the
amount and timing of delinquencies and defaults on the Mortgage Loans and the
liquidations of defaulted Mortgage Loans. Delinquencies and defaults will
generally slow the rate of payment of principal to the Securityholders.
However, this effect will be offset to the extent that lump sum recoveries on
defaulted Mortgage Loans and foreclosed Mortgaged Properties result in principal
payments on the Mortgage Loans faster than otherwise scheduled.
When a full prepayment occurs on a Mortgage Loan, the Mortgagor will be
charged interest on the principal amount of the Mortgage Loan so prepaid only
for the number of days in the month actually elapsed up to the date of the
prepayment rather than for a full month. Interest shortfalls also could result
from the application of the Relief Act, as described under "Certain Legal
Aspects of the Mortgage Loans -- Soldiers' and Sailors' Civil Relief Act"
herein. In the event that less than 30 days' interest is collected on a Mortgage
Loan during a Collection Period, the Servicer or any Sub-Servicer, if
applicable, will generally be obligated to make Compensating Interest Payments
with respect thereto, but only to the extent of the aggregate Servicing Fee for
the related Distribution Date. (If the Servicer is not required to remit such
amounts, the Prospectus Supplement will describe the Servicer's obligations, if
any, with respect to principal prepayments.) To the extent such shortfalls
exceed the amount of Compensating Interest Payments that the Servicer or any
Sub-Servicer is obligated to make, the yield on the Securities could be
adversely affected. Partial prepayments in a given month may be applied to the
outstanding principal balances of the Mortgage Loans so prepaid on the first day
of the month of receipt or the month following receipt. In the latter case,
partial prepayments will not reduce the amount of interest passed through in
such month.
Under certain circumstances, the Originator, the Servicer,the
Depositor, the holders of REMIC Residual Certificates or certain other entities
specified in the related Prospectus Supplement may have the option to purchase
the Mortgage Loans and other assets of a Trust, thereby effecting early
retirement of the related Series of Certificates, subject to the principal
balance of the related Mortgage Loans being less than the percentage specified
in the related Prospectus Supplement of the aggregate principal balance of the
Mortgage Loans at the Cut-off Date for the related Series. Typically, the
Originator, the Servicer, the Depositor or such other entity will cause the
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retirement of a Series of Certificates at the point at which servicing of the
remaining relatively small pool of Mortgage Loans becomes inefficient. See "The
Pooling and Servicing Agreement -- Termination; Optional Termination" herein.
Under certain circumstances, a Series of Notes may be (i) redeemed at the
request of holders of such Notes; (ii) redeemed at the option of the related
Depositor or another party specified in the Prospectus Supplement relating to
such Series of Notes; or (iii) subject to special redemption under certain
circumstances. The circumstances and terms under which the Notes of a Series may
be redeemed will be described in the related Prospectus Supplement. See "The
Indenture -- Redemption of Notes" herein.
The effective yield to Securityholders will be slightly lower than
the yield otherwise produced by the applicable Interest Rate and purchase
price, because while interest generally will accrue on the Securities from the
first day of each month, the distribution of such interest will not be made
earlier than a specified date in the month following the month of accrual.
The timing of payments on the Mortgage Loans may significantly affect
an investor's yield. In general, the earlier a prepayment of principal on the
Mortgage Loans, the greater will be the effect on an investor's yield to
maturity. As a result, the effect on an investor's yield of principal
prepayments occurring at a rate faster (or slower) than the rate anticipated by
the investor during the period immediately following the issuance of the
Securities will not be offset by a subsequent like reduction (or increase) in
the rate of principal payments.
In addition, if so specified in the related Prospectus Supplement,
prepayments may result from amounts on deposit, if any, in the Pre-Funding
Account at the end of the Funding Period being applied to the payment of
principal of the Securities.
The Prospectus Supplement relating to a Series of Securities may
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments) on the yield, weighted average lives and
maturities of such Securities, including the effect of prepayments and
allocation of realized losses on the Mortgage Loans as they relate to specific
Classes of Securities. Factors other than those identified herein and in the
related Prospectus Supplement could significantly affect principal prepayments
at any time and over the lives of the Securities. The relative combination of
the various factors affecting prepayment may also vary from time to time. There
can be no assurance as to the rate of payment of principal of the Mortgage Loans
at any time or over the lives of the Securities.
The Originator has limited historical experience with mortgage loan
originations and servicing and its portfolio of serviced mortgage loans is
relatively unseasoned. The Company believes that its current information with
respect to prepayments on the mortgage loans it has serviced is not indicative
of the prepayments which may be made on its current portfolio of serviced
mortgage loans and therefore provides no information about the
prepayment experience of the mortgage loans which it services.
THE POOLING AND SERVICING AGREEMENT
Set forth below is a summary of the material provisions of each Pooling
and Servicing Agreement that are not described elsewhere in this Prospectus. The
summary does not purport to describe all provisions of each Pooling and
Servicing Agreement and is subject to, and qualified in its entirety by
reference to, the provisions of each Pooling and Servicing Agreement. Where
provisions or terms used in a particular Pooling and Servicing Agreement are
different than as described herein, a description of such provisions or terms
will be included in the related Prospectus Supplement.
The Mortgage Loans to be included in a Mortgage Pool for a Series of
Notes will be assigned to the Trustee pursuant to provisions included in the
related Indenture that are substantially the same as, and the obligations of the
Depositor and the Trustee with respect to the Mortgage Loans so conveyed will
be substantially similar to, those described under "-- Assignment of Mortgage
Loans" below. In addition, the Mortgage Loans included in a Mortgage Pool for a
Series of Notes will be serviced pursuant to the terms of a Servicing Agreement
and any such Servicing Agreement will contain provisions governing the
servicing of such Mortgage Loans that are substantially similar to the
provisions included in each Pooling and Servicing Agreement relating to
servicing and collection procedures with respect to the related Mortgage Loans
as described below. See "The Indenture -- General" herein.
ASSIGNMENT OF THE MORTGAGE LOANS
Assignment of the Mortgage Loans. At the closing date (each, a "Closing
Date") for a Series of Certificates, the Originator will cause the Mortgage
Loans comprising the related Trust to be sold and assigned directly, or
indirectly through the related Depositor and Transferor, if any, to the Trustee,
without recourse, together with all principal and interest received by or on
behalf of the Originator or Transferor, if applicable, on or with respect to
such Mortgage Loans on or after the Cut-off Date, other than principal and
interest due before the Cut-off Date. The Trustee will, concurrently with such
assignment, deliver the Certificates to the Depositor in exchange for the
Mortgage Loans. In no event will any FHA Loan be transferred or delivered in
violation of Title I of the rules and regulations promulgated thereunder.
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Each Mortgage Loan assigned to the Trustee will be identified in a schedule
appearing as an exhibit to the related Pooling and Servicing Agreement (a "Loan
Schedule"). The Loan Schedule will include information as to the outstanding
principal balance of each Mortgage Loan after application of payments due on the
Cut-off Date, as well as information regarding the Mortgage Rate, the maturity
date of the Mortgage Loan, the Combined Loan-to-Value Ratio at origination and
certain other information.
In addition, to the extent specified in the related Prospectus Supplement,
the net proceeds received from the sale of the Certificates of a given Series
will be applied to the deposit of the Pre-Funded Amount into the Pre-Funding
Account. The aggregate principal balance of additional Mortgage Loans to be
purchased for the related Trust generally will be equal to the Pre-Funded Amount
on the date of the issuance of the related Series. On each applicable purchase
date, the Originator will sell directly, or indirectly through the related
Depositor and Transferor, if any, to the related Trust, without recourse, the
entire interest of the Originator in the additional Mortgage Loans identified in
a Loan Schedule attached to a supplemental conveyance relating to such
additional Mortgage Loans executed on such date by the Originator. In connection
with each purchase of additional Mortgage Loans, the related Trust will be
required to pay directly, or indirectly through the related Depositor, to the
Depositor a cash purchase price equal to the outstanding principal balance of
each additional Mortgage Loan as of its related Cut-off Date. The purchase price
will be withdrawn from the Pre-Funding Account and paid so long as the
representations and warranties set forth in "--Representations and Warranties"
below apply to each additional Mortgage Loan to be conveyed, and the conditions
set forth in the paragraph below and in the related Agreement are satisfied.
Any conveyance of additional Mortgage Loans will be subject to the
following conditions, among others specified in the related Prospectus
Supplement: (i) each such additional Mortgage Loan must satisfy the eligibility
criteria specified in the preceding paragraph as of its applicable Cut-off Date
and such additional criteria as may be specified in the related Prospectus
Supplement; (ii) if and to the extent specified in the relate Prospectus
Supplement, the third-party credit enhancement provider, if any, shall have
approved the transfer of such additional Mortgage Loans to the related Trust;
(iii) the Originator or Transferor, as applicable, will not have selected such
additional Mortgage Loans in a manner that it believes is adverse to the
interests of Certificateholders; (iv) the Originator or Transferor, as
applicable, will deliver certain opinions of counsel to the Trustee(s) and the
Rating Agencies with respect to the validity of the conveyance of such
additional Mortgage Loans; and (v) with respect to any Mortgage Loan that is
also an FHA Loan, each FHA Loan will comply with, in all respects, Title I and
the rules and regulations promulgated thereunder.
In connection with the sale, the Originator or Transferor, as applicable,
will be required to deliver or cause to be delivered directly, or indirectly
through the related Depositor, to the Trustee certain specified items
(collectively, with respect to each Mortgage Loan, the "Mortgage File"). Each
Mortgage File will generally be required to include:
(i) the original Mortgage Note, with all intervening endorsements
sufficient to show a complete chain of endorsement to the Originator or
Transferor, as applicable, endorsed by the Originator or the Transferor and the
Depositor, without recourse, to the order of the Trustee or in blank;
(ii) the original Mortgage with evidence of recording indicated
thereon;
(iii) an assignment of the Mortgage in recordable form;
(iv) originals of all assumption, modification and substitution
agreements, if any, in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or Mortgage Note
have been assumed;
(v) originals of all intervening mortgage assignments with evidence of
recording indicated thereon sufficient to show a complete chain of assignment
from the originator of the Mortgage Loan to the Originator or Transferor, as
applicable; and
(vi) except with respect to FHA Loans, the original lender's title
insurance policy or marked-up title report issued on the date of the origination
of such Mortgage Loan, and (2) with respect to FHA Loans, the title report.
Any variation in the requirements for a Mortgage File will be noted in the
related Prospectus Supplement.
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The Originator (or Transferor, if applicable) or the Trustee will promptly
cause the assignments of the related Mortgage Loans to be recorded in the
appropriate public office for real property records, except in states in which,
in the opinion of counsel acceptable to the Trustee, such recording is not
required to protect the trustee's interest in such loans against the claim of
any subsequent transferee or any successor to or creditor of the Originator or
the originator of such Mortgage Loans.
If the Originator (or Transferor, if applicable) cannot deliver an original
Mortgage or mortgage assignment with evidence of recording thereon on the
Closing Date because of a delay caused by the public recording office where such
original Mortgage or mortgage assignment has been delivered for recordation or
because such original Mortgage is lost, the Originator or Transferor and the
related Depositor shall deliver to the Trustee an Officer's Certificate, with a
photocopy of such Mortgage attached thereto, stating that such original Mortgage
or mortgage assignment has been delivered to the appropriate public recording
official for recordation or that such original Mortgage is lost, as the case may
be. The Originator or Transferor, if applicable, and the related Depositor
shall promptly deliver to the Trustee such original Mortgage or mortgage
assignment with evidence of recording indicated thereon upon receipt thereof
from the public recording official. If the Originator (or Transferor, if
applicable) within 12 months from the Closing Date shall not have received such
original Mortgage or mortgage assignment from the public recording official, it
shall obtain, and deliver to the Trustee within 12 months from the Closing Date,
a copy of such original Mortgage or mortgage assignment certified by such public
recording official to be a true and complete copy of such original Mortgage or
mortgage assignment as recorded by such public recording office.
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the Mortgage Loans as agent of the Trustee.
Review of the Mortgage File. The Trustee will agree, for the benefit of
the Securityholders, to review each Mortgage File and the specified items
delivered by or on behalf of the Originator within 45 days after the Closing
Date or applicable purchase date, to determine if the documents described in
clauses (i) through (vi) above have been executed and received, and that such
documents relate to the Mortgage Loans in the related Loan Schedule. The Trustee
is under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they are other
than what they purport to be on their face, nor is the Trustee under any duty to
determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage Loan.
If within such 45-day period the Trustee finds any document constituting a
part of a Mortgage File is not properly executed, has not been received (except
any original recorded Mortgage or mortgage assignment as discussed above), or is
unrelated to the Mortgage Loans identified in the related Loan Schedule, or that
any Mortgage Loan does not conform in a material respect to the description
thereof as set forth in the related Loan Schedule, the Trustee will be required
to promptly notify the Originator or Transferor, if applicable, and the related
Depositor of any defect. The Originator or Transferor, if applicable, will use
reasonable efforts to remedy a material defect in a document constituting part
of a Mortgage File within 60 days after the Trustee's notice. Thereafter, the
Trustee shall also certify that it has received all of the documents referred to
in clauses (i) through (vi) and that all corrections or curative actions
required to be taken by the Originator or Transferor, if applicable, and the
related Depositor within the 60-day period have been completed or effected, or
that the related Mortgage Loans will be repurchased or substituted, as specified
below.
Repurchase or Substitution of Mortgage Loans. If, within 60 days after
the Trustee's notice of defect, the Originator (or Transferor, if applicable)
has not remedied the defect and the defect materially and adversely affects the
interest of the Securityholders in the related Mortgage Loan, the Originator or
Transferor will generally be required directly, or indirectly through the
related Depositor, prior to the next Distribution Date, at its option, (i) to
substitute in lieu of such Mortgage Loan another Mortgage Loan of like kind (a
"Qualified Replacement Mortgage Loan") or (ii) to repurchase such Mortgage Loan
at a price equal to its principal balance together with one month's interest at
the Mortgage Rate, less any payments received during the related Collection
Period ("Loan Purchase Price").
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If as provided above, the Originator or Transferor, if applicable, rather
than repurchase the Mortgage Loan, removes a Mortgage Loan (a "Deleted Mortgage
Loan") from the related Trust and substitutes in its place a Qualified
Replacement Mortgage Loan, such substitution must be effected within 90 days of
the date of the initial issuance of the Certificates of a Series with respect to
which no REMIC election is made. With respect to a Trust for which a REMIC
election is to be made, except as otherwise provided in the related Prospectus
Supplement, such substitution of a defective Mortgage Loan must be effected
within two-years of the date of the initial issuance of the Securities, and may
not be made if such substitution would cause the Trust to not qualify as a REMIC
or result in a prohibited transaction tax under the Code. Except as otherwise
provided in the related Prospectus Supplement, any Qualified Replacement
Mortgage Loan generally will, on the date of substitution, (i) have an
outstanding principal balance, after deduction of all scheduled payments due in
the month of substitution, not in excess of and not substantially less than the
outstanding principal balance of the Deleted Mortgage Loan (the amount of any
shortfall to be paid to the related Trust in the month of substitution for
distribution to the Securityholders as a reduction of principal), (ii) have a
Mortgage Rate neither one percentage point less than nor one percentage point
greater than the Mortgage Rate of the Deleted Mortgage Loan as of the date of
substitution, (iii) have a remaining term to maturity neither one year earlier
than nor one year later than that of the Deleted Mortgage Loan, (iv) comply with
all of the representations and warranties set forth in the related Pooling and
Servicing Agreement as of the date of substitution, and (v) with respect to any
Qualified Replacement Mortgage Loan that is an FHA Loan, comply with Title I and
the rules and regulations promulgated thereunder. The related Pooling and
Servicing Agreement may include additional provisions relating to meeting the
foregoing requirements on an aggregate basis where a number of substitutions
occur contemporaneously.
Representations and Warranties. The Originator or Transferor, if
applicable, will make representations and warranties in respect of the Mortgage
Loans sold by the Originator or Transferor and evidenced by a Series of
Certificates. Such representations and warranties generally include, among other
things: (i) that with respect to Mortgage Loans other than Home Improvement
Loans, title insurance (or in the case of Mortgaged Properties located in areas
where such policies are generally not available, an attorney's certificate of
title) was in effect on the Closing Date; (ii) that the Originator or
Transferor, if applicable, had title to each such Mortgage Loan and such
Mortgage Loan was subject to no offsets, defenses or counterclaims; (iii) that
each Mortgage Loan constituted a valid first or junior lien on the Mortgaged
Property (subject only to permissible title insurance exceptions, if applicable,
and certain other exceptions described in the Pooling and Servicing Agreement)
and that the Mortgaged Property was free from damage and was in acceptable
condition; (iv) that there were no delinquent tax or assessment liens against
the Mortgaged Property at the time of origination; (v) that as of the related
Cut-off Date no required payment on a Mortgage Loan was delinquent more than the
number of days specified in the related Pooling and Servicing Agreement; and
(vi) that each Mortgage Loan was made in compliance with, and is enforceable
under, all applicable state and federal laws and regulations in all material
respects. Upon the discovery by the Originator or Transferor, if applicable, the
related Depositor or the Trustee that the representations in the applicable
Pooling and Servicing Agreement are untrue in any material respect as of the
dates specified therein, with the result that the interests of the
Securityholders in the related Mortgage Loan are materially and adversely
affected, the party discovering such breach is required to give prompt written
notice to the other parties. Upon the earliest to occur of the Originator's or
Transferor's, if applicable, discovery, its receipt of notice of breach from any
of the other parties or such time as a situation resulting from a representation
which is untrue and materially and adversely affects the interests of the
Securityholders, the Originator or Transferor is required promptly to cure such
breach in all material respects or the Originator or Transferor will, on the
Distribution Date next succeeding such discovery, receipt of notice or such
other time, repurchase, or provide a Qualified Replacement Mortgage Loan, as set
forth above. The obligation of the Originator or Transferor so to cure,
substitute or repurchase any Mortgage Loan as to which breach has not been
remedied constitutes the sole remedy available to the Securityholders or the
Trustee respecting such breach.
PAYMENTS ON THE MORTGAGE LOANS
The Pooling and Servicing Agreement will require the Servicer to
establish and maintain one or more accounts (each, a "Collection Account") at
one or more institutions meeting the requirements set forth in the related
Pooling and Servicing Agreement. Pursuant to
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the related Pooling and Servicing Agreement, the Servicer will be required to
deposit all collections (other than amounts escrowed for taxes and insurance)
related to the Mortgage Loans into the Collection Account no later than the
second business day after receipt. All funds in the Collection Accounts will be
required to be invested in instruments designated as Permitted Investments. Any
investment earnings on funds held in the Collection Accounts are for the benefit
of the Servicer.
The Servicer may make withdrawals from the Collection Account only for
the following purposes: (i) to make deposits into the Distribution Account and
the FHA Premium Account, as set forth below; (ii) to pay itself any monthly
Servicing Fees; (iii) to make any Servicing Advance or to reimburse itself for
any Servicing Advance or Monthly Advance previously made; (iv) to withdraw
amounts that have been deposited to the Collection Account in error (including,
without limitation, any overpayments in connection with repayments of Mortgage
Loans paid in full); and (v) to clear and terminate the Collection Account.
Not later than the third day prior to any Distribution Date or such
other date as may be specified in the related Prospectus Supplement (the
"Deposit Date"), the Servicer will be required to wire transfer to the Trustee
for deposit in the Distribution Account the sum (without duplication) of all
amounts on deposit in the Collection Account that constitute any portion of
Available Funds for the related Distribution Date. See "Description of
Securities -- Distribution on Securities -- Available Funds" herein. Prior
to each Distribution Date, the Servicer will be required to transfer to the
Trustee for deposit in a trust account maintained with the Trustee (the "FHA
Premium Account") the sum (without duplication) of all amounts ("FHA Premium
Amounts") received by the Servicer in respect of FHA Insurance Premiums.
INVESTMENT OF ACCOUNTS
All or a portion of any Account, including the Collection Account, may
generally be invested and reinvested in one or more Permitted Investments
bearing interest or sold at a discount. The Trustee or any affiliate thereof may
be the obligor on any investment in any Account which otherwise qualifies as a
Permitted Investment. No investment in the Collection Account may mature later
than the Deposit Date next succeeding the date of investment.
The Trustee will not in any way be held liable by reason of any
insufficiency in any Account resulting from any loss on any Permitted Investment
included therein.
All income or other gain from investments in any Account will be held
in such Account for the benefit of the Servicer and will be subject to
withdrawal from time to time as permitted by the related Pooling and Servicing
Agreement. Any loss resulting from such investments will be for the account of
the Servicer. The Servicer will be required to deposit the amount of any such
loss immediately upon the realization of such loss to the extent such loss is
not offset by other income or gain from investments in such Account and then
available for such application.
PERMITTED INVESTMENTS
Each Pooling and Servicing Agreement will define "Permitted
Investments" generally as follows:
(i) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States, the
timely payment or the guarantee of which constitutes a full faith and
credit obligation of the United States (but excluding any such
securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption).
(ii) Federal Housing Administration debentures (but excluding
any such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption).
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(iii) Federal Home Loan Mortgage Corporation senior debt
obligations, but excluding any such securities whose terms do not
provide for payment of a fixed dollar amount upon maturity or call for
redemption.
(iv) Federal National Mortgage Association senior debt
obligations, but excluding any such securities whose terms do not
provide for payment of a fixed dollar amount upon maturity or call for
redemption.
(v) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not
more than 365 days) of any domestic bank or trust company, the
short-term debt obligations of which have been assigned a minimum
rating specified in the related Pooling and Servicing Agreement by the
applicable Rating Agency.
(vi) Deposits of any bank or savings and loan association
which has combined capital, surplus and undivided profits of at least
$100,000,000 which deposits are not in excess of the applicable limits
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation.
(vii) Commercial paper (having original maturities of not more
than 180 days) assigned a minimum rating specified in the related
Pooling and Servicing Agreement by the applicable Rating Agency.
(viii) Investments in money market funds assigned a minimum
rating specified in the related Pooling and Servicing Agreement by the
applicable Rating Agency.
(ix) Other investments acceptable to the applicable Rating
Agency.
No instrument described above is permitted to evidence either the right to
receive (a) only interest with respect to obligations underlying such instrument
or (b) both principal and interest payments derived from obligations underlying
such instrument and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of the yield to
maturity at par of the underlying obligations, and no instrument described above
may be purchased at a price greater than par if such instrument may be prepaid
or called at a price less than its purchase price prior to stated maturity.
MONTHLY ADVANCES AND COMPENSATING INTEREST
In order to maintain a regular flow of scheduled interest to
Securityholders (rather than to guarantee or insure against losses), each
Pooling and Servicing Agreement will generally require that, on each
Distribution Date, the Servicer or any Sub-Servicer deposit in the Collection
Account an amount of its own funds or funds in the Collection Account which do
not constitute Available Funds for such Distribution Date (a "Monthly Advance").
Each Pooling and Servicing Agreement will provide that a Monthly Advance will
generally be equal to the sum of the interest portions of the aggregate amount
of monthly payments (net of the Servicing Fee) due on the Mortgage Loans during
the related Collection Period, but delinquent as of the close of business on the
last day of the related Collection Period, plus, with respect to each Mortgaged
Property which was acquired in foreclosure or similar action (each, an "REO
Property") during or prior to the related Collection Period and as to which
final sale did not occur during the related Collection Period, an amount equal
to the excess, if any, of interest on the outstanding principal balance of the
Mortgage Loan relating to such REO Property for the related Collection Period at
the related Mortgage Rate (net of the Servicing Fee) over the net income from
the REO Property transferred to the Distribution Account for such Distribution
Date.
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The Servicer or any Sub-Servicer, if applicable, may recover Monthly
Advances, if not recovered from the Mortgagor on whose behalf such Monthly
Advance was made, from late collections on the related Mortgage Loans, including
Liquidation Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the Mortgagor or otherwise relating to the
Mortgage Loan. To the extent the Servicer, in its good faith business judgment,
determines that any Monthly Advance will not be ultimately recoverable from late
collections, insurance proceeds, Liquidation Proceeds on the related Mortgage
Loans or otherwise, the Servicer may reimburse itself or a Sub-Servicer, if
applicable, on the next Distribution Date from Available Funds remaining in the
Distribution Account after making required payments on such Distribution Date.
With respect to each Mortgage Loan as to which a prepayment is
received, which becomes a Liquidated Mortgage Loan or is otherwise charged-off
during the Collection Period related to a Distribution Date, the Servicer will
generally be required with respect to such Distribution Date to remit to the
Trustee, from amounts otherwise payable to the Servicer as the Servicing Fee, a
certain amount, as shall be specified in the related Prospectus Supplement as
"Compensating Interest Payments." The Servicer will not be entitled to be
reimbursed from collections on the Mortgage Loans or any assets of the Trust for
any Compensating Interest Payments made. If the Servicing Fee in respect of such
Collection Period is insufficient to make the entire required Compensating
Interest Payment, the resulting shortfall will reduce the amount of interest
payable to the Securityholders on such Distribution Date and such reduction
will not be recoverable thereafter.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Servicer is generally required to foreclose upon or otherwise
comparably effect the ownership in the name of the Trustee or the Servicer,
on behalf of the Trustee, of Mortgaged Properties relating to defaulted
Mortgage Loans (and in the case of FHA Loans, for which a claim is not
submitted to the FHA) as to which no satisfactory arrangements can be made for
collection of delinquent payments and which the Originator, the related
Depositor or the Servicer has not purchased pursuant to its purchase option
described below, unless the Servicer reasonably believes that Liquidation
Proceeds with respect to such Mortgage Loan would not be increased as a result
of such foreclosure or other action, in which case the Mortgage Loan will be
charged off and will be liquidated (a "Liquidated Mortgage Loan"). If so
specified in the related Prospectus Supplement, the holders of a majority
of REMIC Residual Certificates may have the right to direct the Servicer to
foreclose upon defaulted Mortgage Loans. In connection with such foreclosure
or other conversion, the Servicer is required to exercise or use foreclosure
procedures with the same degree of care and skill as it would ordinarily
exercise or use under the circumstances in the conduct of its own affairs. Any
amounts advanced in connection with such foreclosure or other action will
constitute Servicing Advances.
If a REMIC election has been made, the Servicer will be required to
sell REO Property within 24 months of its acquisition by the Trustee, unless an
opinion of counsel experienced in federal income tax matters, addressed to the
Trustee, the Originator and the Servicer is obtained to the effect that the
holding by the Trust of such REO Property for a greater specified period will
not result in the imposition of taxes on "prohibited transactions" of the Trust
as defined in Section 860F of the Code or cause the Trust to fail to qualify as
a REMIC.
In servicing the Mortgage Loans, the Servicer is required to
determine, with respect to each defaulted Mortgage Loan, when it has recovered,
whether through trustee's sale, foreclosure sale or otherwise, all amounts, if
any, it expects to recover from or on account of such defaulted Mortgage Loan,
whereupon such Mortgage Loan shall become a Liquidated Mortgage Loan.
The Originator, the Depositor, the holders of the REMIC Residual
Certificates or the Servicer may have the right and the option under
the related Pooling and Servicing Agreement, but not the obligation, to purchase
for its own account any Mortgage Loan which becomes delinquent, in whole or in
part, as to three consecutive monthly installments or any Mortgage Loan as to
which enforcement proceedings have been brought by the Servicer. Any such
Mortgage Loan so purchased will be purchased on a Deposit Date at the Loan
Purchase Price thereof.
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GENERAL SERVICING PROCEDURES
The Servicer will service the Mortgage Loans, either directly or
through Sub-Servicers, in accordance with the provisions of each related Pooling
and Servicing Agreement and the policies and procedures customarily employed by
the Servicer in servicing other comparable mortgage loans. Servicing includes,
but is not limited to, post-origination loan processing, customer service,
remittance handling, collections and liquidations. In connection with each FHA
Loan, the Originator, the Servicer will comply at all times with the provisions
of Title I and the rules and regulations promulgated thereunder in servicing
each FHA Loan and making claims for reimbursement with respect to any FHA Loan.
Mortgage Loans on which a payment is past due are referred to the
Servicer's collection department. Delinquent accounts are automatically placed
in the appropriate collector's queue ten days after the due date of payment.
Telephone calls are initially made by the collection personnel to the obligor on
a delinquent Mortgage Loan. Dunning letters are sent if no contact is made by
telephone or if a Mortgage Loan continues to be delinquent despite payment
arrangements made over the telephone. Mortgage Loans which are delinquent for
longer periods of time are referred to outside attorneys who generally write
letters to the obligors demanding payment. Between 90 and 105 days after the due
date of payment, the Servicer decides whether to foreclose or take other action.
Foreclosure determinations are made by a committee of officers of the Servicer.
The Servicer's servicing and collection practices may change at any time as
dictated by the Servicer's business judgment and applicable law.
The Servicer, in its own name or in the name of any Sub-Servicer, will
be authorized and empowered pursuant to the related Pooling and Servicing
Agreement (i) to execute and deliver 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, (ii) to institute foreclosure proceedings or obtain a deed in lieu
of foreclosure so as to effect ownership of any Mortgaged Property in the name
of the Trustee or in its own name on behalf of the Trustee, and (iii) to hold
title in its own name to any Mortgaged Property upon such foreclosure or deed in
lieu of foreclosure on behalf of the Trustee.
During a foreclosure, any expenses incurred by the Servicer are added
to the amount owed by the Mortgagor, as permitted by applicable law. Upon
completion of the foreclosure, the property is sold to an outside bidder, or
passes to the mortgagee, in which case the Servicer will proceed to liquidate
the asset. Servicing and charge-off policies and collection practices may change
over time in accordance with the Servicer's business judgment, changes in its
real estate loan portfolio and applicable laws and regulations.
The Servicer may not assign its obligations under any Pooling and
Servicing Agreement nor resign from the obligations and duties thereby imposed
on it except by mutual consent of the Servicer, the Financial Insurer, if any,
the Trustee and the Certificateholders evidencing Voting Interests represented
by all Certificates aggregating not less than 51%, or upon the determination
that the Servicer's duties thereunder are no longer permissible under applicable
law and such incapacity cannot be cured by the Servicer. No such resignation
shall become effective until a successor has assumed that Servicer's
responsibilities and obligations in accordance with the related Pooling and
Servicing Agreement.
SUB-SERVICERS
The Servicer will be permitted under the related Pooling and Servicing
Agreement to enter into sub-servicing arrangements with certain mortgage
servicing institutions meeting the requirements of such Pooling and Servicing
Agreement to service the Mortgage Loans in a Mortgage Pool. Any material
sub-servicing arrangements, if any, will be described in the related Prospectus
Supplement, and in any case, will not relieve the Servicer of any liability it
might otherwise have, had the sub-servicing arrangement not been entered into.
Compensation for the services of the Sub-Servicer with respect to the Mortgage
Loans shall be paid by the Servicer. See "The Pooling and Servicing Agreement --
Servicing and Other Compensation and Payment of Expenses" herein.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
As compensation for its servicing activities under a Pooling and
Servicing Agreement, the Servicer will be entitled to retain the amount of the
"Servicing Fee" (as defined in the related Pooling and Servicing Agreement) with
respect to each Mortgage Loan. Additional servicing compensation in the form of
prepayment charges, release fees, bad check charges,
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assumption fees, extension fees, late payment charges, and any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Collection Account and similar items may, to the extent collected from
Mortgagors, be retained by the Servicer.
The Servicer will be required to pay all reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Properties, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of Mortgaged Properties acquired in satisfaction of the related
Mortgage Loans and (iv) the payment of any premium charged by FHA as payment for
insurance coverage of FHA Loans ("FHA Insurance Premiums") not otherwise
satisfied by FHA Premium Amounts received. Such expenditures (each, a "Servicing
Advance") may include costs of collection efforts, reappraisals, forced
placement of hazard insurance if a borrower allows his hazard policy to lapse,
legal fees in connection with foreclosure actions, advancing payments due under
any Senior Lien, if any, advancing delinquent property taxes, and upkeep and
maintenance of the Mortgaged Property if it is acquired through foreclosure and
similar types of expenses. The Servicer will be obligated to make the Servicing
Advances incurred in the performance of its servicing obligations. The Servicer
will be entitled to recover Servicing Advances, if not theretofore recovered
from the Mortgagor on whose behalf such Servicing Advance was made, from late
collections on the related Mortgage Loans, including Liquidation Proceeds,
Insurance Proceeds, FHA Payment and such other amounts. Servicing Advances will
be reimbursable to the Servicer from the sources described above out of the
funds on deposit in the Collection Account. The Servicer is not required to make
any Servicing Advance which it determines would be nonrecoverable.
In addition, a Sub-Servicer may be entitled to a monthly servicing fee
in a minimum amount set forth in the related Prospectus Supplement. The
Sub-Servicer may also be entitled to collect and retain, as part of its
servicing compensation, any late charges or prepayment penalties provided in the
Mortgage Note or related instruments. The Sub-Servicer will be reimbursed by the
Servicer for certain expenditures that it makes, generally to the same extent
that the Servicer would be reimbursed for such expenditures under the related
Pooling and Servicing Agreement. Unless specified in the related Prospectus
Supplement and Pooling and Servicing Agreement, compensation for the services of
the Sub-Servicer shall be paid by the Servicer as a general corporate obligation
of the Servicer.
MAINTENANCE OF HAZARD INSURANCE
The Servicer will generally be required to cause to be maintained fire
and hazard insurance with extended coverage customary in the area where each
Mortgaged Property is located in an amount which is at least equal to the least
of (i) the outstanding principal balance owing on the Mortgage Loan and the
related Senior Lien, if any, (ii) the full insurable value of the related
Mortgaged Property and (iii) the minimum amount required to compensate for
damage or loss on a replacement cost basis. If the Mortgaged Property is in an
area identified in the Federal Register by the Flood Emergency Management Agency
as having special flood hazards, the Servicer will generally be required to
cause to be purchased a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(a) the outstanding principal balance of the Mortgage Loan and the Senior Lien,
if any, (b) the minimum amount required to compensate for damages or loss on a
replacement cost basis, or (c) the maximum amount of insurance available under
the National Flood Protection Act of 1973, as amended, provided that such flood
insurance is available. Any variation in the insurance requirements set forth
above will be noted in the related Prospectus Supplement. The Servicer will also
be required to maintain fire, hazard and, if applicable, flood insurance on each
REO Property in the respective amounts described above, as well as liability
insurance, in each case to the extent such insurance is available. Any amounts
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the Mortgaged Property, or to be
released to the Mortgagor in accordance with customary mortgage servicing
procedures) are required to be deposited by the Servicer in the Collection
Account.
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In the event that the Servicer obtains and maintains a blanket policy
insuring against fire and hazards of extended coverage on all of the Mortgage
Loans, then, to the extent such policy names the Trustee as loss payee and
provides coverage in an amount equal to the aggregate unpaid principal balances
of the Mortgage Loans without co-insurance, and otherwise complies with the
requirements of the preceding paragraph, the Servicer will be deemed
conclusively to have satisfied its obligations with respect to fire and hazard
insurance coverage. If such blanket policy contains a deductible clause, the
Servicer will be required to pay to the Trustee the difference between the
amount that would have been payable under a policy described in the preceding
paragraph and the amount paid under the blanket policy.
ENFORCEMENT OF DUE-ON-SALE CLAUSES
When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer, on behalf of the Trustee, in performing its servicing
functions will, to the extent it has knowledge of such conveyance or prospective
conveyance, be required to enforce the rights of the Trustee as the mortgagee of
record to accelerate the maturity of the related Mortgage Loan under any
due-on-sale clause contained in the related Mortgage or Mortgage Note; provided,
however, that the Servicer will not be required to exercise any such right if
the due-on-sale clause, in the reasonable belief of the Servicer, is not
enforceable under applicable law or if such enforcement would materially
increase the risk of default or delinquency on, or materially decrease the
security for, such Mortgage Loan. In such event, the Servicer will attempt to
enter into an assumption and modification agreement with the person to whom such
property has been or is about to be conveyed, pursuant to which such person
becomes liable under the Mortgage Note and, to the extent permitted by
applicable law or the mortgage documents, the Mortgagor remains liable thereon.
The Servicer also will be authorized to enter into a substitution of liability
agreement with such person, pursuant to which the original Mortgagor is released
from liability and such person is substituted as Mortgagor and becomes liable
under the Mortgage Note. The Servicer will not enter into an assumption
agreement unless permitted by applicable law and unless such assumption
agreement would not materially increase the risk of default or delinquency on,
or materially decrease the security for, such Mortgage Loan.
VOTING
With respect to any provisions of the Pooling and Servicing Agreement
providing for the action, consent or approval of the holders of all Certificates
evidencing specified "Voting Interests" in the Trust, the holders of any Class
of Certificates will collectively be entitled to the then-applicable percentage
of such Class of Certificates of the aggregate Voting Interests represented by
all Certificates. Each Certificateholder of a Class will have a Voting Interest
equal to the product of the Voting Interest to which such Class is collectively
entitled and the Certificateholder's Percentage Interest (as such term is
defined in the related Pooling and Servicing Agreement) in such Class. With
respect to any provisions of the Pooling and Servicing Agreement providing for
action, consent or approval of a specified Class or Classes of Certificates,
each Certificateholder of such specified Class will have a Voting Interest in
such Class equal to such Certificateholder's Percentage Interest in such Class.
Any Certificate registered in the name of the Originator or any affiliate
thereof will be deemed not to be outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to take any such action, or
effect any such consent, has been obtained.
AMENDMENTS
The Trustee, the Originator, the Depositor and the Servicer may, at
any time and from time to time, without the consent of the Certificateholders,
amend the related Pooling and Servicing Agreement, for the purposes of (i)
curing any ambiguity, or correcting or supplementing any provision of such
agreement which may be inconsistent with any other provision of such agreement,
(ii) if a REMIC election has been made and if accompanied by an approving
opinion of counsel experienced in federal income tax matters, removing the
restriction against the transfer of a Residual Certificate to a Disqualified
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Organization (as such term is defined in the Code)
or (iii) complying with the requirements of the Code; provided, however, that
such action shall not, as evidenced by an opinion of counsel delivered to the
Trustee, materially and adversely affect the interests of any Certificateholder.
The related Pooling and Servicing Agreement may also be amended by the
Trustee, the Originator, the Depositor and the Servicer, at any time and from
time to time, with the prior written approval of not less than a majority of
the Percentage Interests represented by each affected Class of Certificates
then outstanding, for the purpose of adding any provisions or changing in any
manner or eliminating any of the provisions thereof or of modifying in any
manner the rights of the Certificateholders thereunder; provided, however, that
no such amendment shall (a) change in any manner the amount of, or delay the
timing of, payments which are required to be distributed to any
Certificateholder without the consent of such Certificateholder or (b) change
the aforesaid percentages of Percentage Interests which are required to consent
to any such amendments, without the consent of the Certificateholders of all
Certificates of the Class or Classes affected then outstanding. If a REMIC
election has been made with respect to the related Trust, any such amendment
must be accompanied by an opinion of tax counsel as to REMIC matters.
The Trustee will be required to furnish a copy of any such amendment to
each Certificateholder in the manner set forth in the related Pooling and
Servicing Agreement.
EVENTS OF DEFAULT
Events of default (each, a "Certificate Event of Default") under a
Pooling and Servicing Agreement will generally consist of (i) any failure by the
Servicer to deposit in the Collection Account or Distribution Account any amount
(including an amount representing a Monthly Advance or an FHA Insurance Premium)
required to be so deposited under the related Pooling and Servicing Agreement,
which failure continues unremedied for two business days after the giving of
written notice of such failure to the Servicer by the Trustee or to the Servicer
and the Trustee by Certificateholders evidencing Voting Interest represented by
all Certificates aggregating not less than 51%; (ii) any failure by the Servicer
to duly observe or perform in any material respect any other of its covenants or
agreements in the Pooling and Servicing Agreement which materially and adversely
affects the rights of Certificateholders and continues unremedied for 30 days
after the giving of written notice of such failure to the Servicer by the
Trustee or the Certificateholders evidencing Voting Interests represented by all
Certificates aggregating not less than 51%; (iii) certain events of insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings regarding the Servicer and certain actions by the Servicer
indicating its insolvency or inability to pay its obligations; (iv) the
occurrence of delinquencies and/or losses in respect of the Mortgage Loans in
excess of a level, and for a period of time, as specified in the Pooling and
Servicing Agreement and (v) if the Originator or any affiliate thereof is the
Servicer any failure of the Originator to duly observe or perform in any
material respect any of its covenants or agreements in the Pooling and Servicing
Agreement which materially and adversely affects the rights of
Certificateholders and continues unremedied for 30 days after the giving of
written notice of such failure to the Originator by the Trustee or to the
Servicer and the Trustee by Certificateholders evidencing Voting Interests
represented by all Certificates aggregating not less than 51%.
RIGHTS UPON CERTIFICATE EVENTS OF DEFAULT
The Financial Insurer, Certificateholders evidencing Voting Interests
represented by all Certificates aggregating not less than 51% and/or the
Trustee, as specified in the related Prospectus Supplement, may terminate all of
the rights and obligations of the Servicer under the related Pooling and
Servicing Agreement, whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under the related
Pooling and Servicing Agreement and will be entitled to such compensation as the
Servicer would have been entitled to under the related Pooling and Servicing
Agreement. In the event that the Trustee would be obligated to succeed the
Servicer but is unwilling or legally unable to act, it may appoint, or petition
a court of competent jurisdiction for the appointment of, any established
housing and home finance institution or any institution that regularly services
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mortgage loans that is currently servicing a mortgage loan portfolio that has
all licenses, permits and approvals required by applicable law and a net worth
of at least $10,000,000 (and, in the case of FHA Loans, is a Title I approved
lender pursuant to the FHA Regulations) to act as successor to the Servicer
under the related Pooling and Servicing Agreement, provided that the appointment
of any such successor Servicer will not result in the qualification, reduction
or withdrawal of the rating assigned to the Certificates by any applicable
Rating Agency. Pending appointment of a successor Servicer, unless the Trustee
is prohibited by law from so acting, the Trustee shall be obligated to act as
Servicer. The Trustee and such successor Servicer may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
described above.
No Certificateholder, solely by virtue of its status as a
Certificateholder, will have any right under the related Pooling and Servicing
Agreement to institute any action, suit or proceeding with respect to the
related Pooling and Servicing Agreement unless such Certificateholder previously
has given to the Trustee written notice of default and unless Certificateholders
evidencing Voting Interests represented by all Certificates aggregating not less
than 51% have made written request upon the Trustee to institute such action,
suit or proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity for costs, expenses and liabilities to be incurred,
and the Trustee for 60 days has neglected or refused to institute any such
action, suit or proceeding. However, the Trustee will be under no obligation to
exercise any of the rights or powers vested in it by the related Pooling and
Servicing Agreement or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
TERMINATION; OPTIONAL TERMINATION
Unless otherwise specified in the related Pooling and Servicing
Agreement, the obligations created by each Pooling and Servicing Agreement for
each Series of Certificates will terminate upon the payment to the related
Certificateholders of all amounts held in any Accounts or by the Servicer, and
required to be paid to them pursuant to such Pooling and Servicing Agreement
following the later of (i) the final payment or other liquidation of the last of
the Mortgage Loans subject thereto or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any such Mortgage Loans
remaining in the Trust and (ii) the purchase by the Originator, the Servicer,
the Depositor, or other entity specified in the related Prospectus Supplement
including, if REMIC treatment has been elected, the holder of the residual
interest in the REMIC (see "Certain Federal Income Tax Consequences" below),
from the related Trust of all of the remaining Mortgage Loans and all property
acquired in respect of such Mortgage Loans. Any such purchase of Mortgage Loans
and property acquired in respect of Mortgage Loans evidenced by a Series of
Certificates will be made at the option of the Originator, the Servicer or other
entity at a price, and in accordance with the procedures, specified in the
Prospectus Supplement, but in no event will such price be less than is
sufficient to allow payment from the Trust of the aggregate unpaid principal
amount of such Series of Certificates plus accrued and unpaid interest on the
Series to the termination date. The exercise of such right will effect early
retirement of the Certificates of that Series, but the right of the Originator,
the Servicer or other entity to so purchase is subject to the principal balance
of the related Mortgage Loans being less than the percentage specified in the
related Prospectus Supplement (which shall not be greater than 10%) of the
aggregate principal balance of such Mortgage Loans at the Cut-off Date for the
Series. The foregoing is subject to the provisions that if a REMIC election is
made with respect to a Trust, any repurchase pursuant to clause (ii) above will
be made only in connection with a "qualified liquidation" of the REMIC within
the meaning of Section 860F(g)(4) of the Code.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related Pooling and Servicing
Agreement, each Pooling and Servicing Agreement will provide that on or before a
specified date in each year, a firm of independent public accountants will
furnish a statement to the Trustee to the effect that, on the basis of certain
procedures substantially in conformance with the Uniform Single Audit Program
for Mortgage Bankers (to the extent the procedures are applicable to the
servicing obligations set forth in the Pooling and Servicing Agreement), the
servicing by or on
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behalf of the Servicer of the related Mortgage Loans, under agreements
substantially similar to each other (including the related Pooling and Servicing
Agreement), was conducted in compliance with such agreements and such procedures
have disclosed no exceptions or errors in records relating to the Mortgage Loans
subject to the related Pooling and Servicing Agreement which, in the opinion of
such firm, are material, except for such exceptions as will be referred to in
the report. Unless otherwise specified in the related Pooling and Servicing
Agreement, each Pooling and Servicing Agreement will provide that the Originator
will be required to deliver to the Trustee, on or before a specified date in
each year, an annual statement signed by an officer of the Originator to the
effect that the Servicer has fulfilled its material obligations under the
related Pooling and Servicing Agreement throughout the preceding year.
INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE ORIGINATOR
The related Pooling and Servicing Agreement will provide that neither
the Originator nor the Depositor nor any of their respective directors,
officers, employees or agents shall have any liability to the related Trust
created thereunder or to any of the Certificateholders, except with respect to
liabilities resulting from willful malfeasance, bad faith or gross negligence
or from the reckless disregard of obligations or duties arising under the
related Pooling and Servicing Agreement. The related Pooling and Servicing
Agreement will further provide that, with the exceptions stated above, the
Originator and its directors, officers, employees and agents are entitled to
be indemnified and held harmless by the related Trust against any loss,
liability or expense incurred in connection with legal actions relating to such
Pooling and Servicing Agreement or the Certificates.
THE TRUSTEE
Each Prospectus Supplement will name the Trustee under the related
Pooling and Servicing Agreement. The Trustee will be required to have and
maintain a valid FHA contract of insurance, or else appoint a co-trustee that is
so insured to act as trustee with respect to the FHA Loans. The Pooling and
Servicing Agreement will provide that the Trustee may resign at any time, upon
notice to the Originator, the Servicer, the Depositor and any Rating Agency,
in which event the Originator will be obligated to appoint a successor Trustee.
The Depositor may remove the Trustee if the Trustee ceases to be eligible to
continue as such under the Pooling and Servicing Agreement or if the Trustee
becomes insolvent. Any resignation or removal of the Trustee and appointment of
a successor Trustee will not become effective until acceptance of the
appointment by the successor. Each Pooling and Servicing Agreement will
provide that the Trustee is under no obligation to exercise any of the rights
or powers vested in it by the Pooling and Servicing Agreement at the request
or direction of any of the Certificateholders, unless such Certificateholders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction. The Trustee may execute any of the rights or
powers granted by the Pooling and Servicing Agreement or perform any duties the
reunder either directly or by or through agents or attorneys, and the Trustee
is responsible for any misconduct or negligence on the part of any agent or
attorney appointed and supervised with due care by it thereunder. Pursuant to
the Pooling and Servicing Agreement, the Trustee is not liable for any action
it takes or omits to take in good faith which it reasonably believes to be
authorized by an authorized officer of any person or within its rights or
powers under the Pooling and Servicing Agreement. The Trustee and any director,
officer, employee or agent of the Trustee may rely and will be protected in
acting or refinancing from acting in good faith in reliance on any certificate,
notice or other document of any kind prima facie properly executed and
submitted by the authorized officer of any person respecting any matters
arising under the Pooling and Servicing Agreement.
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THE INDENTURE
GENERAL
Each Series of Notes will be issued pursuant to an Indenture to be
entered into between the related Depositor and the related Trustee. The Mortgage
Loans to be included in the related Mortgage Pool will be assigned to the
Trustee pursuant to provisions included in a Sale and Servicing Agreement
entered into by the Depositor the Servicer, the Transferor, if applicable, and
the Trustee in connection with the related Indenture that are
substantially the same as, and the obligations of the Depositor and the Trustee
with respect to the Mortgage Loans so conveyed will be substantially similar to,
those described under "The Pooling and Servicing Agreement -- Assignment of
Mortgage Loans" herein. The Sales and Servicing Agreement additionally provide
that the Mortgage Loans included in the Mortgage
Pool for any Series of Notes will be serviced by the Servicer pursuant to the
provisions of such agreement, which will be substantially
similar to the servicing and collection provisions included in each Pooling and
Servicing Agreement and described under "The Pooling and Servicing Agreement"
herein. Where provisions or terms used in a particular Indenture or Sale and
Servicing Agreement differ from those provided herein, a description of such
provisions or terms will be included in the related Prospectus Supplement.
The following summaries describe certain provisions of the Indenture
not described elsewhere in this Prospectus. Where particular provisions or terms
used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summaries.
The description set forth below is subject to modification in the Prospectus
Supplement for a Series of Notes to describe the terms and provisions of the
particular Indenture relating to such Series of Notes.
MODIFICATION OF INDENTURE
With the consent of the holders of not less than 51% of the then
aggregate principal amount of the outstanding Notes of any Series issued under
an Indenture, the related Trustee and the related Depositor may execute a
supplemental indenture to add provisions to, or change in any manner or
eliminate any provisions of, the Indenture with respect to such Series or modify
(except as provided below) in any manner the rights of the holders of such
Notes.
Without the consent of the holder of each outstanding Note of such
Series affected thereby, however, no supplemental indenture shall (a) change the
final Distribution Date of any installment of principal of or interest on,
any Note of such Series or reduce the principal amount thereof, the Security
Rate specified thereon (except as provided in the related Indenture with respect
to Notes that have an adjustable Security Rate), the redemption price with
respect thereto or the earliest date on which any Notes of such Series may be
redeemed at the option of the holders of residual interests in the related
Trust, change the provisions of the Indenture relating to the application of
collections on, or the proceeds of the sale of, the collateral for the Notes to
payment of principal of or interest on the Notes or change any place of payment
where, or the coin or currency in which, any Note of such Series or any interest
thereon is payable, or impair the right to institute suit for the enforcement of
certain provisions of the Indenture regarding payment, (b) reduce the percentage
of the aggregate principal amount of the outstanding Notes of such Series, the
consent of the holders
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of which is required for any such supplemental indenture, or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture, (c) modify or alter the
provisions of the Indenture defining what constitutes an "outstanding" Note, (d)
reduce the percentage of the aggregate principal amount of the outstanding Notes
of such Series the consent of the holders of which is required to direct the
Trustee to direct the related Depositor to sell or liquidate any part of the
property subject to the lien of the Indenture in the event of a Note Event of
Default (as described below), (e) modify the provisions of the Indenture
specifying the circumstances under which such a supplemental indenture may not
change the provisions of the Indenture without the consent of the holders of
each outstanding Note of such Series affected thereby, except to increase any
percentage specified therein or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Note affected thereby, (f) permit the creation of any lien ranking
prior to or on a parity with the lien of the Indenture with respect to any
part of the property subject to a lien under the Indenture or terminate the lien
of the Indenture on any property at any time subject thereto or deprive the
holder of any Note of such Series of the security afforded by the lien of the
Indenture, or (g) modify any of the provisions of the Indenture in such manner
as to affect the calculation of the amount of any payment of interest or
principal due on any Note or to affect the rights of the holders of Notes of
such Series to the benefits of any provisions combined therein for the
redemption at the request of holders of Notes of such Series.
The related Depositor and the respective Trustee may also enter into
supplemental indentures, without obtaining the consent of Noteholders of such
Series, to cure ambiguities or make corrections, to provide for the
issuance of Notes in bearer or registered form or for the conversion of any
outstanding Notes to or from bearer form and to do such other things as would
not adversely affect the interests of the Noteholders of such Series.
NOTE EVENTS OF DEFAULT
Unless otherwise specified in the Prospectus Supplement relating to a
given Series of Notes, a "Note Event of Default" with respect to any Series of
Notes will be defined in the respective Indenture under which such Notes are
issued as: (a) unless otherwise specified in the Prospectus Supplement for such
Series, a default in the payment of principal of any Note of such Series or a
default for a specified period in the payment of any interest on any Note of
such Series; (b) a default in the observance of certain negative covenants in
the Indenture; (c) a default in the observance of any other covenant
of the Indenture, and the continuation of any such default for a specified
period after notice to the related Depositor by the Trustee or to the related
Depositor and the Trustee by the holders of at least 51% in principal amount of
the Notes of such Series then outstanding; (d) the failure of the lien of the
Indenture to constitute a valid first priority security interest in the Trust
Estate; or (e) certain events of bankruptcy, insolvency, receivership or
reorganization of the related Depositor.
RIGHTS UPON NOTE EVENTS OF DEFAULT
Unless otherwise specified in the Prospectus Supplement relating to a
given Series of Notes, in case a Note Event of Default should occur and be
continuing with respect to a Series of Notes, the Trustee may, and on request of
holders of not less than 51% in principal amount of the
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Notes of such Series then outstanding shall, declare the principal of such
Series of Notes to be due and payable. Such declaration may under certain
circumstances be rescinded by the holders of a majority in principal amount of
the Notes of such Series then outstanding.
If, following a Note Event of Default, a Series of Notes has been
declared to be due and payable, the Trustee may, in its discretion provided
that the holders of the Notes of such Series have not directed the Trustee to
sell the assets included in the related Trust), refrain from selling such assets
and continue to apply all amounts received on such assets to payments due on the
Notes of such Series in accordance with their terms. In addition, upon a Note
Event of Default the Trustee may, in its discretion (provided that, unless,
certain conditions are met, the Trustee must receive the consent of the holders
of all outstanding Notes of such Series), sell the assets included in the
related Trust for such Series, in which event the Notes of such Series will be
payable pro rata out of collections on, or proceeds from the sale of, such
assets.
Subject to certain limitations contained in the Indenture, the holders
of a majority in principal amount of the outstanding Notes of a Series shall
have the right to direct the time, method, and place of conducting any
proceeding or any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Notes of such Series; and,
prior to the declaration of the acceleration of the maturity of the Notes, the
holders of a majority in principal amount of the Notes of a Series then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in respect
of a covenant or provision of the Indenture that cannot be modified without the
waiver or consent of the holder of each outstanding Note.
LIST OF NOTEHOLDERS
Unless otherwise specified in the Prospectus Supplement relating to a
given Series of Notes, three or more holders of the Notes of any Series (each of
whom has owned a Note of such Series for at least six months) may, by written
request to the Trustee, obtain access to the list of all Noteholders of such
Series maintained by the Trustee for the purpose of communicating with other
such Noteholders with respect to their rights under the Indenture. The Trustee
may elect not to
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afford the requesting Noteholders access to the list of Noteholders if it agrees
to mail the desired communication or proxy, on behalf of the requesting
Noteholders, to all Noteholders.
ANNUAL COMPLIANCE STATEMENT
The related Depositor will be required to file annually with the
Trustee a written statement as to the fulfillment of its obligations under the
Indenture.
TRUSTEE'S ANNUAL REPORT
The Trustee will be required to mail each year to all Noteholders a
brief report relating to its eligibility and qualifications to continue as the
Trustee under the Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by the
related Depositor to it in the Trustee's individual capacity, the property and
funds physically held by the Trustee as such, any release, or release and
substitution, of property subject to the lien of the Indenture that has not been
previously reported, any additional Series of Notes not previously reported and
any action taken by it which materially affects the Notes and which has not been
previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the assets securing
the Notes of a Series upon the delivery to the Trustee for cancellation of all
of the Notes of such Series or, with certain limitations, upon deposit with the
Trustee of funds sufficient for the payment in full of all of the Notes of such
Series.
REDEMPTION OF NOTES
To the extent provided in the related Prospectus Supplement, the Notes
of any Series may be (i) redeemed at the option of the related Depositor or
another party specified in the related Prospectus Supplement; or (ii) subject to
special redemption under certain circumstances. The circumstances and terms
under which the Notes of a Series may be redeemed will be described in the
related Prospectus Supplement.
REPORTS BY TRUSTEE TO NOTEHOLDERS
On each Payment Date, the Trustee will send a report to each Noteholder
setting forth, among other things, (i) the available amount for distribution
with respect to such Payment Date, (ii) the Class Principal Balance of each
Class of Notes before and after giving effect to distributions made to the
holders on such Payment Date and the pool principal balance as of the first and
last day of the related period; (iii) the amount of principal and interest
received on the Mortgage Loans during the related period; (iv) the weighted
average maturity of the Mortgage Loans and the weighted average interest rate of
the Mortgage Loans; (v) certain performance information, including delinquency
and foreclosure information with respect to the Mortgage Loans; and (xi) the
Pre-Funding Amount at the end of the related period.
LIMITATION ON SUITS
Unless otherwise specified in the Prospectus Supplement relating to a
given Series of Notes, no Noteholder of any Series will have any right to
institute any proceedings with respect to the Indenture unless (1) such holder
has previously given written notice to the Trustee of a continuing Note Event of
Default with respect to such Series; (2) the holders of at least 25% in
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principal amount of the Notes of such Series then outstanding have made written
request to the Trustee to institute proceedings in respect of such Note Event of
Default in its own name as Trustee; (3) such holders have offered to the Trustee
reasonable indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request; (4) for a specified
period after its receipt of such notice, request and offer of indemnity the
Trustee has failed to institute any such proceedings; and (5) no direction
inconsistent with such written request has been given to the Trustee during such
period by the holders of not less than 51% in principal amount of the Notes of
such Series then outstanding.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND RELATED MATTERS
The following discussion contains summaries, which are general in
nature, of material legal matters relating to the Mortgage Loans. Because such
legal aspects are governed primarily by applicable state laws (which laws may
differ substantially from one state to another), the summaries do not purport to
be complete or to encompass the laws of all states in which Mortgaged Properties
are situated. The summaries are qualified in their entirety by reference to the
appropriate laws of the states in which Mortgage Loans may be originated.
NATURE OF MORTGAGE LOANS
The Mortgage Loans will be secured by mortgages, deeds of trust,
security deeds or deeds to secure debt, depending upon the prevailing practice
in the state in which the Mortgaged Property is located. A mortgage creates a
lien upon the real property encumbered by the mortgage, which lien is generally
not prior to the lien for real estate taxes and assessments and other charges
under governmental police powers. Priority between mortgages depends on their
terms and generally on the order of recording in the appropriate state or county
office. There are two parties to a mortgage: the mortgagor, who is the borrower
and owner of the mortgaged property, and the mortgagee, who is the lender. The
mortgagor delivers to the mortgagee a note or bond and the mortgage. Although a
deed of trust is similar to a mortgage, a deed of trust has three parties: the
borrower and property owner who is typically referred to as the trustor (similar
to a mortgagor), the lender who is referred to as the beneficiary (similar to a
mortgagee), and a third-party grantee who takes title to the encumbered property
and is referred to as the trustee. Under a deed of trust, the borrower
irrevocably grants the property to the trustee to secure payment of the
borrower's obligation to the lender. Title to the property is held in trust
until the debt is paid or until a default occurs and the lender exercises its
remedies which generally includes a power of sale. A security deed and a deed to
secure debt are special types of deeds which indicate on their face that they
are granted to secure an underlying debt. By executing a security deed or deed
to secure debt, the grantor conveys title to the subject property to the grantee
until such time as the underlying debt is repaid, as opposed to merely creating
a lien upon such property. The lender's authority to take action upon a default,
including without limitation its ability to exercise remedies, whether under a
mortgage, a deed of trust, a security deed or deed to secure debt is governed
primarily by the laws of the jurisdiction in which the encumbered property is
located.
Certain of the Mortgage Loans may be loans secured by condominium
units. The condominium units may be part of a multi-unit building or buildings,
or a group of buildings whether or not attached to each other, located on
property subject to condominium ownership. Condominium ownership is a form of
ownership of real property wherein each owner is entitled to the exclusive
ownership and possession of his or her individual condominium unit together with
a proportionate undivided interest in all parts of the condominium building
(other than the individual condominium units) and all areas or facilities, if
any, for the common use of the condominium units. The condominium unit owners
appoint or elect the condominium association to govern the affairs of the
condominium.
FORECLOSURE/REPOSSESSION
In most states that use a deed of trust to secure Mortgage Loans,
foreclosure can be accomplished by a non-judicial sale if the deed of trust
contains a specific provision which authorizes the trustee to sell the property
at public auction upon any default by the borrower under the terms of the note
or deed of trust. A deed of trust may also be judicially foreclosed. In addition
to any notice requirements contained in a deed of trust, in certain states the
trustee must record a notice of default and send a copy to the borrower-trustor,
to any person who has recorded a request for a copy of any notice of default and
notice of sale, to any successor-in-interest to the borrower-trustor, to the
beneficiary of any junior deed of trust and others given such rights by the laws
of that state. Before a non-judicial sale takes place, typically a notice of
sale must be posted in a public place and published during a specific period of
time in one or more newspapers, posted on the property, and sent to parties
having an interest of record in the property.
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. When the
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mortgagee's right to foreclosure is contested, the legal proceedings necessary
to resolve the issue can be time-consuming. After the completion of a judicial
foreclosure proceeding, the court generally issues a judgment of foreclosure and
appoints a referee or other court officer to conduct the sale of the property.
In some states, the borrower under a mortgage or a deed of trust will
have the right to reinstate the loan at any time following default until shortly
before the foreclosure sale. In such states, the borrower and other persons
holding junior liens on the encumbered real estate may, during a statutorily
prescribed reinstatement period, cure monetary defaults by paying the entire
amount in arrears plus other designated costs and expenses incurred in enforcing
the obligation. Generally, while the mortgage or related loan documents may
require the borrower to pay the costs incurred by the lender in exercising its
remedies, state law controls the amount of foreclosure expenses and costs,
including attorney's fees, which may be recovered by a lender. After the
reinstatement period has expired without the default having been cured, the
borrower or junior lienholder no longer has the right to reinstate the loan and
must pay the loan in full to prevent the scheduled foreclosure sale. If the
mortgage or deed of trust is not reinstated, a notice of sale must be posted in
a public place and, in most states, published for a specific period of time in
one or more newspapers. In addition, some state laws require that a copy of the
notice of sale be posted on the property and sent to all parties having an
interest in the real property.
Although foreclosure sales are typically public sales, frequently no
third-party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the principal amount outstanding under the
loan, accrued and unpaid interest and the expenses of foreclosure. Thereafter,
the lender will assume the burden of ownership, including liability for the
environmental condition of the property, obtaining and maintaining casualty
insurance and making such repairs as are necessary to render the property
suitable for sale, etc. In addition, the lender will typically be required to
retain the services of a real estate broker and pay the broker's commission in
connection with any subsequent sale of the property. Depending upon the
condition of the property and prevailing market conditions, the ultimate
proceeds of the sale of the property may not equal the lender's investment in
the property. In certain states, if the amount of the proceeds received by the
lender at the sale, or if the value of the real property foreclosed upon, is
less than the loan amount, the lender may be entitled to a deficiency judgment.
In many jurisdictions, courts have imposed general equitable principles
upon foreclosure, which are designed to mitigate the legal consequences to the
borrower of the borrower's defaults under the loan documents. Such equitable
limitations may, in those jurisdictions, limit the ability of the lender to
exercise its remedies for certain defaults.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the borrower and foreclosed junior lienholders are given a
statutory period in which to redeem the property from the foreclosure sale. In
some cases, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In other
states, redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory right of redemption would defeat the
title of any purchaser from the lender subsequent to foreclosure or sale under a
deed of trust. Consequently, the practical effect of the redemption right is to
force the lender to retain the property and pay the expenses of ownership until
the redemption period has run.
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ANTI-DEFICIENCY LEGISLATION, BANKRUPTCY LAWS AND OTHER LIMITATIONS
Certain states, such as California, have adopted statutory prohibitions
restricting the right of a beneficiary or mortgagee to obtain a deficiency
judgment against borrowers financing the purchase of their residence following
sale under a deed of trust or certain other foreclosure proceedings. Such
statutes provide that there can be only one action for recovery of any debt,
including an action to enforce the lien securing such debt. A deficiency
judgment is a personal judgment against the borrower for an amount equal to the
difference between the amount due to the lender and the net amount received by
the lender at the foreclosure sale. As a result of these prohibitions, it is
anticipated that in those states that have statutes restricting actions for
deficiency judgments, the Servicer may not seek deficiency judgments against
Mortgagors who are in default.
In addition to such "one action" laws limiting or prohibiting
deficiency judgments, numerous other federal and state statutory provisions,
including the federal bankruptcy laws and state laws affording relief to
debtors, may interfere with or affect the ability of the secured mortgage lender
to foreclose against collateral (including mortgaged real estate) or to obtain
or enforce a deficiency judgment. For example, with respect to federal
bankruptcy law, a court with federal bankruptcy jurisdiction may permit a debtor
to cure a monetary default in respect of a mortgage loan on the debtor's
residence by paying arrearages within a reasonable time period and reinstating
the original mortgage loan payment schedule even though the lender accelerated
the mortgage loan and final judgment of foreclosure had been entered in state
court (provided no sale of the residence had yet occurred) prior to the filing
of the debtor's petition. Some courts with federal bankruptcy jurisdiction have
approved plans, based on the particular facts of the reorganization case, that
effected the curing of a mortgage loan default by paying arrearages over a
number of years.
Courts with federal bankruptcy jurisdiction also have the power to
modify the terms of a mortgage loan secured by a lien on real property. Such
courts have allowed modifications that include reducing the amount of each
monthly payment, changing the rate of interest, altering the repayment schedule,
forgiving all or a portion of the debt and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan.
The effect of any such proceedings under the federal bankruptcy code,
including but not limited to any automatic stay, could result in considerable
delays in receiving payments on the Mortgage Loans underlying a Series of
Certificates and possible reductions in the aggregate amount of such payments.
Some states also have homestead exemption laws which would protect a principal
residence from a liquidation in bankruptcy.
Federal and local real estate tax laws provide priority to certain tax
liens over the lien of a mortgage or secured party. Numerous federal and state
consumer protection laws impose substantive requirements upon mortgage lenders
in connection with the origination, servicing and enforcement of such loans.
These laws include the federal Truth in Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes and regulations. These federal and
state laws impose specific statutory liabilities upon lenders who fail to comply
with the provisions of the law. In some cases, this liability may affect
assignees of the loans.
ENFORCEABILITY OF DUE-ON-SALE CLAUSES
Each Mortgage Loan will generally contain a due-on-sale clause which
provides that if the Mortgagor sells, transfers or conveys the Mortgaged
Property, the Mortgage Loan may be accelerated by the mortgagee. The Garn-St
Germain Depository Institutions Act of 1982 (the "Garn-St Germain Act"), subject
to certain exceptions, preempts state constitutional, statutory and case law
prohibiting the enforcement of due-on-sale clauses. As to loans secured by an
owner-occupied residence, the Garn-St Germain Act sets forth nine specific
instances in which a mortgagee covered by such Act may not exercise its rights
under a due-on-sale clause, notwithstanding the fact that a transfer of the
property
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may have occurred. The inability to enforce a due-on-sale clause may result in
transfer of the related Mortgaged Property to an uncreditworthy person, which
could increase the likelihood of a default.
PREPAYMENT CHARGES
Under certain state laws, prepayment charges may not be imposed at all
or after a certain period of time following origination of the mortgage loans
with respect to prepayments on mortgage loans secured by liens encumbering
residential properties. It is anticipated that prepayment charges may not be
imposed with respect to many of the Mortgage Loans. The absence of such
restraint on prepayment may increase the likelihood of refinancing or other
early retirement of such Mortgage Loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), generally overrides
usury limitations imposed by state constitutions, state statutes or state
regulations as they apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute, however, authorized the states to
reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision which expressly rejects an application of the federal
law. Several states have adopted laws to override Title V and reimpose interest
rate limits and/or to limit discount points or other charges. In addition, even
where Title V is not so rejected, states are authorized by the law to adopt
provisions limiting discount points or other charges on mortgage loans covered
by Title V.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
Generally, under the terms of the Relief Act, a Mortgagor who enters
military service after the origination of the related Mortgage Loan (including a
Mortgagor who is a member of the National Guard or is in reserve status at the
time of the origination of the Mortgage Loan and is later called to active duty)
may not be charged interest above an annual rate of 6% during the period of such
borrower's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that such interest rate limitation could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Mortgage Loans. Any shortfall
in interest collections resulting from the application of the Relief Act could
result in losses to the Certificateholders. In addition, the Relief Act imposes
limitations which would impair the ability of the Servicer to foreclose on an
affected Mortgage Loan during the Mortgagor's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the inability to realize upon the Mortgaged
Property in a timely fashion.
ENVIRONMENTAL CONSIDERATIONS
Real property pledged as security to a lender may be subject to
unforeseen environmental risks. Under the laws of certain states, contamination
of a property may give rise to a lien on the property to assure the payment of
the costs of clean-up. In several states such a lien has priority over the lien
of an existing mortgage against such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the United States Environmental Protection Agency (the "EPA") may
impose a lien on property where the EPA has incurred clean-up costs. However, a
CERCLA lien is subordinate to pre-existing, perfected security interests.
Under CERCLA and certain State laws, a lender may be held liable for
the costs of remediating releases or threatened releases of hazardous substances
("Cleanup Costs") at mortgaged properties. While an exception
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exists in CERCLA and most State laws for lenders holding indicia of ownership
solely for the purpose of protecting their security interest, the scope of that
exception is still unclear. Although it is unusual for a lender that has not
participated in the management of a contaminated facility to be found liable for
Cleanup Costs, it is possible that such liability could attach. Furthermore,
under CERCLA and certain State laws, a secured party taking a deed in lieu of
foreclosure or purchasing a mortgaged property at a foreclosure sale may become
liable for Cleanup Costs, regardless of whether such costs were caused by
actions of a prior owner or operator of the property. In either case, such
Cleanup Costs may be substantial. It is possible that such costs could become a
liability of a Trust and reduce the amounts otherwise distributable to the
Certificateholders.
At the time the Mortgage Loans were originated, no environmental
assessment or a very limited environmental assessment of the Mortgaged
Properties was conducted.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Gibson, Dunn & Crutcher LLP, New York, New York, the
following summary discusses the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Securities. This
summary is based on the Code, regulations, including proposed and temporary
regulations, promulgated thereunder, and judicial and administrative rulings and
decisions now in effect, all of which are subject to change either prospectively
or retroactively. Except as otherwise indicated, this summary assumes that the
Securities will be held as "capital assets" within the meaning of Section 1221
of the Code, by investors who are citizens or residents of the United States.
This summary does not address the federal income tax consequences of an
investment in Securities applicable to all categories of investors, some of
which (for example, foreign persons, tax-exempt organizations, dealers in stocks
and securities, banks and insurance companies) may be subject to special rules.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF SECURITIES.
GENERAL
Different federal income tax consequences will obtain for holders of
Certificates and of Notes. The federal income tax consequences to
Certificateholders will vary depending upon whether an election is made to treat
the Trust (or certain assets of the Trust) relating to a particular Series of
Certificates as a REMIC under the Code. The Prospectus Supplement for each
Series of Certificates will specify whether a REMIC election will be made or
whether the Trust will be treated as a "grantor trust" (as described below).
This summary will discuss first the federal income tax consequences to
Certificateholders if the Trust (or certain assets of the Trust) in which they
hold Certificates elects to be treated as a REMIC and then will discuss such
consequences if no such election is made. Thereafter, the federal income tax
consequences to holders of Notes will be discussed.
TAX STATUS AS A REMIC
The Trust relating to a Series of Certificates may elect to be treated
(or to treat a certain portion of its assets) as a REMIC. (References to a
"REMIC Trust" are to a Trust or the portion of the assets of a Trust in respect
of which a REMIC election is made.) Qualification as a REMIC requires ongoing
compliance with certain conditions. Although a REMIC is not generally subject to
federal income tax (see, however, "Prohibited Transactions and Other Taxes"), if
a Trust with respect to which a REMIC election is made fails to comply with one
or more of the ongoing requirements of the Code for REMIC status during any
taxable year, including the implementation of certain restrictions on the
purchase and transfer of the residual interest in the REMIC as described below
under "Residual Certificates," the Code provides that such Trust will not be
treated as a REMIC for such year and thereafter. In the event a REMIC-electing
Trust is not treated as a REMIC, the classification of the Trust for federal
income tax purposes is uncertain, although it is likely that, if such Trust has
two classes of Regular Certificates outstanding, such Trust would be treated as
a taxable mortgage pool (a "TMP") for federal income tax purposes. If the Trust
were treated as a TMP, any residual income of the Trust
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(i.e., income from the Mortgage Loans less interest and original issue discount
expense allocable to such of the Regular Certificates as are treated as debt
thereof and any administrative expenses of the Trust) would be subject to
corporate income tax at the Trust level. See "Grantor Trust Status -- Taxable
Mortgage Pools." On the other hand, an entity with multiple classes of ownership
interests may be treated as a separate association taxable as a corporation
under Treasury Regulations, and certain of the Regular Certificates may be
treated as equity interests therein, with the result that amounts paid on such
recharacterized interests would not be deductible in calculating the
entity-level income of the Trust. Under yet another possible classification, an
entity with only one class of Regular Certificates outstanding may be treated as
a grantor trust, with the consequences described below. See "Grantor Trust
Status -- Grantor Trust with a Single Class of Senior Certificates."
Although the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of REMIC
status (if steps are taken to correct the conditions that caused
disqualification within a reasonable time after discovery of the disqualifying
event), no such regulations have been issued. Any such relief, moreover, may be
accompanied by sanctions, such as the imposition of a corporate tax on all or a
portion of the income of the REMIC for the period in which the requirements for
such status are not satisfied. Each Trust that elects REMIC status will receive
an opinion from Gibson, Dunn & Crutcher LLP, counsel to the Originator,
generally to the effect that, under then existing law and assuming compliance
with all provisions of the related Pooling and Servicing Agreement, such Trust
(or the portion of the assets of such Trust in respect of which the REMIC
election is made) will qualify as a REMIC and the related Certificates will be
considered to be regular interests or residual interests in the REMIC.
To the extent provided in the Prospectus Supplement for a Series,
holders of Regular Certificates who are entitled to payments of supplemental
interest pursuant to yield supplement agreements ("Yield Supplement Agreements")
in the event of a basis risk shortfall will be required for federal income tax
purposes to allocate the purchase price of their Regular Certificates between
their beneficial ownership interests in the related REMIC regular interests and
the related Yield Supplement Agreements. Such holders will be required to report
income realized with respect to each for federal income tax purposes taking into
account such allocation. In general, such allocation would be based on the
respective fair market values of the REMIC regular interests and the related
Yield Supplement Agreements on the date of purchase of the Regular Certificate.
No representation is or will be made as to the fair market value of the Yield
Supplement Agreements or the relative value of the REMIC regular interests and
the Yield Supplement Agreements upon initial issuance of the related REMIC
Regular Certificates or at any time thereafter. Such Certificateholders are
advised to consult their own tax advisors concerning the determination of such
fair market values. Holders of applicable classes of Regular Certificates will
be required to agree that, for federal income tax purposes, they will be treated
as owners of the respective class of regular interests and of the corresponding
Yield Supplement Agreement.
Treatment of Certain Owners
The Prospectus Supplement for each Series of Certificates will indicate
whether the Trust will make a REMIC election and whether a Class of Certificates
will be treated as a regular or residual interest in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Section 7701(a)(19)(C) of the Code (assuming that at least 95% of the Trust's
assets are "qualifying real property loans" determined as if such holder held
the assets of the Trust); (ii) Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code (assuming that at least 95% of the Trust's assets are
"real estate assets" determined as if such holder held the assets of the Trust);
and (iii) interest on Certificates will be
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considered "interest on obligations secured by mortgages on real property"
within the meaning of Section 856(c)(3)(B) of the Code (assuming that at least
95% of the Trust's assets are "real estate assets" determined as if such holder
held the assets of the Trust). If less than 95% of the REMIC's assets consist of
assets referred to in the parentheticals in clauses (i) through (iii), the
Certificates will qualify for the tax treatment described in such clauses in the
proportion that the REMIC's assets are qualifying assets for such clauses. None
of clauses (i) through (iii) will apply to the extent of any Yield Supplement
Agreement. In addition, payments on Mortgage Loans held in cash flow investments
pending distributions on the Regular Certificates will be treated as real estate
assets within the meaning of Section 856(c) of the Code (assuming that at least
95% of the Trust's assets are "real estate assets" determined as if such holder
held the assets of the Trust).
Tiered REMIC Structures
For certain Series of Certificates, two separate elections may be made
to treat each of certain designated portions of the related Trust as a REMIC
(respectively, the "Subsidiary REMIC" and the "Master REMIC") for federal income
tax purposes. Counsel to the Originator, upon the issuance of any such Series of
Certificates, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the related Pooling and Servicing Agreement
and any related agreements, the Subsidiary REMIC and the Master REMIC will each
qualify as a REMIC and the REMIC Certificates issued by the Subsidiary REMIC and
the Master REMIC, respectively, will be considered to evidence ownership of
Regular Certificates or Residual Certificates in the related REMIC within the
meaning of the REMIC provisions.
Only REMIC Certificates issued by the Master REMIC will be offered
hereunder. The Subsidiary REMIC and the Master REMIC will be treated as one
REMIC solely for purposes of determining whether the REMIC Certificates will be
(i) "loans secured by an interest in real property" under Section 7701(a)(19)(C)
of the Code, (ii) "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code, and (iii) whether the income on such Certificates is
interest described in Section 856(c)(3)(B) of the Code.
Taxation of Regular Certificates
Interest and Original Issue Discount. The following discussion is based
in part on Treasury regulations issued on January 27, 1994 and June 11, 1996
under Sections 1271 through 1273 and 1275 of the Code (the "OID Regulations"),
and in part on the provisions of the Tax Reform Act of 1986 (the "1986 Act").
The Regular Certificates will be treated as having been issued on the
"Startup Day" of the REMIC Trust, which is the day the REMIC Trust issues all of
its regular and residual interests or any day during a 10-day period during
which all such interests are issued and all transfers to the REMIC Trust occur
and that is designated by the REMIC Trust. The Prospectus Supplement for each
Series of Certificates for which a REMIC election is made will specify the
Startup Day of the REMIC.
Regular Certificates generally will be taxable to holders in the same
manner as debt instruments. Accordingly, payments of "qualified stated interest"
on the Regular Certificates will be includible in the gross income of
Certificateholders for federal income tax purposes as ordinary income.
Certificateholders, however, will be required to use the accrual method of
accounting for such payments, regardless of each Certificateholder's normal
method of accounting for federal income tax purposes. Qualified stated interest
is defined generally as any one of a series of payments on a debt instrument
that is payable unconditionally at least annually in cash or property (other
than debt instruments of the issuer) in an amount equal to the product of (i)
the outstanding principal balance of the debt instrument and (ii) a single fixed
rate, or certain variable rates, including variable rates the fluctuation in
value of which is reasonably expected to measure the
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variations in the cost of newly borrowed funds (see the discussion below under
the caption "Variable Rate Regular Certificates)."
Tax returns of the REMIC Trust will take the position that all of the
stated interest required to be paid on a current basis on the Regular
Certificates constitutes "qualified stated interest." Because the failure to pay
interest on Regular Certificates (which could occur as a result of a default in
payment of the Mortgage Loans) may not entitle the Certificateholders to
exercise remedies to compel payment (other than by exercising remedies under the
Mortgage Loans), it is possible that stated interest on such Regular
Certificates may not be considered to be "unconditionally payable" for purposes
of determining whether such payments constitute qualified stated interest. In
such event, none of the stated interest on any of such Regular Certificates
would constitute qualified stated interest, and all of the income derived from
such Regular Certificates would be treated as original issue discount ("OID"),
as described below.
Even if the position of the REMIC Trust that stated interest
constitutes qualified stated interest is accepted by the Internal Revenue
Service (the "Service"), the Regular Certificates may be issued with OID within
the meaning of Section 1273 of the Code. In general, OID, if any, on a debt
instrument will equal the excess of (i) the stated redemption price at maturity
of the debt instrument over (ii) its issue price. Under a de minimis exception,
there is no OID if the excess of the stated redemption price at maturity of a
debt obligation over its issue price is less than 0.25% of the stated redemption
price at maturity multiplied by the number of complete years to maturity (taking
into account the timing of the scheduled payments included in stated redemption
price at maturity and, presumably the "Prepayment Assumption" as defined below).
The "issue price" of a Regular Certificate generally will be the initial
offering price at which a substantial amount is sold to the public (not taking
into account sales to bond houses, brokers or similar persons acting in the
capacity of underwriters, wholesalers or placement agents). The "stated
redemption price at maturity" of a Regular Certificate generally will include
all payments to be made on such Certificate other than payments of qualified
stated interest; all interest on any Regular Certificates the stated interest on
which is not payable at least annually will be included in the stated redemption
price at maturity of such Regular Certificates.
The OID Regulations do not address certain aspects of the tax treatment
of securities, such as the Regular Certificates, on which principal is required
to be prepaid based on prepayments of the underlying assets. Accordingly, the
treatment of the Regular Certificates under the OID provisions of the Code is
uncertain. The discussion below as it relates to accrual of OID is based on the
relevant provisions of the Code and the legislative history thereto. The amount
of OID to be included in income by a holder of a debt instrument, such as a
Regular Certificate, that is subject to acceleration due to prepayments on other
debt obligations securing such instrument, is generally computed by taking into
account the anticipated rate of prepayments assumed in pricing such debt
instrument (the "Prepayment Assumption"). Under the Code, the Prepayment
Assumption must be determined in the manner prescribed by regulations which have
not yet been issued. The relevant legislative history provides, however, that
Congress intended the regulations to require that the Prepayment Assumption be
the prepayment assumption that is used in determining the initial offering price
of such debt instrument. The Prospectus Supplement for each Series of Regular
Certificates will specify the Prepayment Assumption to be used for the purpose
of determining the amount and rate of accrual of OID. No representation is made
that the Regular Certificates will prepay at the Prepayment Assumption or at any
other rate.
The holder of a Regular Certificate issued with OID must include in
gross income for federal income tax purposes as ordinary income for all days
during its taxable year during which it holds such Regular Certificate the sum
of the "daily portions" of such OID determined under a method taking into
account an economic accrual of the discount. The amount of OID that will accrue
during an accrual period (generally the period between interest payments or
compounding dates) is the excess (if any) of (i) the sum of (a) the present
value of all payments remaining to be made on the Regular Certificate as of the
close of the accrual period and (b) the payments during the accrual period of
amounts included in the stated redemption price at maturity of the Regular
Certificate, over (ii) the "adjusted issue price" of the Regular Certificate at
the beginning of the accrual period.
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The "adjusted issue price" of a Regular Certificate is the sum of its
issue price and prior accruals of OID, reduced by the total payments made with
respect to such Regular Certificate in all prior periods, other than payments of
qualified stated interest. The present value of the remaining payments is
determined on the basis of the following factors: (i) the original "yield to
maturity" of the Regular Certificate (which is the interest rate, determined on
the basis of compounding at the end of each accrual period and properly adjusted
for the length of the accrual period, that causes the present values of all
future payments on the Regular Certificate (determined in accordance with the
Prepayment Assumption) to equal its issue price on the issue date), (ii) events
which have occurred before the end of the accrual period, (iii) the Prepayment
Assumption and (iv) in the case of a Variable Rate Regular Certificate, an
assumption that the value of the index upon which such variable rate is based
remains the same as its value on the Startup Day over the entire life of such
Certificate. The effect of this method would be to increase the portions of OID
required to be included in income by a Certificateholder to take into account
prepayments with respect to the Mortgage Loans that occur at a rate that exceeds
the Prepayment Assumption.
The OID accrued during an accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in the accrual period. With respect to an initial accrual period shorter than a
full accrual period, the daily portions of OID must be determined according to
an appropriate allocation under any reasonable method.
Distributions of interest on Regular Certificates the stated interest
of which is not payable at least annually will not constitute qualified stated
interest payments; such Regular Certificates will be issued with OID.
Special rules also apply to Regular Certificates that provide for accrual of
interest when one or more Mortgage Loans are adding interest to their principal
balance, see "Deferred Interest," interest only Regular Certificates, see
"Interest Only Certificates" below and Regular Certificates with "Payment Lags,"
see "Accrued Interest Certificates" below. Further, certain additional amounts
would be includible in the gross income of certain Certificateholders if the
REMIC Trust were treated as a "single class REMIC," as described below under
"Pass-Through of Miscellaneous Itemized Deductions" below.
Acquisition Premium. The amount of OID required to be included in gross
income for federal income tax purposes by a holder that acquires a Regular
Certificate by "purchase" would be reduced as described below if such holder's
tax basis in the Offered Certificate immediately after such acquisition (i)
exceeds the adjusted issue price of the Regular Certificate and (ii) is less
than or equal to its stated redemption price at maturity (reduced by any payment
made on the Regular Certificate prior to the purchase date other than a payment
of qualified stated interest). Any such excess of adjusted basis over adjusted
issue price is considered "acquisition premium." For purposes of these rules,
the term "purchase" means any acquisition of a Regular Certificate.
The amount of the reduction in OID would be equal to the amount of the
daily portion of OID multiplied by a fraction, the numerator of which is the
amount of acquisition premium on the date of purchase and the denominator of
which is the excess of (i) the stated redemption price at maturity of the
Regular Certificate (reduced as described above) over (ii) its adjusted issue
price on the date of purchase. Under the OID Regulations, Certificateholders may
elect to amortize acquisition premium on a constant interest basis. If a
subsequent holder acquires a Regular Certificate for a price lower than the
adjusted issue price of the Regular Certificate, such Certificateholder's OID
would not exceed that of the original Certificateholder. See, however, the
discussion below under "Market Discount."
Variable Rate Regular Certificates. Regular Certificates may provide
for interest based on a variable rate. Interest on a debt obligation payable at
a variable rate is treated as qualified stated interest and not as contingent
interest if, generally, (i) the issue price of such obligation does not exceed
the amount of non-contingent principal payments by more than a specified amount
and (ii) such debt obligation provides for stated interest, paid or compounded
at least annually, at (a) one or more qualified floating rates, (b) a single
fixed rate and one or more qualified floating rates, (c) a single objective rate
or (d) a single fixed rate and a single objective rate that is a qualified
inverse floating rate. A "qualified floating rate" is any variable rate where
variations in the value of such rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which the debt instrument is denominated. Certain multiples of
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a qualified floating rate will also constitute a qualified floating rate for
purposes of the OID Regulations. Subject to certain limitations, an "objective
rate" is a rate that is not itself a qualified floating rate but which is
determined using a single fixed formula and which is based upon (i) one or more
qualified floating rates, (ii) one or more rates where each rate would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) either the
yield on or changes in the price of one or more items of actively traded
personal property or (iv) a combination of rates described in (i), (ii) and
(iii). An objective rate will qualify as a "qualified inverse floating rate" if
such rate is equal to a fixed rate minus a qualified floating rate and
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly-borrowed funds. Subject to the
discussion above under "Interest and Original Issue Discount," the variable
interest generally will be qualified stated interest to the extent it is
unconditionally payable at least annually and, to the extent successive variable
rates are used, interest is not significantly accelerated or deferred.
The amount of OID with respect to a Regular Certificate that provides
for interest at a single qualifying floating rate or a single objective rate
(or, in certain circumstances, a single fixed rate for less than one year
followed, for the remainder of the term of the debt instrument, by a qualified
floating rate or objective rate) will accrue in the manner described above under
"Original Issue Discount," by assuming generally that the index used for the
variable rate will remain fixed throughout the term of the Certificate, either
at the value thereof on the issue date or, in the case of certain objective
rates, at the reasonably expected yield thereof. Appropriate adjustments are
made for the actual variable rate. In general, any other variable rate debt
instrument not treated as bearing contingent interest will be converted into an
"equivalent" fixed rate debt instrument for purposes of determining the amount
and accrual of original issue discount thereon, generally by substituting a
fixed rate in the manner described above for any qualified floating rate or
objective rate at which interest in respect of the debt instrument is
calculated. The original issue discount rules described above would then be
applied to such "equivalent" debt instrument.
The OID Regulations do not clearly address the treatment of a Regular
Certificate the interest accrual on which is based on a weighted average of the
interest rates on underlying Mortgage Loans. Under the OID Regulations, interest
payments on such a Regular Certificate may be characterized as qualified stated
interest which is includible in gross income as ordinary income in accordance
with the manner described above in respect of qualified stated interest. The
REMIC Trust will so treat and report such payments unless a different treatment
is required by applicable law, in which event such different treatment will be
disclosed in the relevant Prospectus Supplement. However, it is also possible
that interest payments on such a Regular Certificate would be treated as
contingent interest (possibly includible in income when the payments become
fixed) or in some other manner. In such event, it is not clear under current law
how a Regular Certificate would be taxed. Such treatment may effect the timing
of income accruals on such Regular Certificates. Additionally, if some or all of
the Mortgage Loans are subject to "teaser rates" (i.e., the initial rates on the
Mortgage Loans are less than subsequent rates on the Mortgage Loans), the
interest paid on some or all of the Regular Certificates may be subject to
accrual using a constant yield method notwithstanding the fact that such
Certificates may not have been issued with "true" non-de minimis original issue
discount.
Market Discount. A purchaser of a Regular Certificate also may be
subject to the market discount provisions of the Code. Except as discussed
below, gain recognized on the disposition of a Regular Certificate that has
accrued market discount will be treated as ordinary income, and not as capital
gain, to the extent of the accrued market discount. "Market discount" in respect
of a Regular Certificate equals the excess, if any, of (i) the Regular
Certificate's stated redemption price at maturity or, in the case of a Regular
Certificate issued with OID, its adjusted issue price over (ii) the tax basis of
the Regular Certificate in the hands of the holder immediately after its
acquisition. Market discount with respect to a Regular Certificate will be
considered to be zero if the amount of such discount allocable to the Regular
Certificate is less than 0.25% of the Regular Certificate's stated redemption
price at maturity multiplied by the number of complete years in the Regular
Certificate's weighted average maturity remaining after the date of purchase. If
market discount on a Regular Certificate is considered to be zero under this
rule, the actual amount of market discount must be allocated to the
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remaining principal payments on the Regular Certificate and gain equal to such
allocated amount will be recognized when the corresponding principal payment is
made.
Unless the holder elects to include market discount in income on a
constant yield basis, the accrued market discount at any time generally would be
the amount calculated by multiplying the market discount by a fraction, the
numerator of which is the number of days the obligation has been held by the
holder and the denominator of which is the number of days after the holder's
acquisition of the obligation up to and including its maturity date. Accrued
market discount generally would be required to be recognized upon sale or
exchange of the Regular Certificate. If a holder of a Regular Certificate
acquired with market discount disposes of such Regular Certificate in any
transaction other than a sale, exchange or involuntary conversion, such holder
will be deemed to have realized an amount equal to the fair market value of the
Regular Certificate and will be required to recognize as ordinary income any
accrued market discount. In the case of obligations on which partial principal
payments may be made, a portion of each such principal payment must be included
in income for federal income tax purposes as ordinary income to the extent such
payment does not exceed the entire amount of market discount that has accrued
during the period that the obligation was held. In general terms, until
regulations are promulgated under the Code, market discount in such cases may be
treated as accruing, at the election of the Certificateholder, either (i) under
a constant yield method, taking into account the Prepayment Assumption or (ii)
in proportion to accruals of OID (or, if there is no OID, in proportion to
accruals of stated interest).
A holder of a Regular Certificate that acquires such Regular
Certificate with market discount also may be required to defer, until the
maturity date of such Regular Certificate or its earlier disposition in a
taxable transaction, the deduction of the portion of interest that the holder
paid or accrued during the taxable year on indebtedness incurred or maintained
to purchase or carry the Regular Certificate in excess of the aggregate amount
of interest (including OID) includible in such holder's gross income for the
taxable year with respect to such Regular Certificate. The amount of such net
interest expense deferred in a taxable year may not exceed the amount of market
discount accrued on the Regular Certificate for the days during the taxable year
on which the holder held the Regular Certificate and, in general, would be
deductible when such market discount is includible in income (i.e., upon
disposition or partial principal payment). The amount of any remaining deferred
deduction generally is allowed as a deduction in the taxable year in which the
Regular Certificate matures or is disposed of in a taxable transaction. In the
case of a disposition in which gain or loss is not recognized in whole or in
part, any remaining deferred deduction will be allowed to the extent of gain
recognized on the disposition, and any remaining deferred deduction will carry
over with the property received.
As an alternative to the inclusion of market discount in income on the
foregoing basis, the Certificateholder may elect to include market discount in
income currently as it accrues on all market discount instruments acquired by
such Certificateholder in that taxable year or thereafter, in which case the
interest deferral rule will not apply. This election would apply to all market
discount obligations acquired by the electing Certificateholder on or after the
first day of the first taxable year to which the election applies. The election
may be revoked only with the consent of the Service. Purchasers that acquire a
Regular Certificate with market discount should consult their tax advisors
regarding the manner in which accrued market discount is calculated and the
election to include such market discount currently in income.
Bond Premium. A purchaser of a Regular Certificate who purchases the
Regular Certificate at a cost (not including accrued qualified stated interest)
greater than its remaining stated redemption price at maturity will be
considered to have purchased the Regular Certificate with bond premium, which
such Certificateholder may elect to amortize as an offset to interest income
(and not as a separate deduction item) on a constant yield method. Such
Certificateholder would not be required to include any OID in respect of such
Regular Certificate in its gross income for federal income tax purposes. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the Regular Certificate for purposes of determining the
amount of amortizable bond premium allocable to any particular payment. Although
no regulations have been issued, the legislative history of the 1986 Act could
be read to provide that the same rules that apply to accrual of market discount
(which rules require use of a prepayment assumption in accruing market discount
with respect to a debt
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instrument without regard to whether such debt instrument has OID) also apply in
amortizing bond premium. Accordingly, although there is no authority directly on
point, it appears that the accrual of premium on a Regular Certificate should be
calculated using the Prepayment Assumption. If a Certificateholder makes an
election to amortize premium on a Regular Certificate, such election will apply
to all taxable debt instruments (including all REMIC regular interests) held by
the Certificateholder at the beginning of the taxable year in which the election
is made, and to all taxable debt instruments acquired thereafter by such
Certificateholder. Such election may be revoked only with the consent of the
Service. Purchasers that pay a premium for Regular Certificates should consult
their tax advisors regarding the election to amortize premium and the method to
be employed.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. See "Market Discount". Similarly, a Certificateholder
that makes this election for a Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such Certificateholder
owns or acquires. See "Bond Premium". The election to accrue interest, discount
and premium on a constant yield method with respect to a Certificate may be
revoked only with the consent of the Service.
Deferred Interest. Certain of the Regular Certificates may provide for
the accrual of interest when one or more Mortgage Loans are adding interest to
their principal balance by reason of negative amortization ("Deferred
Interest"). Any Deferred Interest that accrues with respect to a class of
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear under the OID Regulations whether any of the stated
interest on such Certificates will constitute qualified stated interest or
whether all or a portion of the interest payable on the Certificate must be
included in the stated redemption price at maturity of the Certificate and
accounted for as OID (which could accelerate such inclusion). The REMIC Trust
will treat and report such payments as payments of qualified stated interest,
unless a different treatment is required by applicable law, in which event such
different treatment will be disclosed in the relevant Prospectus Supplement.
Interest on Regular Certificates must in any event be accounted for under an
accrual method by the holders of such Certificates, and therefore applying the
latter analysis may result only in a slight difference in the timing of the
inclusion in income of interest on such Regular Certificates.
Interest Only Certificates. As of the date hereof, there is no
authority directly on point regarding the federal income tax consequences of the
issuance by a REMIC of an "interest-only" regular certificate. In the absence of
such authority, the Trust intends to report income from any such classes of
Regular Certificates to the Service and to holders of interest-only Regular
Certificates based on the assumption that the stated redemption price at
maturity of such Regular Certificates is equal to the sum of all payments
required to be made in respect of such Regular Certificates, determined on the
basis of the relevant Prepayment Assumption. If subsequent authority requires a
different treatment, such treatment will be disclosed in the relevant Prospectus
Supplement. As a result, such interest-only Regular Certificates will be treated
as having original issue discount. The treatment of a holder of such a Regular
Certificate in such event is unclear in the event that the calculation of
accrued OID on the Certificate results in a negative amount, although such
holder in such event might be permitted to claim a loss. Alternatively, all
payments on an interest-only Regular Certificate may be treated as payments of
qualified stated interest and the holder of such Certificate may be treated as
having purchased such Certificate at a premium in an amount equal to the excess
of the amount paid for such Certificate over the amount payable at maturity
thereon, if any. The amount of such premium generally would be amortized over
the life of such Regular Certificate taking into account the Prepayment
Assumption if the holder elects the application of the bond premium rules, see
"Bond Premium," although the application of such rules to such a Certificate in
certain circumstances is unclear.
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Accrued Interest Certificates. Certain of the Regular Certificates may
provide for payments of interest based on a period that corresponds to the
interval between Distribution Dates but that ends prior to each such
Distribution Date ("Payment Lag Certificates"). The period between the Closing
Date for Payment Lag Certificates and their first Distribution Date may or may
not exceed such interval. Purchasers of Payment Lag Certificates for which the
period between the Closing Date and the first Distribution Date does not exceed
such interval could pay upon purchase of the Regular Certificates accrued
interest in excess of the accrued interest that would be paid if the interest
paid on the Distribution Date were interest accrued from Distribution Date to
Distribution Date. If a portion of the initial purchase price of a Regular
Certificate is allocable to interest that has accrued prior to the issue date
("pre-issuance accrued interest") and the Regular Certificate provides for a
payment of stated interest on the first payment date, within one year of the
issue date, that equals or exceeds the amount of the pre-issuance accrued
interest, then the Regular Certificate's issue price may be computed by
subtracting from the issue price the amount of pre-issuance accrued interest,
rather than treating such accrued interest as an amount payable on the Regular
Certificate. No similar rule applies to debt instruments, such as the Payment
Lag Certificate described above, that are issued with pre-issuance accrued
interest in excess of the amount of such interest that is payable within one
year. Accordingly, in the case of such a Payment Lag Certificate, it is
anticipated that accrued interest will be included in the issue price and that
interest payments made on the first Distribution Date will be reported as
interest to the extent such payments represent interest for the number of days
which the initial Certificateholder would hold such Payment Lag Certificate
during the first accrual period were such Certificateholder to hold the
Certificate for the entire accrual period. Investors should consult their own
tax advisors concerning the treatment of Payment Lag Certificates for federal
income tax purposes.
Effects of Defaults and Delinquencies. Certificateholders will be
required to report interest income with respect to Regular Certificates under an
accrual method without giving effect to delays and reductions in distributions
attributable to a default or delinquency on the Mortgage Loans and without
regard to whether the Certificates bear OID, except to the extent that it can be
established that such amounts are uncollectible. Further, it is the position of
the Service that OID must be included as income as described above
notwithstanding its uncollectibility. As a result, the amount of income reported
by a Certificateholder in any period could exceed significantly the amount of
cash distributed to such Certificateholder in that period. The Certificateholder
will eventually be allowed a loss (or will be allowed to report a lesser amount
of income) to the extent that the aggregate amount of distributions on the
Certificate is reduced as a result of a Mortgage Loan default. However, the
timing and character of such losses or reductions in income are uncertain and,
accordingly, Certificateholders should consult their own tax advisors on this
point.
Tax Basis. In general, a Certificateholder's tax basis in its Regular
Certificate will be increased by any amounts of OID included in income pursuant
to the foregoing rules through the day preceding the day of disposition and
reduced by any payments received (other than payments of qualified stated
interest) and any amortized bond premium. In addition, to the extent a
Certificateholder recognizes interest income without the receipt of cash in
respect thereof, such Certificateholder will be treated as having tax basis in a
separate asset represented by such interest receivable.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those Regular Certificateholders that are
"pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the Regular Certificates. See "Pass-Through of
Miscellaneous Itemized Deductions" below.
Sale, Exchange or Redemption of Regular Certificates. The sale,
exchange, redemption or other disposition of a Regular Certificate generally
will be a taxable event for federal income tax purposes. The seller will
recognize gain or loss in an amount equal to the difference, if any, between (i)
the amount realized on the sale, exchange or redemption and (ii) the seller's
adjusted tax basis in the Regular Certificate. Similarly, a Certificateholder
who receives a payment which is part of the stated redemption price at maturity
of a Regular
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Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over his adjusted tax basis in the Regular Certificate. Subject to
the discussion above under "Market Discount" and to that in the next paragraph,
any such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if the Regular Certificate has been held for the requisite holding
period (currently more than one year). Recently enacted legislation provides
that for individual United States holders, the maximum rate of United States
federal income taxation on net long-term capital gains is 28% if the asset
disposed of was held for more than one year but not more than eighteen months,
and that the maximum such rate generally will be 20% if the asset disposed of
was held for over eighteen months.
Gain from the sale or other disposition of a Regular Certificate that
might otherwise be capital gain will be treated as ordinary income to the extent
that such gain does not exceed the excess, if any, of (i) the amount that would
have been includible in such holder's income with respect to the Regular
Certificate had the yield thereon equaled 110% of the applicable federal rate
(generally, an average yield of U.S. Treasury Obligations published monthly by
the Service) determined as of the date of purchase of such Regular Certificate
over (ii) the amount of ordinary income actually includible in such holder's
income. Further, gain from the sale of a Certificate that might otherwise be
capital gain will be treated as ordinary income if such Certificate is held
as part of a conversion transaction, as defined in Section 1258(c) of the Code,
up to the amount of interest that would have accrued on the holder's net
investment in the conversion transaction at 120% of the applicable Federal rate
in effect at the time the taxpayer entered into the transaction, reduced by any
amount treated as ordinary income with respect to any prior disposition or
other termination of a position that was held as part of such transaction.
Further, Regular Certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized
from the sale of a Regular Certificate by a bank or a thrift institution to
which such Section applies will be ordinary income or loss.
Treatment of Realized Losses. Holders of Regular Certificates that are
corporations should, in general, be allowed to deduct as an ordinary loss any
loss sustained during the taxable year on account of any such Certificates
becoming wholly or partially worthless, and, in general, holders of Certificates
that are not corporations should be allowed to deduct as a short-term capital
loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly worthless. Although the matter is unclear,
non-corporate holders of Certificates may be allowed a bad debt deduction at
such time that the principal balance of any such Certificate is reduced to
reflect realized losses resulting from any liquidated Mortgage Loans. The
Service, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect realized losses only after all Mortgage
Loans remaining in the related Trust have been liquidated or the Certificates of
the related Series have been otherwise retired. Potential investors and
Certificateholders are urged to consult their own tax advisors regarding the
appropriate timing, amount and character of any loss sustained with respect to
such Certificates, including any loss resulting from the failure to recover
previously accrued interest or discount income. Special loss rules are
applicable to banks and thrift institutions, including rules regarding reserves
for bad debts. Such taxpayers are advised to consult their tax advisors
regarding the treatment of losses on Certificates.
Information Reporting. Information relating to OID accruing during the
calendar year will be furnished annually to the Service and to
Certificateholders to whom such information is required to be furnished.
Certificateholders will be required to determine for themselves whether, by
reason of the rules described above, they are eligible to report a reduced
amount of OID for federal income tax purposes. Although OID will be reported to
each Certificateholder based on the Prepayment Assumption for the particular
Series of Regular Certificates held by such Certificateholder, no representation
is made to Certificateholders that the Mortgage Loans will be prepaid at that
rate or at any other rate
Non-U.S. Persons. Generally, payments of interest and any payment in
respect of accrued OID on the Regular Certificates to a Regular
Certificateholder who is not a U.S. Person (as defined below) not engaged in a
trade or business within the United States, will not be subject to federal
withholding tax if such Regular Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Regular Certificateholder under penalties of perjury, certifying that such
Regular Certificateholder is a foreign person and providing the name and address
of such Regular Certificateholder). If a Regular Certificateholder does not
comply with the certification requirements, payments of interest, including
payments in respect of accrued OID, to such holder may be subject to a 30%
withholding tax, subject to reduction under any applicable tax treaty.
For purposes of this discussion, a "U.S. Person" means a citizen or
resident of the United States, a corporation or a partnership organized in or
under the laws of the United States, or any political subdivision thereof, a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have authority to control all substantial decisions of the trust or
an estate, the income of which, from sources outside the United States, is
includible in gross
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income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States.
Backup Withholding
Under the Code, Certificateholders may be subject to, under certain
circumstances, "backup withholding" at the rate of 31% in respect of cash
payments of interest or OID on the Regular Certificates. This withholding
generally applies if the Certificateholder (i) fails to furnish the Principal
Paying Agent with its taxpayer identification number ("TIN"); (ii) furnishes the
Principal Paying Agent an incorrect TIN; (iii) is notified by the Service that
it has failed to report properly interest, dividends or other "reportable
payments" as defined in the Code; or (iv) under certain circumstances, fails to
provide the Principal Paying Agent or such Certificateholder's securities broker
with a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that the Certificateholder is not subject to
backup withholding. Any amount withheld from a payment to a Certificateholder
under the backup withholding rules is allowable as a credit against such
Certificateholder's federal income tax liability, provided that the required
information is furnished to the Service. Backup withholding will not apply with
respect to payments made to certain Certificateholders, including payments to
certain exempt recipients (such as corporations and exempt organizations) and to
certain nonresident alien individuals, foreign corporations or other Non-U.S.
Persons. Certificateholders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
The Trust generally must report annually to the Service and to each
Certificateholder that is a Non-U.S. Person the amount of interest and cash in
respect of OID paid to, and the amount, if any, of tax withheld in respect of
each such Certificateholder. These reporting requirements apply whether or not
withholding is reduced or eliminated by an applicable tax treaty. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which such
Certificateholder resides.
The United States 31% backup withholding tax will generally not apply
to payments of interest and cash in respect of OID that are exempt from
withholding tax as described above (provided that neither the Trust nor its
paying agent has actual knowledge that the Certificateholder is a United States
person). See "Taxation of Regular Certificate -- Non-U.S. Persons."
The payments of the proceeds from the disposition of Regular
Certificates effected by the United States office of any broker, U.S. or
foreign, will be subject to information reporting and possible backup
withholding tax unless the owner of the Regular Certificate certifies its
non-U.S. status under penalty of perjury, or otherwise establishes an exemption,
and the broker has no actual knowledge to the contrary. In the case of the
payment of proceeds from the disposition of Regular Certificates effected by a
non-U.S. office of a broker that is either a U.S. person or a "U.S. related
person," existing Treasury regulations require information reporting on the
payment, unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Person and the broker has no actual knowledge to the contrary. For
this purpose, a "U.S. related person" is (i) a "controlled foreign corporation"
for United States federal income tax purposes (generally, a foreign corporation
controlled by United States shareholders) or (ii) a foreign person 50% or more
of whose gross income from all sources for a certain period is derived from
activities that are effectively connected with the conduct of a United States
trade or business. Temporary Treasury regulations provide that reportable
payments of proceeds from the disposition of Certificates effected by a non-U.S.
office of a broker that is a U.S. person or a U.S. related person are not
subject to backup withholding tax until provided otherwise, and the preamble to
recently finalized regulations (which adopted no rule on this point) states that
such temporary regulation is to continue in effect. The payment of the proceeds
from the disposition of Certificates effected by a non-U.S. office of a non-U.S.
broker that is not a U.S. related person generally will not be subject to
information reporting and backup withholding tax.
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Residual Certificates
A REMIC will not be subject to federal income tax except with respect
to income from prohibited transactions and certain other transactions. See
"Prohibited Transactions and Other Taxes" herein. Instead, each original holder
of a Residual Certificate will report on its federal income tax return, as
ordinary income, its share of the taxable income (or loss) of the REMIC for each
day during the taxable year on which such holder owns any Residual Certificates.
An entity cannot qualify as a REMIC absent reasonable arrangements
designed to ensure that (1) residual interests in such entity are not held by
disqualified organizations and (2) information necessary to calculate the tax
due on transfers to disqualified organizations is made available by the REMIC.
The governing instruments of a Trust will contain provisions designed to ensure
the foregoing, and any transferee of a Residual Certificate must execute and
deliver an affidavit stating that neither the transferee nor any person for
whose account such transferee is acquiring the Residual Certificate is a
disqualified organization. In addition, as to the requirement that reasonable
arrangements be made to ensure that disqualified organizations do not hold a
residual interest in the REMIC, the REMIC regulations require that notice of the
prohibition be provided either through a legend on the certificate that
evidences ownership, or through a conspicuous statement in the prospectus or
other offering document used to offer the residual interest for sale. As to the
requirement that sufficient information be made available to calculate the tax
on transfers to disqualified organizations, the REMIC regulations further
require that such information also be provided to the Service.
UNLESS OTHERWISE SPECIFIED IN A RELATED PROSPECTUS SUPPLEMENT, NO
RESIDUAL CERTIFICATES WILL BE OFFERED PURSUANT TO THIS PROSPECTUS. TO THE EXTENT
RESIDUAL CERTIFICATES ARE OFFERED HEREUNDER, AT A LATER DATE, ADDITIONAL
INFORMATION RELEVANT TO THE RESIDUAL CERTIFICATES OFFERED WILL BE PROVIDED IN
THE RELATED PROSPECTUS SUPPLEMENT.
Pass-Through of Miscellaneous Itemized Deductions
As a general rule, all of the expenses of a REMIC will be taken into
account by the holder or holders of the Residual Certificates. In the case of a
"single-class REMIC", however, certain expenses will be allocated, under
Treasury regulations, among the holders of the Regular Certificates and the
holders of the Residual Certificates on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
the case of a holder of a Regular Certificate who is an individual, trust,
estate or a "pass-through interest holder" as defined in the Code, such
Certificateholder's allocable share of the non-interest expenses of the Trust
would be required to be added to its gross income, and an equivalent amount
would be treated as an investment expense. Such expenses would be deductible
only to the extent that such expenses, plus other "miscellaneous itemized
deductions" of the Certificateholder, exceed 2% of such Certificateholder's
adjusted gross income. In addition, itemized deductions of individuals with
adjusted gross incomes above particular levels (in 1997, $121,200, or $60,600 in
the case of a separate return by a married individual within the meaning of
Section 7703 of the Code, which amounts shall be adjusted for inflation in
subsequent years) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount, or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. Further, personal
exemptions are subject to phase-out above certain levels of adjusted gross
income. The reduction or disallowance of this deduction coupled with the
allocation of additional income may have a significant impact on the yield of
the Regular Certificate. Further, Certificateholders (other than corporations)
subject to the alternative minimum tax may not deduct miscellaneous itemized
deductions in determining such Certificateholders' alternative minimum taxable
income. In general terms, a single class REMIC is one that either (i) would be
classified as an
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investment trust under Treas. Reg. Section 301.7701-4(c)(i) but for its
qualification as a REMIC (treating all interests as ownership interests, even if
they would be classified as debt for federal income tax purposes) because the
existence of multiple classes of ownership is merely incidental to facilitating
a direct investment in the trust assets (the Mortgage Loans in this case), or
(ii) is substantially similar to such a trust and is structured with the
principal purpose of avoiding the allocation of investment expenses described
above required by the single class REMIC rules. Unless otherwise required, in
which event such requirement will be disclosed in the applicable Prospectus
Supplement, the expenses of the REMIC will be allocated to holders of the
related Residual Certificates in their entirety and not to holders of the
related Regular Certificates.
Prohibited Transactions and Other Taxes
A REMIC is subject to a tax at a rate equal to 100% of the net income
derived from "prohibited transactions." In general, a prohibited transaction is
the disposition of a Mortgage Loan other than pursuant to certain specified
exceptions, the receipt of investment income from a source other than a Mortgage
Loan or certain other permitted investments, or the disposition of an asset
representing a temporary investment of payments on the Mortgage Loans pending
distributions on the Residual Certificates or Regular Certificates. Further, the
assumption of a Mortgage Loan by a subsequent purchaser could cause the REMIC to
recognize gain, which would also be subject to the 100% tax on prohibited
transactions. In addition, certain contributions to a REMIC made after the
Closing Date could result in the imposition of a tax on the REMIC equal to 100%
of the value of the contributed property.
It is not anticipated that the Trust in respect of which an election to
be taxed as a REMIC is made will engage in any prohibited transactions or
receive any contributions subject to the contributions tax. However, in the
event that any such Trust is subject to any such tax, such tax would be borne
first by the Residual Certificateholders, to the extent of amounts distributable
to them, and then by the Servicer.
Liquidation and Termination
If a Trust in respect of which an election to be taxed as a REMIC is
made adopts a plan of complete liquidation, which may be accomplished by
designating in such Trust's final tax return a date on which such adoption is
deemed to occur, and sells all of its assets (other than cash) within a 90-day
period beginning on such date, such Trust will recognize no gain or loss on the
sale of its assets, provided that such Trust credits or distributes in
liquidation all of the sale proceeds plus its cash (other than the amounts
retained to meet claims) to holders of Regular and Residual Certificates within
the 90-day period.
Administrative Matters
Solely for the purpose of the administrative provisions of the Code,
the Trust in respect of which an election to be taxed as a REMIC is made will be
treated as a partnership and the Residual Certificateholders will be treated as
the partners thereof; however, under Temporary Regulations if there is at no
time during the taxable year more than one Residual Certificateholder, a REMIC
shall not be subject to the rules of Subchapter C of chapter 63 of the Code,
relating to the treatment of partnership items for a taxable year. The Trust
will file an annual tax return on Form 1066, U.S. Real Estate Mortgage
Investment Conduct Income Tax Return. In addition, certain other information
will be furnished quarterly to each Residual Certificateholder who held such
Residual Certificate on any day in the previous calendar quarter.
GRANTOR TRUST STATUS
If a REMIC election is not made in respect of a Trust (or any portion
of the assets thereof) and the Trust issues Certificates, Gibson, Dunn &
Crutcher LLP, counsel to the Originator will deliver its opinion that the Trust
will be classified as a grantor trust under subpart E, Part I of subchapter J of
Chapter 1 of subtitle A of the Code. In this case, owners of Certificates will
be treated for
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federal income tax purposes as owners of a
portion of the Trust's assets as described below, and no entity level tax will
be imposed on the Trust.
Grantor Trust with a Single Class of Senior Certificates
Characterization. The Trust may be created with one class of Senior
Certificates and one class of Subordinated Certificates (which will represent
the equity in the Trust). In this case, each Senior Certificateholder will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust represented by that Senior Certificate and will
be considered the equitable owner of a pro rata undivided interest in each of
the Mortgage Loans in the Mortgage Pool. Any amounts received by a Senior
Certificateholder in lieu of amounts due with respect to any Mortgage Loan
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
Each holder of a Senior Certificate will be required to report on its
federal income tax return its pro rata share of the entire income from the
Mortgage Loans in the Trust represented by such Senior Certificate, including
interest, original issue discount, if any, prepayment fees, assumption fees, any
gain recognized upon an assumption and late payment charges received by the
Servicer in accordance with such Senior Certificateholder's method of
accounting. Under Section 162 or 212 of the Code, each Senior Certificateholder
will be entitled to deduct its pro rata share of servicing fees, prepayment
fees, assumption fees, any loss recognized upon an assumption and late payment
charges retained by the Servicer provided that such amounts are reasonable
compensation for services rendered to the Trust. Senior Certificateholders that
are individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other miscellaneous itemized
deductions (as defined in the Code) exceed two percent of such
Certificateholder's adjusted gross income, subject to the reduction of such
deductions mentioned above under "Tax Status as a REMIC -- Pass-Through of
Miscellaneous Itemized Deductions." A Senior Certificateholder using the cash
method of accounting must take into account its pro rata share of income and
deductions as and when collected by or paid to the Servicer. A Senior
Certificateholder using an accrual method of accounting must take into account
its pro rata share of income and deductions as they become due or are paid to
the Servicer, whichever is earlier. If the Servicing Fees paid to the Servicer
were deemed to exceed reasonable servicing compensation, the amount of such
excess could be considered as a retained ownership interest by the Servicer (or
any person to whom the Servicer assigned for value all or a portion of the
Servicing Fees) in a portion of the interest payments on the Mortgage Loans. In
such event, the Mortgage Loans could be subject to the "coupon stripping" rules
of the Code discussed below. See "Grantor Trust with Multiple Classes of Senior
Certificates -- Striped Bonds and Stripped Coupons."
Treatment of Certain Owners. As to each Series of Certificates,
counsel to the Originator will have advised the Originator that:
(i) a Senior Certificate held by a thrift institution taxed
as a "domestic building and loan association" representing principal
and interest payments on Mortgage Loans will represent "loans . . .
principally secured by an interest in real property which is . . .
residential property" within the meaning of Section 7701(a)(19)(C)(v)
of the Code to the extent that the Mortgage Loans represented by that
Senior Certificate are of a type described in such Code section;
(ii) a Senior Certificate owned by a real estate investment
trust representing an interest in Mortgage Loans will be considered to
represent "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code, and interest income on the Mortgage Loans
will be considered "interest on
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obligations secured by mortgages on real property" within the meaning
of Section 856(c)(3)(B) of the Code, to the extent that the Mortgage
Loans represented by that Senior Certificate are of a type described in
such Code Section; and
(iii) a Senior Certificate owned by a REMIC will be an
"obligation . . . which is principally secured, directly or indirectly,
by an interest in real property" within the meaning of Section
860G(a)(3) of the Code.
Tax Basis. The price paid for a Senior Certificate by a holder will be
allocated to such holder's undivided interest in each Mortgage Loan based on
each Mortgage Loan's relative fair market value, so that such holder's undivided
interest in each Mortgage Loan will have its own tax basis. Such tax basis will
be reduced to the extent of payments in respect of the Mortgage Loans (other
than payments of qualified stated interest), and to the extent that amortizable
premium is applied to offset interest payments, and will be increased by the
amount of any OID required to be included in income, in each case as described
below. See "Bond Premium" and "Original Issue Discount."
Bond Premium. A Senior Certificateholder that acquires an interest in
Mortgage Loans at a premium may elect to amortize such premium under a constant
interest method, provided that such Mortgage Loan was originated after September
27, 1985. See the discussion above under the caption "Tax Status as a REMIC
- -- Taxation of Regular Certificates -- Bond Premium" for a discussion of the
election to amortize bond premium. Any amortizable bond premium in respect of
which such election is made will be treated as an offset of interest income on
such Senior Certificate. Premium allocable to a Mortgage Loan originated on or
before September 27, 1985 should be allocated among the principal payments on
the Mortgage Loan and allowed as an ordinary deduction as principal payments are
made.
Although not free from doubt, the amortization of bond premium should
be based on scheduled payments on the Mortgage Loans or using a reasonable
prepayment assumption. If a premium is not subject to amortization using a
reasonable prepayment assumption, the holder of a Senior Certificate acquired at
a premium should recognize a loss, if a Mortgage Loan prepays in full, equal to
the difference between the portion of the prepaid principal amount of the
Mortgage Loan that is allocable to the Certificate and the portion of the
adjusted basis of the Certificate that is allocable to the Mortgage Loan. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
Original Issue Discount. The Service has stated in published rulings
that, in circumstances similar to those described herein, the OID rules of the
Code will be applicable to a Senior Certificateholder's interest in those
Mortgage Loans meeting the conditions necessary for such rules to apply. Rules
regarding periodic inclusion of OID are applicable to mortgages of corporations
originated after May 27, 1969, mortgages of noncorporate mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. OID could arise by the financing of points or
other charges by the originator of the mortgages in an amount greater than the
statutory de minimis amount described above to the extent that the points are
not currently deductible under applicable Code provisions or are not for
property or for services provided by the lender.
Under the Code, the Mortgage Loans underlying the Senior Certificates
will be treated as having been issued on the date they were originated with an
amount of OID equal to the excess of each such Mortgage Loan's stated redemption
price at maturity over its issue price. The issue price of a Mortgage Loan is
generally the amount lent to the mortgagee, which may be adjusted to take into
account certain loan origination fees. The stated redemption price at maturity
of a Mortgage Loan is the sum of all payments to be made on such Mortgage Loan
other than payments that are treated as qualified stated interest payments.
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OID generally must be included in income for federal income tax
purposes as ordinary income as it accrues under a constant interest method. See
"Multiple Classes of Senior Certificates -- Accrual of Original Issue Discount"
below.
Market Discount. A purchaser of a Senior Certificate that acquires an
undivided interest in Mortgage Loans may be subject to the market discount
provisions of the Code to the extent an undivided interest in a Mortgage Loan is
considered to have been purchased at a "market discount." Except as discussed
below, gain recognized on the disposition of a debt obligation that has accrued
market discount will be treated as ordinary income, and not as capital gain, to
the extent of the market discount accrued during such holder's holding period.
Under the market discount provisions, market discount equals the excess, if any,
of (i) the portion of the stated redemption price at maturity (adjusted issue
price in the case of a Mortgage Loan issued with OID) of such Mortgage Loan
allocable to such holder's undivided interest over (ii) the tax basis of such
interest in the hands of the holder immediately after its acquisition. Market
discount with respect to a Mortgage Loan (and Senior Certificate) will be
considered to be zero if the amount allocable to the Mortgage Loan (and Senior
Certificate) is less than 0.25% of the Mortgage Loan's (or Senior Certificate's)
stated redemption price at maturity multiplied by the number of complete years
in the weighted average maturity remaining after the date of purchase. If market
discount on a Senior Certificate is considered to be zero under this rule, the
actual amount of market discount must be allocated to the remaining principal
payments on the Senior Certificate and gain equal to such allocated amount will
be recognized when the corresponding principal payment is made.
For a discussion of the rules applicable to calculating the amount of
accrued market discount, the possibility that certain interest deductions on
debt incurred to purchase or carry market discount bonds would be deferred and
the election to include market discount currently in income, see the discussion
above under the caption "Tax Status as a REMIC -- Taxation of Regular
Certificates -- Market Discount."
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a Certificate with market discount, the Certificateholder would
be deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount that
such Certificateholder acquires during the year of the election or thereafter.
See "Tax Status as a REMIC -- Taxation of Regular Certificates -- Market
Discount." Similarly, a Certificateholder that makes this election for a Senior
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See "Tax
Status as a REMIC -- Taxation of Regular Certificates --Bond Premium." The
election to accrue interest, discount and premium on a constant yield method
with respect to a Senior Certificate may only be revoked with the consent of the
Service.
Grantor Trust with Multiple Classes of Senior Certificates
Characterization. Except as discussed below, the characterization and
consequence of ownership of Senior Certificates will be as described above under
the caption "Grantor Trust with a Single Class of Senior Certificates
- --Characterization."
Stripped Bonds and Stripped Coupons. Pursuant to Section 1286 of the
Code, the separation of ownership of the right to receive some or all of the
interest payments on an obligation from ownership of the right to receive some
or all of the principal payments on such obligation results in the creation of
"stripped bonds" with respect to principal payments and "stripped coupons" with
respect to interest payments. For purposes of the OID and market discount
provisions of the Code, a stripped bond or a stripped coupon is treated as a
debt obligation issued on the date that such a stripped interest is purchased.
If a Trust is created with two classes of Senior Certificates, one class of
Senior Certificates will represent the right to receive either principal and
interest, or principal only, on all or a portion of the Mortgage Loans (the
"Stripped Bond Certificates"), and
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the second class of Senior Certificates will represent the right to some or all
of the interest on such portion (the "Stripped Coupon Certificates").
Although not entirely clear, based on recent guidance issued by the
Service, a Stripped Bond Certificate generally should be treated as a single
debt instrument (rather than a fractional interest in each of the Mortgage
Loans) issued on the day it is purchased for purposes of the calculation and
accrual of OID. Generally, if the Stripped Bond Certificate is so treated and
the discount thereon is larger than a de minimis amount (as calculated for
purposes of the OID rules), a purchaser of such a Certificate will be required
to accrue the discount under the OID rules of the Code (although if the
Certificate were treated as a fractional interest in each Mortgage Loan, a
holder could be required to make such determination on a loan-by-loan basis).
See "Tax Status as a REMIC -- Taxation of Regular Certificates -- Interest and
Original Issue Discount" herein. Notwithstanding the foregoing, a purchaser of a
Stripped Bond Certificate will be required to account for any discount on the
Certificate as market discount rather than OID if either (i) the amount of OID
with respect to the Certificate was treated as zero under the OID de minimis
rule when the Certificate was stripped or (ii) no more than 100 basis points
(including any amount of servicing fees in excess of reasonable servicing fees)
is stripped off of the Trust's Mortgage Loans. See "Grantor Trust with a Single
Class of Senior Certificates -- Market Discount" herein.
The precise tax treatment of Stripped Coupon Certificates is also
uncertain. It appears, based on one reading of the OID Regulations, that a
holder of a Stripped Coupon Certificate could take the position that such
Certificate should be treated as a single installment obligation subject to the
OID rules of the Code. As a result, all payments on a Stripped Coupon
Certificate would be included in the Certificate's stated redemption price at
maturity for purposes of calculating income on such Certificate under the OID
rules of the Code. The Trust will take such position unless a different position
is required by applicable law, in which event such position will be disclosed in
the relevant Prospectus Supplement. The Code, however, could be read to require
that OID computations be made on a loan-by-loan (or coupon-by-coupon) basis.
It is unclear under what circumstances, if any, the prepayment of
Mortgage Loans will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account in
computing yield with respect to such Senior Certificate, it appears that no loss
may be available as a result of any particular prepayment unless aggregate
prepayments occur at a rate faster than the assumed prepayment rate. However, if
such Certificate is treated as an interest in discrete Mortgage Loans, or if no
prepayment assumption is so used, then when a Mortgage Loan is prepaid, the
holder of such Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of such Certificate that is allocable to
such Mortgage Loan.
It is unclear whether, if a Stripped Coupon Certificate were treated as
an interest in discrete mortgage loans, the worthlessness of a coupon (resulting
from prepayment of the underlying Mortgage Loan) would give rise to an ordinary
or capital loss. If the coupons constitute "securities" (that is, evidences of
indebtedness issued in registered form), their worthlessness would give rise to
a capital loss. It is unclear whether the treatment of coupons as evidences of
indebtedness for purposes of the rules described above extends to other areas of
the Code. Further, guidance issued by the Service pre-dating the issuance of
such rules indicates that coupons will not be issued in registered form. If
coupons are not securities, their worthlessness in the case of a corporate
holder would give rise to an ordinary deduction. In such event, in the case of
an individual holder, their worthlessness could give rise to an ordinary loss or
to a short-term capital loss. Holders are urged to consult their own tax
advisors regarding the treatment of a worthless coupon.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates
are urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in mortgage loans of the type that
will be included in a Trust. With respect to these Code provisions,
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no specific legal authority exists regarding whether the character of the
Stripped Bond Certificates and Stripped Coupon Certificates described above, for
federal income tax purposes, will be the same as that of the underlying Mortgage
Loans. Although a stripped obligation is treated as a separate obligation for
purposes of the calculation of the amount and accrual of OID, it is not clear
that such characterization would apply with regard to these other Code sections.
Although the issue is not free from doubt, based on policy considerations, each
class of Senior Certificates should be treated in the manner described above
under the caption "Grantor Trust With a Single Class of Certificates --
Treatment of Certain Owners."
Interest and Original Issue Discount. The following discussion is based
in part on the OID Regulations. The OID Regulations generally are effective for
debt instruments issued on or after April 4, 1994, but may be relied upon as
authority with respect to debt instruments issued after December 21, 1992.
Alternatively, proposed Treasury regulations issued December 21, 1992 may be
treated as authority for debt instruments issued after December 21, 1992 and
prior to April 4, 1994, and proposed Treasury regulations issued in 1986 and
1991 (the "Proposed OID Regulations") may be treated as authority for
instruments issued before December 21, 1992. In applying these dates, the issue
date of the Mortgage Loans should be used, except in the case of Stripped Bond
Certificates or Stripped Coupon Certificates, for which the relevant date is the
date such Certificates are acquired. Further, as discussed above, it is unclear
in the case of Stripped Bond Certificates and Stripped Coupon Certificates
whether the determination of the amount and accrual of OID should be made for
each Certificate or by treating each Certificate as a fractional interest in
each of the Mortgage Loans. In the case of Stripped Bond Certificates and
Stripped Coupon Certificates, and in the absence of additional guidance, the
Trust will take the position that such determinations should be made by
treating each of such Certificates as a single debt instrument. In the event
that contrary guidance is issued, the Trust will take the position required by
such guidance and disclose such position in the relevant Prospectus Supplement.
A holder of a Senior Certificate will be required to include payments
of "qualified stated interest" in its income for federal income tax purposes in
accordance with its method of accounting for federal income tax purposes. See
the discussion above under the caption "Tax Status as a REMIC -- Taxation of
Regular Certificates -- Interest and Original Issue Discount" for a discussion
of the definition of qualified stated interest. A holder of a Senior Certificate
issued with OID will be required to include such OID in income on a constant
yield basis over the term of the Certificate. See the discussion above under the
caption "Tax Status as a REMIC -- Taxation of Regular Certificates -- Interest
and Original Issue Discount" for a discussion of the definition of OID.
Accrual of Original Issue Discount. Recently enacted legislation
provides that, for taxable years beginning after August 5, 1997, the accrual of
OID with respect to a pool of debt instruments the yield on which could be
affected by prepayments should be calculated by taking into account a reasonable
assumption regarding the prepayment of the instruments in the pool. Accordingly,
the OID accruing on the portion of a Mortgage Loan allocable to a Senior
Certificate will be calculated in generally the same fashion as described above
under the caption "Tax Status as a REMIC -- Taxation of Regular Certificates --
Interest and Original Issue Discount" i.e., by taking into account the
Prepayment Assumption. There is no directly applicable authority governing the
accrual of OID on instruments such as the Senior Certificates with respect to
taxable years beginning prior to August 5, 1997. However, to the extent
permitted by law the Trust intends to take a position consistent with the
recently enacted legislation.
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below. It is possible, however, that a different method is required, in which
event a holder would be required to include a different amount of OID in its
gross income for federal income tax purposes.
The holder of a Senior Certificate issued with OID must include in
gross income for federal income tax purposes as ordinary income for all days
during its taxable year on which it holds such Senior Certificate the sum of the
"daily portions" of such OID determined under a method taking into account an
economic accrual of the discount. Under the method the Servicer intends to use
to calculate the accrual of OID, the amount of OID that will accrue during an
accrual period (generally the period between interest payments or compounding
dates) is the excess (if any) of (i) the sum of (a) the present value of all
payments remaining to be made on the Senior Certificate as of the close of the
accrual period and (b) the payments during the accrual period of amounts
included in the stated redemption price at maturity of the Senior Certificate,
over (ii) the "adjusted issue price" of the Senior Certificate at the beginning
of the accrual period. The "stated redemption price at maturity" of a Senior
Certificate generally will include all payments to be made on such Certificate
other than payments of qualified stated interest; all interest on Senior
Certificates the stated interest on which is not payable at least annually will
be included in the stated redemption price at maturity of such Senior
Certificates. The adjusted issue price of a Senior Certificate is the sum of its
issue price and prior accruals of OID, reduced by the total payments made with
respect to such Senior Certificate in all prior periods, other than payments of
qualified stated interest. The present value of the remaining payments is
determined on the basis of three factors: (i) the original "yield to maturity"
of the Senior Certificate (which is the interest rate, determined on the basis
of compounding at the end of each accrual period and properly adjusted for the
length of the accrual period, that causes the present values of all future
payments on the Senior Certificate (determined in accordance with the Prepayment
Assumption) to equal its issue price on the issue date), (ii) events which have
occurred before the end of the accrual period and (iii) the Prepayment
Assumption. The effect of this method would be to increase the portions of OID
required to be included in income by a Certificateholder to take into account
prepayments with respect to the Mortgage Loans that occur at a rate that exceeds
the Prepayment Assumption.
Acquisition Premium. The amount of OID required to be included in gross
income for federal income tax purposes by a holder that acquires a Senior
Certificate by "purchase" would be reduced if such holder's tax basis in the
Senior Certificate immediately after such acquisition (i) exceeds the adjusted
issue price of the Senior Certificate and (ii) is less than or equal to its
stated redemption price at maturity (reduced by any payment made on the Senior
Certificate prior to the purchase date other than a payment of qualified stated
interest). For a discussion of the rules relating to the amortization of such
"acquisition premium," see the discussion above under the caption "Tax Status as
a REMIC -- Taxation of Regular Certificate --Acquisition Premium."
Senior Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such
as certain Senior Certificates, which represent interests in ARM Loans.
Additionally, the Service has not issued guidance under the Code's coupon
stripping rules with respect to such instruments. In the absence of any
authority, the Servicer or the Trustee for the related Series of Certificates
will report OID on Senior Certificates attributable to ARM Loans ("Stripped ARM
Obligations") to holders in a manner it believes is consistent with the rules
described above and with the OID Regulations. In general, application of these
rules may require inclusion of income on a Stripped ARM Obligation in advance of
the receipt of cash attributable to such income. Further, the addition of
interest deferred by reason of negative amortization to the principal balance of
an ARM Loan may require the inclusion of such amount in the income of the
Certificateholder when such amount accrues. Furthermore, the addition of
Deferred Interest to the Certificate's principal balance will result in
additional income (including possibly OID income) to the Certificateholder and
the Stripped Coupon Certificateholder over the remaining life of such Senior
Certificates. See the discussion above under "Tax Status as a REMIC --Taxation
of Regular Certificates -- Deferred Interest."
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
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Sale or Exchange of a Senior Certificate
The sale, exchange, redemption or other disposition of a Senior
Certificate generally will be a taxable event for federal income tax purposes.
The seller will recognize gain or loss in an amount equal to the difference, if
any, between (i) the amount realized on the sale, exchange or redemption and
(ii) the seller's adjusted tax basis in the Senior Certificate. Similarly, a
Certificateholder who receives a payment which is part of the stated redemption
price at maturity of a Senior Certificate will recognize gain equal to the
excess, if any, of the amount of the payment over his adjusted tax basis in the
Senior Certificate. Subject to the discussion above under "Market Discount", to
the discussion above under "Tax Status as a REMIC -- Taxation of Regular
Certificates" regarding the circumstances in which a Certificateholder could
recognize ordinary income upon the disposition of a Certificate held as part of
a conversion transaction, and to that in the next paragraph, any such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if
the Senior Certificate has been held for the requisite holding period (currently
more than one year).
Senior Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a Senior Certificate by a bank or a thrift institution to which such
Section applies will be ordinary income or loss.
Non-U.S. Persons - Senior Certificates
Generally, to the extent that a Senior Certificate evidences ownership
in Mortgage Loans that are issued on or before July 18, 1984, interest or
payments in respect of OID paid by the person required to withhold tax under
Section 1441 or Section 1442 of the Code to (i) an owner that is not a U.S.
Person, or (ii) a Senior Certificateholder holding on behalf of an owner that is
not a U.S. Person, will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for interest
by an applicable tax treaty. Accrued OID recognized by the owner on the sale or
exchange of such a Senior Certificate also will be subject to federal income tax
at the same rate. Generally, such payments would not be subject to withholding
to the extent that a Senior Certificate evidences ownership in Mortgage Loans
issued after July 18, 1984, if (i) such Senior Certificateholder does not
actually or constructively own 10 percent or more of the combined voting power
of all classes of equity in the issuer (which for purposes of this discussion
may be defined as the Trust (the "Issuer")); (ii) such Senior Certificateholder
is not a controlled foreign corporation (within the meaning of Code Section 957)
related to the Issuer; and (iii) such Senior Certificateholder complies with
certain identification requirements (including delivery of a statement, signed
by the Senior Certificateholder under penalties of perjury, certifying that such
Senior Certificateholder is not a U.S. Person and providing the name and address
of such Senior Certificateholder).
Information Reporting and Backup Withholding
Information relating to OID accruing during the calendar year will be
furnished annually to the Service and to Certificateholders to whom such
information is required to be furnished. Certificateholders will be required to
determine for themselves whether, by reason of the rules described above, they
are eligible to report a reduced amount of OID for federal income tax purposes.
Although OID will be reported to each Certificateholder based on the Prepayment
Assumption for the particular Series of Senior Certificates held by such
Certificateholder, no representation is made to Certificateholders that the
Mortgage Loans will be prepaid at that rate or at any other rate. For a
discussion of backup withholding, see the discussion above under "Tax Status as
a REMIC -- Backup Withholding."
Taxable Mortgage Pools
Effective January 1, 1992, an entity classified as a TMP is subject to
corporate-level tax on its net income (i.e., income from Mortgage Loans less
interest and original issue discount expenses and any administrative expenses).
A TMP is generally defined as an entity that meets the following requirements:
(i) the entity is not a REMIC, (ii) substantially all of the assets of the
entity are debt obligations, and more than 50 percent of such debt obligations
consist of real estate mortgages (or interests therein), (iii) the entity is the
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obligor under debt obligations with two or more maturities, and (iv) payments on
the debt obligations on which the entity is the obligor bear a relationship to
the payments on the debt obligations which the entity holds as assets. With
respect to requirement (iii), the Code authorizes the Service to provide by
regulations that equity interests may be treated as debt for purposes of
determining whether there are two or more maturities. If a Series of Senior
Certificates were treated as obligations of a TMP, the Trust would be ineligible
to file consolidated returns with any other corporation and could be liable for
corporate tax. Treasury regulations do not provide for the recharacterization of
equity as debt for purposes of determining whether an entity has issued debt
with two maturities, except in the case of transactions structured to avoid the
TMP rules.
FEDERAL INCOME TAX CONSEQUENCES OF NOTES
Tax Characterization of Depositor
If a Series of Securities constitutes Notes, and the Depositor is a
business trust, Gibson, Dunn & Crutcher LLP will deliver its opinion that the
Depositor with respect to such Series will not be treated as an association
taxable as a corporation or a publicly traded partnership treated as such an
association for federal income tax purposes. As such, such Depositor itself will
not be subject to federal income tax. The opinion of Gibson, Dunn & Crutcher LLP
as to the tax status of such Depositor will be based on the assumption that the
terms of the Trust Agreement and related documents will be complied with, and on
the conclusion either that the nature of the income of the trust will exempt it
from the rule that certain publicly traded partnerships are taxable as
corporations or that the issuance of the equity interests in the Depositor will
have been structured as a private placement under a Service safe harbor, so that
the Depositor will not be characterized as a publicly-traded partnership treated
as an association taxable as a corporation. There are, however, no cases or
Service rulings on transactions involving a trust issuing both debt and equity
interests with terms similar to those of the Notes. As a result, the Service may
disagree with all or a part of this discussion.
If the Depositor is a single member limited liability company, its
existence will be ignored for federal income tax purposes. Accordingly,
assuming that the Notes are debt for federal income tax purposes, its assets
will be treated as assets of its sole member and the Notes will be treated as
debt of such member. If the Depositor is a corporate subsidiary of Cityscape
Corp. and assuming that the Notes are treated as debt for federal income tax
purposes, the mortgages will be treated as assets of the Depositor and the
Notes will be treated as debt of the Depositor.
If the Depositor were a business trust taxable as a corporation for
federal income tax purposes, the Depositor would be subject to corporate income
tax on its taxable income. The Depositor's taxable income would include all its
income on the related Mortgage Loans, possibly reduced by its interest expense
on the Notes. Any such corporate income tax could materially reduce cash
available to make payments on the Notes.
Treatment of Certain Owners.
As to each Series of Notes, it is expected that:
(i) A Note held by a thrift institution will not represent
"loans...principally secured by an interest in real property" within the meaning
of Section 7701(a)(19) of the Code and
(ii) A Note held by a real estate investment trust will not be
considered to represent "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The Depositor, the Trustee, on
behalf of the Trust, and the Noteholders by their purchase of Notes will agree
to treat the Notes as debt for federal income tax purposes. Further, the
Depositor will seek an opinion of counsel that the Notes will be classified as
debt for federal income tax purposes. The discussion below assumes
characterization of the Notes as debt will be correct.
Interest Income on the Notes. Payments of qualified stated interest on
the Notes will be included in the gross income of Noteholders for federal income
tax purposes as ordinary income when received or accrued in accordance with the
respective Noteholder's method of tax accounting. Under the applicable
regulations, the Notes may be considered to be issued with OID as defined above,
subject to de minimis rules described above. A Noteholder generally must include
any OID in income as interest over the term of the Notes under a constant yield
method that is described in more detail above under "Tax Status as a REMIC --
Taxation of Regular Certificates -- Interest and Original Issue Discount."
A holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may be subject to
special rules. An accrual basis holder of a Short-Term Note (and certain
cash-method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest income
as interest accrues on a straight-line basis over the term of each interest
period. Other cash basis holders of a Short-Term Note would, in general, be
required to report interest income as interest is paid (or, if earlier, upon the
taxable disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would be subject to the interest
expense deferral rule referred to in the preceding sentence.
Election to Treat All Interest as OID. The OID Regulations permit a
Noteholder to elect to accrue all interest, discount (including de minimis
market discount or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a Note with market discount, the Noteholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Noteholder acquires
during the taxable year of the election or thereafter. See "Tax Status as a
REMIC -- Taxation of Regular Certificates -- Market Discount." Similarly, a
Noteholder that makes this election for a Note that is acquired at a premium
will be deemed to have made an election to amortize bond premium that such
Noteholder owns or acquires. See "Tax Status as a REMIC -- Taxation of Regular
Certificates -- Bond Premium." The election to accrue interest, discount and
premium on a constant yield method with respect to a Note may only be revoked
with the consent of the Service.
Market Discount. The Notes, whether or not issued with original issue
discount, other than any Short-Term Notes, will be subject to the "market
discount rules" of Section 1276 of the Code. The rules regarding the existence
and amortization of market discount are described more fully above under "Tax
Status as a REMIC -- Taxation of Regular Certificates -- Market Discount."
Amortizable Bond Premium. In general, if a Noteholder purchases a Note
at a cost (not including accrued qualified stated interest) greater than its
remaining stated redemption price at maturity, such Noteholder will be
considered to have purchased such Note with "bond premium" equal to the amount
of such excess. The rules discussing the existence and amortization of such
premium are discussed more fully above under "Tax Status as a REMIC -- Taxation
of Regular Certificates -- Bond Premium."
Disposition of Notes. The sale, exchange, redemption or other
disposition of a Note generally will be a taxable event for federal income tax
purposes. The selling Noteholder will recognize gain or loss in an amount equal
to the difference, if any, between (i) the amount realized on the sale, exchange
or redemption and (ii) the Noteholder's adjusted tax basis in the Note.
Similarly, a Noteholder who receives a payment which is part of the stated
redemption price at maturity of a Note will recognize gain equal to the
excess, if any, of the amount of the payment over his adjusted tax basis in the
Note. The adjusted tax basis of a Note to a particular Noteholder generally will
equal the Noteholder's cost for the Note, increased by any market discount and
OID previously included by such Noteholder in income with respect to the Note
and decreased by principal payments previously received by such Noteholder and
the amount of bond premium previously amortized with respect to the Note.
Subject to the discussion above under "Market Discount" and to the discussion
above under "Tax Status as a REMIC -- Taxation of Regular Certificates"
regarding the circumstances in which a Noteholder could recognize ordinary
income from the disposition of a Note, any such gain or loss will be capital
gain or loss, except for gain representing accrued interest, and will be
long-term capital gain or loss if the Note was held for more than one year.
Capital losses generally may be used only to offset capital gains.
Non-U.S. Holders. Generally, interest paid to a Noteholder that is not
a U.S. Person will not be subject to United States withholding tax provided the
conditions and circumstances described more fully above with respect to the
holders of Senior Certificates under "Status as a REMIC -- Taxation of Regular
Certificates -- Non-U.S. Persons" exist.
Tax Administration and Reporting. The Trustee will furnish to each
Noteholder with each distribution a statement setting forth the amount of such
distribution allocable to principal and to interest. Reports will be made
annually to the Service and to holders of record that are not excepted from the
reporting requirements regarding such information as may be required with
respect to interest and original issue discount, if any, with respect to the
Notes.
Backup Withholding. Under certain circumstances, described more fully
above under "Tax Status as a REMIC -- Taxation of Regular Certificates -- Backup
Withholding," a Noteholder may be subject to "backup withholding" at a 31% rate
with respect to payments received on the Note.
Possible Alternative Treatment of the Notes. If, contrary to the
position of the Depositor, the IRS were to assert successfully that the Notes
did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Depositor. If so treated, the Depositor, if a
business trust or a limited liability company, might be taxable as a corporation
with the adverse consequences described above, and in any event the Depositor
would not be able to reduce its taxable income by deductions for interest
expense on Notes recharacterized as equity. Alternatively, and most likely in
the view of counsel, the Depositor, if a business trust or a limited liability
company, would be treated as a publicly traded partnership that would not be
taxable as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the Notes as equity interests in such a partnership
could have adverse tax consequences to certain holders. For example, income to
foreign holders generally would be subject to federal tax and federal tax return
filing and withholding requirements, income to certain tax-exempt entities
(including pension funds) would be "unrelated business taxable income," and
individual holders might be subject to certain limitations on their ability to
deduct their share of the expenses of the Depositor.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described herein
under "Certain Federal Income Tax Considerations," potential investors should
consider the state income tax consequences of the acquisition, ownership, and
disposition of the Securities. State income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various tax
consequences of investments in the Securities.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended,
imposes certain requirements on employee benefit plans and collective investment
funds, separate accounts and insurance company general accounts in which such
plans or arrangements are invested to which it applies and on those persons who
are fiduciaries with respect to such benefit plans. Certain employee benefit
plans, such as governmental plans (as defined in Section 3(32) of ERISA) and
certain church plans (as defined in Section 3(33) of ERISA), are not subject to
ERISA. In accordance with ERISA's general fiduciary standards, before investing
in a Security a benefit plan fiduciary should determine whether such an
investment is permitted under the governing benefit plan instruments, is being
undertaken for the exclusive benefit of the plan participants and beneficiaries,
and is appropriate for the benefit plan in view of its overall investment policy
and the composition and diversification of its portfolio and is prudent.
In addition, benefit plans subject to ERISA and individual retirement
accounts or certain types of Keogh plans not subject to ERISA but subject to
Section 4975 of the Code are prohibited from engaging in a broad range of
transactions involving Plan assets and persons having certain specified
relationships to a Plan ("parties in interest" and "disqualified persons"). Such
transactions are treated as "prohibited transactions" under Sections 406 and 407
of ERISA and excise taxes are imposed upon such persons by Section 4975 of the
Code. The Originator, the Financial Insurer, the Underwriter and the Trustee and
certain of their affiliates might be considered "parties in interest" or
"disqualified persons" with respect to a Plan. If so, the acquisition or holding
or transfer of Securities by or on behalf of such Plan could be considered to
give rise to a "prohibited transaction" within the meaning of ERISA and the Code
unless an exemption is available. In addition, the Department of Labor ("DOL")
has issued a regulation (29 C.F.R. Section 2510.3-101) concerning the definition
of what constitutes the assets of a Plan, which provides that, as a general
rule, the underlying assets and properties of corporations, partnerships, trusts
and certain other entities in which a Plan makes an "equity" investment will be
deemed for purposes of ERISA to be assets of the investing Plan unless certain
exceptions apply. If an investing Plan's assets were deemed to include an
interest in the Mortgage Loans and any other assets of the Trust and not merely
an interest in the Securities, the assets of the Trust would become subject to
the fiduciary investment standards of ERISA, and transactions occurring between
the Representative, the Trustee, the Servicer, the Financial Insurer or any of
their affiliates might constitute prohibited transactions, unless an
administrative exemption applies. Certain such exemptions which may be
applicable to the acquisition and holding of the Securities or to the servicing
of the Mortgage Loans are noted below.
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The U.S. Department of Labor has issued an administrative exemption,
Prohibited Transaction Class Exemption 83-1, 48 F.R. 895 (Jan. 7, 1983) ("PTCE
83-1"), which, under certain conditions, exempts from the application of the
prohibited transaction rules of ERISA and the excise tax provisions of Section
4975 of the Code certain transactions involving a Plan in connection with the
operation of a "mortgage pool" investment trust and the purchase, sale and
holding of "mortgage pool pass-through certificates" evidencing interests
therein. A "mortgage pool" is defined as an investment pool, the corpus of which
is held in trust and consists solely of interest bearing obligations secured by
first or second mortgages or deeds of trust on single-family residential
property, property which had secured such obligations and which has been
acquired in foreclosure, and undistributed cash. "Single - family residential
property" means non-farm property comprising one to four dwelling units, and
also includes condominiums. A "mortgage pool pass-through certificate" is
defined as a certificate which represents a beneficial undivided interest in a
mortgage pool which entitles the holder to pass-through payments of principal
and interest from the mortgage loans, less any fees retained by the pool
sponsor.
For the exemption to apply, PTCE 83-1 requires that (i) the
Representative and the Trustee maintain a system of insurance or other
protection for the Mortgage Loans and the property securing such Mortgage Loans,
and for indemnifying holders of Certificates relying on the exemption against
reductions in pass-through payments due to defaults in loan payments or property
damage in an amount at least equal to the greater of 1% of the aggregate
principal balance of the Mortgage Loans, or the principal balance of the largest
covered pooled Mortgage Loan; (ii) the Trustee may not be an affiliate of the
Representative; and (iii) the payments made to and retained by the
Representative in connection with the Trust, together with all funds inuring to
its benefit for administering the Trust, represent no more than "adequate
consideration" for selling the Mortgage Loans, plus reasonable compensation for
services provided to the Trust.
If the above conditions are met, then, except as provided below, PTCE
83-1 exempts the initial sale of Certificates to a Plan and continued holding of
such Certificates by a Plan, with respect to which the Representative, the
Certificate Guaranty Insurer, or the Trustee is a party in interest (or
if the Servicer is a party in interest by virtue of providing services to the
Plan, or by virtue of being affiliated with such a service provider, solely
because of the Plan's ownership of Certificates), if the Plan does not pay more
than the fair market value for such Certificates and the rights and interests
evidenced by such Certificates are not subordinated to the rights and interests
evidenced by other Certificates of the same pool. PTCE 83-1 also exempts from
the prohibited transaction rules certain transactions in connection with the
servicing and operation of the Pool, provided that any payments made to the
Servicer in connection with the servicing of the Trust are made in accordance
with a binding pooling and servicing agreement, copies of which must be made
available to prospective investors.
PTCE 83-1 also exempts the initial sale, exchange, or transfer of
Certificates where the Representative, the Certificate Guaranty Insurer, or the
Trustee is a fiduciary, if, in addition of the other requirements: (i) the
initial sale, exchange or transfer of Certificates is expressly approved by an
independent fiduciary who has authority to manage and control those plan assets
being invested in Certificates; (ii) the Plan pays no more for the Certificates
than would be paid in an arm's length transaction; (iii) no investment
management, advisory or underwriting fee, sale commission, or similar
compensation is paid to the Representative with regard to the sale, exchange or
transfer of Certificates to the Plan; (iv) the total value of the Certificates
purchased by such Plan does not exceed 25% of the amount of Certificates issued;
and (v) at least 50% of the aggregate amount of Certificates is acquired by
persons independent of the Representative, the Trustee, the Servicer, and the
Certificate Guaranty Insurer.
Before purchasing Certificates, a fiduciary of a Plan should confirm
that the Trust is a "mortgage pool," that the Certificates constitute "mortgage
pool pass-through certificates," and that the conditions set forth in PTCE 83-1
would be satisfied. In addition to making its own determination as to the
availability of the exemptive relief provided in PTCE 83-1, the Plan fiduciary
should also consider the availability of any other prohibited transaction
exemptions. The Plan fiduciary also should consider its general fiduciary
obligations under ERISA in determining whether to purchase any Certificate on
behalf of a Plan.
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In addition, DOL has granted to certain underwriters and/or placement
agents individual prohibited transaction exemptions which may be applicable to
avoid certain of the prohibited transaction rules of ERISA with respect to the
initial purchase, the holding and the subsequent resale in the secondary market
by Plans of pass-through certificates representing a beneficial undivided
ownership interest in the assets of a trust that consist of certain receivables,
loans and other obligations that meet the conditions and requirements of the
exemptions, which may be applicable to the Certificates.
One or more other prohibited transaction exemptions issued by the DOL
may be available to the Plan investing in Securities, depending in part upon the
type of Plan fiduciary making the decision to acquire a Security and the
circumstances under which such decision is made, including but not limited to:
PTCE 90-1, regarding investments by insurance company pooled separate accounts,
PTCE 91-38, regarding investments by bank collective investment funds, PTCE
84-14, regarding transactions effected by qualified professional asset managers,
and PTCE 95-60, regarding investments by insurance company general accounts.
However, even if the conditions specified in one of the individual underwriter
or placement agent exemptions or one or more of these other exemptions are met,
the scope of the relief provided might or might not cover all acts which might
be construed as prohibited transactions.
Accordingly, any Plan fiduciary considering the purchase of a
Security should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment. Moreover, each Plan
fiduciary should determine whether, under the general fiduciary standards of
exclusive benefit, investment prudence, and diversification, an investment in
the Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
LEGAL INVESTMENT CONSIDERATIONS
SMMEA
Unless the related Prospectus Supplement specifies that the
Securities will constitute "mortgage related securities" for purposes of
SMMEA, the Securities will not constitute "mortgage related securities" for
purposes of SMMEA. Accordingly, many institutions with legal authority to invest
in comparably rated securities based on first mortgage loans or deeds of trust
may not be legally authorized to invest in the Securities. No representation
is made herein as to whether the Securities will constitute legal investments
for any entity under any applicable statute, law, rule, regulation or order.
Prospective purchasers are urged to consult with their counsel concerning the
status of the Securities as legal investments for such purchasers prior to
investing in any Class of Securities.
FFIEC POLICY STATEMENT
The Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Comptroller of the Currency and the Office of
Thrift Supervision have adopted the Federal Financial Institutions Examination
Council's Supervisory Policy Statement on Certificates Activities (the "Policy
Statement"). Although the National Credit Union Administration has not yet
adopted the Policy Statement, it has adopted other regulations affecting
mortgage-backed securities and is expected to consider adoption of the Policy
Statement. The Policy Statement, among other things, places responsibility on a
depository institution to develop and monitor appropriate policies and
strategies regarding the investment, sale and trading of securities and
restricts an institution's ability to engage in certain type of transactions.
The Policy Statement and any applicable modifications or supplements
thereto should be reviewed prior to the purchase of any Securities by a
depository institution. The summary of the Policy Statement contained herein
does not purport to be complete and should not be relied upon for purposes of
making any regulatory determinations. In addition, any regulation may adopt
modifications or supplements to the Policy Statement or additional restrictions
on the purchase of mortgage-backed or other securities. Investors are urged to
consult their own legal advisors prior to making any determinations with respect
to the Policy Statement or other regulatory requirements.
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The Policy Statement provides that a "high-risk mortgage security" is
not suitable as an investment portfolio holding for a depository institution. A
high-risk mortgage security must be reported in the trading account at market
value or as an asset held for sale at the lower of cost or market value and
generally may only be acquired to reduce an institution's interest rate risk.
However, an institution with strong capital and earnings and adequate liquidity
that has a closely supervised trading department is not precluded from acquiring
high-risk mortgage securities for trading purposes.
A depository institution must ascertain and document prior to purchase
and no less frequently than annually thereafter that a no-high-risk mortgage
security held for investment remains outside the high-risk category. If an
institution is unable to make these determinations through internal analysis, it
must use information derived from a source that is independent of the party from
whom the product is being purchased. The institution is responsible for ensuring
that the assumptions underlying the analysis and resulting calculations are
reasonable. Reliance on analyses and documentation from a securities dealer or
other outside party without internal analyses by the institution is
unacceptable.
In general, a high-risk mortgage security is a mortgage derivative
product possessing greater price volatility than a benchmark fixed rate 30-year
mortgage-backed pass-through security. Mortgage derivative products include
collateralized mortgage obligations ("CMOs"), REMICs, CMO and REMIC residuals
and stripped mortgage-backed securities. A mortgage derivative product that, at
the time of purchase or at a subsequent testing date, meets any one of three
tests will be considered a high-risk mortgage security. When the characteristics
of a mortgage derivative product are such that the first two tests cannot be
applied (such as interest-only strips), the mortgage derivative product remains
subject to the third test.
The three tests of a high-risk mortgage security are as follows: (i)
the mortgage derivative product has an expected weighted average life greater
than 10 years; (ii) the expected weighted average life of the mortgage
derivative product: (a) extends by more than 4 years, assuming an immediate and
sustained parallel shift in the yield curve of plus 300 basis points, or (b)
shortens by more than 6 years, assuming an immediate and sustained parallel
shift in the yield curve of minus 300 basis points; and (iii) the estimated
change in the price of the mortgage derivative product is more than 17%, due to
an immediate and sustained parallel shift in the yield curve of plus or minus
300 basis points.
When performing the price sensitivity test, the same prepayment
assumptions and same cash flows that were used to estimate average life
sensitivity must be used. The discount rate assumptions should be determined by
(i) calculating that the discount rate for the security equals the yield on a
comparable average life U.S. Treasury security plus a constant spread, (ii)
calculating the spread over Treasury rates from the bid side of the market for
the mortgage derivative product, and (iii) assuming the spread remains constant
when the Treasury curve swings up or down 300 basis points. Discounting the cash
flows by their respective discount rates estimates a price in the plus or minus
300 basis point environments. The initial price must be determined by the offer
side of the market and used as the base price from which the 17% price
sensitivity test will be measured.
Generally, a floating-rate debt class will not be subject to the
average life and average life sensitivity tests described above if it bears a
rate that, at the time of purchase or at a subsequent testing date, is below the
contractual cap on the instrument. An institution may purchase interest rate
contracts that effectively uncap the instrument. For purposes of the Policy
Statement, a CMO floating-rate debt class is a debt class whose rate adjusts at
least annually on a one-for-one basis with the debt class's index. The index
must be a conventional, widely-used market interest rate index such as the
London Interbank Offered Rate (LIBOR). Inverse floating rate debt classes are
not included in the definition of a floating rate debt class.
Certificates and other products, whether carried on or off balance
sheet (such as CMO swaps but excluding servicing assets), having characteristics
similar to those of high-risk mortgage securities, will be subject to the same
supervisory treatment as high-risk mortgage securities. Long-maturity holdings
of zero coupon, stripped and deep discount OID products which are
disproportionately large in relation to the total
93
<PAGE> 96
investment portfolio or total capital of a depository institution are considered
an imprudent investment practice. Long-maturity generally means a remaining
maturity exceeding 10 years.
GENERAL
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Securities, to purchase
Securities representing more than a specified percentage of the investor's
assets, or to purchase certain types of Securities, such as residual interests
or stripped mortgage-backed securities. Investors should consult their own legal
advisors in determining whether and to what extent the Securities constitute
legal investments for such investors and comply with any other applicable
requirements.
METHOD OF DISTRIBUTION
The Securities offered hereby and by the Prospectus Supplement will
be offered in Series, either directly by the Originator or through one or more
underwriters or underwriting syndicates ("Underwriters"). The Prospectus
Supplement for each Series will set forth the terms of the offering of such
Series and of each Class within such Series, including the name or names of the
Underwriters, the proceeds to the Originator, and either the initial public
offering price, the discounts and commissions to the Underwriters and any
discounts or concessions allowed or reallowed to certain dealers, or the method
by which the price at which the Underwriters will sell the Securities will be
determined.
The Securities in a Series may be acquired by Underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. It is anticipated that the
underwriting agreement pertaining to the sale of any Series of Securities will
provide that the obligations of any Underwriters will be subject to certain
conditions precedent, and such Underwriters will be severally obligated to
purchase all of a Series of Securities described in the related Prospectus
Supplement, if they are purchased and that in limited circumstances the
Originator will indemnify any Underwriters against certain civil liabilities,
including liabilities under the Securities Act, or will contribute to
payments any Underwriters may be required to make in respect thereof.
If Securities of a Series are offered other than through
Underwriters, the related Prospectus Supplement will contain information
regarding the nature of such offering and any agreements to be entered into
between the seller and purchasers of Securities of such Series.
The Originator anticipates that the Securities will be sold primarily
to institutional investors. Purchasers of Securities, including dealers, may,
depending on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection
with reoffers and sales by them of Securities. Securityholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Securities of
each Series, including certain federal income tax consequences with respect
thereto, will be passed upon by Gibson, Dunn & Crutcher LLP, New York, New York.
FINANCIAL INFORMATION
The Originator has determined that its financial statements are not
material to the offering made hereby.
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<PAGE> 97
A new Trust will be formed to hold the Mortgage Loans and to issue each
Series of Securities. Each such Trust will have no assets or obligations prior
to the issuance of the Securities and will not engage in any activities other
than those described herein. Accordingly, no financial statements with respect
to such Trusts will be included in this Prospectus or any Prospectus Supplement.
Although the Notes of any Series will represent obligations of the related
Depositor, such obligations will be non-recourse and the proceeds of the assets
included in the related Trust will be the sole source of payments on the Notes
of such Series. The Depositor for any Series of Notes will not have, nor be
expected in the future to have, any significant assets available for payments on
such Series of Notes other than the assets included in the related Trust.
Accordingly, the investment characteristics of a Series of Notes will be
determined by the assets included in the related Trust and will not be affected
by the identity of the obligor with respect to such Series of Notes.
Accordingly, no capitalization information or any historical or pro forma ratio
of earnings to fixed charges or any other financial information with respect
to the Depositor has been or will be included herein or in the related
Prospectus Supplement.
RATING
It is a condition to the issuance of the Securities of each Series
offered hereby that they shall have been rated in one of the four highest rating
categories by the nationally recognized statistical rating agency or agencies
specified in the related Prospectus Supplement.
Ratings on asset backed securities address the likelihood of receipt by
securityholders of all distributions on the underlying mortgage loans. These
ratings address the structural, legal and issuer-related aspects associated with
such securities, the nature of the underlying mortgage loans and the credit
quality of the guarantor, if any. Ratings on asset backed securities do not
represent any assessment of the likelihood of principal prepayments by
mortgagors or of the degree by which such prepayments might differ from those
originally anticipated. As a result, securityholders might suffer a lower than
anticipated yield, and, in addition, holders of stripped pass-through
certificates in extreme cases might fail to recoup their underlying investments.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
95
<PAGE> 98
INDEX OF DEFINED TERMS
Term Page
---- ----
1
1933 Act..............................................3
1986 Act.............................................67
A
Accounts.............................................34
Accrual Certificates.................................38
Adjusted Issue Price.................................69
Appraised Value......................................27
ARM Loans............................................23
Available Funds......................................36
B
Balloon Loan.........................................20
Bankruptcy Bond......................................13
C
Cede.................................................18
CERCLA...............................................64
Certificateholders....................................1
Certificates..........................................1
Class.................................................1
Cleanup Costs........................................64
Closing Date.........................................48
CMOs.................................................88
Code.................................................16
Collection Account...................................51
Collection Period....................................37
Combined Loan-to-Value Ratio.........................27
Commission............................................3
Compensating Interest Payments.......................54
Cut-off Date.........................................10
D
Deferred Interest....................................72
Definitive Certificates..............................18
Deleted Mortgage Loan................................51
Deposit Date.........................................52
Depositor.............................................1
Detailed Description.................................26
Distribution Account.................................36
Distribution Date.....................................1
DOL..................................................85
DTC..................................................18
E
EPA..................................................64
ERISA................................................17
Event of Default.....................................58
Exchange Act..........................................3
F
FHA...................................................9
FHA Insurance Premium................................56
FHA Loans.............................................8
FHA Premium Account..................................52
FHA Premium Amounts..................................52
FHLMC................................................24
FNMA.................................................24
Financial Guaranty Insurance Policy .................12
Financial Insurer....................................41
Funding Period.......................................10
G
Garn-St Germain Act..................................63
H
Home Equity Loans.....................................8
HUD...................................................9
I
Indirect Participant.................................34
Insurance Proceeds...................................37
Insured Amount.......................................12
Interest Rate........................................37
Interest Weighted Class..............................24
Issuer...............................................84
J
Junior Loan..........................................20
L
Liquidated Mortgage Loan.............................54
Liquidation Proceeds.................................37
Loan Purchase Price..................................50
Loan Schedule........................................48
lockout periods......................................27
M
Master REMIC.........................................67
96
<PAGE> 99
INDEX OF DEFINED TERMS
Term Page
- ---- ----
Mixed Use Loans.......................................8
Monthly Advance......................................53
Mortgage File........................................49
Mortgage Loans........................................1
Mortgage Note.........................................8
Mortgage Pool.........................................1
Mortgage Pool Insurance Policy.......................13
Mortgage Pool Insurer................................42
Mortgaged Property....................................9
Mortgagor............................................12
Multi-Family Loans....................................8
N
Net Liquidation Proceeds.............................37
NHA Act..............................................29
Non-REMIC Certificates...............................17
Noteholders..........................................
O
OID..................................................68
OID Regulations......................................67
Originator............................................1
P
Parent...............................................30
Participants.........................................34
Payment Lag Certificates.............................73
Permitted Investments................................52
Plan Asset Regulations...............................18
Plan(s)..............................................17
Policy Statement.....................................87
Pool Balance.........................................39
Pool Factor..........................................39
Pooling and Servicing Agreement.......................7
Pre-Funded Amount....................................10
Pre-Funding Account..................................10
pre-issuance accrued interest........................73
Prepayment Assumption................................68
Principal Balance....................................38
Principal Prepayment.................................15
Principal Weighted Class.............................24
Proposed OID Regulations.............................82
Prospectus Supplement.................................1
PTCE 83-1............................................86
Q
Qualified Replacement Mortgage Loan .................50
R
Rating Agency........................................15
Register.............................................36
Regular Certificates.................................16
Relief Act...........................................25
REMIC.................................................1
REO Property.........................................53
Reserve Account......................................12
Residual Certificates................................16
S
Securityholders.......................................
Senior Securities.....................................7
Senior Loan..........................................20
Series................................................1
Service..............................................68
Servicer..............................................1
Servicing Advance....................................56
SMMEA................................................18
Special Hazard Insurance Policy......................13
Special Hazard Insurer...............................43
Spread Amount........................................14
Standard Hazard Insurance Policies ...................9
Stripped ARM Obligations.............................83
Stripped Bond Certificates...........................80
Stripped Coupon Certificates.........................81
Subordinated Securities...............................7
Subordinated Classes.................................33
Sub-Servicer..........................................7
Subsidiary REMIC.....................................67
Supplemental Interest Payments.......................14
T
TIN..................................................75
Title V..............................................64
Title I Loan Program..................................9
TMP..................................................65
Transferor............................................1
Trust.................................................1
U
U.S. Person..........................................74
U.S. related person..................................75
Underwriters.........................................89
V
Voting Interest......................................57
97
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses in connection with the
offering described in this registration statement will be as follows:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee........... $ 344,827.59
Printing expenses............................................. 52,000.00
Accounting fees and expenses.................................. 48,000.00
Legal fees and expenses....................................... 436,000.00
Listing fees.................................................. 0.00
Fees and expenses (including legal fees) for
qualifications under state securities laws.................... 0.00
Trustee's fees and expenses................................... 40,000.00
Rating Agency fees and expenses 330,000.00
Miscellaneous................................................. 284,000.00
-------------
Total..................................................... $1,396,896.55
=============
</TABLE>
All amounts except the Securities and Exchange Commission
registration fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Sections 721 through 725 of the Business Corporation Law of
the State of New York (the "BCL"), the Registrant has broad powers to indemnify
its directors, officers and other employees. These sections (i) provide that the
statutory indemnification and advancement of expenses provisions of the BCL are
not exclusive, provided that no indemnification may be made to or on behalf of
any director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled, (ii) establish
procedures for indemnification and advancement of expenses that may be contained
in the certificate of incorporation or by-laws, or, when authorized by either of
the foregoing, set forth in a resolution of the shareholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii) apply
a single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful and (iv) permit the advancement
of litigation expenses upon receipt of an undertaking to repay such advance if
the director or officer is ultimately determined not to be entitled to
indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 726 of the
BCL permits the purchase of insurance to indemnify a corporation or its officers
and directors to the extent permitted.
The Registrant's Certificate of Incorporation provides that the
Registrant may, to the fullest extent permitted by Section 721 through 726 of
the BCL, indemnify any and all directors and officers whom it shall have power
to indemnify under the said sections from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
sections and that the indemnification provided for in the Certificate of
Incorporation shall not be deemed exclusive of any other rights to which the
persons so
II-1
<PAGE> 101
indemnified may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in such person's
official capacities and as to action in other capacities by holding such
offices, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of such person's heirs, executors and
administrators.
The Company presently maintains policies of directors' and
officers' liability insurance in the amount of $10.0 million.
ITEM 16. EXHIBIT SCHEDULE
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
(a) Any required financial statements of a provider of credit
enhancement will be included as an appendix to the related
Prospectus Supplement
1.1 Form of Underwriting Agreement between the Originator and
Servicer and the Underwriter named therein, relating to the
distribution of the Securities*
3.1 Certificate of Incorporation of Cityscape Corp.**
3.2 By-laws of Cityscape Corp.**
4.1 Form of Pooling and Servicing Agreement*
4.2 Form of Indenture*
4.3 Form of Sale and Servicing Agreement*
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of
certificate being issued*
5.2 Opinion of Gibson, Dunn & Crutcher LLP as to legality of Notes
being issued*
8.1 Opinion of Gibson, Dunn & Crutcher LLP with respect to tax
matters*
23.3 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibits
5.1, 5.2 and 8.1)
24.1 Power of Attorney (included on signature page of Registration
Statement)
99.1 Form of Prospectus Supplement**
99.2 Form of Master Agreement for Sale and Purchase of Mortgages
between Originator and independent mortgage broker**
* Filed herewith
** Previously filed
b) FINANCIAL STATEMENTS
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
II-2
<PAGE> 102
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in the post-effective amendment is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes to
provide to the Underwriter at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 5 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the Village of Elmsford, State of New York, on August 25, 1997.
CITYSCAPE CORP.
/s/ Robert C. Patent
By: -----------------------------
ROBERT C. PATENT
EXECUTIVE VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 5 to the Registration Statement has been signed by the following
persons in the capacity indicated on August 25, 1997.
SIGNATURE TITLE
*
-------------------------------- Chairman of the Board,
Robert Grosser President and Director
(Principal Executive Officer)
/s/ Robert C. Patent
-------------------------------- Executive Vice President,
Robert C. Patent Treasurer, Assistant Secretary
and Director
*
--------------------------------
Cheryl P. Carl Director
*
--------------------------------
Asher Fensterheim Director
*
--------------------------------
Jonah L. Goldstein Director
*
--------------------------------
Robert M. Stata Director
*
--------------------------------
Steven P. Weiss Director
*
--------------------------------
Tim S. Ledwick Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
* By /s/ ROBERT C. PATENT
--------------------------------
Robert C. Patent
Attorney-in-Fact
II-4
<PAGE> 104
EXHIBIT INDEX
- -------------
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
(a) Any required financial statements of a provider of credit
enhancement will be included as an appendix to the related
Prospectus Supplement
1.1 Form of Underwriting Agreement between the Originator and
Servicer and the Underwriter named therein, relating to the
distribution of the Class A Securities*
3.1 Certificate of Incorporation of Cityscape Corp.**
3.2 By-laws of Cityscape Corp.**
4.1 Form of Pooling and Servicing Agreement*
4.2 Form of Indenture*
4.3 Form of Sale and Servicing Agreement*
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of
certificates being issued*
5.2 Opinion of Gibson, Dunn & Crutcher LLP with respect to Notes
being issued*
8.1 Opinion of Gibson, Dunn & Crutcher LLP with respect to tax
matters*
23.3 Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibits
5.1, 5.2 and 8.1)
24.1 Power of Attorney (included on signature page of Registration
Statement)
99.1 Form of Prospectus Supplement**
99.2 Form of Master Agreement for Sale and Purchase of Mortgages
between Originator and independent mortgage broker.**
* Filed herewith
** Previously filed
<PAGE> 1
EXHIBIT 1.1
CITYSCAPE CORP.
CITYSCAPE LOAN TRUST 199_-_
MORTGAGE LOAN ASSET-BACKED [NOTES/CERTIFICATES]
UNDERWRITING AGREEMENT
New York, New York
________, 199_
[NAME OF REPRESENTATIVE]
[REPRESENTATIVE'S ADDRESS]
[NAME OF REPRESENTATIVE]
[REPRESENTATIVE'S ADDRESS]
Dear Sirs:
Cityscape Corp., a New York corporation (the "Company"), proposes to
sell to the several underwriters (including yourselves) represented by you and
listed in Schedule I hereto (the "Underwriters") its Cityscape Loan Trust
199_-_ Mortgage Loan Asset-Backed [Notes/Certificates] in the series and
classes, in the respective original principal amounts and with the designations
set forth in Schedule I hereto (the Class A-[ ] [Notes/Certificates] [Insert
additional Classes of Notes/Certificates] and the Class [ ]
[Notes/Certificates], collectively, the "[Notes/Certificates]"). Only the
[Notes/Certificates] are being purchased by the Underwriters hereunder. The
[Notes/Certificates] will be issued pursuant to [an indenture, dated as of
_______, 199_ (the "Indenture"), between Cityscape Loan Trust 199_-_ and
_______________, as indenture trustee (the "Indenture Trustee"). Pursuant to
the Indenture, the [Notes/Certificates] will be secured by the assets of a
trust (the "Trust") formed by a trust agreement, dated as of ________, 199_
(the "Trust Agreement"), among ____________, as depositor (the "Depositor"),
__________, as transferor (the "Transferor"), __________, as owner trustee (the
"Owner Trustee") and __________, as co-owner trustee (the "Co-Owner
Trustee").][a pooling and servicing agreement, dated as of _______, 199_ (the
"Pooling and Servicing Agreement"), among the Company, as seller, servicer and
claims administrator, and __________, as trustee (the "Trustee"). The
Certificates will represent a beneficial ownership interest in a trust (the
"Trust") formed by the Pooling and Servicing Agreement.] The Trust will consist
primarily of a pool (the "Pool") of mortgage loans ("Mortgage Loans") secured
either by mortgages, deeds of trust or other similar security instruments. The
[Notes/Certificates] are described more fully in Schedule I hereto and in a
prospectus supplement furnished to you by the Company.
1
<PAGE> 2
Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned to them in the Sale and Servicing Agreement.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, you that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (the file
number of which is set forth in Schedule I hereto) for the registration of
securities, issuable in series under the Securities Act of 1933, as amended (the
"1933 Act"), which registration statement was declared effective on the date set
forth in Schedule I hereto and copies of which have heretofore been delivered to
you. The Company meets the requirements for use of Form S-3 under the 1933 Act,
and such registration statement, as amended at the date hereof, meets the
requirements set forth in Rule 415(a)(1)(x) under the 1933 Act and complies in
all other material respects with the 1933 Act and the rules and regulations
thereunder. The Company proposes to file with the Commission, with your consent,
pursuant to Rule 424 under the 1933 Act, a supplement to the form of prospectus
included in such registration statement relating to the [Notes/Certificates] and
the plan of distribution thereof and has previously advised you of all further
information (financial and other) with respect to the [Notes/Certificates] and
the Pool to be set forth therein. Such registration statement, including all
exhibits thereto, as amended at the date hereof, is referred to herein as the
"Registration Statement"; such prospectus, in the form in which it appears in
the Registration Statement, is referred to herein as the "Basic Prospectus"
(except that if the prospectus filed by the Company pursuant to Rule 424(b)
under the 1933 Act differs from the prospectus on file at the time the
Registration Statement became effective, the term "Basic Prospectus" shall refer
to such Rule 424(b) prospectus from and after the time it is mailed or
transmitted to the Commission for filing); such form of prospectus, in the form
in which it is first filed with the Commission pursuant to Rule 424(b) under the
1933 Act, as supplemented by the prospectus supplement (the "Prospectus
Supplement") relating to the [Notes/Certificates] is referred to herein as the
"Final Prospectus". Any preliminary form of the Final Prospectus that has
heretofore been filed pursuant to Rule 424 or, prior to the effective date of
the Registration Statement, pursuant to Rule 402(a) or 424(a) is hereinafter
called a "Preliminary Final Prospectus".
(b) As of the date hereof, as of the date on which the Final
Prospectus is first filed pursuant to Rule 424 under the 1933 Act, as of the
date on which, prior to the Closing Date (as hereinafter defined), any amendment
to the Registration Statement becomes effective, as of the date on which any
supplement to the Final Prospectus is filed with the Commission, and at the
Closing Date, (i) the Registration Statement, as amended as of any such time,
and the Final Prospectus, as amended or supplemented as of any such time,
complies and will comply as to form in all material respects with the applicable
requirements of the 1933 Act and the rules and regulations thereunder, (ii) the
Registration Statement, as amended as of any such time, does not contain and
will not contain any untrue statement of a material fact and does not omit and
will not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not
2
<PAGE> 3
misleading and (iii) the Final Prospectus, as amended or supplemented as of any
such time, will not contain any untrue statement of a material fact and will not
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to statements contained in or omitted from the Registration
Statement or the Final Prospectus or any amendment or supplement thereto made in
reliance upon and in conformity with information furnished in writing to the
Company by you specifically for use in the Registration Statement and the Final
Prospectus.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of New York, has
full power and authority (corporate and other) necessary to own or hold its
properties and to conduct its business as now conducted by it and to enter into
and perform its obligations under this Agreement [, the loan sale agreement,
dated as ____ __, 199_, among the Depositor, the Transferor and the Company (the
"Loan Sale Agreement"), the Sale and Servicing Agreement, dated as of ____ __,
199_ (the "Sale and Servicing Agreement"), among the Trust, the Depositor, the
Transferor, the Company, as servicer (the "Servicer"), and the Trustee and the
Co-Owner Trustee,][the Pooling and Servicing Agreement,] and the Custodial
Agreement, dated as of ____ __, 199_ (the "Custodial Agreement"), among the
Company, the Depositor, the Trust, the [Indenture] Trustee and ________, as
custodian (the "Custodian")(all such agreements, with the exception of this
Agreement, are collectively referred to herein as the "Other Agreements").
[(d) The Transferor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has full power and authority (corporate and other) necessary to own or
hold its properties and to conduct its business as now conducted by it and to
enter into and perform its obligations under the Trust Agreement; the Trust
Agreement, when executed and delivered as contemplated hereby, will have been
duly authorized, executed and delivered by the Transferor, and when so executed
and delivered, will constitute a legal, valid, binding and enforceable agreement
of the Transferor, subject, as to enforceability, to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (ii) general principles of equity regardless of whether
enforcement is sought in a proceeding in equity or at law.]
(e) As of the date hereof, as of the date on which the Final
Prospectus is first filed pursuant to Rule 424 under the 1933 Act, as of the
date on which, prior to the Closing Date, any amendment to the Registration
Statement becomes effective, as of the date on which any supplement to the Final
Prospectus is filed with the Commission, and as of the Closing Date, there has
not been and will not have been (i) any request by the Commission for any
further amendment to the Registration Statement or the Final Prospectus or for
any additional information, (ii) any issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threat of any proceeding for that purpose or (iii) any
notification with respect to the suspension of the qualification of the
[Notes/Certificates] for sale in any jurisdiction or any initiation or threat of
any proceeding for such purpose.
3
<PAGE> 4
(f) This Agreement has been duly authorized, executed and delivered
by the Company.
(g) [The Sale and Servicing Agreement][The Pooling and Servicing
Agreement] and the Custodial Agreement when executed and delivered as
contemplated hereby, will have been duly authorized, executed and delivered by
the Company, and when so executed and delivered, will constitute a legal, valid,
binding and enforceable agreement of the Company, subject, as to enforceability,
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (ii) general principles of equity
regardless of whether enforcement is sought in a proceeding in equity or at law.
[(h) The Loan Sale Agreement, when executed and delivered as
contemplated hereby and thereby, will have been duly authorized, executed and
delivered by the Company, and when so executed and delivered, will constitute
the legal, valid, binding and enforceable agreement of the Company, except
insofar as the indemnification provisions therein may be limited by applicable
law.]
(i) As of the Closing Date, the [Notes/Certificates], the
[Indenture and the Trust Agreement][Pooling and Servicing Agreement] will
conform in all material respects to the respective descriptions thereof
contained in the Final Prospectus. As of the Closing Date, the
[Notes/Certificates] will be duly and validly authorized and, when duly and
validly executed, authenticated and delivered in accordance with the [Indenture
or the Trust Agreement, as applicable,][Pooling and Servicing Agreement] and
delivered to you against payment therefor as provided herein, will be duly and
validly issued and outstanding and entitled to the benefits of the [Indenture
and the Sale and Servicing Agreement][such agreement]. The [Notes/Certificates]
will not be "mortgage related securities," as such term is defined in the
singular in the Securities Exchange Act of 1934, as amended (the "1934 Act").
(j) As of the Closing Date, each of the Mortgage Loans will meet
the criteria for selection to be described in the Final Prospectus, and on the
Closing Date the representations and warranties of the Company with respect to
the Mortgage Loans contained in the [Sale and Servicing Agreement][Pooling and
Servicing Agreement] will be true and correct.
(k) The Company is not in violation of its certificate of
incorporation or by-laws or in default under any agreement, indenture or
instrument the effect of which violation or default would be material to the
Company. Neither the issuance and sale of the [Notes/Certificates], nor the
execution and delivery by the Company of this Agreement and the Other
Agreements, nor the consummation by the Company of any of the transactions
herein or therein contemplated, nor compliance by the Company with the
provisions hereof or thereof, does or will conflict with or result in a breach
of any term or provision of the certificate of incorporation or by-laws of the
Company or conflict with, result in a breach, violation or acceleration of, or
constitute a default under, the terms of any indenture or other agreement or
instrument to which the Company is a party
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<PAGE> 5
or by which it is bound, or any statute, order or regulation applicable to the
Company of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Company. The Company is not a party to, bound
by or in breach or violation of any indenture or other agreement or instrument,
or subject to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over it that materially and adversely affects, or may in the future materially
and adversely affect, (i) the ability of the Company to perform its obligations
under this Agreement and the Other Agreements or (ii) the business, operations,
financial conditions, properties or assets of the Company.
(l) There are no actions or proceedings against, or investigations
of, the Company pending, or, to the knowledge of the Company, threatened, before
any court, arbitrator, administrative agency or other tribunal (i) asserting the
invalidity of this Agreement, the Other Agreements or the [Notes/Certificates],
(ii) seeking to prevent the issuance of the [Notes/Certificates], or the
consummation of any of the transactions contemplated by this Agreement and the
Other Agreements, (iii) that are reasonably likely to be adversely determined
and that might materially and adversely affect the performance by the Company of
its obligations under, or the validity or enforceability of, this Agreement, the
Other Agreements or the [Notes/Certificates] or (iv) seeking to affect adversely
the federal income tax attributes of the [Notes/Certificates] as described in
the Final Prospectus.
(m) Any taxes, fees and other governmental charges in connection
with the execution and delivery of this Agreement and the Other Agreements or
the execution, delivery and sale of the [Notes/Certificates] have been or will
be paid on or prior to the Closing Date.
(n) Immediately prior to the assignment of the Mortgage Loans to
the [Owner] Trustee as contemplated by the [Sale and Servicing
Agreement][Pooling and Servicing Agreement], the Company (i) had good title to,
and was the sole owner of, each Loan free and clear of any pledge, mortgage,
lien, security interest or other encumbrance (collectively, "Liens"), (ii) had
not assigned to any person any of its right, title or interest in such Mortgage
Loans or in the [Sale and Servicing Agreement][Pooling and Servicing Agreement]
and (iii) will have the power and authority to sell such Mortgage Loans to the
[Owner] Trustee, and upon the execution and delivery of the [Sale and Servicing
Agreement][Pooling and Servicing Agreement] by the [Owner] Trustee, the [Owner]
Trustee will have acquired all of the Company's right, title and interest in and
to the Mortgage Loans.
(o) Neither the Company nor the Trust is, and neither the issuance
and sale of the [Notes/Certificates] nor the activities of the Trust pursuant to
the [Sale and Servicing Agreement, the Indenture or the Trust Agreement][Pooling
and Servicing Agreement] will cause the Company or the Trust to be, an
"investment company" or under the control of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act").
5
<PAGE> 6
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties set forth herein, the Company
agrees to sell the [Notes/Certificates] to you, and you agree to purchase the
[Notes/Certificates] from the Company, for the purchase price of $____________
(including accrued interest).
3. Delivery and Payment. Delivery of and payment for the
[Notes/Certificates] shall be made at the office of Gibson, Dunn & Crutcher LLP,
200 Park Avenue, New York, New York at 10:00 A.M., New York time, on the date
specified in Schedule I hereto (or such subsequent date, not later than seven
business days after such specified date, as you shall designate), which date and
time may be changed by agreement between you and the Company or as provided
herein (such date and time of delivery and payment for the [Notes/Certificates]
being herein called the "Closing Date"). Delivery of the [Notes/Certificates]
shall be made to you against payment by you of the purchase price therefor in
immediately available funds wired to such bank as may be designated by the
Company, or such other manner of payment as may be agreed upon by the Company
and you. The [Notes/Certificates] to be so delivered shall be in definitive
fully registered form, unless otherwise agreed, in such denominations and
registered in such names as you may have requested in writing not less than two
full business days in advance of the Closing Date.
The Company agrees to have the [Notes/Certificates] available for
inspection, checking and packaging by you in New York, New York, not later than
10:00 a.m. on the business day prior to the Closing Date.
4. Offering of the [Notes/Certificates]. It is understood that you
propose to offer the [Notes/Certificates] for sale to the public as set forth in
the Final Prospectus.
5. Covenants of the Company. The Company covenants and agrees with you
that:
(a) The Company will prepare a supplement to the Basic Prospectus
setting forth the amount of [Notes/Certificates] covered thereby and the terms
thereof not otherwise specified in the Basic Prospectus, the expected proceeds
to the Company from the sale of such [Notes/Certificates], and such other
information as you and the Company may deem appropriate in connection with the
offering of such [Notes/Certificates]. The Company promptly will advise you or
your counsel (i) when the Final Prospectus shall have been filed or transmitted
to the Commission for filing pursuant to Rule 424, (ii) when any amendment to
the Registration Statement shall have become effective or any further supplement
to the Prospectus shall have been filed with the Commission, (iii) of any
proposal or request to amend or supplement the Registration Statement, the Basic
Prospectus or the Final Prospectus or any request by the Commission for any
additional information, (iv) when notice is received from the Commission that
any post-effective amendment to the Registration Statement has become or will
become effective, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereto or the institution or threat of any proceeding for that
purpose, (vi) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the [Notes/Certificates] for sale in any
jurisdiction or the institution or threat of any
6
<PAGE> 7
proceeding for that purpose, and (vii) of the occurrence of any event that would
cause the Registration Statement, as then in effect, to contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or that would cause the Final Prospectus, as then in effect, to
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company will use its best efforts to prevent the issuance of any
such stop order or suspension and, if issued, to obtain as soon as possible the
withdrawal thereof. The Company will cause the Final Prospectus to be
transmitted to the Commission for filing pursuant to Rule 424 under the 1933 Act
or will cause the Final Prospectus to be filed with the Commission pursuant to
said Rule 424.
(b) If, at any time when a prospectus relating to the
[Notes/Certificates] is required to be delivered under the 1933 Act, any event
occurs as a result of which the Final Prospectus, as then amended or
supplemented, would contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it shall be necessary to amend or supplement the Final
Prospectus to comply with the 1933 Act or the rules and regulations thereunder,
the Company promptly will prepare and file with the Commission, at the expense
of the Company, subject to paragraph (a) of this Section 5, an amendment or
supplement that will correct such statement or omission or an amendment that
will effect such compliance and, if such amendment or supplement is required to
be contained in a post-effective amendment to the Registration Statement, the
Company will use its best efforts to cause such amendment to the Registration
Statement to be made effective as soon as possible.
(c) The Company will furnish to you and your counsel, without
charge, signed copies of the Registration Statement (including exhibits thereto)
and each amendment thereto which shall become effective on or prior to the
Closing Date, and so long as delivery of a prospectus by you may be required by
the 1933 Act, as many copies of any Preliminary Final Prospectus and the Final
Prospectus, and any amendments and supplements thereto, as you may reasonably
request.
(d) The Company agrees that, so long as the [Notes/Certificates]
shall be outstanding, it will deliver to you the annual statement as to
compliance delivered to the [Indenture] Trustee pursuant to the [Sale and
Servicing Agreement][Pooling and Servicing Agreement] and the annual statement
of a firm of independent public accountants delivered to the [Indenture] Trustee
pursuant to the [Sale and Servicing Agreement][Pooling and Servicing Agreement],
as soon as such statements are furnished to the Company.
(e) The Company will furnish such information, execute such
instruments and take such action, if any, as may be required to qualify the
[Notes/Certificates] for sale under the laws of such jurisdictions as you may
designate and will maintain such qualifications in effect so long as required
for the distribution of the [Notes/Certificates]; provided, however, that the
Company shall
7
<PAGE> 8
not be required to qualify to do business in any jurisdiction where it is not
now qualified or to take any action that would subject it to general or
unlimited service of process in any jurisdiction where it is not now subject to
such service of process.
(f) The Company will pay all costs and expenses in connection with
the transactions herein contemplated, including, but not limited to, the fees
and disbursements of its counsel; the costs and expenses of printing (or
otherwise reproducing) and delivering the [Sale and Servicing Agreement, the
Indenture][Pooling and Servicing Agreement] and the [Notes/Certificates], the
fees, costs and expenses of the [Indenture Trustee, Owner Trustee and Co-Owner
Trustee][Trustee] (to the extent permitted under the [Sale and Servicing
Agreement][Pooling and Servicing Agreement], and except to the extent that
another party is obligated to pay such amounts thereunder); the fees and
disbursements of accountants for the Company; the costs and expenses in
connection with the qualification or exemption of the [Notes/Certificates] under
state securities or "blue sky" laws, including filing fees and reasonable fees
and disbursements of counsel in connection therewith, in connection with the
preparation of any blue sky survey and in connection with any determination of
the eligibility of the [Notes/Certificates] for investment by institutional
investors and the preparation of any legal investment survey; the expenses of
printing any such blue sky survey and legal investment survey; the cost and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including exhibits thereto), the Basic Prospectus, the
Preliminary Final Prospectus, if any, and the Final Prospectus, the preparation
and production of this Agreement and the delivery to you of such copies of each
Preliminary Final Prospectus, if any, and Final Prospectus as you may reasonably
request; and the fees of rating agencies.
(g) The Company will enter into the Other Agreements on or prior to
the Closing Date.
(h) The Company will file with the Commission within fifteen days
of the issuance of the [Notes/Certificates] a current report on Form 8-K setting
forth specific information concerning the [Notes/Certificates] and the Pool to
the extent that such information is not set forth in the Final Prospectus. The
Company will also file with the Commission a current report on Form 8-K setting
forth all Computational Materials, ABS Term Sheets and Collateral Term Sheets
(as each defined in Section 12 hereof) provided to the Company by any
Underwriter within the applicable time periods allotted for such filing pursuant
to the No-Action Letters (as defined in Section 12 hereof).
(i) In the event that an Underwriter must prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets pursuant to
Section 12(d), the Company shall file any corrected Computational Materials, ABS
Term Sheets or Collateral Term Sheets no later than two days following receipt
thereof.
6. Conditions to the Purchase of the [Notes/Certificates]. Your
obligation hereunder to purchase the [Notes/Certificates] shall be subject to
the accuracy of the representations and
8
<PAGE> 9
warranties on the part of the Company contained herein as of the date hereof, as
of the date of the effectiveness of any amendment to the Registration Statement
filed prior to the Closing Date and as of the Closing Date, to the accuracy of
the statements of the Company made in any certificates delivered pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective, and no
stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and not withdrawn and no
proceedings for that purpose shall have been instituted or threatened; and the
Final Prospectus shall have been filed or transmitted for filing with the
Commission in accordance with Rule 424 under the 1933 Act.
(b) The Company shall have delivered to you a certificate of the
Company, signed by the President or a vice president of the Company and dated
the Closing Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement, the Final Prospectus and this
Agreement and that: (i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects at and as of the
Closing Date with the same effect as if made on the Closing Date, (ii) the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date, (iii) no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened, and (iv) nothing has come to the attention of
the signer that would lead the signer to believe that the Final Prospectus
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) You shall have received from each of Gibson, Dunn & Crutcher
LLP and counsel for the Company, a favorable opinion, dated the Closing Date, to
the effect that:
(i) The Registration Statement has become effective under the
1933 Act; to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and not withdrawn, no proceedings for that purpose have been
instituted or threatened and not terminated; and the Registration
Statement, as of its effective date (other than the financial and
statistical information contained therein, as to which such counsel
need express no opinion), complied as to form in all material respects
with the applicable requirements of the 1933 Act and the rules and
regulations thereunder;
(ii) To the best knowledge of such counsel, there are no material
contracts, indentures or other documents of a character required to be
described or referred to in the Registration Statement or the Final
Prospectus or to be filed as exhibits to the Registration Statement
other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto; [and]
9
<PAGE> 10
(iii) This Agreement, the [Sale and Servicing Agreement][Pooling
and Servicing Agreement] and the [Administration Agreement] have been
duly authorized, executed and delivered by the Company and constitute
the legal, valid, binding and enforceable agreements of the Company,
subject, as to enforceability, to: (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights in general; (ii) general principles of equity regardless of
whether enforcement is considered in a proceeding in equity or at law;
[and
(iv) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and neither the Company nor the
Trust is required to be registered under the Investment Company Act.]
Such counsel shall also state that nothing has come to its
attention that would lead it to believe that the Registration Statement (other
than the financial and statistical information contained therein, as to which
such counsel need not express an opinion), at the time it became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(d) You shall have received from counsel for the Company, a
favorable opinion, dated the Closing Date, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of New
York and has all corporate power and authority necessary to own or hold
its properties and to conduct its business as now conducted by it and
to enter into and perform its obligations under this Agreement and the
Other Agreements;
(ii) To the best knowledge of such counsel, there are no actions,
proceedings or investigations pending or threatened against or
affecting the Company before or by any court, arbitrator,
administrative agency or other governmental authority reasonably likely
to be adversely determined that would materially and adversely affect
the ability of the Company to carry out the transactions contemplated
in this Agreement or the Other Agreements;
(iii) No consent, approval, authorization or order of, or filing or
registration with, any state or federal court or governmental agency or
body is required for the consummation by the Company of the
transactions contemplated herein, except such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase
and distribution of the [Notes/Certificates] and except any recordation
of the assignments of the Mortgage Loans to the [Owner] Trustee
pursuant to the [Sale and Servicing Agreement][Pooling and Servicing
Agreement] that have not yet been completed; and
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<PAGE> 11
(iv) The Company is not in violation of its certificate of
incorporation or by-laws or in default under any agreement, indenture
or instrument the effect of which violation or default would be
material to the Company, and neither the issuance and sale of the
[Notes/Certificates], nor the execution or delivery of or performance
under this Agreement or the Other Agreements, nor the consummation of
any other of the transactions contemplated herein or therein will
conflict with or result in a breach or violation of any term or
provision of, or constitute a default (or an event which with the
passing of time or notification, or both, would constitute a default)
under, the certificate of incorporation or by-laws of the Company, or,
to the knowledge of such counsel, any indenture or other agreement or
instrument to which the Company or any of its affiliates is a party or
by which it or any of them is bound, or any New York or federal statute
or regulation applicable to the Company or any of its affiliates or, to
the knowledge of such counsel, any order of any New York or federal
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Company or any of its affiliates.
[(v) the direction by the Company to the Trustee to execute,
authenticate and deliver the Certificates has been duly authorized by
the Trust, and the Certificates, when executed and authenticated in the
manner contemplated in the Pooling and Servicing Agreement, will be
validly issued and outstanding and entitled to the benefits of such
agreement.]
With respect to the opinions in (c) and (d) above, such counsel
may: (1) express its reliance as to factual matters on the representations and
warranties made by, and on certificates or other documents furnished by officers
of, the parties to this Agreement and the Other Agreements; (2) assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Company; (3) qualify such
opinion only as to the federal laws of the United States of America and the laws
of the State of New York; and (4) to the extent necessary, rely as to the laws
of states, other than those specified in clause (3), on the opinion of local
counsel. Such counsel shall also confirm that you may rely, on and as of the
Closing Date, on any opinion or opinions of such counsel submitted to the rating
agency or agencies rating the [Notes/Certificates] as if addressed to you and
dated the Closing Date.
(e) You shall receive from KPMG Peat Marwick, certified public
accountants, one or more letters, dated the date of the Final Prospectus and
satisfactory in form and substance to you and your counsel, to the effect that
such accountants have performed certain specified procedures as a result of
which they determined that certain information of an accounting, financial or
statistical nature set forth in the Prospectus Supplement under the caption "The
Mortgage Pool" agrees with the general accounting records of the Company.
(f) You shall have received from each of Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc. ("Standard and Poor's"),
and Duff & Phelps Credit Rating Co. ("Duff & Phelps") [Add or substitute other
ratings agencies as appropriate] a rating letter assigning a rating of "___" to
the Class A-[ ] [Notes/Certificates][Add additional classes of
11
<PAGE> 12
Notes/Certificates as applicable] and a rating of "___" by Standard & Poor's and
"___" by Duff & Phelps to the Class [] [Notes/Certificates], which rating shall
not have been withdrawn.
[(g) You shall have received from counsel for the Owner Trustee a
favorable opinion, dated the Closing Date, in form and substance satisfactory to
you and your counsel, to the effect that:
(i) the Indenture and the Trust Agreement have been duly
authorized, executed and delivered by the Owner Trustee and constitute
legal, valid, binding and enforceable agreements of the Owner Trustee,
subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights in general and by general principles of equity regardless of
whether enforcement is considered in a proceeding in equity or at law,
and as to such other matters as may be agreed upon by you and the Owner
Trustee; and
(ii) the direction by the Trust to the Indenture Trustee to
execute, authenticate and deliver the Notes has been duly authorized by
the Trust, and the Notes, when executed and authenticated in the manner
contemplated in the Indenture, will be validly issued and outstanding
and entitled to the benefits of the Indenture.]
[(g) You shall have received from counsel for the Trustee a
favorable opinion, dated the Closing Date, in form and substance satisfactory to
you and your counsel, to the effect that the Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Owner Trustee and
constitutes the legal, valid, binding and enforceable agreement of the Trustee,
subject, as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights in general and by
general principles of equity regardless of whether enforcement is considered in
a proceeding in equity or at law, and as to such other matters as may be agreed
upon by you and the Trustee.]
[(h) You shall have received from counsel for the Co-Owner Trustee
a favorable opinion, dated the Closing Date, in form and substance satisfactory
to you and your counsel, to the effect that the Sale and Servicing Agreement and
the Trust Agreement have been duly authorized, executed and delivered by the
Co-Owner Trustee and constitute legal, valid, binding and enforceable agreements
of the Co-Owner Trustee, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights in general and by general principles of equity regardless of
whether enforcement is considered in a proceeding in equity or at law, and as to
such other matters as may be agreed upon by you and the Co-Owner Trustee.]
[(i) You shall have received from counsel for the Indenture Trustee
a favorable opinion, dated the Closing Date, in form and substance satisfactory
to you and your counsel, to the effect that the Indenture has been duly
authorized, executed and delivered by the Indenture Trustee and constitutes
legal, valid, binding and enforceable agreements of such Indenture Trustee,
subject,
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<PAGE> 13
as to enforceability, to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights in general and by general
principles of equity regardless of whether enforcement is considered in a
proceeding in equity or at law, and as to such other matters as may be agreed
upon by you and the Indenture Trustee.]
[(j) You shall have received from counsel for the Transferor, a
favorable opinion, dated the Closing Date, in form and substance satisfactory to
you and your counsel to the effect that, among other things, the Sale and
Servicing Agreement, the Trust Agreement, Loan Sale Agreement and the
Administration Agreement have each been duly authorized, executed and delivered
by the Transferor and constitute the legal, valid, binding and enforceable
agreements of the Transferor, subject, as to enforceability, to: (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights in general; (ii) general principles of equity regardless of
whether enforcement is considered in a proceeding in equity or at law; (iii)
public policy considerations underlying the securities laws, to the extent that
such public policy considerations limit the enforceability of those provisions
of the Loan Sale Agreement that purport to provide indemnification from
securities law liabilities; and (iv) such other matters as may be agreed upon by
you and the Transferor.]
[(k)/(j)] You shall have received such further information,
certificates, documents and opinions as you may reasonably have requested not
less than three business days prior to the Closing Date.
[(l)/(k)] All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall be
satisfactory in form and substance to you and your counsel, and you and such
counsel shall have received such information, certificates and documents as you
or they may have reasonably requested.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
if the Company is in breach of any covenants or agreements contained herein or
if any of the opinions and certificates referred to above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to you and your counsel, this Agreement and all your obligations
hereunder may be canceled by you at, or at any time prior to, the Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone or facsimile transmission confirmed in writing.
7. Indemnification and Contribution. The Company agrees with you that:
(a) The Company will indemnify and hold harmless the Underwriters
and each person who controls any of the Underwriters within the meaning of
either the 1933 Act or the 1934 Act against any and all losses, claims, damages
or liabilities, joint or several, to which you or any of them may become subject
under the 1933 Act, the 1934 Act, or other federal or state law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue
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<PAGE> 14
statement of a material fact contained in the Registration Statement or in any
amendment thereof, or the omission or alleged omission to state in the
Registration Statement or any amendment thereof a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(y) any untrue statement or alleged untrue statement of a material fact
contained in the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, or the omission or alleged omission to state in the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus or in any
amendment or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by it in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that (i) the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company as herein stated by you
specifically for use in connection with the preparation thereof and in the
Investor Materials other than a misstatement or omission arising from a
misstatement or omission in the information provided by the Company concerning
the assets of the Trust (such information, the "Company Provided Information"),
and (ii) such indemnity with respect to the Basic Prospectus or any Preliminary
Final Prospectus shall not inure to you (or any person controlling you) from
whom the person asserting any such loss, claim, damage or liability purchased
the [Notes/Certificates] that are the subject thereof if such person did not
receive a copy of the Final Prospectus at or prior to the confirmation of the
sale of such [Notes/Certificates] to such person in any case where such delivery
is required by the 1933 Act and the untrue statement or omission of a material
fact contained in the Basic Prospectus or in any such Preliminary Final
Prospectus was corrected in the Final Prospectus. This indemnity will be in
addition to any liability that the Company may otherwise have.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person, if any, who
controls the Company within the meaning of either the 1933 Act or the 1934 Act,
to the same extent as the foregoing indemnity from the Company to you, but only
with reference to written information furnished to the Company as herein stated
by you specifically for use in connection with the preparation of the documents
referred to in the foregoing indemnity or in the Investor Materials (as defined
below) except to the extent that such misstatement or omission arises from a
misstatement or omission in the Company Provided Information (as defined below).
This indemnity will be in addition to any liability that you may otherwise have.
The Company and you each acknowledge that the statements set forth in the first
sentence of each of the [INSERT APPROPRIATE SECTION REFERENCES] in the
Prospectus Supplement, constitute the only information furnished in writing by
you for inclusion in the documents referred to in the foregoing indemnity, and
you confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in
14
<PAGE> 15
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any liability
that it may have to any indemnified party otherwise than under this Section 7.
In case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent that it may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided, that
if the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
elect to retain separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties; provided, further, that the Company shall not, in connection with any
one such action, or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such indemnified parties, such firm
to be designated for all such indemnified parties in writing by a majority of
such indemnified parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, unless the indemnified
party shall have employed separate counsel in connection with the assertion of
legal defenses in accordance with the provisos to the immediately preceding
sentence and, in such case, shall only be liable in respect of such counsel.
(d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable to an indemnified party under this Section 7, then you
and the Company shall contribute to the amount paid or payable by such
indemnified party as a result of the aggregate losses, claims, damages and
liabilities referred to in paragraph (a) or (b) above, in such proportion so
that (i) you are responsible for the lesser of (1) 0.35% thereof and (2) 0.35%
of the sum of the Pool Balance and the Pre-Funded Amount (each, as set forth on
Schedule I hereto) and (ii) the Company is responsible for the balance; provided
that no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls any of the Underwriters within the
meaning of either the 1933 Act or the 1934 Act shall have the same rights to
contribution as do the Underwriters and each person, if any, who controls the
Company within the meaning of either the 1933 Act or the 1934 Act, each officer
of the Company who shall have executed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this paragraph (d), notify such party or parties from whom
15
<PAGE> 16
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
paragraph (d).
8. Termination. (a) This Agreement shall be subject to termination in
your absolute discretion, by notice given to the Company prior to delivery of
and payment for the [Notes/Certificates], if prior to such time (i) trading of
securities generally on the New York Stock Exchange or the American Stock
Exchange shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or New York State authorities or (iii) there shall have
occurred any material outbreak or declaration of hostilities or other calamity
or crisis the effect of which on the financial markets of the United States is
such as to make it, in your reasonable judgment, impracticable to market the
[Notes/Certificates] on the terms specified herein.
(b) If the sale of the [Notes/Certificates] shall not be
consummated because any condition to your obligations set forth in Section 6
hereof is not satisfied or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of your default, the Company shall reimburse you for
the reasonable fees and expenses of your counsel and for such other
out-of-pocket expenses as shall have been incurred by you in connection with
this Agreement and the proposed purchase of the [Notes/Certificates], and upon
demand the Company shall pay the full amount thereof to you.
(c) This Agreement will survive delivery of and payment for the
[Notes/Certificates]. The provisions of Section 7 and this Section 8(c) shall
survive the termination or cancellation of this Agreement.
9. Notices. All communications hereunder will be in writing and will
be effective, if to the Underwriters, only on receipt by you and, if to the
Company, only on receipt by the Company. Communications, if sent to the you,
will be mailed, delivered or transmitted by facsimile and confirmed to [Insert
name and address for each of the Representatives]; or, if sent to the Company,
will be mailed, delivered or transmitted by facsimile and confirmed to it at 565
Taxter Road, Elmsford, NY 10523, Attention: Jonah L. Goldstein.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and their
successors and assigns, and no other person will have any right or obligation
hereunder.
11. Applicable Law; Counterparts. This Agreement will be governed by
and construed in accordance with the laws of the State of New York. This
Agreement may be executed in any number of counterparts, each of which shall for
all purposes be deemed to be an original and all of which shall together
constitute but one and the same instrument.
16
<PAGE> 17
12. Investor Information. Each Underwriter may prepare and provide to
prospective investors certain Computational Materials, ABS Term Sheets or
Collateral Term Sheets (collectively, the "Investor Materials") in connection
with its offering of the [Notes/Certificates], subject to the following
conditions:
(a) Such Underwriter shall comply with the requirements of the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder, Peabody
Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and Kidder
Structured Asset Corporation, as made applicable to other issuers and
underwriters by the Commission in response to the request of the Public
Securities Association dated May 24, 1994 (collectively, the "Kidder/PSA
Letter"), and the requirements of the No-Action Letter of February 17, 1995
issued by the Commission to the Public Securities Association (the "PSA Letter",
together with the Kidder/PSA Letter, the "No-Action Letters").
(b) For purposes hereof, "Computational Materials" shall have the
meaning given such term in the No-Action Letters, but shall include only those
Computational Materials that have been prepared or delivered to prospective
investors by any Underwriter. For purposes hereof, "ABS Term Sheets" and
"Collateral Term Sheets" shall have the meanings given such terms in the PSA
Letter but shall include only those ABS Term Sheets or Collateral Term Sheets
that have been prepared or delivered to prospective investors by any
Underwriter.
(c) Each Underwriter shall provide to the Company any Computational
Materials, ABS Term Sheets or Collateral Term Sheets which are provided to
investors no later than the date preceding the date such Computational
Materials, ABS Term Sheets or Collateral Term Sheets are required to be filed
pursuant to the applicable No-Action Letters. Each Underwriter may provide
copies of the foregoing in a consolidated or aggregated form including all
information required to be filed.
(d) In the event that the Company or any Underwriter discovers an
error in the Computational Materials, ABS Term Sheets or Collateral Term Sheets,
the Underwriter that prepared such material shall prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets and deliver
them to the Company for filing pursuant to Section 5(i).
17
<PAGE> 18
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
CITYSCAPE CORP.
By: ______________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted by the
undersigned on behalf of the
Underwriters as of the date first above
written.
[NAME OF REPRESENTATIVE]
By: ________________________________
Name:
Title:
[NAME OF REPRESENTATIVE]
By: ________________________________
Name:
Title:
<PAGE> 19
SCHEDULE I
As used in this Agreement, the term "Registration Statement" refers to the
Registration Statement on Form S-3 (File No. 333-4387 filed on May 22, 1996, as
amended, and declared effective by the Commission on ___________ __, 1997.
Closing Date: __________ __, 1997.
Title of [Notes/Certificates]: Cityscape Loan Trust 199_-_, Mortgage Loan
Asset-Backed [Notes/Certificates], Class A-[ ] [Insert additional Classes of
Notes/Certificates as applicable] and Class [] [Notes/Certificates].
Pool Balance: $__________.
Pre-Funded Amount: $__________.
Cut-off Date: _________ __, 199_.
<TABLE>
<CAPTION>
Original
Security
Principal
Designation Balance
- ----------- ---------
<S> <C>
Class A-[ ] [Note/Certificate] $
-----------
[Insert additional Classes of Notes/Certificates as applicable]
Class [] [Note/Certificate] $
-----------
</TABLE>
Purchase Terms of Notes: Subject to the terms and conditions set forth in this
Agreement, the Underwriters agree to severally, and not jointly, purchase from
the Company the respective principal amounts of Class A-[ ] [Notes/Certificates]
[Insert additional Classes of Notes/Certificates as applicable] and Class []
[Notes/Certificates] set forth below at a purchase price of _____% [Insert
additional discounted prices as applicable] and _____% of the principal amount
of each of the Class A-[ ] [Notes/Certificates] [Insert additional Classes of
Notes/Certificates as applicable] and Class [] [Notes/Certificates],
respectively, plus, in each case, accrued interest from ____ __, 199_ to the
date of payment and delivery:
<PAGE> 20
<TABLE>
<CAPTION>
Principal Amount of [Notes/Certificates]
---------------------------------------------------------------------------------------------------
[Add additional
Class A-[ ] classes of Class []
-------------------- ------------------- --------------- ----------------- ------------------
Underwriter [Notes/Certificates] Notes/Certificates [Note/Certificate]
- ----------- as applicable]
-------------------- -------------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
[Name of Underwriter].....
[Name of Underwriter].....
</TABLE>
20
<PAGE> 1
EXHIBIT 4.1
===========================================================================
CITYSCAPE CORP.
as Seller, Servicer and Claims Administrator
and
---------------------------------
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of __________ __, 199_
Cityscape Loan Trust 199_-__
Pass-Through Certificates 199__-__
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENT.....................................................1
ARTICLE ONE DEFINITIONS...........................................2
Section 1.01. Definitions...........................................2
Section 1.02. Interest Calculations................................40
Section 1.03. Determination of Material Adverse Effect.............41
ARTICLE TWO CONVEYANCE OF THE TRUST; ORIGINAL ISSUANCE OF
CERTIFICATES........................................41
Section 2.01. Conveyance of the Trust..............................41
Section 2.02. Conveyance of the Subsequent Mortgage Loans..........45
Section 2.03. Acceptance by Trustee; Repurchase or
Substitution of Mortgage Loans......................49
Section 2.04. Representations and Warranties Regarding the
Seller, Servicer and Claims Administrator...........53
Section 2.05. Representations and Warranties of the Seller
Regarding the Mortgage Loans........................56
Section 2.06. Execution and Authentication of Certificates.........70
Section 2.07. Designation of Certificates; Designation of
Startup Day.........................................70
ARTICLE THREE ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS; CERTIFICATE ACCOUNT..........................71
Section 3.01. Administration of the Trust; Servicing of the
Mortgage Loans......................................71
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.......................................75
Section 3.03. Termination of Sub-Servicing Agreements..............76
i
<PAGE> 3
Section 3.04. Liability of the Servicer............................76
Section 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders..................................76
Section 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee...............................77
Section 3.07. Collection of Certain Mortgage Loan Payments.........77
Section 3.08. Sub-Servicing Accounts...............................78
Section 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts...........................78
Section 3.10. Collection Account...................................79
Section 3.11. Withdrawals from the Collection Account; the
Certificate Account.................................81
Section 3.12. Investment of Funds in the Accounts..................83
Section 3.13. Maintenance of Hazard Insurance and Errors
and Omissions and Fidelity Coverage.................84
Section 3.14. Enforcement of Due-On-Sale Clauses;
Assumption Agreements...............................86
Section 3.15. Realization Upon Defaulted Mortgage Loans............87
Section 3.16. Trustee to Cooperate; Release of Mortgage
Files...............................................89
Section 3.17. Servicing Compensation...............................90
Section 3.18. Reports to the Trustee; Collection Account
Statement...........................................91
Section 3.19. Statement as to Compliance and Financial
Statements..........................................91
Section 3.20. Independent Public Accountants' Servicing
Report..............................................92
Section 3.21. Access to Certain Documentation......................92
Section 3.22. Title, Management and Disposition of REO
Property............................................93
Section 3.23. Compensating Interest................................95
ii
<PAGE> 4
Section 3.24. Superior Liens.......................................95
Section 3.25. Indemnification......................................96
Section 3.26. Certain Procedures Relating to Successor
Sub-Servicers and Successor Servicers...............97
Section 3.27. Additional Servicing Responsibilities for the
Adjustable Rate Mortgage Loans and the FHA
Loans...............................................98
Section 3.28. Pre-Funding Account..................................98
Section 3.29. Capitalized Interest Account.........................99
Section 3.30. Establishment of FHA Premium Account;
Deposits in FHA Premium Account; Permitted
Withdrawals from FHA Premium Account...............100
Section 3.31. Duties of the Claims Administrator..................101
Section 3.32. Trustee Not to Hold Other FHA Insured Title I
Loans..............................................103
ARTICLE FOUR FLOW OF FUNDS.......................................103
Section 4.01. Establishment of Accounts...........................103
[SECTION 4.02. THE CERTIFICATE INSURANCE POLICY]..................103
Section 4.03. Deposits to, and Transfers Among, the Accounts......106
Section 4.04. Flow of Funds and Distributions.....................106
Section 4.05. Statements to Certificateholders....................110
Section 4.06. Remittance Reports; Delinquency Advances by
the Servicer and Insurance Claims..................114
Section 4.07. Compliance with Withholding Requirements............115
Section 4.08. Excess Claim Amounts................................115
ARTICLE FIVE THE CERTIFICATES....................................116
Section 5.01. The Certificates....................................116
iii
<PAGE> 5
Section 5.02. Registration of Transfer and Exchange of
Certificate........................................117
Section 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.......................................120
Section 5.04. Persons Deemed Certificateholders...................120
Section 5.05. Book-Entry Certificates.............................120
Section 5.06. Notices to Depositary...............................121
Section 5.07. Definitive Certificates.............................122
ARTICLE SIX THE SELLER, THE SERVICER AND THE CLAIMS
ADMINISTRATOR......................................122
Section 6.01. Liability of the Seller, the Claims
Administrator and the Servicer.....................122
Section 6.02. Merger or Consolidation of the Seller, the
Claims Administrator or the Servicer...............122
Section 6.03. Limitation on Liability of the Seller, the
Servicer and Others................................123
Section 6.04. Limitation on Resignation of the Servicer or
the Claims Administrator; No Assignment or
Delegation of Duties by Servicer...................124
Section 6.05. Rights of the Seller, the Certificateholders
and Others in Respect of the Servicer..............125
Section 6.06. Eligibility Requirements for Servicer...............125
ARTICLE SEVEN DEFAULT.............................................126
Section 7.01. Events of Default...................................126
Section 7.02. Trustee to Act; Appointment of Successor............128
Section 7.03. Notification to Mortgagors and
Certificateholders.................................130
Section 7.04. Additional Remedies of Trustee Upon Event of
Default............................................130
Section 7.05. Waiver of Events of Default.........................131
iv
<PAGE> 6
ARTICLE EIGHT THE TRUSTEE.........................................131
Section 8.01. Duties of the Trustee...............................131
Section 8.02. Certain Matters Affecting the Trustee...............132
Section 8.03. Trustee Not Liable for Certificates or
Mortgage Loans.....................................134
Section 8.04. Trustee May Own Certificates........................134
Section 8.05. Expenses of Trustee.................................134
Section 8.06. Trustee Eligibility Requirements....................135
Section 8.07. Resignation and Removal of the Trustee..............135
Section 8.08. Successor Trustee...................................136
Section 8.09. Merger or Consolidation of Trustee..................137
Section 8.10. Appointment of Co-Trustee or Separate Trustee.......137
Section 8.11. Trustee Records.....................................138
Section 8.12. Appointment of Office or Agency.....................139
Section 8.13. Exercise of Trustee Powers by [CERTIFICATE
INSURER AND] Certificateholders....................139
[ARTICLE NINE CERTAIN MATTERS REGARDING THE CERTIFICATE
INSURER............................................139
SECTION 9.01. CERTAIN RIGHTS OF THE CERTIFICATE INSURER...........139
SECTION 9.02. TRUSTEE TO ACT SOLELY WITH CONSENT OF THE
CERTIFICATE INSURER................................140
SECTION 9.03. TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF
THE CERTIFICATE INSURER AND THE
CERTIFICATEHOLDERS.................................141
SECTION 9.04. EFFECT OF PAYMENTS BY THE CERTIFICATE
INSURER; SUBROGATION...............................141
SECTION 9.05. NOTICES TO THE CERTIFICATE INSURER..................142
SECTION 9.06. THIRD-PARTY BENEFICIARY............................142]
v
<PAGE> 7
ARTICLE TEN TERMINATION.........................................142
Section 10.01. Termination........................................142
Section 10.02. Additional Termination Requirements................145
ARTICLE ELEVEN MISCELLANEOUS PROVISIONS............................145
Section 11.01. Amendment..........................................145
Section 11.02. Recordation of Agreement...........................147
Section 11.03. Limitation on Rights of Certificateholders.........147
Section 11.04. Governing Law; Jurisdiction........................148
Section 11.05. Notices............................................148
Section 11.06. Severability of Provisions.........................149
Section 11.07. Article and Section References.....................149
Section 11.08. Notice to S&P and Moody's..........................149
Section 11.09. Further Assurances.................................150
Section 11.10. Benefits of Agreement..............................150
Section 11.11. Acts of Certificateholders.........................151
Section 11.12. Appointment of Tax Matters Person..................151
Section 11.13. Certificates Nonassessable and Fully Paid..........151
SCHEDULES
Schedule I List of Sub-Servicers
Schedule II Representations and Warranties of Seller
Regarding
Subsequent Mortgage Loans
EXHIBITS
Exhibit A Form of Class [A-__] Certificate
Exhibit B Form of Class R Certificate
vi
<PAGE> 8
Exhibit C-1 Pool I Mortgage Loan Schedule
Exhibit C-2 Pool II Mortgage Loan Schedule
Exhibit C-3 Pool III Mortgage Loan Schedule
Exhibit C-4 Pool IV Mortgage Loan Schedule
Exhibit D-1 Request for Release (Foreclosure)
Exhibit D-2 Request for Release (Paid-in-Full)
Exhibit E-1 Trustee's Acknowledgment of Receipt
Exhibit E-2 Form of Trustee's Certification
Exhibit E-3 Form of Trustee Report
Exhibit F Collection Account Certification
Exhibit G Form of Liquidation Report
Exhibit H Collection Account Activity Report
Exhibit I Form of Transfer Certificate
Exhibit J Form of Transfer Affidavit
Exhibit K Written Order to Authenticate Pursuant to
Section 5.01 of the Pooling and Servicing
Agreement
Exhibit L Seller's Underwriting Guidelines
Exhibit M Requests for Refunds and Expenses From the
Collection Account
Exhibit N Depository Agreement
Exhibit O Request for Release of Documents of 90 Day
Delinquent FHA Loans
Exhibit P Notice to Trustee
Exhibit Q Form of Subsequent Transfer Agreement
vii
<PAGE> 9
THIS POOLING AND SERVICING AGREEMENT, dated as of __________ __, 199_,
among CITYSCAPE CORP., a New York corporation, as seller (in such capacity, the
"Seller"), as servicer (in such capacity, together with permitted successors
hereunder, the "Servicer") and as claims administrator (in such capacity,
together with permitted successors hereunder, the "Claims Administrator"), and
_______________________, as trustee (the "Trustee"),
PRELIMINARY STATEMENT:
The Seller intends to sell the Certificates to be issued hereunder in
multiple Classes, which in the aggregate will evidence the entire beneficial
ownership interest in the Trust to be created hereunder, the primary assets of
which will be four separate cross-supported sub-trusts, each consisting of a
Pool of Mortgage Loans having the characteristics described herein, and amounts
on deposit in the Pre-Funding Account. As provided herein, the Trustee shall
elect or shall cause an election to be made that a portion of the segregated
pools of assets subject to this Agreement (including, without limitation, the
Mortgage Loans) be treated for federal income tax purposes as a real estate
mortgage investment conduit (a "REMIC").
The following table sets forth the Class designation, the pass-through
rate, the initial aggregate Loan Balance and the initial ratings given by the
Rating Agencies for each subclass of Certificates evidencing interests in the
Trust.
Original
Class Class __ Class __ Certificate Rating
Designation Pass-Through Rate Principal Balance [ ] - [ ]
----------- ----------------- -------------------- ---------
Class [A-__] ________ $____ --
Class R ________ $____ --
As and to the extent provided herein, with respect to the Pool I
Certificates, the Class [A-__], Class [A-__] and Class [A-__] Certificates will
be subordinate to the Class [A-___] Certificates; with respect to the Pool II
Certificates, the Class [A-__] Certificates will be subordinate to the Class
[A-__] Certificates; and with respect to the Pool III Certificates, the Class
[A-__], Class [A-__] and Class [A-__] Certificates will be subordinate to the
Class [A-__] Certificates.
The Class [LIST CLASSES] Certificates will evidence "regular interests" in
the REMIC created hereunder. The sole class of "residual interests" in the REMIC
created hereunder will be evidenced by the Class R Certificates.
<PAGE> 10
As of the close of business on the Cut-off Date, the Mortgage Loans had an
aggregate Loan Balance, after application of all payments of principal due on or
before such date, whether or not received, equal to $ .
W I T N E S S E T H T H A T :
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing residential mortgage loans
held for its own account, giving due consideration to standards of practice of
prudent mortgage lenders and loan servicers that originate and service mortgage
loans comparable to the Mortgage Loans and to the reliance placed by the
Certificateholders [AND THE CERTIFICATE INSURER] on the Servicer for the
servicing of the Mortgage Loans (or, in the case of FHA Loans, in accordance
with accepted Title I servicing practices) but without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or
any affiliate of the Servicer or any Sub-Servicer may have with the
related Mortgagor;
(ii) the ownership of any Certificate by the Servicer or any
affiliate of the Servicer;
(iii) the Servicer's obligation to make Delinquency Advances
or Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Account: Any of the Collection Account, the Certificate Account,
Distribution Account, the Pre-Funding Account, the FHA Premium Account,
the Servicing Account, the Capitalized Interest Account and Policy
Payments Account.
Addition Notice: With respect to the transfer of Subsequent Mortgage Loans
to the Trust pursuant to Section 2.02 of this Agreement, notice of the Seller's
designation of
2
<PAGE> 11
Subsequent Mortgage Loans to be sold to the Trust and the aggregate Subsequent
Cut-off Date Principal Balance of such Subsequent Mortgage Loans, which notice
shall be given to the Trustee [AND TO THE CERTIFICATE INSURER] not later than
one Business Day prior to the related Subsequent Transfer Date.
Additional Servicing Compensation: As defined in Section 3.17.
Additional Subsequent Purchase Price: As to the last Subsequent Transfer
Date occurring during the Funding Period and with respect to the appropriate
Pool, the amount, if any, specified by [THE CERTIFICATE INSURER] in connection
with its approval of the Subsequent Mortgage Loans pursuant to Section 2.02
using criteria established on or before the Closing Date.
Adjustable Rate Mortgage Loan: Any Mortgage Loan with a Mortgage Loan Rate
that is adjustable at regular periodic intervals, based on the Index plus the
related Gross Margin subject to any Minimum Rate, Maximum Rate and any periodic
limitations on adjustment from time to time, all as set forth in the Mortgage
Loan Schedule. All Pool II Mortgage Loans and Pool IV Mortgage Loans are
Adjustable Rate Mortgage Loans.
Adjustment Date: With respect to any Adjustable Rate Mortgage Loan, the
date on which a change to the Mortgage Loan Rate on a Mortgage Loan becomes
effective.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings corresponding to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Appraised Value: With respect to any Mortgaged Property, the value thereof
as determined by an independent appraisal made at the time of the origination of
the related Mortgage Loan; except that, with respect to any Mortgage Loan that
is a purchase money mortgage loan, the lesser of (i) the value thereof as
determined by an independent appraisal made at the time of the origination of
such Mortgage Loan, and (ii) the sales price of the related Mortgaged Property.
Assignment: An assignment of Mortgage, notice of transfer or equivalent
instrument, in recordable form, which is sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
3
<PAGE> 12
Available Funds: As defined in Section 4.02(a) hereof.
Available Funds Shortfall: As defined in Section 4.02(a) hereof.
Balloon Loan: Any Mortgage Loan that provided on the date of origination
for scheduled monthly payments in level amounts substantially lower than the
amount of the final scheduled payment.
Balloon Payment: With respect to any Balloon Loan, as of any date
of determination, the Monthly Payment payable on the stated maturity date
of such Mortgage Loan.
Bankruptcy Code: The Bankruptcy Code, as amended (Title 11 to the
United States Code).
BIF: The Bank Insurance Fund of the FDIC.
Book-Entry Certificate: Any Certificate registered in the name of the
Depositary or its nominee, ownership of which is reflected on the books of the
Depositary or on the books of a Person maintaining an account with such
Depositary (directly or as an indirect participant in accordance with the rules
of such Depositary).
Business Day: Any day other than (a) a Saturday or a Sunday or (b) a day
on which banking institutions in the State of New York are required or
authorized by law, executive order or governmental decree to be closed.
Capitalized Interest Account: The segregated account, which shall be an
Eligible Account, established and maintained pursuant to Section 3.29 and
entitled "_____________________________, as Trustee for Cityscape Loan Trust
199__-__ Pass-Through Certificates 199__-__, Capitalized Interest Account."
Capitalized Interest Account Deposit: $_______________.
Carry-Forward Amount: With respect to any Pool as of any Distribution
Date, equals the sum of (i) the amount, if any, by which (a) the Insured
Distribution Amount with respect to such Pool for the immediately preceding
Distribution Date exceeded (b) the amount actually distributed to the Holders of
the related Classes of Class [A] Certificates on such Distribution Date in
respect of such Insured Distribution Amount (including, without limitation, any
Insured Payments with respect to such Pool) and (ii) 30 days' interest on such
amount in clause (i) at the Pass-Through Rate for such Distribution (or in the
case of Pool II or Pool IV, interest for the actual number of days in the
related Due Period).
Certificate: Any Class [A] Certificate or Class R Certificate.
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<PAGE> 13
Certificate Account: The segregated account or accounts, which shall be an
Eligible Account or Accounts, established and maintained pursuant to Section
4.01 with respect to each Pool and entitled "_____________________, as Trustee
for Cityscape Loan Trust 199__-__ Pass-Through Certificates 199__-__, Pool I
[POOL II, POOL III OR POOL IV, AS APPLICABLE] Certificate Account."
[CERTIFICATE INSURANCE POLICY: THE FINANCIAL GUARANTY INSURANCE
POLICY NO. ________, DATED THE STARTUP DATE, ISSUED BY THE CERTIFICATE
INSURER TO THE TRUSTEE FOR THE BENEFIT OF THE HOLDERS OF THE CLASS [A]
CERTIFICATES.]
[CERTIFICATE INSURER: [INSERT NAME AND STATE OF BUSINESS], OR ANY
SUCCESSOR THEREOF, AS ISSUER OF THE CERTIFICATE INSURANCE POLICY.]
[CERTIFICATE INSURER DEFAULT: THE EXISTENCE AND CONTINUANCE OF ANY
OF THE FOLLOWING:
(a) THE CERTIFICATE INSURER FAILS TO MAKE A PAYMENT REQUIRED
UNDER THE CERTIFICATE INSURANCE POLICY IN ACCORDANCE WITH ITS TERMS; OR
(b) (i)...THE ENTRY BY A COURT HAVING JURISDICTION IN THE PREMISES OF (A)
A DECREE OR ORDER FOR RELIEF IN RESPECT OF THE CERTIFICATE INSURER IN AN
INVOLUNTARY CASE OR PROCEEDING UNDER ANY APPLICABLE UNITED STATES FEDERAL OR
STATE BANKRUPTCY, INSOLVENCY, REHABILITATION, REORGANIZATION OR OTHER SIMILAR
LAW OR (B) A DECREE OR ORDER ADJUDGING THE CERTIFICATE INSURER AS BANKRUPT OR
INSOLVENT, OR APPROVING AS PROPERLY FILED A PETITION SEEKING REORGANIZING,
REHABILITATION, ARRANGEMENT, ADJUSTMENT OR COMPOSITION OF OR IN RESPECT OF THE
CERTIFICATE INSURER UNDER ANY APPLICABLE UNITED STATES FEDERAL OR STATE LAW, OR
APPOINTING A CUSTODIAN, RECEIVER, LIQUIDATOR, REHABILITATOR, ASSIGNEE, TRUSTEE,
SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE CERTIFICATE INSURER OR OF ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING-UP OR LIQUIDATION OF
ITS AFFAIRS, AND THE CONTINUANCE OF ANY SUCH DECREE OR ORDER FOR RELIEF OR ANY
SUCH OTHER DECREE OR ORDER UNSTAYED AND IN EFFECT FOR A PERIOD OF 60 CONSECUTIVE
DAYS; OR
(ii) THE COMMENCEMENT BY THE CERTIFICATE INSURER OF A VOLUNTARY CASE OR
PROCEEDING UNDER ANY APPLICABLE UNITED STATES FEDERAL OR STATE BANKRUPTCY,
INSOLVENCY, REORGANIZATION OR OTHER SIMILAR LAW OR OF ANY OTHER CASE OR
PROCEEDING TO BE ADJUDICATED AS BANKRUPT OR INSOLVENT, OR THE CONSENT OF THE
CERTIFICATE INSURER TO THE ENTRY OF A DECREE OR ORDER FOR RELIEF IN RESPECT OF
THE CERTIFICATE INSURER IN AN INVOLUNTARY CASE OR PROCEEDING UNDER ANY
APPLICABLE UNITED STATES FEDERAL OR STATE BANKRUPTCY, INSOLVENCY CASE OR
PROCEEDING AGAINST THE CERTIFICATE INSURER, OR THE FILING BY THE CERTIFICATE
INSURER OR THE CONSENT OF THE CERTIFICATE INSURER TO THE FILING OF SUCH PETITION
OR TO THE APPOINTMENT OF OR THE TAKING POSSESSION BY A CUSTODIAN, RECEIVER,
LIQUIDATOR, ASSIGNEE, TRUSTEE, SEQUESTRATOR OR SIMILAR OFFICIAL OF THE
CERTIFICATE INSURER OR OF ANY SUBSTANTIAL
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<PAGE> 14
PART OF ITS PROPERTY, OR THE FAILURE BY THE CERTIFICATE INSURER TO PAY DEBTS
GENERALLY AS THEY BECOME DUE, OR THE ADMISSION BY THE CERTIFICATE INSURER IN
WRITING OF ITS INABILITY TO PAY ITS DEBTS GENERALLY AS THEY BECOME DUE, OR THE
TAKING OF CORPORATE ACTION BY THE CERTIFICATE INSURER IN FURTHERANCE OF ANY SUCH
ACTION.]
Certificate Owner: With respect to any Book-Entry Certificate, the Person
who is the beneficial owner thereof.
Certificate Principal Balance: With respect to the Class [LIST
SUBCLASSES] Certificates, the Class [LIST SUBCLASSES] Certificate
Principal Balance.
Certificate Register: The register maintained pursuant to Section 5.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that a Disqualified Organization
or non-U.S. Person shall not be a Holder of a Class R Certificate for any
purpose hereof.
Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Claim: An insurance claim submitted to the FHA by the Claims Administrator
with respect to a 90 Day Delinquent FHA Loan pursuant to the FHA Regulations.
Claims Administrator: The Servicer, acting in the capacity of Claims
Administrator appointed as herein provided.
Class: Collectively, Certificates having the same priority of payment and
bearing the same class designation and whose form is identical except for
variation in the Percentage Interest evidenced thereby.
Class [A] Certificates: Any one of the Class [LIST SUBCLASSES]
Certificate.
Class [A] Certificate Principal Balance: As of any date of determination,
the Original Class [A] Certificate Principal Balance less any amounts actually
distributed with respect to the Principal Distribution Amount pursuant to
Section 4.04(b) hereof on all preceding Distribution Dates.
Class [A] Certificateholder: Any holder of a Class [A] Certificate.
Class [A] Distribution Amount: As of any Distribution Date and with
respect to any Pool, the sum of (i) the Interest Distribution Amount with
respect to such Pool and (ii) the Principal Distribution Amount for such Pool
and Distribution Date.
Class Certificate Principal Balance: With respect to any Class of Class
[A] Certificates and any Determination Date, the Original Class Certificate
Principal Balance of
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<PAGE> 15
such Class, less any amounts actually distributed with respect to such Class
from the Principal Distribution Amount (including that portion of Insured
Payments, if any, made in respect of principal and, with respect to Pool III
Certificates, any FHA Payments made in respect of principal) pursuant to Section
4.04(b) hereof on all preceding Distribution Dates.
Class R Certificate: Any one of the Certificates designated on the face
thereof as a Class R Certificate, substantially in the form annexed hereto as
Exhibit B, executed, authenticated and delivered by the Trustee, representing
the right to distributions as set forth herein and evidencing an interest
designated as the "residual interest" in the Trust for the purposes of the REMIC
Provisions.
Closing Date: __________ __, 199_.
Closing Date Deposit: The aggregate amount deposited by the Seller in the
Collection Account on or prior to the Closing Date pursuant to Section 2.01,
which amount is equal to [30] days of interest on the principal balance of each
Mortgage Loan that is included in the Trust as of the Cut-off Date and does not
have a Monthly Payment due in the Due Period relating to the __________ 199_
Distribution Date (except that, with respect to Mortgage Loans in Pool II or
Pool IV, the Closing Date Deposit shall reflect __ days of interest on the
principal balance of each such Mortgage Loan not having a Monthly Mortgage
Payment due in the Due Period relating to the _______ 199_ Distribution Date),
at a per annum rate equal to the Mortgage Loan Rate for each such Mortgage Loan,
net of the applicable Servicing Fee Rate.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Collection Account: The segregated account or accounts, each of which
shall at all times be an Eligible Account, established and maintained pursuant
to Section 3.10(a) and entitled "[SERVICER], in trust for the benefit of Holders
of Cityscape Loan Trust 199__-__ Pass-Through Certificates 199__-__, Collection
Account." References herein to the Collection Account shall include any
Sub-Servicing Account as the context requires.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the Loan Balance
of the related Mortgage Loan on the date of origination of such Mortgage Loan or
(in the event the Appraised Value for the related Mortgaged Property is based on
an appraisal conducted at the time of the purchase by the Seller of such
Mortgage Loan) the Loan Balance of such Mortgage Loan at the time of such
purchase, plus, in the case of a Junior Mortgage Loan, the outstanding principal
balance of the related Senior Lien on such date of origination or purchase, as
the case may be, of the Mortgage Loan, and the denominator of which is the
Appraised Value of the related Mortgaged Property.
Company: Cityscape Corp., a Delaware corporation.
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<PAGE> 16
Compensating Interest: With respect to any Deposit Date, for each Mortgage
Loan that was the subject during the related Due Period of a Principal
Prepayment an amount equal to the excess, if any, of (i) a full month's interest
on the amount of such Principal Prepayment at a per annum rate equal to the
Mortgage Loan Rate (or at such lower rate as may be in effect for such Mortgage
Loan pursuant to application of the Civil Relief Act) minus the Servicing Fee
Rate over (ii) the amount of interest actually remitted by the Mortgagor in
connection with such Principal Prepayment less the Servicing Fee for such
Mortgage Loan in such month.
Conventional Home Improvement Loan: A Pool III Home Improvement Loan that
is not an FHA Loan.
Corporate Trust Office: The principal corporate trust office of the
Trustee at which at any particular time its corporate trust business with
respect to the Certificates shall be administered, which office at the date of
the execution of this instrument is located at __________, __________,
_________, Attention: _________________ or at such other address as the Trustee
may designate from time to time by notice to the Certificateholders, the Seller,
the Servicer [AND THE CERTIFICATE INSURER].
Cram Down Loss: With respect to a Mortgage Loan, the amount of reduction
of a Loan Balance or the Mortgage Loan Rate (or both) of a Mortgage Loan
resulting from an order being issued by a court of appropriate jurisdiction in
an insolvency proceeding. A "Cram Down Loss" shall be deemed to have occurred on
the date of issuance of such order.
Cumulative Loss Percentage: As of any date of determination thereof, the
aggregate of all Realized Losses since the Startup Day as a percentage of the
Maximum Collateral Amount.
Cumulative Loss Test: The Cumulative Loss Test for each period indicated
below is satisfied if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
- ------ --------------------------
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<PAGE> 17
Cumulative Net Losses: As of any date of determination, the amount by
which the aggregate Loan Balances of, and accrued interest on, all Mortgage
Loans on which Final Recovery Determinations have been made exceeds the Net
Recovery Proceeds for such Mortgage Loans allocated to principal and accrued
interest.
Cut-off Date: The close of business on __________ __, 199_.
Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased or substituted by the Seller pursuant to Section 2.03 or 2.05.
Definitive Certificates: As defined in Section 5.05.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by one
or more Qualified Replacement Mortgage Loans.
Delinquency Advance: As defined in Section 4.06(b) hereof.
Delinquency Report: The monthly report described in Section 3.18(a).
Deposit Date: With respect to any Distribution Date, the fifth Business
Day preceding such Distribution Date.
Depositary: The initial Depositary shall be the Depository Trust Company
("DTC"), the nominee of which is Cede & Co., or any other organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary shall initially be the
registered Holder of the Book-Entry Certificates. The Depositary shall at all
times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York.
Depository Agreement: With respect to the Book-Entry Certificates, the
agreement among the Seller, the Trustee and the initial Depositary, dated as of
the Closing Date, substantially in the form of Exhibit N.
Depository Participant: A broker, dealer, bank or other financial
institution or other person for whom from time to time a Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.
Determination Date: With respect to any Distribution Date, the close of
business on the fourteenth day of the calendar month in which such Distribution
Date occurs or, if such fourteenth day is not a Business Day, the close of
business on the Business Day immediately preceding such fourteenth day.
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<PAGE> 18
Directly Operate: With respect to any REO Property, the furnishing or
rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the Trust other than through an
Independent Contractor; provided, however, that the Trustee (or the Servicer on
behalf of the Trustee) shall not be considered to Directly Operate an REO
Property solely because the Trustee (or the Servicer on behalf of the Trustee)
establishes rental terms, chooses tenants, enters into or renews leases, deals
with taxes and insurance, or makes decisions as to repairs or capital
expenditures with respect to such REO Property.
Disqualified Organization: A "disqualified organization" under Section
860E of the Code, which as of the Closing Date is either (i) the United States,
any state or political subdivision thereof, any possession of the United States,
or any agency or instrumentality of any of the foregoing, (ii) a foreign
government, any international organization, or any agency or instrumentality of
either of the foregoing, (iii) any organization (other than a cooperative
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code unless such organization is subject to the tax imposed by
Section 511 of the Code or (iv) any organization described in Section
1381(a)(2)(C) of the Code or (v) any other Person so designated by the Trustee
based upon an Opinion of Counsel provided by nationally recognized counsel to
the Trustee that the holding of an ownership interest in a Class R Certificate
by such Person may cause the Trust Estate or any Person having an ownership
interest in any Class of Certificates (other than such Person) to incur
liability for any federal tax imposed under the Code that would not otherwise be
imposed but for the transfer of an ownership interest in the Class R Certificate
to such Person. In the case of subparagraphs (i) and (ii) above, a corporation
will not be treated as an instrumentality of the United States, any state or
political subdivision thereof, or of a foreign governmental or international
organization, if all of its activities are subject to tax and, a majority of its
board of directors is not selected by a governmental unit. The term "United
States", "state" and "international organizations" shall have the meanings set
forth in Section 7701 of the Code.
Distribution Account: The trust account or accounts established and
maintained by the Trustee pursuant to Section 4.01 with respect to each pool
which shall be entitled "Pool I [POOL II, POOL III OR POOL IV, AS APPLICABLE]
Distribution Account, _______, as Trustee, in trust for the registered Pool I
[POOL II, POOL III OR POOL IV, AS APPLICABLE] Certificateholders of Cityscape
Loan Trust 199_-_" and which must be an Eligible Account.
Distribution Date: The twenty-fifth day of each month or, if such
day is not a Business Day, the Business Day immediately following such
twenty-fifth day, beginning __________ __, 199_.
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<PAGE> 19
Due Date: With respect to each Mortgage Loan and any Distribution Date,
the day of the calendar month preceding the calendar month in which such
Distribution Date occurs on which the Monthly Payment for such Mortgage Loan was
due, exclusive of any days of grace.
Due Period: As to any Distribution Date, the period beginning on the first
day of the calendar month immediately preceding the month in which such
Distribution Date occurs (or, in the case of the first Distribution Date,
beginning on the day after the Cut-Off Date) and ending on the last day of such
calendar month.
Eligible Account: Either (A) a segregated account or accounts maintained
with an institution whose deposits are insured by the BIF or the SAIF of the
FDIC, the unsecured and uncollateralized long term debt obligations of which
shall be rated "A" or better by S&P and "A2" or better by Moody's and in one of
the two highest short term rating categories by S&P and P-1 by Moody's, and
which is any of (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, and (v) approved in
writing by [THE CERTIFICATE INSURER] or (B) a segregated trust account
maintained with the trust department of a federal or state chartered depository
institution or trust company, having capital and surplus of not less than
$100,000,000, acting in its fiduciary capacity. Any Eligible Account maintained
by the Trustee shall comply with the provisions of clause (B) hereof.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Estate in Real Property: A fee simple estate or a leasehold estate in a
parcel of real property.
Event of Default: One or more of the events described in Section 7.01.
Excess Overcollateralized Amount: With respect to the Mortgage Loans of
any Pool and any Distribution Date, the excess, if any, of (x) the
Overcollateralized Amount with respect to such Pool that would apply on such
Distribution Date after taking into account the payment of the related Class [A]
Distribution Amount on such Distribution Date (except for any distributions of
related Overcollateralization Reduction Amounts for such Pool on such
Distribution Date) over (y) the related Specified Overcollateralization Amount
with respect to such Pool for such Distribution Date; provided, however, that
the Excess Overcollateralization Amount for each Pool for the period beginning
with the Distribution Date in ____ 199_ and ending on the Distribution Date in
_____ 199_ (inclusive) shall be limited to the amount obtained using the
following formula.
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<PAGE> 20
n-24 X E.O.A.
----
6
Where "n" is equal to the number of Distribution Dates that have occurred
since the Startup Day and "E.O.A." is equal to the amount of Excess
Overcollateralized Amount with respect to such Pool that would otherwise be
obtained (e.g., in ____ 199_, n=__) for such Distribution Date without regard to
the provisions of this proviso.
FDIC: The Federal Deposit Insurance Corporation and its successors in
interest.
FHA: The Federal Housing Administration, and its successors in interest.
FHA Contract of Insurance: [INSERT DEFINITION.]
FHA Insurance Premium: The premium charged by the FHA pursuant to 24
C.F.R. Section 201.31, or any successor regulation, as payment for Title I
insurance coverage for any FHA Loan, which premium shall be the responsibility
of the Servicer, who will be reimbursed from the FHA Premium Account in
accordance with Section 3.30(b) hereof; provided that [THE CERTIFICATE INSURER]
shall have the option to pay the FHA Insurance Premium with respect to any FHA
Loan to the extent funds are not otherwise available and to be reimbursed from
the FHA Premium Account in accordance with Section 3.30(b)(i) hereof.
FHA Insurance Rate: As to any FHA Loan with respect to which the FHA
Insurance Premium is paid by the related Mortgagor as part of the Mortgage Loan
Rate, the rate of ___% per annum, which is used to calculate the amount to be
applied to the payment of the related FHA Insurance Premium.
FHA Loan: A Pool III Home Improvement Loan that is partially insured by
the FHA under Title I.
FHA Payment: The amount received from the FHA for a Claim filed with
respect to a 90 Day Delinquent FHA Loan.
FHA Premium Account: The account, which shall be an Eligible Account,
established and maintained by the Trustee in accordance with Section 3.30 hereof
to reimburse the Servicer [AND THE CERTIFICATE INSURER] for payments with
respect to FHA Premiums or to make payments with respect to FHA Premiums and
entitled "____________, as Trustee for Cityscape Loan Trust 199__-__
Pass-Through Certificates 199__-__, FHA Premium Account."
FHA Premium Amount: With respect to any FHA Loan for any Distribution
Date, (i) if the FHA Insurance Premium is paid by the related Mortgagor as part
of the Mortgage Loan Rate on an FHA Loan, an amount equal to 1/12 of the product
of the FHA Insurance Rate
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<PAGE> 21
times the Loan Balance as of the first day of the immediately preceding Due
Period and (ii) if the related Mortgagor pays the FHA Insurance Premium as a
separate amount in addition to Monthly Payments, any such amount received by the
Servicer during the related Due Period.
FHA Regulations: The regulations of the FHA with respect to Title I home
improvement loans set forth in 24 C.F.R. Section 201, as the same may be amended
during the term of this Agreement.
FHA Reserve Account: The account of the Trustee maintained by the FHA with
respect to the FHA Loans and certain other mortgage loans in accordance with
Section 3.33 hereof, registered in the name of the Trustee and insured by the
FHA under Title I in accordance with the FHA Regulations.
FHLMC: The Federal Home Loan Mortgage Corporation and its successors in
interest.
Final Maturity Date: The Distribution Date occurring in __________, 20__
which is the Distribution Date that corresponds to the final scheduled maturity
date of the latest maturing Mortgage Loan initially included in the REMIC Trust,
plus approximately two years and two months.
Final Recovery Determination: A determination by the Servicer with respect
to any defaulted Mortgage Loan or REO Property (other than a Mortgage Loan
purchased or replaced by the Seller or the Servicer pursuant to Section 2.06 or
3.15(c)) that all Net Recovery Proceeds and other payments or recoveries that
the Servicer, in its reasonable judgment, expects to be finally recoverable have
been recovered or that the Servicer, in its reasonable judgment as evidenced by
an Officer's Certificate which accompanies the related Liquidation Report,
believes the cost of obtaining any additional recoveries would exceed the amount
of such recoveries. The Servicer shall maintain records, prepared by a Servicing
Officer, of each Final Recovery Determination.
First Mortgage Loan: Any Mortgage Loan that is secured by a first lien on
or first priority security interest in the related Mortgaged Property.
Fixed Rate Mortgage Loan: Any Mortgage Loan with a Mortgage Loan Rate that
is a fixed per annum rate of interest, as set forth in the Mortgage Loan
Schedule. All of the Pool I Mortgage Loans and Pool III Mortgage Loans are Fixed
Rate Mortgage Loans.
FNMA: The Federal National Mortgage Association and its successors in
interest.
Funding Period: The period beginning on the Closing Date and ending on the
earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is less than
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<PAGE> 22
$_______________, or (b) the close of business on __________ __, 199_. [NOT
LATER THAN 90 DAYS AFTER THE CLOSING DATE]
Gross Margin: With respect to an Adjustable Rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note, which amount is added
to the Index in accordance with the terms of the related Mortgage Note to
determine the Mortgage Loan Rate.
Home Improvement Loan: A Fixed Rate Mortgage Loan that is a single family
residential first, second and more junior home improvement mortgage loan. All
Home Improvement Loans will be included in Pool III.
HUD: The United States Department of Housing and Urban Development, and
its successors in interest.
Indemnified Party: As defined in Section 3.25(a).
Independent: When used with respect to any specified Person, any such
Person who (i) is in fact independent of the Seller, the Servicer and the
Underwriter, (ii) does not have any direct financial interest or any material
indirect financial interest in the Seller, the Servicer or in any affiliate of
either, and (iii) is not connected with the Seller, the Servicer or the
Underwriter as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
Independent Contractor: Either (i) any Person (other than the Servicer and
the Seller) that would be an "independent contractor" with respect to the Trust
within the meaning of Section 856(d)(3) of the Code if the Trust were a real
estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35 percent or more of any Class of Certificates), so long as the
Trust does not receive or derive any income from such Person and provided that
the relationship between such Person and the Trust is at arm's length, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer and the Seller) if the Trustee[, THE
CERTIFICATE INSURER] and the Certificateholders have each received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
Index: With respect to any Adjustable Rate Mortgage Loan, the applicable
index for computing the Mortgage Loan Rate as specified in the Mortgage Note.
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<PAGE> 23
Initial Certificate Principal Balance: With respect to any Class [A]
Certificate, the Initial Certificate Principal Balance set forth on the face
thereof.
Initial Mortgage Loans: The Initial Pool I Mortgage Loans, Initial Pool II
Mortgage Loans, Initial Pool III Mortgage Loans and Initial Pool IV Mortgage
Loans, collectively.
Initial Pool I Mortgage Loans: The Pool I Mortgage Loans listed on Exhibit
C-1 delivered to the Trustee on the Closing Date.
Initial Pool II Mortgage Loans: The Pool II Mortgage Loans listed on
Exhibit C-2 delivered to the Trustee on the Closing Date.
Initial Pool III Mortgage Loans: The Pool III Mortgage Loans listed on
Exhibit C-3 delivered to the Trustee on the Closing Date.
Initial Pool IV Mortgage Loans: The Pool IV Mortgage Loans listed on
Exhibit C-4 delivered to the Trustee on the Closing Date.
Initial Specified Overcollateralization Amount: $_______________ .
[INSURANCE AGREEMENT: THE INSURANCE AND INDEMNITY AGREEMENT DATED AS OF
____ __, 199_ BETWEEN THE CERTIFICATE INSURER AND THE SELLER.]
[INSURANCE PREMIUM: WITH RESPECT TO ANY DISTRIBUTION DATE, THE PRODUCT OF
(x) THE CLASS [A] CERTIFICATE PRINCIPAL BALANCE, AFTER TAKING INTO ACCOUNT ALL
DISTRIBUTIONS TO BE MADE ON SUCH DISTRIBUTION DATE AND (y) ONE-TWELFTH OF THE
PREMIUM RATE.]
[INSURED DISTRIBUTION AMOUNT: WITH RESPECT TO ANY POOL AND ANY
DISTRIBUTION DATE, THE SUM OF (i) THE INTEREST DISTRIBUTION AMOUNT FOR SUCH POOL
AND (ii) THE OVERCOLLATERALIZATION DEFICIT, IF ANY, FOR SUCH POOL AND FOR SUCH
DISTRIBUTION DATE.]
[INSURED PAYMENT: WITH RESPECT TO EACH POOL AND AS OF ANY DISTRIBUTION
DATE, (i) ANY AVAILABLE FUNDS SHORTFALL PLUS (ii) ANY PREFERENCE AMOUNT NOT
OTHERWISE PAID TO A CERTIFICATEHOLDER OF A RELATED POOL CERTIFICATE.]
Interest Distribution Amount: With respect to any Distribution Date and
any Class of Class [A] Certificates, the sum of (i) interest accrued during the
related Due Period on the Class Certificate Principal Balance of such Class at
the related Pass-Through Rate and (ii) the pro rata share allocable to such
Class (based on the amount of interest they would otherwise be entitled to
receive) of the portion of the Carry-Forward Amount representing interest.
Interest Remittance Amount: As defined in Section 3.11(a)(i)(A) hereof.
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<PAGE> 24
Jumbo Loan: An adjustable rate, one- to four-family residential
first mortgage loan which has an initial Loan Balance of $________ or
more. All Pool IV Mortgage Loans are Jumbo Loans.
Junior Mortgage Loan: Any Mortgage Loan that is secured by a second lien
on or second priority security interest in the related Mortgaged Property.
Late Collection: With respect to any Mortgage Loan and the Monthly Payment
due thereon during any Due Period, all amounts received subsequent to the
Determination Date immediately following such Due Period, whether as a late
payment of such Monthly Payment or as Property Insurance Proceeds, Liquidation
Proceeds or otherwise, which represent the late payment or collection of such
Monthly Payment.
Late Payment Rate: For any Distribution Date, the lesser of (i) the rate
of interest set forth in the Eastern Edition of The Wall Street Journal in its
"Money Rates" section as the "prime rate" on the first Business Day preceding
such Distribution Date that such rate is so published plus __% and (ii) the
maximum rate permissible under any applicable law limiting interest rates. The
Late Payment Rate shall be computed on the basis of a year of 365 days
calculating the actual number of days elapsed.
Lien: As defined in Section 2.05(b).
Lifetime Cap: With respect to each Pool II Mortgage Loan, the percentage
set forth in the related Mortgage Note to be added to the initial Mortgage Loan
Rate thereof to determine such Mortgage Loan's Maximum Rate.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan
as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, during the related Due Period that all Liquidation
Proceeds which it expects to recover from or on account of such Mortgage Loan
have been recovered.
Liquidation Expenses: Expenses which are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses shall include, without
limitation, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 3.06 respecting
the related Mortgage Loan (including, without limitation, amounts voluntarily
advanced to correct defaults on each mortgage loan that is senior to such
Mortgage Loan), any other related and previously unreimbursed Servicing Advances
and any related and previously unreimbursed Property Protection Expenses.
Liquidation Proceeds: Cash (other than Property Insurance Proceeds)
received in connection with the liquidation of any Mortgaged Property, whether
through trustee's sale, foreclosure sale, condemnation, taking by eminent domain
or otherwise received in respect of
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<PAGE> 25
any Mortgage Loan foreclosed upon as described in Section 3.15 (including,
without limitation, proceeds from the rental of the related Mortgaged Property)
other than FHA Payments and Related Payments.
Liquidation Report: A liquidation report in the form of Exhibit G attached
hereto delivered by the Servicer pursuant to Section 3.15(e).
Loan Balance: With respect to each Mortgage Loan, the outstanding
principal balance thereof calculated in accordance with the terms of the related
Mortgage Note; provided, however, that the Loan Balance for any Mortgage Loan
upon which a Final Recovery Determination has been made shall be zero as of the
last day of the Due Period in which such Final Recovery Determination was made,
and at all times thereafter.
Majority Certificateholders: The Holders of Class [A] Certificates
evidencing at least 51% of the Voting Interests.
Majority Class R Certificateholders: The Holders of Class R Certificates
evidencing at least 75% of the Voting Percentage.
Maximum Collateral Amount: With respect to each Pool, the aggregate Loan
Balances of all Mortgage Loans for such Pool as of the Cut-Off Date plus the
aggregate Loan Balances of all Subsequent Mortgage Loans for such Pool on the
related Subsequent Cut-Off Dates.
Maximum Rate: With respect to an Adjustable Rate Mortgage Loan, the
provision in the Mortgage Note which provides for an absolute maximum Mortgage
Loan Rate.
Minimum Rate: With respect to an Adjustable Rate Mortgage Loan, the
provision in the Mortgage Note which provides for an absolute minimum Mortgage
Loan Rate, subject to the initial Mortgage Loan Rate first adjusting to a level
in excess of such Mortgage Loan Rate in accordance with the terms of the
Mortgage Note.
Monthly Excess Spread: With respect to any Distribution Date and for any
Pool, the excess of (i) the interest which is collected on the Mortgage Loans of
such Pool, less the related Servicing Fees, during the prior Due Period, plus
any Delinquency Advances with respect to such Pool, and any amount covering a
Compensating Interest with respect to such Pool paid by the Servicer with
respect to such Due Period, over (ii) the sum of (x) the Interest Distribution
Amount with respect to such Pool for such Distribution Date, (y) the amount to
be distributed with respect to such Pool to [THE CERTIFICATE INSURER] pursuant
to Section 4.04(a)(i) on such Distribution Date and (z) the amount to be
distributed with respect to such Pool to the Trustee pursuant to Section
4.04(a)(ii) on such Distribution Date.
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<PAGE> 26
Monthly Payment: With respect to any Mortgage Loan, the scheduled monthly
payment of principal and interest on such Mortgage Loan which is payable by a
Mortgagor from time to time under the related Mortgage Note in accordance with
its terms, determined: (i) without giving effect to any extension, deferral,
modification, waiver or amendment granted or agreed to by the Servicer pursuant
to Section 3.01 or 3.07; and (ii) after giving effect to any reduction in the
amount of interest collectible from the related Mortgagor as a result of the
application of the Civil Relief Act.
Moody's: Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, and its successors, and, if
such corporation shall for any reason no longer perform the functions of a
securities rating agency, "Moody's" shall be deemed to refer to any other
"nationally recognized rating organization," as set forth on the most current
list of such organizations released by the Securities and Exchange Commission
and designated by [THE CERTIFICATE INSURER], notice of which designation shall
be given to the Trustee and the Servicer by [THE CERTIFICATE INSURER].
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple in real property securing
a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to
such Mortgage File pursuant to this Agreement.
Mortgage Loan: Each mortgage loan sold, transferred and assigned to the
Trust pursuant to Section 2.01 or 2.02 as from time to time is held as a part of
the Trust, the Mortgage Loans so held being identified in the Mortgage Loan
Schedule. Any mortgage loan which, although intended by the parties hereto to
have been, and which purportedly was, sold to the Trust by the Seller (as
indicated by Exhibit C), that in fact was not transferred and assigned to the
Trust for any reason whatsoever, shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement. As applicable, "Mortgage Loan" shall
be deemed to refer to the related REO Property.
Mortgage Loan Rate: As to any Mortgage Loan other than an Adjustable Rate
Mortgage Loan, the fixed per annum rate of interest applicable to the
calculation of interest thereon; provided that, with respect to any FHA Loan for
which the related Mortgagor pays the FHA Insurance Premium as part of the
Mortgage Loan Rate, such Mortgage Loan Rate shall be adjusted to reflect any
such FHA Premium Amount. With respect to any Adjustable Rate Mortgage Loan, the
per annum rate of interest computed in accordance with the related Mortgage Note
as the sum of the Index and the Gross Margin, subject to the Minimum Rate, the
Maximum Rate and any periodic limitation on adjustments to such rate applicable
from time to time to the calculation of interest thereon.
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Mortgage Loan Schedule: As of any date, the separate schedules of Pool I,
Pool II, Pool III and Pool IV Mortgage Loans delivered to the Trustee for
inclusion in the Trust on such date, in substantially the form attached hereto
as Exhibits D-1, D-2, D-3 and D-4, respectively, which schedules shall set forth
the following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property, including
the city, state and zip code;
(iv) the type of Mortgaged Property;
(v) the Mortgage Loan Rate;
(vi) the occupancy status;
(vii) the original term;
(viii) as of the Cut-Off Date the remaining number of months
to stated maturity;
(ix) the original principal balance (except with respect to any
Mortgage Loan purchased by the Seller, such balance at the time of
acquisition by the Seller of such Mortgage Loan);
(x) the paid through date;
(xi) the amount of the Monthly Payment;
(xii) the unpaid principal balance as of the Cut-Off Date;
(xiii) the Combined Loan-to-Value Ratio (except to the extent
not applicable to Pool III Mortgage Loans);
(xiv) the stated maturity date;
(xv) the Due Date;
(xvi) the Appraised Value, if available;
(xvii) the lien priority of the Mortgage Loan;
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<PAGE> 28
(xviii) the Net Mortgage Loan Rate;
(xix) the paid-to date;
(xx) the origination date (except with respect to any Mortgage Loan
purchased by the Seller, the date of acquisition by the Seller of such
Mortgage Loan);
(xxi) balloon amortization, which is the number of months it would
take a Mortgagor making timely and equal payments without any reference to
the Balloon Payment and the number of scheduled months which the Mortgagor
has to pay off such Mortgage Loan including the Balloon Payment (e.g.,
"360 months due in 180 months");
(xxii) with respect to Exhibits D-2 and D-4, the Minimum Rate, the
Maximum Rate and any periodic limitation on adjustments to each such
Mortgage Loan's Mortgage Loan Rate; and
(xxiii) with respect to Exhibit C-3, whether such Home Improvement
Loan is an FHA Loan or a Conventional Home Improvement Loan.
Such schedules shall also set forth the total of the amounts described under
(xii) above for all of the Mortgage Loans as of the specified date. Such
schedules may be in the form of more than one list, which list or lists may have
one or more attachments, collectively setting forth all of the information
required. Such list of information contained in a Mortgage Loan Schedule shall
also be provided to the Trustee in a computer-readable format on a tape or disk.
The Mortgage Loan Schedule shall be amended from time to time by the Trustee in
accordance with Section 2.07. With respect to any Qualified Replacement Mortgage
Loan, the amounts described in clauses (viii) and (xii) shall be set forth as of
the date of substitution.
The Mortgage Loan Schedule shall be amended on each Subsequent Transfer
Date to reflect the addition of the related Subsequent Mortgage Loans to the
Trust.
Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Portfolio Performance Test: The Mortgage Portfolio Performance
Test is satisfied for any Pool on any date of determination thereof if (i) the
Rolling Six Month Delinquency Rate with respect to such Pool is less than ____%,
(ii) the O/C Loss Test with respect to such Pool is satisfied, (iii) the Rolling
Twelve Month Loss Rate with respect to such Pool for the twelve month period
immediately preceding the date of determination thereof is not greater than or
equal to ____% and (iv) no more than ___% of the aggregate
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<PAGE> 29
current principal balance of Mortgage Loans in the related Pool which are
secured by Small Mixed-Use Properties is 30 days or more Delinquent.
Mortgaged Property: The underlying property securing a Mortgage Loan,
including any REO Property, consisting of an Estate in Real Property improved by
a Residential Dwelling.
Mortgagor: The obligor or obligors on a Mortgage Note.
Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds
net of Liquidation Expenses. For all purposes of this Agreement, Net Liquidation
Proceeds shall be allocated first to accrued and unpaid interest on the related
Mortgage Loan and then to the Loan Balance thereof.
Net Monthly Excess Cashflow: With respect to any Pool, for any
Distribution Date, equals the amount, if any, by which (i) the funds on deposit
in the related Certificate Account (net of any related Premium Amount, Servicing
Fees and Trustee Fees) for such Distribution Date exceed (ii) the sum of (a) the
Interest Distribution Amount for each Class in such Pool plus the Principal
Distribution Amount for each Class in such Pool (calculated for this purpose
without regard to any Overcollateralization Increase Amount or portion thereof
included therein) and (b) any Reimbursement Amount with respect to such Pool
owed to [THE CERTIFICATE INSURER].
Net Mortgage Loan Rate: With respect to each Mortgage Loan, a per annum
rate of interest equal to the Mortgage Loan Rate minus the Servicing Fee Rate.
Net Recovery Proceeds: The amount of any gross Property Insurance
Proceeds, or Liquidation Proceeds received with respect to any Mortgage Loan or
REO Property minus the amount of any unreimbursed Servicing Advances,
unreimbursed Delinquency Advances or accrued and unpaid Servicing Fees and,
without duplication, liquidation expenses.
New Lease: Any lease of REO Property entered into on behalf of the Trust,
including any lease renewed or extended on behalf of the Trust if the Trust has
the right to renegotiate the terms of such lease.
90 Day Delinquent FHA Loan: With respect to any Distribution Date, an FHA
Loan with respect to which four consecutive Monthly Payments have not been
received by the Servicer as of the last day of the related Due Period unless on
or prior to the last day of the Due Period in which the fourth Monthly Payment
is due, the Servicer has received from the related Mortgagor an amount at least
equal to one unpaid Monthly Payment.
Non-acknowledged FHA Loans: As defined in Section 2.05(ggg) hereof.
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Nonrecoverable Delinquency Advance: Any Delinquency Advance previously
made in respect of a Mortgage Loan or REO Property which the Servicer
determines, in connection with a Final Recovery Determination with respect to
such Mortgage Loan (such determination to be evidenced by a certificate of a
Servicing Officer delivered to the Trustee [AND THE CERTIFICATE INSURER]), will
not be recovered from Late Collections, Property Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property.
Notice: As defined in Section 4.02.
Notice of Claim: The notice required to be furnished by the Trustee to
[THE CERTIFICATE INSURER] in the event a Class [A] Insured Amount is required to
be paid under the [CERTIFICATE INSURANCE POLICY] with respect to any
Distribution Date, in the form set forth as Exhibit P hereto.
O/C Loss Test: The O/C Loss Test for any Pool for any period set out below
is satisfied if the Cumulative Loss Percentage for such period does not exceed
the percentage set out for such period below:
Period Cumulative Loss Percentage
- ------ --------------------------
Officer's Certificate: A certificate signed by the Chairman of the Board,
the President or a Vice President of the Seller, the Servicer or the Claims
Administrator, as the case may be, and delivered to the Trustee[, CERTIFICATE
INSURER] or each Rating Agency, as the case may be.
Opinion of Counsel: A written opinion of counsel, who (unless such Opinion
of Counsel is required to be an Independent Opinion of Counsel) may be counsel
for the Seller, the Trustee, the Servicer [OR THE CERTIFICATE INSURER]
(including, except as otherwise expressly provided in this Agreement, the
in-house general counsel for the Servicer, the Seller, the Trustee, any
Certificateholder [OR THE CERTIFICATE INSURER], as the case may be), and who
shall be reasonably acceptable to the parties to which such opinion is
addressed; except that any opinion of counsel relating to the qualification of
the Trust as a REMIC, or compliance with the REMIC Provisions, must be an
opinion of counsel who is a tax counsel experienced in REMIC matters.
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Original Class [A] Certificate: The Class [A] Certificates issued
on the Closing Date.
Original Class [A] Certificate Principal Balance: $__________.
Original Class Certificate Principal Balance: With respect to any Class of
Certificates (other than the Class R Certificates), the corresponding amounts
set forth opposite such Class in the table below:
<TABLE>
<CAPTION>
Original Class
Class Certificate Principal Balance
----- -----------------------------
<S> <C>
Class A-1 $
Class A-2
Class A-3
Class A-4
[SPECIFY OTHER CLASSES]
</TABLE>
OTS: The Office of Thrift Supervision or any successor.
Overcollateralization Deficit: For each Pool and with respect to any
Distribution Date, the amount, if any, by which (x) the Class Certificate
Principal Balance of the Pool Certificates of the related Pool, after taking
into account the payment of the Class [A] Distribution Amount on such
Distribution Date for the related Pool (except for the amount of any Insured
Payment to be paid on such Distribution Date to reduce the Overcollateralization
Deficit for the related Pool), exceeds (y) the aggregate Loan Balance of the
Mortgage Loans for the related Pool as of the close of business on the last day
of the immediately preceding Due Period.
Overcollateralization Increase Amount: For each Pool and with respect to
any Distribution Date the lesser of (i) the Specified Overcollateralization
Deficiency Amount for the related Pool as of such Distribution Date (after
taking into account the payment of the Class [A] Distribution Amount on such
Distribution Date (except for any Overcollateralization Increase Amount) for the
related Pool) and (ii) the amount of Monthly Excess Spread on deposit in the
Certificate Account for the related Pool on such Distribution Date after the
payment of any Reimbursement Amount for the related Pool.
Overcollateralization Reduction Amount: For each Pool and with respect to
any Distribution Date, an amount equal to the lesser of (x) the Excess
Overcollateralized Amount for the related Pool on such Distribution Date and (y)
the Principal Remittance Amount of the related pool transferred from the
Collection Account to the Certificate Account on the Deposit Date immediately
preceding such Distribution Date.
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Overcollateralized Amount: For each Pool, as of any Distribution Date, the
excess, if any, of (x) aggregate Loan Balance of all the Mortgage Loans of the
related pool as of the close of business on the last day of the immediately
preceding Due Period, over (y) the Class Certificate Principal Balance of the
Pool Certificates of the related Pool as of such Distribution Date (after taking
into account the payment of the Class [A] Distribution Amount on such
Distribution Date).
Pass-Through Rate: Class A-1: ___% per annum
Class A-2: ___% per annum
Class A-3: ___% per annum
Class A-4: ___% per annum.
[INSERT APPROPRIATE DEFINITIONS WITH RESPECT TO ADDITIONAL CLASSES OF
CERTIFICATES, IF APPLICABLE.]
Payment Ahead: Any payment of one or more Monthly Payments remitted by a
Mortgagor with respect to a Mortgage Note in excess of the Monthly Payment due
during such Due Period with respect to such Mortgage Note, which sums the
related Mortgagor has instructed the Servicer to apply to Monthly Payments due
in one or more subsequent Due Periods. A Monthly Payment that was a Payment
Ahead shall, for purposes of computing certain amounts under this Agreement, be
deemed to have been received by the Servicer on the date in the related Due
Period that such Monthly Payment would have been due if such Monthly Payment was
not a Payment Ahead.
Percentage Interest: With respect to any Class of Class [A] Certificates,
a fraction, expressed as a decimal, the numerator of which is the Initial
Certificate Principal Balance represented by such Class of Class [A]
Certificates and the denominator of which is the Original Class Certificate
Principal Balance of the related Class. With respect to a Class R Certificate,
the portion of the Class evidenced thereby, expressed as a percentage, as stated
on the face of such Certificate, all of which shall total 100% with respect to
the related Class. The Class [A] Certificates are issuable only in minimum
Percentage Interests corresponding to minimum initial Class [A] Certificate
Principal Balances of $1,000. The Class R Certificates are issuable only in
minimum Percentage Interests equal to 10% of all of the interests represented by
the Certificates of such Class.
Permitted Investments: As used herein, Permitted Investments shall include
the following:
(i) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or
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<PAGE> 33
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States, FHA debentures,
FHLMC senior debt obligations, and FNMA senior debt obligations, but
excluding any of such securities whose terms do not provide for payment of
a fixed dollar amount upon maturity or call for redemption;
(ii) federal funds, certificates of deposit, time and demand deposits
and banker's acceptances (in each case having original maturities of not
more than 365 days) of any bank or trust company incorporated under the
laws of the United States or any state thereof, provided that the
short-term debt obligations of such bank or trust company at the date of
acquisition thereof have been rated "A-1+" or better by S&P and "Prime-1"
or better by Moody's;
(iii) deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $100,000,000
which deposits are held up to the applicable limits insured by BIF or SAIF
and a rating, with respect to its long-term, unsecured, debt obligations,
of "A" or better by S&P and "A2" or better by Moody's;
(iv) commercial paper (having original maturities of not more than
180 days) rated "A-1+" or better by S&P and "Prime-1" by Moody's; and
(v) investments in money market funds rated "AAAm" or "AAAm-G" by
S&P and "Aaa" by Moody's;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity. Permitted Investments shall mature not
later than the Business Day prior to the earliest date on which such monies may
be needed to make payments.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Policy Payments Account: As defined in Section 4.02(b) hereof.
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<PAGE> 34
Pool: With respect to the Class [A] Certificates, the Pool I, Pool II,
Pool III or Pool IV Certificates, as the case may be, and with respect to the
Mortgage Loans, the Pool I, Pool II, Pool III or Pool IV Mortgage Loans, as the
case may be.
Pool Balance: With respect to any Pool and as to the Distribution Date
occurring in __________ 199_, the sum of the aggregate of the Loan Balances of
the Mortgage Loans in the related Pool as of the end of the related Due Period
and the Pre-Funding Account Deposit with respect to the related Pool, minus the
sum of all Subsequent Purchase Price amounts as of the last day of the related
Due Period. As to any Distribution Date thereafter, the aggregate of the Loan
Balances of the Mortgage Loans in the related Pool as of the end of the related
Due Period.
Pool Certificate: With respect to Pool I, the Pool I Certificates; with
respect to Pool II, the Pool II Certificates; with respect to Pool III, the Pool
III Certificates; and with respect to Pool IV, the Pool IV Certificates.
Pool Delinquency Rate: With respect to any Pool and any Due Period, the
fraction, expressed as a percentage, equal to (x) the aggregate Loan Balances of
all Mortgage Loans in such Pool 60 or more days Delinquent, in foreclosure or
relating to REO Properties as of the close of business on the last day of such
Due Period over (y) the aggregate Loan Balances of all Mortgage Loans in such
Pool as of the close of business on the last day of such Due Period.
[POOL PROJECTED NET MONTHLY EXCESS CASHFLOW: AS OF ANY DATE OF
CALCULATION, WITH RESPECT TO POOL I, FIVE TIMES (OR, WITH RESPECT TO POOL II AND
POOL IV, THREE TIMES) NET MONTHLY EXCESS CASHFLOW RELATING TO SUCH POOL, AS
CALCULATED ON THE DISTRIBUTION DATE IMMEDIATELY PRECEDING SUCH DATE OF
CALCULATION. POOL PROJECTED NET MONTHLY EXCESS CASHFLOW SHALL NOT APPLY TO POOL
III.]
Pool I Certificate: A Class [A-_], Class [A-_], Class [A-_] or Class
[A-[SPECIFY OTHERS]] Certificate.
Pool I Initial Specified Overcollateralized Amount: $_______.
Pool I Mortgage Loan: A Mortgage Loan listed on Exhibit C-1 delivered to
the Trustee, as such Exhibit may be amended from time to time.
Pool I Specified Overcollateralized Amount: means (as such amount may be
changed in accordance with the provisions of Section 2.02 hereof) the greater of
(i) the Pool I Initial Specified Overcollateralized Amount or (ii) the Specified
Overcollateralization Amount with respect to Pool I.
Pool II Certificate: A Class [A-_] or Class [A-_] Certificate.
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<PAGE> 35
Pool II Initial Specified Overcollateralized Amount: $_______.
Pool II Mortgage Loan: A Mortgage Loan listed on Exhibit C-2 delivered to
the Trustee, as such Exhibit may be amended from time to time.
Pool II Specified Overcollateralized Amount: means (as such amount may be
changed in accordance with the provisions of Section 2.02 hereof) the greater of
(i) the Pool II Initial Specified Overcollateralized Amount or (ii) the
Specified Overcollateralization Amount with respect to Pool II.
Pool III Certificate: A Class [A-_], Class [A-_], Class [A-_] or Class
[A-_] Certificate.
Pool III Delinquency Period: Any period commencing on a Distribution Date
for which the sum of (i) the three-month moving average of 75% of the Loan
Balance of all 90 Day Delinquent FHA Loans and (ii) the amount of all Claims
filed in the Due Period immediately preceding the then current Distribution Date
is greater than the current Excess Spread for the Pool III Loans for such
Distribution Date, and ending on the first Distribution Date thereafter for
which (a) the six-month moving average of the sum of 75% of the Loan Balance of
all 90 Day Delinquent FHA Loans and (b) the amount of all Claims filed in the
Due Period immediately preceding the then current Distribution Date is less than
the Excess Spread for the Pool III Mortgage Loans for three consecutive
Distribution Dates.
Pool III Initial Specified Overcollateralized Amount: $_______.
Pool III Mortgage Loan: A Mortgage Loan listed on Exhibit C-3 delivered to
the Trustee, as such Exhibit may be amended from time to time.
Pool III Specified Overcollateralized Amount: means (as such amount may be
changed in accordance with the provisions of Section 2.02 hereof) the greater of
(i) the Pool III Initial Specified Overcollateralized Amount or (ii) the
Specified Overcollateralization Amount with respect to Pool III; provided,
however, that the Pool III Specified Overcollateralized Amount shall equal the
Pool III Initial Specified Overcollateralized Amount during any Pool III
Delinquency Period.
Pool IV Certificate: A Class [A-_] Certificate.
Pool IV Initial Specified Overcollateralized Amount: $_______.
Pool IV Mortgage Loan: A Mortgage Loan listed on Exhibit C-4 delivered to
the Trustee, as such Exhibit may be amended from time to time.
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<PAGE> 36
Pool IV Specified Overcollateralized Amount: means (as such amount may be
changed in accordance with the provisions of Section 2.02 hereof) the greater of
(i) the Pool IV Initial Specified Overcollateralized Amount; (ii) the Specified
Overcollateralization Amount with respect to Pool IV; or (iii) the sum of the
Loan Balances of the three largest Pool IV Mortgages.
Preference Amount: Any amount previously distributed on the Class [A]
Certificates that is recovered as a voidable preference by a trustee in
bankruptcy pursuant to the Bankruptcy Code in accordance with a final
nonappealable order of a court having competent jurisdiction.
Preference Claim: As defined in Section 4.4(e).
Pre-Funding Account: The segregated account, which shall be an Eligible
Account, established and maintained pursuant to Section 3.28 and entitled
"____________________, as Trustee for Cityscape Loan Trust 199__-__ Pass-Through
Certificates 199__-__, Pre-Funding Account."
Pre-Funding Account Deposit: The amount deposited in the Pre-Funding
Account that is allocated for the purchase of Subsequent Mortgage Loans, which
amount is equal to the sum of (i) $________ from the proceeds of the sale of the
Pool I Certificates, (ii) $________ from the proceeds of the sale of the Pool II
Certificates, (iii) $________ from the proceeds of the sale of the Pool III
Certificates and (iv) $________ from the proceeds of the sale of the Pool IV
Certificates.
Premium Rate: With respect to any Distribution Date, a per annum rate
equal to ___%.
Prepayment Assumption: As defined in the Prospectus Supplement.
Principal Distribution Amount: With respect to any Pool and any
Distribution Date, the lesser of:
(a) the Available Funds with respect to such Pool plus any Insured
Payment with respect to such Pool (and, in the case of Pool III
Certificates, any FHA Payments) minus the Interest Distribution
Amount with respect to such Pool; and
(b) (i) the excess, if any, of the sum, without duplication, of:
(A) the Carry-Forward Amount with respect to the
related Pool Certificates as it relates to
principal,
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<PAGE> 37
(B) the Preference Amount owed to the Holders of such Pool
Certificates as such amounts relate to principal
previously distributed on such Pool Certificates,
(C) the principal (including any Principal Prepayment)
actually collected by the Servicer during the related
Due Period with respect to such Pool,
(D) the Loan Balance of each Mortgage Loan in such Pool that
was repurchased by the Seller or purchased by the
Servicer during the related Due Period, to the extent
such Loan Balance is actually received by the Trustee on
or prior to the related Deposit Date,
(E) the Net Recovery Proceeds actually collected by
the Servicer during the related Due Period with
respect to each Mortgage Loan in such Pool
remaining after prior application thereof to all
accrued and unpaid interest on the related
Mortgage Loan (but not in excess of the
then-outstanding Loan Balance of the related
Mortgage Loan), to the extent such Net Recovery
Proceeds are actually received by the Trustee on
or prior to the related Deposit Date,
(F) the amount of any Overcollateralization Deficit
with respect to the related Pool on such
Distribution Date,
(G) the portion of the proceeds received by the Trustee from
any termination of the Trust (to the extent such
proceeds related to principal and such Pool), and
(H) the amount of any Overcollateralization Increase Amount
with respect to the related Pool on such Distribution
Date, to the extent of any Monthly Excess Spread;
over
(ii) the amount of any Overcollateralization Reduction Amount with
respect to the related Pool on such Distribution Date.
Principal Payment: As to any Mortgage Loan and Due Period, all amounts
received or, in the case of the principal portion of any Payment Ahead, deemed
to have been received by the Servicer from or on behalf of the related Mortgagor
during such Due Period (including Principal Prepayments) which, at the time of
receipt or, in the case of any Payment Ahead, at
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<PAGE> 38
the time such Payment Ahead is deemed to have been received, were applied or
were required to be applied by the Servicer in reduction of the Loan Balance of
such Mortgage Loan.
Principal Prepayment: As to any Mortgage Loan and Due Period, any
Mortgagor payment or other recovery in respect of principal on a Mortgage Loan
(including Net Liquidation Proceeds) which, in the case of a Mortgagor payment,
is received in advance of its scheduled due date and is not a Payment Ahead.
Principal Remittance Amount: As defined in Section 3.11(a)(i)(B) hereof.
Property Insurance Proceeds: Proceeds of any title policy, hazard policy
or other insurance policy covering a Mortgage Loan, other than any payments
under the [CERTIFICATE INSURANCE POLICY], to the extent such proceeds are not to
be applied to the restoration of the related Mortgaged Property or released to
the Mortgagor in accordance with the Accepted Servicing Procedures, subject to
the terms and conditions of the related Mortgage Note and Mortgage.
Property Protection Expenses: Expenses (exclusive of overhead expenses)
reasonably paid or incurred by or for the account of the Servicer in connection
with the preservation or protection of a Mortgaged Property or the security of a
Mortgaged Property, including (a) hazard insurance policy premiums, (b) real
estate taxes and property repair, replacement, protection and preservation
expenses, (c) amounts expended to cure or prevent any default with respect to
any mortgage loan senior to the related Mortgage Loan, and (d) similar expenses
reasonably paid or incurred to preserve or protect the value of such Mortgaged
Property or security (including but not limited to reasonable legal fees and
expenses).
Prospectus Supplement: That certain prospectus supplement dated ______ __,
199_ relating to the public offering of the Class [A] Certificates.
Purchase Price: With respect to any Mortgage Loan required to be purchased
pursuant to Section 2.03 or to be purchased pursuant to Section 3.15(c) and as
confirmed by an Officer's Certificate, an amount equal to the sum, without
duplication, of (i) 100% of the Loan Balance as of the date of purchase, (ii)
interest from the date interest was last paid by the Mortgagor through the end
of the calendar month in which such purchase occurs, at a per annum rate equal
to the Mortgage Loan Rate, (iii) any unreimbursed Servicing Advances allocable
to such Mortgage Loan and (iv) in the event the Mortgage Loan is required to be
purchased pursuant to Section 2.03, expenses reasonably incurred or to be
incurred by the Servicer or the Trustee in respect of the breach or defect
giving rise to the purchase obligation, including any reasonable expenses
arising out of the enforcement of the purchase obligation.
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Qualified Replacement Mortgage Loan: A mortgage loan substituted for a
Deleted Mortgage Loan pursuant to the terms of this Agreement which must, on the
date of such substitution, (i) have an outstanding principal balance (when taken
together with any other Qualified Replacement Mortgage Loan being substituted
for such Deleted Mortgage Loan), after deduction of all scheduled payments of
principal due in the month of substitution, not in excess of and not
substantially less than the unpaid principal balance of the Deleted Mortgage
Loan as of the date of substitution, (ii) have a Mortgage Loan Rate not less
than (and not more than ___ percentage point[s] in excess of) the Mortgage Loan
Rate of the Deleted Mortgage Loan, (iii) have a remaining term to maturity not
greater than (and not more than _______ less than) that of the Deleted Mortgage
Loan, (iv) have a Combined Loan-to-Value Ratio equal to or lower than the
Combined Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (v)
satisfy the criteria set forth from time to time in the definition of "qualified
replacement mortgage" at Section 860G(a)(4) of the Code, (vi) have the same or a
superior lien priority as the Deleted Mortgage Loan, (vii) comply as of the date
of substitution with each representation and warranty set forth in Section 2.07
hereof, (viii) have the same or better property type as the Deleted Mortgage
Loan, (ix) have the same or better occupancy status, (x) have the same Due Date
as the Deleted Mortgage Loan, (xi) be of the same or of a better credit quality
(determined in accordance with the Seller's credit underwriting guidelines as
attached hereto as Exhibit L) as the Mortgage Loan being replaced and (xii) with
respect to Pool III, is an FHA Loan if the Deleted Mortgage Loan was an FHA Loan
or a Conventional Home Improvement Loan if the Deleted Mortgage Loan was a
Conventional Home Improvement Loan. In the event that one or more mortgage loans
are proposed to be substituted for one or more Deleted Mortgage Loans, [THE
CERTIFICATE INSURER] may allow the tests set forth in (i)-(iii) above to be met
on a weighted average basis or other aggregate basis (based on the mortgage
loans substituted in any one Due Period) acceptable to [THE CERTIFICATE
INSURER].
Rating Agencies: S & P and Moody's (each, a "Rating Agency"), and their
respective successors in interest. If any such agency or successor is no longer
in existence, "Rating Agency" shall be such statistical credit rating agency, or
other comparable Person, designated by the Servicer, notice of which designation
shall be given to the Trustee.
Realized Loss: As to any Mortgage Loan on which a Final Recovery
Determination has been made, the amount, if any, by which the Loan Balance of
such Mortgage Loan as of the date of such Final Recovery Determination exceeds
the Net Recovery Proceeds allocable to principal for such Mortgage Loan.
With respect to each 90 Day Delinquent FHA Loan for which a Claim is
eligible to be filed with the FHA, the Realized Loss, if any, shall be
determined as of the Determination Date following the date the related FHA
Payment is received by the Trustee, and shall be an amount (not less than zero
or greater than the related outstanding Loan Balance as of the date the Claim
relating to such FHA Loan is filed with the FHA) equal to the outstanding Loan
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Balance of the FHA Loan as of the date of such filing, minus amounts paid from
the Certificate Account relating to such 90 Day Delinquent FHA Loan (such
amounts to be applied first to the Loan Balance of such FHA Loan and then to
interest thereon).
Record Date: With respect to each Distribution Date, the last Business Day
of the month immediately preceding the month in which such Distribution Date
occurs.
Reimbursement Amount: With respect to any Pool and as of any Distribution
Date, the sum of (x) (i) the aggregate of all Insured Payments with respect to
such Pool previously received by the Trustee and not previously repaid to [THE
CERTIFICATE INSURER] pursuant to Section 4.04(a)(vi) hereof plus (ii) interest
accrued on each Insured Payment with respect to such Pool not previously repaid
calculated at a rate equal to the Late Payment Rate from the date the Trustee
received such Insured Payment with respect to such pool, (y) (i) the amount of
any Insurance Premium attributable to such Pool and not paid on the date due and
(ii) interest on such amount at the Late Payment Rate from the date such
Insurance Premium was due to be paid and (z) the amount of any amounts owing and
unpaid under the Insurance Agreement. [THE CERTIFICATE INSURER] shall notify the
Trustee, the Seller and the Servicer of the amount of any Reimbursement Amount
with respect to any Pool.
Related Payments: As described in Section 3.31(c).
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.
REMIC Trust: The segregated pool of assets consisting of the Trust Estate
except for the Distribution Account, the Pre-Funding Account and the Capitalized
Interest Account.
Remittance Report: A report prepared by the Trustee pursuant to Section
4.06(a).
Rents from Real Property: With respect to any REO Property, gross income
of the character described in Section 856(d) of the Code.
REO Disposition: The receipt by the Servicer of all Net Recovery Proceeds
and other payments or recoveries (including proceeds of a final sale) which the
Servicer expects to be finally recoverable from the sale or other disposition of
the related REO Property.
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REO Property: A Mortgaged Property acquired by the Servicer in the name of
the Trustee on behalf of the Certificateholders through foreclosure or
deed-in-lieu of foreclosure, as described in Section 3.22.
Request for Release: A release signed by a Servicing Officer, in the form
of Exhibit D-1 or Exhibit D-2 attached hereto.
Reserve Amount: As of any Determination Date, the maximum amount of FHA
insurance available with respect to all FHA Loans. The Reserve Amount initially
will equal at least 10% of the aggregate Loan Balances of all Home Improvement
Loans as of the Cut-off Date and will decline as set forth in 24 C.F.R. Section
201.32(b).
Residential Dwelling: Any one of the following: (i) a detached or
semi-detached single-family dwelling, (ii) a two- to four-unit dwelling, (iii) a
townhouse, (iv) a unit in a condominium or a planned unit development, none of
which is a co-operative unit or a mobile home, but which may be a pre-fabricated
manufactured unit affixed to a permanent foundation or (v) a Small Mixed-Use
Property where generally at least ___% of the gross income arises from
residential purposes in accordance with the Seller's Underwriting Guidelines
attached hereto as Exhibit L.
Responsible Officer: When used with respect to the Trustee, the Chairman
or Vice Chairman of the Board of Directors, the President, any vice president,
any assistant vice president, the Secretary, any assistant secretary, the
Treasurer, any assistant treasurer, the Controller and any assistant controller
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also to whom, with
respect to a particular matter, such matter is referred because of such
officers' knowledge of and familiarity with the particular subject.
Rolling Six Month Delinquency Rate: With respect to any Pool, beginning
with the sixth Determination Date and as of each Determination Date thereafter
the average of the Pool Delinquency Rates for each of the six immediately
preceding Due Periods.
Rolling Twelve Month Loss Rate: With respect to any Pool, beginning with
the twelfth Determination Date and as of each Determination Date thereafter the
fraction, expressed as a percentage, equal to (x) the dollar amount of all
Realized Losses with respect to such Pool for the preceding twelve months over
(y) the aggregate Loan Balances of the Mortgage Loans in such Pool as of the
opening of business on the first day of the preceding twelfth month.
S&P: Standard & Poor's, a division of McGraw Hill, and its successors,
and, if such division shall for any reason no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
"nationally recognized rating organization," as set forth on the most current
list of such organizations released by the Securities and
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Exchange Commission and designated by [THE CERTIFICATE INSURER], notice of which
designation shall be given to the Trustee and the Servicer by [THE CERTIFICATE
INSURER].
SAIF: The Savings Association Insurance Fund of the FDIC.
Securities Act: The Securities Act of 1933, as amended.
Seller: Cityscape Corp., a corporation organized under the laws of New
York, or its successor in interest, in its capacity as the originator of the
Mortgage Loans. The Seller is also recognized in certain states as Cityscape
Mortgage Corp.
Senior Lien: With respect to any Junior Mortgage Loan, any liens on the
related Mortgaged Property of higher priority.
Servicer: The Company or any successor servicer appointed as provided
pursuant to this Agreement.
Servicer Information: Any information contained in a Liquidation Report, a
Servicer Remittance Report or a Delinquency Report.
Servicer Loss Test: The Servicer Loss Test for any period set out below is
satisfied, if the Cumulative Loss Percentage for such period does not exceed the
percentage set out for such period below (provided, that for purposes of the
calculation of the Servicer Loss Test, Realized Losses attributable solely to
Cram Down Losses should be excluded from the calculation of Cumulative Loss
Percentage):
Cumulative Loss
Period Percentage
------ ---------------
Servicer Remittance Report: The monthly report described in Section
3.18(a).
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Servicer Termination Test: The Servicer Termination Test is satisfied for
any date of determination thereof if (x) as of the immediately preceding
Determination Date, the Rolling Six Month Delinquency Rate is less than ____%,
(y) the Servicer Loss Test is satisfied and (z) as of the immediately preceding
Determination Date, the Rolling Twelve Month Loss Rate is not greater than
____%.
Servicing Account: The account or accounts created and maintained pursuant
to Section 3.09.
Servicing Advances: The costs and expenses incurred by the Servicer in
connection with (i) the preservation, restoration and protection of a Mortgaged
Property or REO Property, (ii) any enforcement or judicial proceedings,
including foreclosures, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property, (iv) the payment of
any taxes or insurance premiums, and the performance of its obligations under
Sections 3.01(b)(ii), 3.09, 3.13, 3.15(a) and 3.22, (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the Senior Lien pursuant to Section 3.24 and (vi) the payment of
any FHA Insurance Premium not otherwise satisfied by FHA Premium Amounts
received.
Servicing Fee: With respect to each Mortgage Loan and for any Due Period,
an amount equal to one month's interest (or in the event of any payment of
interest which accompanies a Principal Prepayment in full made by the Mortgagor
during such calendar month, interest for the number of days covered by such
payment of interest) at the Servicing Fee Rate on that principal amount on which
interest on such Mortgage Loan accrues during such calendar month. A portion of
such Servicing Fee may be paid to any Sub-Servicer as its servicing
compensation.
Servicing Fee Rate: With respect to each Mortgage Loan and Due Period a
per annum rate equal to 0.__%.
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 and specimen signatures appear on a list of servicing
officers furnished to the Trustee [AND THE CERTIFICATE INSURER] by the Servicer
or such Sub-Servicer, as such list may from time to time be amended. There shall
at no time be fewer than two Servicing Officers.
Small Mixed-Use Property: A Mortgaged Property with improvements
consisting of a two- to four-unit residential dwelling and not more than two
non-residential units.
Specified Overcollateralization Amount: With respect to any Pool and a
Distribution Date (x) prior to the Stepdown Date with respect to such Pool, the
amount which is equal to __% of the Maximum Collateral Amount for such Pool and
(y) after the Stepdown Date (i) if the Stepdown Requirement with respect to such
Pool is satisfied, the lesser of (A) the amount
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equal to ___% of the then outstanding aggregate Loan Balances of the Mortgage
Loans for such Pool or (B) the Initial Specified Overcollateralization Amount
for such Pool or (ii) if the Stepdown Requirement is not satisfied, the amount
which is equal to __% of the Maximum Collateral Amount for such Pool; provided,
however, that such amount will not be reduced below the product of 0.__% and the
Maximum Collateral Amount for such Pool; provided, further, that if on any
Distribution Date, the Mortgage Portfolio Performance Test with respect to such
Pool is not satisfied, then the Specified Overcollateralization Amount for the
related Pool will be unlimited during the period that such Mortgage Portfolio
Performance Test is not satisfied; provided, further, that notwithstanding
anything to the contrary in this definition of Specified Overcollateralization
Amount, the Specified Overcollateralization Amount for each Pool and for any
Distribution Date on which the Monthly Excess Spread with respect to such Pool
is less than one-twelfth of __% of the Class Certificate Principal Balance of
the Pool Certificates of the related Pool for such Distribution Date, shall be
the sum of (I) the Specified Overcollateralization Amount otherwise obtained
hereunder for the related Pool and (II) three times the excess of (i)
one-twelfth of ____% of the Class Certificate Principal Balance of the Pool
Certificates of the related Pool for such Distribution Date over (ii) the
Monthly Excess Spread for the related Pool for such Distribution Date.
Specified Overcollateralization Deficiency Amount: With respect to any
Pool and any Distribution Date, the excess, if any, of (i) the Specified
Overcollateralized Amount of the related Pool applicable to such Distribution
Date over (ii) the Overcollateralized Amount of the related Pool for such
Distribution Date prior to taking into account the payment of any related
Overcollateralization Increase Amounts for the related Pool on such Distribution
Date.
Startup Day: As defined in Section 2.07.
Stepdown Date: The Determination Date occurring in ________ 199_.
Stepdown Requirement: With respect to each Pool, the Stepdown Requirement
is satisfied for any date of determination thereof if as of such date of
determination (x) the Rolling Six Month Delinquency Rate for such Pool as of the
immediately preceding Determination Date is less than ________%, (y) the
Cumulative Loss Test for such Pool is satisfied and (z) the Rolling Twelve Month
Loss Rate for such Pool is not greater than or equal to 0.__%.
Subsequent Cut-off Date: The date specified as such in a Subsequent
Transfer Agreement with respect to those Subsequent Mortgage Loans which are
transferred and assigned to the Trust pursuant to the related Subsequent
Transfer Agreement.
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Subsequent Cut-off Date Principal Balance: As to any Subsequent Mortgage
Loan, the actual outstanding principal balance due thereunder from the Mortgagor
on the Subsequent Cut-off Date.
Subsequent Mortgage Loan: A Mortgage Loan sold to the Trust pursuant to
Section 2.02 of this Agreement, which shall be listed on the Subsequent Mortgage
Loan Schedule attached to a Subsequent Transfer Agreement.
Subsequent Mortgage Loan Schedule: As of any Subsequent Transfer Date, the
schedule of Subsequent Pool I, Pool II, Pool III and Pool IV Mortgage Loans as
of the related Subsequent Cut-off Date being transferred to the Trust on such
Subsequent Transfer Date pursuant to a Subsequent Transfer Agreement. Each
Subsequent Mortgage Loan Schedule shall contain information regarding the
related Subsequent Mortgage Loans of the type included in, and shall be
substantially in the form of, the Mortgage Loan Schedules attached hereto as
Exhibits D-1, D-2, D-3 and D-4.
Subsequent Pool I Mortgage Loan: A Subsequent Mortgage Loan assigned to
Pool I.
Subsequent Pool II Mortgage Loan: A Subsequent Mortgage Loan assigned to
Pool II.
Subsequent Pool III Mortgage Loan: A Subsequent Mortgage Loan assigned to
Pool III.
Subsequent Pool IV Mortgage Loan: A Subsequent Mortgage Loan assigned to
Pool IV.
Subsequent Purchase Price: As of any Subsequent Transfer Date, with
respect to the Subsequent Mortgage Loans, an amount equal to the sum of (i) the
product of _____% and the aggregate of the Loan Balances as of the Subsequent
Cut-off Date of such Subsequent Mortgage Loans listed in the related Subsequent
Transfer Agreement and (ii) any Additional Subsequent Purchase Price
attributable to such Subsequent Mortgage Loans; provided, however, that the
Additional Subsequent Purchase Price, if any, shall be paid only on the last day
of the Funding Period, provided, further, that in no event shall the Subsequent
Purchase Price exceed 100% of the Loan Balances of the Subsequent Mortgages
Loans.
Subsequent Transfer Agreement: With respect to any Subsequent Mortgage
Loan, the agreement pursuant to which such Subsequent Mortgage Loan is
transferred to the Trust, in substantially the form attached hereto as Exhibit
Q.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement, but no later than __________ __, 199_.
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Subsequent Transfer Deposit: The amount deposited by the Seller in the
Collection Account in connection with each conveyance of Subsequent Mortgage
Loans pursuant to Section 2.02, which amount is equal to one month's interest on
the principal balance of each Subsequent Mortgage Loan that does not have a
Monthly Payment due in the Due Period relating to the __________ 199_
Distribution Date, at a per annum rate equal to the Mortgage Loan Rate for each
such Mortgage Loan, net of the applicable Servicing Fee Rate.
Sub-Servicer: Any Person with which the Servicer has entered into a
Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.
Sub-Servicing Account: An account established by a Sub-Servicer which
meets the requirements set forth in Section 3.08 and is otherwise acceptable to
the Servicer.
Sub-Servicing Agreement: The written contract between the Servicer and a
Sub-Servicer and any successor Sub-Servicer relating to servicing and
administration of certain Mortgage Loans as provided in Section 3.02.
Tax Matters Person: The Tax Matters Person appointed pursuant to Section
11.12 hereof.
Tax Returns: The federal income tax return on Internal Revenue Service
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of
REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed
on behalf of REMIC Trust in its capacity as a REMIC under the REMIC Provisions,
together with any and all other information reports or returns that may be
required to be furnished to the Certificateholders or filed with the Internal
Revenue Service or any other governmental taxing authority under any applicable
provisions of federal, state or local tax laws.
Termination Price: As defined in Section 10.01(b) hereof.
30 days Delinquent: A Mortgage Loan is "30 days Delinquent" if any Monthly
Payment due thereon has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
Monthly Payment was due corresponding to the day that such monthly payment was
due , or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such month)
then on the last day of such immediately succeeding month. Similarly for "60
days Delinquent," "90 days Delinquent" and so on.
Title I: Section 2 of Title I of the National Housing Act and the rules
and regulations promulgated thereunder.
Trust: Cityscape Loan Trust 199_-_, the trust created hereunder.
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Trust Estate: The segregated pool of assets subject hereto, constituting
the trust created hereby and to be administered hereunder, consisting of: (i)
such Mortgage Loans as from time to time are subject to this Agreement, together
with the Mortgage Files relating thereto, and together with all collections
thereon and proceeds thereof, (ii) any REO Property, together with all
collections thereon and proceeds thereof, (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof, (iv) the
[CERTIFICATE INSURANCE POLICY], (v) the rights and remedies of the Trustee
against any person making any representation or warranty to the Trustee
hereunder, to the extent provided herein, and (vi) each Account and the Policy
Payments Account, together with such assets that are deposited therein from time
to time and any investments thereof, together with any and all income, proceeds
and payments with respect thereto. The Mortgage Loans included from time to time
in the Trust shall be divided into four separate sub-trusts, one for the Pool I
Mortgage Loans, one for the Pool II Mortgage Loans, one for the Pool III
Mortgage Loans and one for the Pool IV Mortgage Loans.
Trustee: ____________________, a ________, and its successors in interest
or any successor trustee appointed as provided pursuant to this Agreement. In
the event that the Trust contains FHA Loans, the Trustee shall be required to
have and maintain a valid FHA Contract of Insurance, or else appoint a
co-trustee pursuant to Section 8.10 that is so insured, to act as trustee with
respect to the FHA Loans. In the event of the appointment of a co-trustee
pursuant to the preceding sentence, the term "Trustee," as used in this
Agreement, shall include such co-trustee with respect to any references herein
related to the FHA Loans or as the context otherwise requires.
Trustee's Fee: With respect to any Distribution Date, the product of (x)
one-twelfth of the Trustee's Fee Rate and (y) the aggregate Loan Balances of all
Mortgage Loans as of the opening of business on the first day of the related Due
Period.
Trustee's Fee Rate: With respect to any Distribution Date, the greater of
(x) _____% and (y) the fraction, expressed as a percentage, the numerator of
which is $________ and the denominator of which is the aggregate Loan Balance of
all Mortgage Loans as of opening of business on the first day of the related Due
Period.
Underwriter: Greenwich Capital Markets, Inc., a ____________ corporation,
and ____________, a ____________ corporation, each in its capacity as
underwriter of the Class [A] Certificates.
Uninsured Cause: Any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to Section 3.13.
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United States Person or U.S. Person: A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the Unites States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States. The term "United States" shall have the meaning set forth in
Section 7701 of the Code or successor provisions.
Vice President: Any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president."
Voting Interest: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. Except as otherwise
expressly provided for herein, for so long as the Class [A] Certificates are
outstanding, 100% of the Voting Interests shall be allocated among Classes of
Class [A] Certificates in proportion to their Certificate Principal Balances and
among Holders of each Class in proportion to their respective Voting
Percentages; provided, however, that any Class [A] Certificate registered in the
name of the Servicer, the Seller or the Trustee or any of their respective
affiliates shall not be included in the calculation of Voting Interests;
provided, further, that when the Class [A] Certificates are no longer
outstanding, 100% of the Voting Interests shall be allocated among Holders of
the Class R Certificates in accordance with their respective Voting Percentage.
Voting Percentage: With respect to any Class of Class [A] Certificates, a
fraction, expressed as a decimal, the numerator of which is the Certificate
Principal Balance represented by such Class [A] Certificate and the denominator
of which is the Class [A] Certificate Principal Balance of the related Class.
With respect to a Class R Certificate, the Percentage Interest set forth on such
Certificate.
Written Order to Authenticate: A written order in the form of Exhibit K
hereto by which the Seller directs the Trustee to issue the Certificates.
Section 1.02. Interest Calculations. All calculations of interest at the
Mortgage Loan Rate that are made in respect of the Loan Balance of a Mortgage
Loan shall be made on a daily basis using a 360-day year of twelve 30-day
months.
All calculations of interest with respect to Fixed Rate Mortgage Loans
will be computed on the basis of a 360-day year of twelve 30-day months.
All calculations of interest with respect to Adjustable Rate Mortgage
Loans will be computed on the basis of the actual number of days elapsed in the
related Due Period and a year of 360 days.
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Section 1.03. Determination of Material Adverse Effect. Whenever a
determination is to be made under this Agreement as to whether a given action,
course of conduct, event or set of facts or circumstances could or would have a
material adverse effect on the Trust or the Certificateholder (or any similar or
analogous determination), such determination shall be made without giving effect
to the insurance provided by the [CERTIFICATE INSURANCE POLICY]; subject to the
FHA Regulations, if applicable.
ARTICLE TWO
CONVEYANCE OF THE TRUST;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Trust. The Seller, concurrently with the
execution and delivery of this Agreement, does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders of the related Pool, without recourse (except
as otherwise explicitly provided for herein), all of its right, title and
interest in and to the Trust, including specifically, without limitation, the
Initial Pool I, Pool II, Pool III and Pool IV Mortgage Loans, the Mortgages, the
Mortgage Files, the Mortgage Notes and, with respect to FHA Loans, all rights
under the Reserve Amount relating to such FHA Loans, including all interest and
principal received or deemed to be received by the Seller on or with respect to
the Mortgage Loans on or after the Cut-off Date (whether in the nature of
amounts held by the Seller for application on behalf of the related Mortgagor as
a Monthly Payment that is due on any date on or after the Cut-off Date or
otherwise), together with all of its right, title and interest in and to the
proceeds received on or after the Cut-off Date of any related insurance
policies. In addition, on or prior to the Closing Date the Seller shall [(i)]
cause the [CERTIFICATE INSURANCE POLICY] to be delivered to the Trustee [AND
(ii) DEPOSIT THE CLOSING DATE DEPOSIT IN THE COLLECTION ACCOUNT].
The Mortgage Loans that from time to time constitute part of the Trust
Estate shall be divided into four separate sub-trusts, one for the Pool I
Mortgage Loans, one for the Pool II Mortgage Loans, one for the Pool III
Mortgage Loans and one for the Pool IV Mortgage Loans. Nothing in this
Agreement, however, shall be deemed to create a transfer of an FHA Loan in
violation of Title I or the FHA Regulations.
In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Trust by the Seller to the Trustee, such
sale and assignment are deemed to constitute a pledge of security for a loan, it
is the intent of this Agreement that the Seller shall be deemed to have granted
to the Trustee for the benefit of the Certificateholders of the related Pool a
first priority perfected security interest in all of the Seller's right, title
and interest in and to the Mortgage Loans, the Mortgages, the Mortgage Files and
the Mortgage Notes, all payments of principal or interest on the Mortgage Loans
received on or after the Cut-off Date, all other payments (exclusive of
assumption fees, late payment charges,
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charges for checks returned for insufficient funds, prepayment fees, if any, and
extension and other administrative charges) made in respect of such Mortgage
Loans on or after the Cut-off Date and all proceeds of any thereof with respect
to the related Pool, including all amounts on deposit in the Certificate
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account and amounts invested in Permitted Investments, and that this
Agreement shall constitute a security agreement under applicable law.
The Company confirms to the Trustee that it has caused its computer
records relating to the Mortgage Loans to indicate by a code that the Mortgage
Loans have been sold to the Trustee on behalf of the Trust and constitute part
of the Trust in accordance with the terms of the Trust and that the Company will
treat the transaction contemplated by such sale and assignment as a sale in
accordance with generally accepted accounting principles and will reflect such
sale on its primary accounting records.
In connection with such sale and assignment, the Company, in its capacity
as Seller hereunder, does hereby deliver to, and deposit with, the Trustee the
originals of the following documents or instruments with respect to each
Mortgage Loan so assigned:
(a) The original Mortgage Note, endorsed in blank or in the
following form: "Pay to the order of _______________, as Trustee under the
Pooling and Servicing Agreement, dated as of _____ __, 199_, Cityscape
Loan Trust 199_-_, without recourse", with all prior and intervening
endorsements showing a complete chain of endorsement from origination of
the Mortgage Loan to the Seller;
(b) The original Mortgage with evidence of recording thereon (or, if
the original Mortgage has not been returned from the applicable public
recording office or is not otherwise available, a copy of the Mortgage
certified by a Responsible Officer of the Seller or by the closing
attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy or commitment
therefor to be a true and complete copy of the original Mortgage submitted
for recording) and, if the Mortgage was executed pursuant to a power of
attorney, the original power of attorney with evidence of recording
thereon (or, if the original power of attorney has not been returned from
the applicable public recording office or is not otherwise available, a
copy of the power of attorney certified by a Responsible Officer of the
Seller or by the closing attorney or by an officer of the title insurer or
agent of the title insurer which issued the related title insurance policy
or commitment therefor, to be a true and complete copy of the original
power of attorney submitted for recording);
(c) The original executed Assignment of the Mortgage, acceptable for
recording except with respect to any currently unavailable recording
information, from the Seller to the Trustee in blank or in the following
form:
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"___________________, as Trustee under the Pooling and Servicing
Agreement, dated as of _______ __, 199_, Cityscape Loan Trust 199_-_";
(d) The original Assignment and any intervening Assignments of the
Mortgage, with evidence of recording thereon, showing a complete chain of
assignment from origination of the Mortgage Loan to the Seller (or, if any
such Assignment has not been returned from the applicable public recording
office or is not otherwise available, a copy of such Assignment certified
by a Responsible Officer of the Seller or by the closing attorney or by an
officer of the title insurer or agent of the title insurer which issued
the related title insurance policy or commitment therefor to be a true and
complete copy of the original Assignment submitted for recording);
(e) The original, or a copy certified by the Seller to be a true and
correct copy of the original, of each assumption, modification, written
assurance or substitution agreement, if any;
(f) (1) Except with respect to the FHA Loans, (i) an original, or a
copy certified by the Seller to be a true and correct copy of the
original, of a lender's title insurance policy, or if a lender's title
policy has not been issued as of the Closing Date of a commitment (binder)
(including any marked additions thereto or deletions therefrom) to issue
such policy, and (ii) either: (A) an original hazard insurance policy; (B)
a certificate of insurance issued by the related insurer or its agent as
to such policy; or (C) an Officer's Certificate of the Seller certifying
that a hazard insurance policy is in effect as to the Mortgaged Property
(in which case such Officer's Certificate shall be accompanied by a copy
of such hazard insurance policy); and (2) with respect to the FHA Loans,
the written Mortgage Loan application, title report, credit reconciliation
worksheet, credit investigation receipts and approval sheet; and
(g) If required because a Mortgaged Property is located in a
federally designated special flood zone, either: (A) an original flood
insurance policy or (B) a certificate of insurance issued by the related
insurer or its agent as to such policy; or (C) an Officer's Certificate of
the Seller certifying that a flood insurance policy is in effect covering
the Mortgaged Property (in which case such Officer's Certificate shall be
accompanied by a copy of such flood insurance policy).
With respect to any Mortgage referred to in clause (b) above as to which
the original Mortgage is not available as of the Closing Date, and with respect
to any Assignment referred to in clause (c) above or clause (d) above as to
which the original Assignment is not available as of the Closing Date, the
Seller shall deliver, prior to the Closing Date, a copy of such Mortgage or such
Assignment, as the case may be, certified by the Seller to be a true and correct
copy, to the Trustee and shall also deliver the original Mortgage, or where the
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original Mortgage is unavailable a copy thereof certified by the applicable
public recording office, and the original Assignment, or where the original
Assignment is unavailable a copy thereof certified by the applicable public
recording office, to the Trustee within five Business Days of receipt thereof by
the Seller but in no event later than 360 days (or such longer period as [ANY
ONE RATING AGENCY/THE CERTIFICATE INSURER] may approve in writing with respect
to specific Mortgage Loans upon the request of the Seller) following the date of
origination of the related Mortgage Loan or the date of such Assignment to the
Seller, as the case may be. The failure of the Seller to deliver to the Trustee
(x) any original Mortgage under clause (b) above (or where the original is
unavailable a copy thereof certified by the applicable public recording office),
or (y) any original Assignment under clause (c) above or clause (d) above (or
where the original is unavailable a copy thereof certified by the applicable
public recording office), shall not be deemed a breach of this Agreement for any
purpose whatsoever until the expiration of such 360 day period (or such longer
period as [ANY ONE RATING AGENCY/THE CERTIFICATE INSURER] may approve in writing
with respect to specific Mortgage Loans upon the request of the Seller).
The Trustee shall promptly (and in no event later than twenty Business
Days following the Closing Date) submit for recording, at the Seller's own
expense, in the appropriate public office for real property records, each
original Assignment referred to in clause (c) above, as well as each original
Assignment referred to in clause (d) above that was not previously submitted for
recording. With respect to any original Assignment referred to in clause (c)
above as to which the related recording information is unavailable within five
Business Days following the Closing Date, such original Assignment shall be
submitted for recording within five Business Days after receipt of such
information but in no event later than 180 days (or such longer period, up to an
additional 180 days, as [ANY ONE RATING AGENCY/THE CERTIFICATE INSURER] may
approve and any longer period as approved by [ANY ONE RATING AGENCY/THE
CERTIFICATE INSURER] and the Majority Certificateholders in writing with respect
to specific Mortgage Loans upon the request of the Seller) after the Closing
Date. The Seller shall deliver each recorded Assignment referred to in clause
(c) above or, where the original is unavailable, a copy thereof certified by the
applicable public recording office to be a true and correct copy of the
original, to the Trustee within 360 days (or such longer period as [ANY ONE
RATING AGENCY/THE CERTIFICATE INSURER] may approve in writing with respect to
specific Mortgage Loans upon the request of the Seller) of the Closing Date or
Subsequent Transfer Date, and any failure of the Seller to deliver to the
Trustee, prior to the expiration of such 360 day period (or any such longer
period as [ANY ONE RATING AGENCY/THE CERTIFICATE INSURER] may have approved in
accordance with the terms set forth above), any such recorded Assignment, or
such certified copy if such recorded Assignment has not been received by it,
shall not be deemed a breach of this Agreement for any purpose. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Seller shall promptly prepare a substitute Assignment or cure such
defect, as the case may be, and thereafter cause each such Assignment to be duly
recorded.
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The Trustee shall promptly upon receipt thereof, with respect to each
Mortgage Note and Assignment of Mortgage delivered in blank in accordance with
clause (a) above and clause (c) above, respectively, endorse each such Mortgage
Note and Assignment in the form described therein.
The Servicer shall promptly upon receipt thereof (and in no event later
than the earlier of (i) twenty Business Days following such receipt and (ii) 360
days after the Closing Date or Subsequent Transfer Date (or such longer period
as [ANY ONE RATING AGENCY/THE CERTIFICATE INSURER] may approve in writing with
respect to specific Mortgage Loans upon the request of the Seller)), deliver to
the Trustee (a) the original recorded Mortgage in those instances where a
certified copy thereof was delivered to the Trustee; (b) the original recorded
Assignment of Mortgage to the Trustee; (c) the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment from
origination of a Mortgage Loan to the Seller in those instances where certified
copies thereof were delivered to the Trustee; (d) the original policy of title
insurance or a copy certified by the Seller to be a true and correct copy in
those instances where a commitment (binder) (including any marked additions
thereto or deletions therefrom) to issue such policy was delivered to the
Trustee; and (e) any other original documents constituting a part of a Mortgage
File received with respect to any Mortgage Loan, including, but not limited to,
any original documents evidencing an assumption or modification of any Mortgage
Loan.
In the event that [ANY ONE RATING AGENCY/THE CERTIFICATE INSURER] approves
in writing any extension of time for delivery of any document as provided for in
this Section 2.01, a copy of such written approval shall be sent to the Trustee.
All original documents relating to the Mortgage Loans that are not
delivered to the Trustee are and shall be held by the Seller or the Servicer, as
the case may be, in trust for the benefit of the Trustee on behalf of the
Certificateholders. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee. Any original document that
is not required pursuant to the terms of this Section to be a part of a Mortgage
File delivered to or held by the Trustee shall be delivered promptly to the
Servicer.
If the Seller has not delivered all required documentation with respect to
any Mortgage Loan within the time periods specified in this Agreement, the
Seller shall be required to take action with respect to such Mortgage Loan as
and to the extent provided in Section 2.03 hereof.
Section 2.02. Conveyance of the Subsequent Mortgage Loans. Subject to the
conditions set forth in the paragraphs below, in consideration of the Trustee's
delivery on the related Subsequent Transfer Dates to or upon the order of the
Seller of the Subsequent Purchase Price of the related Subsequent Mortgage Loans
from amounts on deposit in the
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Pre-Funding Account, the Seller shall, from time to time, on any Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without
recourse, to the Trustee on behalf of the Certificateholders of the related
Pool, all right, title and interest of the Seller in and to each Subsequent
Mortgage Loan identified on the Subsequent Mortgage Loan Schedule attached to
the related Subsequent Transfer Agreement delivered by the Seller on such
Subsequent Transfer Date, including all of its right, title and interest in and
to principal and interest received or deemed to be received by the Seller on
each such Subsequent Mortgage Loan on and after the related Subsequent Cut-off
Date (whether in the nature of amounts held by the Seller for application on
behalf of the related Mortgagor as a Monthly Payment that is due on any date on
or after the related Subsequent Cut-off Date or otherwise) and all items with
respect to such Subsequent Mortgage Loan to be delivered pursuant to Section
2.01 and other items in the related Mortgage File; provided, however, that the
Seller reserves and retains all of its right, title and interest in and to
principal (including prepayments) and interest collected on each such Subsequent
Mortgage Loan prior to the related Subsequent Cut-off Date. The transfer by the
Seller of the Subsequent Mortgage Loans set forth on the Subsequent Mortgage
Loan Schedule to the Trustee shall be absolute and shall be intended by the
parties hereto to be treated as a sale by the Seller.
In connection with each conveyance of Subsequent Mortgage Loans, the
Seller shall deposit any applicable Subsequent Transfer Deposit in the
Collection Account on the related Subsequent Transfer Date.
In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Subsequent Mortgage Loans on the related
Subsequent Transfer Date by the Seller to the Trustee, such sale and assignment
will be deemed to constitute a pledge of security for a loan, it is the intent
of this Agreement that the Seller shall be deemed to have granted to the Trustee
for the benefit of the Certificateholders of the related Pool a first priority
perfected security interest in all of the Seller's right, title and interest in
and to the Subsequent Mortgage Loans, the Mortgages, the Mortgage Files and the
Mortgage Notes, all payments of principal and interest on the Subsequent
Mortgage Loans received on or after the related Subsequent Cut-off Date, all
other payments (exclusive of assumption fees, late payment charges, charges for
checks returned for insufficient funds, prepayment fees, if any, and extension
and other administrative charges) made in respect of such Subsequent Mortgage
Loans on or after the related Subsequent Cut-off Date and all proceeds of any
thereof with respect to the related Pool, and that this Agreement and the
related Subsequent Transfer Agreement shall each constitute a security agreement
with respect to the related Subsequent Mortgage Loans under applicable law.
The amount released from the Pre-Funding Account with respect to any Pool
on any Subsequent Transfer Date in connection with any conveyance of Subsequent
Mortgage Loans into such Pool shall be equal to the aggregate of the Subsequent
Purchase Prices for such Subsequent Mortgage Loans, which amount shall not
exceed the Pre-Funding Account
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Deposit with respect to such Pool; provided, however, that any Additional
Subsequent Purchase Price in respect of the Subsequent Mortgage Loans shall only
be paid on the last day of the Funding Period. The amount released from the
Pre-Funding Account in connection with any conveyance of Subsequent Mortgage
Loans shall, for federal income tax purposes, be considered cash contributed to
the REMIC Trust by the Seller and used by the Trustee to acquire the related
Subsequent Mortgage Loans.
On the related Subsequent Transfer Date, the Seller shall transfer to the
Trustee the Subsequent Mortgage Loans and the other property and rights related
thereto described in the first paragraph in this section only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(a) the Seller shall provide the Trustee and the [RATING
AGENCIES/CERTIFICATE INSURER] with an Addition Notice and shall provide
any information reasonably requested by the Trustee or the [RATING
AGENCIES/CERTIFICATE INSURER] with respect to the Subsequent Mortgage
Loans;
(b) the Seller shall deliver to the Trustee[, THE CERTIFICATE
INSURER] and the Rating Agencies a duly executed Subsequent Transfer
Agreement and any other exhibits listed thereon;
(c) the Seller shall deposit in the Collection Account all
collections in respect of the Subsequent Mortgage Loans received on or
after the related Subsequent Cut-off Date;
(d) the Seller shall certify that, as of the Subsequent Transfer
Date, the Seller was not insolvent nor was made insolvent by such transfer
nor is aware of any pending insolvency;
(e) the Seller shall certify that such addition of Subsequent
Mortgage Loans will not result in a material adverse tax consequence to
the Trust or the Holders of Class [A] Certificates;
(f) the Funding Period shall not have terminated;
(g) the Seller shall make the representations and warranties set
forth in Section A of Schedule II to the Agreement; and
(h) on such Subsequent Transfer Date, the Seller shall deposit any
applicable Subsequent Transfer Deposit in the Collection Account.
In addition, the Seller will provide [THE CERTIFICATE INSURER AND] the
Trustee with data regarding all Subsequent Mortgage Loans transferred to the
Trust on any Subsequent
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Transfer Date at least ten Business Days prior to the end of the Funding Period.
No later than the end of the Funding Period, the following conditions shall have
been satisfied with respect to all Subsequent Mortgage Loans transferred to the
Trust on any Subsequent Transfer Date:
(i) the Seller shall have delivered to the Trustee and the [RATING
AGENCIES/CERTIFICATE INSURER] an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this Section 2.02
and in the related Subsequent Transfer
Agreements;
(ii) the Seller shall have delivered to the [RATING
AGENCIES/CERTIFICATE INSURER] and the Trustee Opinions of Counsel with
respect to the transfer of all of the Subsequent Mortgage Loans to the
Trust on any Subsequent Transfer Date substantially in the form of the
Opinions of Counsel delivered to the Trustee [AND THE CERTIFICATE INSURER]
on the Closing Date (regarding bankruptcy, corporate and tax matters) or,
in lieu of such Opinions of Counsel, a letter of counsel to the effect
that the [RATING AGENCIES/CERTIFICATE INSURER] and the Trustee may rely on
the Opinion of Counsel delivered on the Closing Date by such counsel to
the same extent as if it were dated the date of such letter authorizing
reliance (except that the statements in such Opinion of Counsel shall be
deemed to give effect to the transfer of the Subsequent Mortgage Loans and
other changes of fact and law since the date of such Opinion of Counsel);
(iii) the Trustee shall deliver to the Rating Agencies[, THE
CERTIFICATE INSURER] and the Seller an Opinion of Counsel with respect to
each of the Subsequent Transfer Agreements substantially in the form of
the Opinion of Counsel delivered to the Seller and the [RATING
AGENCIES/CERTIFICATE INSURER] on the Closing Date or, in lieu of such
Opinions of Counsel, a letter of counsel to the effect that the Rating
Agencies[, THE CERTIFICATE INSURER] and the Seller may rely on the Opinion
of Counsel delivered on the Closing Date by such counsel to the same
extent as if it were dated the date of such letter authorizing reliance
(except that the statements in such Opinion of Counsel shall be deemed to
give effect to the Subsequent Transfer Agreements and other changes of
fact and law since the date of such Opinion of Counsel); [AND]
(iv) The Seller shall deliver to the Trustee an Officer's Certificate
confirming that each Subsequent Pool I Mortgage Loan, Subsequent Pool II
Mortgage Loan, Subsequent Pool III Mortgage Loan or Subsequent Pool IV
Mortgage Loan, as the case may be, conforms in all material respects to
the representations and warranties concerning the individual Initial Pool
I Mortgage Loans, Initial Pool II Mortgage Loans, Initial Pool III
Mortgage Loans or Initial Pool IV Mortgage Loans, as the case may be
(including, if such Subsequent Pool III
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Mortgage Loan is an FHA Loan, the representations and warranties
concerning FHA Loans), set forth in Sections 2.04 and 2.05 and Section B
of Schedule II to the Agreement (except that any reference therein to the
Cut-off Date shall be deemed a reference to the applicable Subsequent
Cut-off Date) and that the inclusion of all Subsequent Pool I Mortgage
Loans, Subsequent Pool II Mortgage Loans, Subsequent Pool III Mortgage
Loans or Subsequent Pool IV Mortgage Loans, as the case may be, being
transferred to the Trust Estate on such Subsequent Transfer Date will not
change, in any material respect, the characteristics of the Initial Pool I
Mortgage Loans, Initial Pool II Mortgage Loans, Initial Pool III Mortgage
Loans or Initial Pool IV Mortgage Loans, as the case may be, in the
aggregate, set forth in Sections 2.04 and 2.05, in Section B of Schedule
II to the Agreement and in the Prospectus Supplement; [AND
(v) THE CERTIFICATE INSURER SHALL DELIVER TO THE SELLER, THE TRUSTEE
AND THE RATING AGENCIES A WRITTEN NOTICE CONFIRMING THE CERTIFICATE
INSURER'S CONSENT AND APPROVAL TO THE ADDITION OF ALL SUBSEQUENT POOL I
MORTGAGE LOANS, SUBSEQUENT POOL II MORTGAGE LOANS, SUBSEQUENT POOL III
MORTGAGE LOANS OR SUBSEQUENT POOL IV MORTGAGE LOANS, AS THE CASE MAY BE,
PURCHASED BY THE TRUST ON ANY SUBSEQUENT TRANSFER DATE.]
Upon the satisfaction of the conditions set forth in clauses (i) through
[(iv)/(v)] of the immediately preceding paragraph, on the last Subsequent
Transfer Date during the Funding Period, the Trustee shall release to the Seller
from the Pre-Funding Account the aggregate Additional Subsequent Purchase Prices
with respect to all Subsequent Mortgage Loans, which amount shall not exceed the
Pre-Funding Account Deposit.
In connection with the transfer of any Subsequent Mortgage Loans to the
Trust Estate, the Seller, the Servicer and the Trustee may[, WITH THE PRIOR
WRITTEN CONSENT OF THE CERTIFICATE INSURER,] amend the definition of "Specified
Overcollateralization Amount" (or any component of the definition thereof) with
respect to the related Pool for the purpose of changing the related Specified
Overcollateralization Amount (or any component of the definition thereof);
provided, however, that any such amendment, other than an amendment increasing
the Pool I, Pool II, Pool III or Pool IV Initial Specified Overcollateralized
Amount (or any component of the definition thereof), as the case may be, and
accompanied by a cash deposit into the Collection Account pursuant to Section
3.10, must comply with the provisions of Section 11.01.
Section 2.03. Acceptance by Trustee; Repurchase or Substitution of
Mortgage Loans. The Trustee acknowledges the sale and assignment of the Trust
and receipt by it of the original Mortgage Notes, Assignments and Mortgages
pursuant to this Agreement [AND THE DELIVERY TO IT OF THE CERTIFICATE INSURANCE
POLICY,] and, subject to the provisions of the penultimate paragraph of Section
2.01, any exceptions noted on the Trustee's certificate in
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the form of Exhibit E-1 and the review provided for in this Section, the
documents referred to in clauses (a) through (g) of Section 2.01, and the
Officer's Certificates delivered pursuant to Section 2.01, declares that it will
hold the Trust in trust upon the terms herein set forth for the use and benefit
of all present and future Certificateholders of the related Pool. The Trustee
agrees, for the benefit of Certificateholders of the related Pool, to review
each Mortgage File within ten days after the Closing Date (or, with respect to
the Subsequent Mortgage Loans, ten days after the Subsequent Transfer Date) to
determine if the documents described in Section 2.01(a)-(d), (f)-(g) have been
executed and received, and that such documents relate to the Mortgage Loans
identified in the Mortgage Loan Schedule or the Subsequent Mortgage Loan
Schedule, as applicable, and in so doing the Trustee may rely on the purported
due execution and genuineness of any such document and on the purported
genuineness of any signature thereon. If within such ten-day period the Trustee
finds any document constituting a part of a Mortgage File not to have been
executed or received, or to be unrelated to the Mortgage Loans identified in the
Mortgage Loan Schedule, then the Trustee shall promptly notify the Seller and
shall provide a copy of such notice to [THE CERTIFICATE INSURER], and the Seller
shall have a period of 90 days after such notice within which to correct or cure
any such defect.
Further, for each Mortgage Loan (other than Pool III Mortgage Loans) with
an original Loan Balance in excess of $_____________ for which the documents in
possession of the Trustee indicate that the Seller conducted a drive-by
appraisal pursuant to FHLMC Form 704 or alternative FNMA Form in connection with
originating such Mortgage Loan, the Trustee shall verify whether the Trustee's
Mortgage File shows that such Mortgage Loan (A) had an original Loan Balance not
in excess of $_____________ and (B) has a Combined Loan-to-Value Ratio less than
_____% (based solely on the Combined Loan-to-Value Ratio included on the
Mortgage Loan Schedule) and/or an appraisal on FNMA/FHLMC Form 1004 was
performed by the Seller within one year prior to the origination of such
Mortgage Loan. Notwithstanding the second paragraph of Section 8.01, the Trustee
shall be under no duty or obligation to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face. Within ten days after the Closing Date, the Trustee shall deliver
to the Seller, the Servicer [AND THE CERTIFICATE INSURER] a certificate in the
form of Exhibit E-2, with any applicable exceptions noted therein.
If the Trustee has notified the Seller of a defect in a Mortgage File
following its review of the Mortgage Files pursuant to this Section and such
defect remains uncured and such defect materially and adversely affects the
interests of the Certificateholders in the related Mortgage Loan, the Seller
shall, (i) in the case of a defect consisting solely of the failure of the
Company to deliver the original Mortgage or any intervening mortgage assignment
with evidence of recording thereon, on the first Deposit Date occurring after
the expiration of 360 days (or any longer period approved by [THE CERTIFICATE
INSURER] and
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notified to the Trustee pursuant to Section 2.01) from the Closing Date and (ii)
in the case of all other defects, on the Deposit Date occurring not later than
90 days (which period may be extended for up to an additional 60 days by [ANY
ONE RATING AGENCY/THE CERTIFICATE INSURER] (or such longer period as [ANY ONE
RATING AGENCY/THE CERTIFICATE INSURER] may consent to), if in its reasonable
judgment it believes the Seller is proceeding diligently to cure any such breach
or missing document) after receipt of notice of such defect from the Trustee,
either (I) repurchase the related Mortgage Loan (including any property acquired
in respect thereof and any insurance policy or insurance proceeds with respect
thereto) from the Trust at a price equal to the Purchase Price, which shall be
accomplished by deposit of monies by the Seller in the Certificate Account on
such Deposit Date, or (II) substitute a Qualified Replacement Mortgage Loan for
the related Mortgage Loan. Notwithstanding the time periods in the previous
sentence, in the case of a defect that would cause the related Mortgage Loan or
Subsequent Mortgage Loan to fail to be a "qualified mortgage" as such term is
defined in the REMIC Provisions if such defect had been discovered prior to the
Startup Day, the Seller must either repurchase the related Mortgage Loan or
Subsequent Mortgage Loan or substitute a Qualified Replacement Mortgage Loan for
the related Mortgage Loan, as discussed above, no more than 90 days after the
discovery of such defect.
Upon receipt by the Trustee of an Officer's Certificate of the Servicer to
the effect that the Purchase Price for a Defective Mortgage Loan (other than a
Defective Mortgage Loan that is a Deleted Mortgage Loan) has been deposited in
the Certificate Account, and upon confirmation by the Trustee that such Purchase
Price has been received by it, the Trustee shall execute and deliver such
instrument of transfer or assignment presented to it by the Seller, in each case
without recourse, as shall be necessary to vest in the Seller legal and
beneficial ownership of such repurchased Defective Mortgage Loan (including any
property acquired in respect thereof or insurance policy or insurance proceeds
with respect thereto), including, without limitation, for each FHA Loan, an FHA
Transfer of Note Report to be filed with the FHA.
Payments received with respect to Qualified Replacement Mortgage Loans in
the Due Period prior to the Deposit Date on which such substitution occurs will
not be part of the Trust and will be retained by the Seller. For the
Distribution Date following the Deposit Date on which such substitution occurs,
distributions to Certificateholders will reflect the payments received on such
Deleted Mortgage Loan in the related Due Period, and the Seller shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. In the case of a Qualified Replacement Mortgage Loan, the
Mortgage File relating thereto shall be delivered to the Trustee and the amount,
if any, by which the Loan Balance of the related Deleted Mortgage Loan exceeds
the Loan Balance of the Qualified Replacement Mortgage Loan shall be remitted by
the Seller to the Trustee for deposit in the Certificate Account on the Deposit
Date on which the substitution occurs. For purposes of this Agreement, any such
amount so deposited in the Certificate Account in connection with the
substitution of a Qualified Replacement Mortgage Loan shall be deemed
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a prepayment of the related Deleted Mortgage Loan in a corresponding amount as
of the prior Determination Date. Upon receipt by the Trustee of the Officer's
Certificate certifying that the Qualified Replacement Mortgage Loan conforms to
the requirements of this Agreement and (a) written notification of such deposit
signed by a Servicing Officer and (b) the new Mortgage File (containing all of
the documents referred to in clauses (a) through (g) of Section 2.01), the
Trustee shall release or cause to be released to the Seller the Mortgage File
related to the Deleted Mortgage Loan or property and shall execute and deliver
or cause to be executed and delivered such instrument of transfer or assignment
presented to it by the Seller, without recourse, as shall be necessary to vest
in the Seller all of the legal and beneficial ownership of such Deleted Mortgage
Loan or property and the Trustee shall have no further responsibility with
respect to said Mortgage File. It is understood and agreed that the obligation
of the Seller to substitute a Qualified Replacement Mortgage Loan for or
repurchase any Defective Mortgage Loan (or any property acquired in respect
thereof or insurance policy or insurance proceeds with respect thereto) shall
constitute the sole remedy against it respecting such defect available to the
Certificateholders of the related Pool or the Trustee, and such obligation on
the part of the Seller shall survive any resignation or termination of the
Company as Servicer under this Agreement. Notwithstanding the foregoing, a
substitution by the Seller for a defect in a constituent document will not be
made unless the Trustee receives an Officer's Certificate that the Qualified
Replacement Mortgage Loan conforms to the requirements of this Agreement and an
Opinion of Counsel that such substitution will not be a "prohibited transaction"
as defined in Section 860F(a)(2) of the Code. Any substitution must be effected
not later than two years, or such longer period of time as may be permitted
under the REMIC Provisions for substitution of mortgage loans, after the Closing
Date.
On or prior to __________ __, 199_ (__________ __, 199_ with respect to
the Subsequent Mortgage Loans), the Trustee shall certify to [THE CERTIFICATE
INSURER,] the Seller and the Servicer that it has received all of the documents
referred to in clauses (a)-(d) and (f)-(g) of Section 2.01 and that all
corrections or curative actions required to be taken by the Seller within the
90-day period referred to in the first paragraph of this Section have been
completed or effected, or the related Mortgage Loans have been repurchased or
substituted, in accordance with the provisions of this Section or, if any
deficiencies in the Mortgage Files or other omissions of the Seller with respect
to the Mortgage Files are known to the Trustee at the time of such
certification, the Trustee shall make such certification only with respect to
those Mortgage Loans as to which no such defects or omissions are known, and
shall qualify such certification with respect to the remaining Mortgage Loans,
identifying the related defects or omissions. Thereafter, the Trustee shall
provide [THE CERTIFICATE INSURER,] the Seller and the Servicer with quarterly
exception reports in the form of Exhibit E-3 indicating the status of any
exceptions until all such exceptions have been eliminated. Such quarterly
exception reports shall be distributed on the next following Distribution Date
with the Statement to Certificateholders.
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The Trustee shall, upon the written request of any Certificateholder [OR
OF THE CERTIFICATE INSURER] and, at the expense of the requesting party, provide
a written report to such Certificateholder [OR THE CERTIFICATE INSURER] of each
Mortgage File released to the Servicer for servicing purposes.
At such time as any Mortgage Loan becomes 90 days Delinquent, the Servicer
shall make, or cause to be made, a reasonable investigation to determine whether
such Mortgage Loan satisfied the representations and warranties of the Seller
set forth in Section 2.05 as of the Closing Date or the Subsequent Transfer
Date, as the case may be; provided, however, that only one such investigation
shall be required for any Mortgage Loan.
Section 2.04. Representations and Warranties Regarding the Seller,
Servicer and Claims Administrator. The Company, as Seller, Servicer and Claims
Administrator, hereby represents and warrants to the Trustee[, THE CERTIFICATE
INSURER] and the Certificateholders that, as of the Closing Date:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and has, and
had at all relevant times, full power to own its property and to carry on
its business as currently conducted. The Company is in compliance with the
laws of each state in which it is acting as Servicer with respect to a
Mortgage Loan to the extent necessary to ensure the enforceability of each
Mortgage Loan in accordance with the terms of this Agreement. Each
Sub-Servicer is in compliance with the laws of each state where the
Mortgaged Properties under the applicable Sub-Servicing Agreement are
located to the extent necessary to perform the servicing obligations
hereunder. The Company has the power and authority to execute and deliver
this Agreement and to perform its obligations in accordance herewith; the
execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Company and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action; this
Agreement evidences the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or
in equity; and the consummation of the transactions contemplated hereby
will not result in the breach of any terms or provisions of the articles
of incorporation or by-laws of the Company or result in a breach of any
term or provision of, or conflict with or constitute a default under or
result in the acceleration for any obligation under, any material
agreement, indenture or loan or credit agreement or other material
instrument to which the Company or its property is subject, or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Company or its property is subject. Each Sub-Servicer has all
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requisite corporate power and authority to conduct its business and
perform the obligations under the Sub-Servicing Agreement to which such
Sub-Servicer is a party;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency, that
are necessary in connection with the execution and delivery by the Company
of this Agreement and the Certificates, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement on the
part of the Company and the performance by the Company of its obligations
as Servicer under this Agreement;
(iii) There are no actions or proceedings against, or investigations
of, the Company pending with regard to which the Company has received
service of process, or, to the knowledge of the Company, threatened,
before any court, administrative agency or other tribunal (A) that, if
determined adversely, would prohibit its entering into this Agreement or
render the Certificates invalid, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or (C) that, if determined adversely, would
prohibit or materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability of, this
Agreement or the Certificates;
(iv) The Company is not in default with respect to, and the execution
and delivery of this Agreement by the Company will not constitute a
violation 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 otherwise) or operations of
the Company or its properties or might have consequences that would
adversely affect its duties hereunder;
(v) The transfer, assignment and conveyance of the Mortgage Loans by
the Company, as Seller, pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
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(vi) The Seller did not sell the Mortgage Loans to the Trust with any
intent to hinder, delay or defraud any of its creditors; the Seller will
not be rendered insolvent as a result of the sale of the Mortgage Loans to
the Trust;
(vii) As of the Closing Date, the Seller had good title to, and was
the sole owner of, each Mortgage Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Seller will have taken all steps necessary so that the
Trust will have good title to, and will be the sole owner of, each
Mortgage Loan free and clear of any lien (except for such liens as may
exist consistent with the representations and warranties made in Sections
2.05(c) and (h) hereof);
(viii) The Seller acquired title to the Mortgage Loans in good faith,
without notice of any adverse claim;
(ix) The Company, as Servicer, will examine each Sub-Servicing
Agreement and will be familiar with the terms thereof. Each designated
Sub-Servicer and the terms of each Sub-Servicing Agreement will be
required to comply with the provisions of Section 3.02 hereof. The terms
of any Sub-Servicing Agreement will not be inconsistent with any of the
provisions of this Agreement.
(x) No Officer's Certificate, statement, report or other document
prepared by the Seller or Servicer, and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading;
(xi) The Company is duly licensed where required as a "Licensee" or
is otherwise qualified in each state in which it transacts business and is
not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a
material adverse effect on the ability of the Company to conduct its
business or perform its obligations hereunder;
(xii) The Seller is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution
and delivery of this Agreement or by the performance of its obligations
hereunder; no petition of bankruptcy (or similar insolvency proceeding)
has been filed by or against the Seller prior to the date hereof;
(xiii) Neither the Company nor the Trust is required to be registered
as an "investment company" under the Investment Company Act of 1940, as
amended;
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(xiv) The Servicer believes that the Servicing Fee Rate provides a
reasonable level of base compensation to the Servicer for servicing the
Mortgage Loans on the terms set forth herein;
(xv) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer; and
(xvi) The Servicer services mortgage loans in accordance with Accepted
Servicing Practices.
The representations and warranties set forth in this Section shall survive
the sale and assignment of the Mortgage Loans to the Trust and the issuance,
sale and delivery of the Certificates and shall inure to the benefit of the
Certificateholders and the Trustee. Upon discovery by any of the Company or the
Trustee of a breach of any of the foregoing representations and warranties which
materially and adversely affects the value of any Mortgage Loan or the interests
of the Certificateholders, the party discovering such breach shall give prompt
written notice (but in no event later than two Business Days following such
discovery) to the other parties [AND THE CERTIFICATE INSURER]. Within 60 days of
its discovery or its receipt of notice of breach, the Company shall cure such
breach in all material respects.
Section 2.05. Representations and Warranties of the Seller Regarding the
Mortgage Loans. The Seller represents and warrants to the Trustee[, THE
CERTIFICATE INSURER] and the Certificateholders as of the Closing Date and, with
respect to any Subsequent Mortgage Loan, as of the related Subsequent Transfer
Date (in either case except as otherwise expressly stated) that, as to each
Mortgage Loan conveyed to the Trust by it:
(a) The information set forth on the Mortgage Loan Schedule relating
to the Mortgage Loans is complete, true and correct as of the Cut-Off
Date;
(b) The Mortgage Note and the Mortgage are not assigned or pledged
by the Seller to a Person other than the Trust, and immediately prior to
the transactions herein contemplated, the Seller had good and marketable
title thereto, and was the sole owner and holder of the Mortgage Loan free
and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any nature
(collectively, a "Lien"), other than any such Lien released simultaneously
with the sale contemplated herein, and had full right and authority,
subject to no interest or participation of, or agreement with, any other
party, to sell and assign the same pursuant to this Agreement, and
immediately upon the transfer and assignment of each Mortgage Loan as
herein contemplated, the Trustee shall have good title to, and will be the
sole legal owner of, each Mortgage Loan free and clear of any Lien;
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(c) The Mortgage is a valid and existing lien on the property
therein described, and the Mortgaged Property is free and clear of all
encumbrances and liens having priority over the lien of the Mortgage,
except (i) liens for real estate taxes and special assessments not yet due
and payable, (ii) in the case of a Mortgaged Property that is a
condominium or an individual unit in a planned unit development, liens for
common charges permitted by statute and (iii) in the case of a Junior
Mortgage Loan, the lien securing the related Senior Lien. Any security
agreement, chattel mortgage or equivalent document related to the Mortgage
and delivered to the Trustee establishes in the Seller a valid and
subsisting lien on the property described therein, and the Seller has full
right to sell and assign the same to the Trustee;
(d) The terms of the Mortgage Note and the Mortgage have not been
impaired, altered or modified in any respect which would have any adverse
effect on the Certificateholders, except by a written instrument which has
been recorded, if necessary to protect the interests of the
Certificateholders, and which has been delivered to the Trustee. The
substance of any such alteration or modification is reflected on the
Mortgage Loan Schedule;
(e) No instrument of release or waiver has been executed in
connection with the Mortgage Loan, and no Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement which
has been approved by the primary mortgage guaranty insurer, if any, and
which has been delivered to the Trustee;
(f) Except with respect to delinquencies described in clause (l) of
this Section, no Mortgagor is in default in complying with the terms of
the Mortgage Note or the Mortgage and there exists no event which, with
the passage of time or notice or both, would constitute a default
thereunder, and the Seller has not waived any default, breach, violation
or event of acceleration except that the Seller may have accepted late
payments. At origination all taxes, governmental assessments, insurance
premiums, or water, sewer and municipal charges and rents under all ground
leases which previously became due and owing have been paid, and each
Mortgage Note and/or the related Mortgage obligate the related Mortgagor
to pay all similar amounts as they become due. The Seller has not advanced
funds, or induced, solicited or knowingly received any advance of funds by
a party other than the Mortgagor, directly or indirectly, for the payment
of any amount required by the Mortgage, except for interest accruing from
the date of the Mortgage Note or date of disbursement of the Mortgage
proceeds, whichever is more recent, to the day which precedes by one month
the Due Date of the first installment of principal and interest;
(g) There is no proceeding pending or, to the best of Seller's
knowledge, threatened for the total or partial condemnation of the
Mortgaged Property, nor is
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such a proceeding currently occurring, and such property is undamaged by
waste, fire, water, earthquake or earth movement, windstorm, flood,
tornado, or otherwise, so as to affect adversely the value of the
Mortgaged Property as security for the Mortgage Loan or the use for which
the premises were intended;
(h) Except with respect to Home Improvement Loans, as to which no
representation is made pursuant to this clause, there are no mechanics' or
similar liens or claims which have been filed for work, labor or material
(and no rights are outstanding that under law could give rise to such
lien) affecting the Mortgaged Property which are, or may be, liens prior
or equal to, or coordinate with, the lien of the Mortgage except those
that are stated in the title insurance policy and for which related losses
are affirmatively insured against by such policy;
(i) Other than with respect to the Home Improvement Loans, as to
which no representation is made pursuant to this clause, to the best
knowledge of the Company, all of the improvements that were included for
the purpose of determining the Appraised Value of the Mortgaged Property
lie wholly within the boundaries and building restriction lines of such
property, and no improvements on adjoining properties encroach upon the
Mortgaged Property except those that are stated in the title insurance
policy and for which related losses are affirmatively insured against by
such policy;
(j) Other than with respect to the Home Improvement Loans, as to
which no representation is made pursuant to this clause, to the best
knowledge of the Company, no improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation. All inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including, but not
limited to, certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities and the
Mortgaged Property is lawfully occupied under applicable law;
(k) All parties that have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in
compliance with any and all licensing requirements of the United States
and of the laws of the state wherein the Mortgaged Property is located
that are applicable to such parties, and (2)(A) organized under the laws
of such state, or (B) qualified to do business in such state or exempt
from such qualification in a manner so as not to affect adversely the
enforceability of such Mortgage Loan, or (C) federal savings and loan
associations or national banks having principal offices in such state, or
(D) not doing business in such state;
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(l) As of the Cut-Off Date, no more than __%, __%, __% and __% of
the Initial Pool I Mortgage Loans, Initial Pool II Mortgage Loans, Initial
Pool III Mortgage Loans and Initial Pool IV Mortgage Loans, respectively,
each measured by Cut-Off Date Loan Balances, were 30 days or more
Delinquent, and none of the Mortgage Loans was 60 days or more Delinquent;
(m) The Mortgage File contains each of the documents and instruments
specified to be included therein duly executed and in due and proper form
and each such document or instrument is in a form generally acceptable to
prudent institutional mortgage lenders that regularly originate or
purchase mortgage loans comparable to the Mortgage Loans for sale to
prudent investors in the secondary market that invest in mortgage loans
such as the Mortgage Loans;
(n) The Mortgage Note and the related Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law). All parties to the Mortgage Note and the Mortgage had legal capacity
(and, with respect to any Mortgage Loan secured by a Small Mixed-Use
Property, such party had full power and authority and had been duly
authorized) to execute the Mortgage Note and the Mortgage, and each
Mortgage Note and Mortgage has been duly and properly executed by such
parties. The Mortgagor is a natural person (except with respect to
Mortgage Loans secured by Small Mixed-Use Properties) who is a party to
the Mortgage Note and the Mortgage in an individual capacity, and not in
the capacity of a trustee or otherwise;
(o) 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, and the Seller has and shall maintain in its possession,
available for the Trustee's inspection, and shall deliver to the Trustee
upon demand, evidence of compliance with all such requirements;
(p) The proceeds of the Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements and
as to disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making, closing or recording the
Mortgage Loan were paid;
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(q) Any future advances made after the date of origination of each
Mortgage Loan but prior to the Cut-Off Date have been consolidated with
the outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the Mortgage Loan Schedule. The
lien of the Mortgage securing the consolidated principal amount is
expressly insured as having Senior Lien priority, except in the case of a
Junior Mortgage Loan where such lien is expressly insured as having second
lien priority subject only to the lien of the related Senior Lien, by a
title insurance policy or an endorsement to the policy insuring the
mortgagee's consolidated interest. The consolidated principal amount does
not exceed the original principal amount of the Mortgage Loan. The Seller
shall not be obligated to make future advances after the Cut-Off Date;
(r) Each Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other form of policy acceptable to FNMA or FHLMC,
issued by and constituting the valid and binding obligation of a title
insurer generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans for
sale to prudent investors in the secondary market that invest in mortgage
loans such as the Mortgage Loans and qualified to do business in the
jurisdiction wherein the Mortgaged Property is located, insuring the
Seller, its successors and assigns, as to the first priority lien of the
Mortgage in the case of a First Mortgage Loan and the second priority lien
of the Mortgage in the case of a Junior Mortgage Loan, in the original
principal amount of the Mortgage Loan. The Seller is the sole payee of
such mortgage title insurance policy, the assignment to the Trustee of the
Seller's interest in such mortgage title insurance policy does not require
the consent of or notification to the insurer or the same has been
obtained, and such mortgage title insurance policy is in full force and
effect and will be in full force and effect and inure to the benefit of
the Trustee upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such mortgage title insurance
policy and no prior holder of the related Mortgage, including the Seller,
has done, by act or omission, anything that would impair the coverage of
such mortgage title insurance policy;
(s) All improvements upon the Mortgaged Property are insured by an
insurer who meets FNMA and/or FHLMC guidelines against loss by fire,
hazards of extended coverage and such other hazards as are customary in
the area wherein the Mortgaged Property is located pursuant to insurance
policies conforming to the requirements of Section 3.13 hereof. If the
Mortgaged Property was, at the time of origination of the related Mortgage
Loan, in an area identified on a Flood Hazard Boundary Map or Flood Hazard
Rate Map issued by the Federal Emergency Management Agency as having
special flood hazards (and if the flood insurance policy referenced herein
has been made available), a flood insurance policy is in
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effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage described in Section 3.13. All
individual insurance policies (collectively, the "hazard insurance
policy") are the valid and binding obligation of the insurer and contain a
standard mortgagee clause naming the Seller, its successors and assigns,
as mortgagee. All premiums thereon have been paid. The Mortgage obligates
the Mortgagor thereunder to maintain all such insurance at the Mortgagor's
cost and expense, and upon the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(t) The Mortgage Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will
the operation of any of the terms of the Mortgage Note or the Mortgage, or
the exercise of any right thereunder, render either the Mortgage Note or
the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto;
(u) The Mortgage Loan was originated or purchased and
re-underwritten by the Seller in accordance with the Seller's underwriting
guidelines attached hereto as Exhibit L. No Mortgage Loan has been
modified except as such modification may be reflected in the related
Mortgage File;
(v) The Mortgage Loan is a closed-end First Mortgage Loan or
closed-end Junior Mortgage Loan having an original term of not more than
30 years to maturity. Except with respect to any Balloon Loan, each
Mortgage Loan is payable in equal monthly installments of principal and
interest which would be sufficient, in the absence of late payments, to
fully amortize such loan within the term thereof, beginning no later than
60 days after disbursement of the proceeds of the Mortgage Loan and, if
the Mortgage Loan is a Fixed Rate Mortgage Loan, bears a fixed interest
rate for the term of the Mortgage Loan. As of the Cut-Off Date,
approximately __% of the Initial Mortgage Loans that are Fixed Rate
Mortgage Loans and __% of the Initial Mortgage Loans that are Adjustable
Rate Mortgage Loans, measured by outstanding principal balances, are
Balloon Loans, each of which has an original term of not less than fifteen
(15) years and which provides for level monthly payments based on a thirty
(30) year amortization schedule and a final Monthly Payment substantially
greater than the preceding Monthly Payments;
(w) The Mortgage contains a customary provision for the acceleration
of the payment of the unpaid principal balance of the Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of
the holder thereunder;
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(x) With respect to ___%, ___%, ___% and ___% of the Initial Pool I
Mortgage Loans, Initial Pool II Mortgage Loans, Initial Pool III Mortgage
Loans and Initial Pool IV Mortgage Loans, respectively, at the time that
each Mortgage Loan was originated, the related Mortgagor represented that
such Mortgagor would occupy the related Mortgaged Property as Mortgagor's
primary residence, and the Seller has no reason to believe that such
representation of the Mortgagor is no longer true. No Mortgage Loan is a
construction loan. Each Mortgaged Property is lawfully occupied under
applicable law;
(y) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in Section 2.05(c);
(z) The Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial or non-judicial
foreclosure. Other than applicable homestead provisions which may delay
the realization against the Mortgaged Property, or exemptions that may
arise in the event a petition under the Bankruptcy Code is filed with
respect to the Mortgagor, there is no homestead or other exemption
available to the Mortgagor that would interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(aa) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Trustee or the
Certificateholders to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor, which
fees and expenses shall constitute [SERVICING ADVANCES];
(bb) The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule for the related Pool and consists of at least one
parcel of real property with a one family residence erected thereon, a
two- to four-family dwelling, a Small Mixed-Use Property or an individual
condominium unit; provided, however, that no residence or dwelling is a
co-operative unit or a mobile home, but may be a pre-fabricated
manufactured unit affixed to a permanent foundation. With respect to Pool
I Mortgage Loans, Pool II Mortgage Loans, Pool III Mortgage Loans and Pool
IV Mortgage Loans, as of the Cut-Off Date with respect to the aggregate
Loan Balance of all Mortgage Loans in such Pools, (i) no more than ____%
___%, ___% and ___%, respectively, are secured by real property improved
by two- to four-
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family dwellings, (ii) no more than ___%, ___%, ___% and ___%,
respectively, are secured by real property improved by individual
condominium or townhouse units, (iii) at least ____%, ___%, ___% and ___%,
respectively, are secured by real property with a detached one family
residence erected thereon, (iv) not more than ___%, ___%, ___% and ___%,
respectively, are secured by real property with an attached one-family
residence erected thereon, (v) not more than ___%, ___%, ___% and ___%,
respectively, are subject to a ground lease and the remainder of the
Mortgaged Properties are fee simple estates, (vi) not more than ___%,
___%, ___% and ___% are Junior Mortgage Loans; (vii) not more than ___%,
___%, ___% and ___% are secured by Small Mixed-Use Properties; (viii) none
is secured by multifamily Mortgaged Properties; (ix) not more than ___%,
___%, ___% and ___% have been originated under a non-income verification
program; and (x) [INSERT APPLICABLE POOLS OF MORTGAGE LOANS] Mortgage Loan
secured by a Small Mixed-Use Property is a first lien on such Mortgaged
Property. With respect to each Mortgaged Property subject to a ground
lease (i) the current ground lessor has been identified and all ground
rents which have previously become due and owing have been paid; (ii) the
ground lease term extends, or is automatically renewable, for at least
five years beyond the maturity date of the related Mortgage Loan; (iii)
the ground lease has been duly executed and recorded; (iv) the amount of
the ground rent and any increases therein are clearly identified in the
lease and are for predetermined amounts at predetermined times; (v) the
ground rent payment is included in the borrower's monthly payment as an
expense item; (vi) the Trust has the right to cure defaults on the ground
lease; and (vii) the terms and conditions of the leasehold do not prevent
the free and absolute marketability of the Mortgaged Property;
(cc) With respect to Initial Pool I Mortgage Loans, Pool II Mortgage
Loans, Pool III Mortgage Loans and Pool IV Mortgage Loans, the Combined
Loan-to-Value Ratio as of the date of origination of each Mortgage Loan
was not more than ___%, ___%, ___% and ___%, respectively. The weighted
average Combined Loan-to-Value ratios of the Initial Pool I Mortgage
Loans, Initial Pool II Mortgage Loans, Initial Pool III Mortgage Loans and
Initial Pool IV Mortgage Loans is approximately ___%, ___%, ___%, and
___%, respectively;
(dd) Other than as provided by this Agreement, there is no
obligation on the part of Initial Pool IV;
(ee) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no escrow deposits or payments
of other charges or payments due the Seller have been capitalized under
the Mortgage or the related Mortgage Note;
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(ff) No Mortgage Loan was originated under a buydown plan;
(gg) Other than as provided by this Agreement, there is no obligation
on the part of the Seller or any other party to make payments in addition
to those made by the Mortgagor;
(hh) Subject to Section 2.01, the Mortgage Note, the Mortgage, the
Assignment of Mortgage and any other documents required to be delivered
have been delivered to the Trustee. The Seller is in possession of a
complete Mortgage File, except those documents delivered to the Trustee,
and there are no custodial agreements in effect adversely affecting the
right or ability of the Seller to make the document deliveries required
hereby. Each original Mortgage was recorded, and all subsequent
Assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien
thereof as against creditors of the Seller (subject to the provisions of
Section 2.01 hereof with respect to Mortgages which are in the process of
being recorded);
(ii) No Mortgage Loan was selected for inclusion under this Agreement
on any basis which was intended to have a material adverse effect on the
Certificateholders;
(jj) No Mortgage Loan has a shared appreciation or other contingent
interest feature;
(kk) No more than 0.__%, 0.__%, 0.__% and 0.__% of the aggregate Loan
Balance of the Pool I Mortgage Loans, Pool II Mortgage Loans, Pool III
Mortgage Loans or Pool IV Mortgage Loans, respectively, as of the Cut-Off
Date is secured by Mortgaged Properties located within any single zip code
area;
(ll) The weighted average Mortgage Loan Rate of all the Fixed Rate
Mortgage Loans as of the Cut-Off Date is approximately ___%, and no Fixed
Rate Mortgage Loan had a Mortgage Loan Rate that was greater than ___% or
less than __%;
(mm) With respect to each Junior Mortgage Loan:
(i) if the related Senior Lien provides for negative
amortization the Combined Loan-to-Value Ratio was calculated at the
maximum principal balance of such Senior Lien that could result upon
application of such negative amortization feature;
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(ii) either no consent for the Junior Mortgage Loan is required
by the holder of the related Senior Lien or such consent has been
obtained and is contained in the Mortgage File; and
(iii) no notice of default has been delivered to the Seller that
has not been cured with respect to the related Senior Lien.
(nn) The Seller has caused or will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
Trustee in any insurance policies applicable to the Mortgage Loans,
including, without limitation, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Trustee.
(oo) All amounts received after the Cut-Off Date (and all interest
payments received on or before the Cut-Off Date that are due after the
Cut-Off Date) with respect to the Mortgage Loans to which the Seller is
not entitled are, as of the Closing Date in the Collection Account;
(pp) Each Initial Mortgage Loan and all such Mortgage Loans in the
aggregate conform, and each Subsequent Mortgage Loan and all Subsequent
Mortgage Loans in the aggregate will conform, to the description thereof
set forth in the Prospectus Supplement;
(qq) Except with respect to Pool III Mortgage Loans, for which no
such representation or warranty is made pursuant to this clause, a full
appraisal on forms approved by FNMA or FHLMC was performed in connection
with the origination of the related Mortgage Loan. Each appraisal meets
guidelines that would be generally acceptable to prudent mortgage lenders
that regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market that
invest in mortgage loans such as the Mortgage Loans;
(rr) To the best of the Seller's knowledge, no Mortgaged Property
was, as of the Cut-Off Date located within a one-mile radius of any site
listed in the National Priorities List as defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of hazardous waste sites which are
known to contain any hazardous substance or hazardous waste;
(ss) None of the Mortgage Loans is subject to a bankruptcy plan;
(tt) No more than ___%, ___%, ___%, and ___% of the aggregate Loan
Balance of the Pool I Mortgage Loans, Pool II Mortgage Loans, Pool III
Mortgage
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Loans and Pool IV Mortgage Loans, respectively, as of the Cut-Off Date
relates to Mortgage Loans originated or purchased under the Seller's
Sav*-A-Loan program;
(uu) To the best of the Seller's knowledge, no statement, report or
other document constituting a part of the Mortgage File contains any
untrue statement of fact or omits to state a fact necessary to make the
statements contained therein not misleading;
(vv) The range of points financed or "net funded" on Mortgage Loans
originated after January 1, 1994 is __% to ___%;
(ww) Each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code;
(xx) The Seller has the full authority to sell and transfer each
Mortgage Note and Mortgage and such transfer and sale will not impair the
enforceability of any Mortgage;
(yy) With respect to each Mortgage Loan secured by a Mortgaged
Property which is a Small Mixed-Use Property, (i) such Mortgaged Property
is in compliance with all environmental laws, statutes, ordinances,
regulation, orders, rules, decrees and similar requirements of federal,
state, municipal and any other governmental authorities relating thereto,
(ii) no hazardous material or oil was or is incorporated in, stored on,
transported to or from, or disposed of on or from (except if the same was
or is in compliance with all laws, ordinances, and regulations pertaining
thereto), the Mortgaged Property, (iii) neither the Seller nor, to the
best of its knowledge, any Mortgagor has received notification from any
federal, state or other governmental authority of any potential, known, or
threat of, release of hazardous material on or from the Mortgaged Property
or any potential or known liability that has resulted in or may result in
a lien on the Mortgaged Property, (iv) the Mortgaged Property is a
separate tax parcel, separate and apart from any other property owned by
the Mortgagor or any other Person, (v) the liability and rent coverage
insurance is consistent with Accepted Servicing Procedures and (vi) except
for no more than _____% of such Mortgage Loans, the security documentation
includes an assignment of leases and rents. For purposes of this
representation, the term hazardous material (a) shall have the meaning
defined under any applicable federal, state, municipal, or other
jurisdictions, laws, rules or regulations and (b) shall include asbestos;
(zz) The Mortgage Loan Rate for each Adjustable Rate Mortgage Loan
will be adjustable on each related Adjustment Date and will equal the sum,
rounded upward to the nearest three decimal places, of the Index plus the
related Gross Margin, rounded to the nearest 0.125%, subject to any
related Minimum Rates,
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Maximum Rates or any limitations or periodic adjustments, in each case as
specified in the related Mortgage Loan Schedule. The Mortgage Notes for
the Adjustable Rate Mortgage Loans provide that in no event shall the
Mortgage Loan Rate of any Adjustable Rate Mortgage Loan increase or
decrease on any Adjustment Date by more than (i) ____% per annum with
respect to ____% of the Adjustable Rate Mortgage Loans; Adjustable Rate
Mortgage Loans representing approximately ____%, ____%, ____% and ____% of
the aggregate Adjustable Rate Mortgage Loan Cut-Off Date Loan Balance have
Lifetime Caps of ____%, ____%, ____% and ____%, respectively. The Gross
Margins on the Adjustable Rate Mortgage Loans range from ____% to ____%,
and the weighted average of such Gross Margins as of the Cut-Off Date was
approximately ____%. No Adjustable Rate Mortgage Loan is subject to
negative amortization;
(aaa) With respect to any Adjustable Rate Mortgage Loan, no related
Mortgage Note contains any provision permitting the Mortgagor thereunder,
at his option, to convert the Mortgage Loan to a fixed interest rate;
(bbb) Each Adjustable Rate Mortgage Loan has an initial Adjustment
Date no later than _______________ ___, ______;
(ccc) With respect to each Adjustable Rate Mortgage Loan, all of the
terms of the Mortgage pertaining to interest rate adjustments, payment
adjustments and adjustments of the outstanding principal balance are in
accordance with applicable law;
(ddd) Approximately __% and __% of the initial Home Improvement Loans
(measured by outstanding principal balance as of the Closing Date) were
FHA Loans and Conventional Home Improvement Loans, respectively;
(eee) Except for the related FHA Premium Account in connection with
any FHA Loan, there is no obligation on the part of the Seller or any
other party to make payments in addition to those made by the Mortgagor;
(fff) Each initial FHA Loan is, and each Subsequent Mortgage Loan that
is an FHA Loan will be, an FHA Title I property improvement loan (as
defined in the FHA Regulations) underwritten in accordance with applicable
FHA requirements and submitted to the FHA for insurance;
(ggg) Each initial FHA Loan has been, and each Subsequent Mortgage
Loan that is an FHA Loan will be, submitted to the FHA for insurance
pursuant to the FHA Title I loan program and, except for no more than 30%
of the initial FHA Loans (measured by outstanding principal balance as of
the Closing Date) (the "Non-acknowledged FHA Loans"), each initial FHA
Loan has been acknowledged by the
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FHA for the FHA Title I loan program; each Non-acknowledged FHA Loan will
be acknowledged by the FHA within 180 days of the Closing Date and each
subsequent FHA Loan will be acknowledged by the FHA within 180 days after
the Funding Period; within 165 days of the Closing Date or, with respect
to the subsequent FHA Loans, within 165 days after the Funding Period, the
Seller will inform [THE CERTIFICATE INSURER], in writing, which
Non-acknowledged FHA Loans have been acknowledged by the FHA and which
have not;
(hhh) The Reserve Amount with respect to each initial FHA Loan will be
transferred to the Trustee's FHA Reserve Account within 180 days after the
Closing Date, the Reserve Amount with respect to each Subsequent Mortgage
Loan that is an FHA Loan will be transferred to the Trustee's FHA Reserve
Account within 180 days after the Funding Period, and the Seller will give
[THE CERTIFICATE INSURER,] the Trustee and the Rating Agencies prompt
notice of its receipt of confirmation of such transfers;
(iii) Assuming sufficient coverage remains available in the Reserve
Amount, each Claim filed by the Claims Administrator with respect to a 90
Day Delinquent FHA Loan will be honored by the FHA in accordance with the
FHA Regulations;
(jjj) Substantially all the proceeds of each Pool III Mortgage Loan
(including each Subsequent Pool III Mortgage Loan) have been or will be
used to acquire or to improve or protect an interest in real property
that, at the origination date of such Pool III Mortgage Loan, was the only
security for such Pool III Mortgage Loan;
(kkk) Each Pool IV Mortgage is a Jumbo Loan, of which ___% of the
related Mortgaged Properties are single-family Residential Dwellings;
(lll) Each Initial Pool I Mortgage Loan and Initial Pool III Mortgage
Loan, and each Subsequent Pool I Mortgage Loan and Subsequent Pool III
Mortgage Loan, will bear a fixed rate of interest and each Initial Pool II
Mortgage Loan and Initial Pool IV Mortgage Loan, and each Subsequent Pool
II Mortgage Loan and Subsequent Pool IV Mortgage Loan, will bear an
adjustable rate of interest;
(mmm) With respect to Pool I, Pool II, Pool III and Pool IV,
approximately ___%, ___%, ___% and ___%, respectively, of the Mortgage
Loans for such Pool were originated by the Seller and approximately ___%,
___%, ___% and ___%,
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respectively, of the Mortgage Loans for such Pool were purchased and
re-underwritten by the Seller in accordance with the Seller's underwriting
criteria.
(nnn) The information set forth in the Mortgage Loan Schedule relating
to any Subsequent Mortgage Loan will be complete, true and correct in all
material respects as of the related Cut-Off Date; and
(ooo) Each of the Mortgage Loans (other than Mortgage Loans accruing
interest in accordance with the "simple interest" method) provides for the
calculation of interest on the basis of a 360-day year consisting of
twelve 30-day months; each of the "simple interest" Mortgage Loans
provides for the calculation of interest on the basis of the actual number
of days elapsed in a year consisting of 365 or 366 days, as applicable.
It is understood and agreed that the representations and warranties set
forth in this Section shall survive the sale and assignment of the Mortgage
Loans to the Trust and the issuance, sale and delivery of the Certificates. Upon
discovery by the Seller, the Servicer or a Responsible Officer of the Trustee of
a breach of any of the foregoing representations and warranties, without regard
to any limitation set forth in such representation or warranty concerning the
knowledge of the Seller as to the facts stated therein, which breach materially
and adversely affects the interests of the Certificateholders in the related
Mortgage Loan or Mortgage Loans, the party discovering such breach shall give
prompt written notice to the other parties hereto[, TO THE CERTIFICATE INSURER]
and to each of the Rating Agencies.
Within 60 days of its discovery or its receipt of notice of breach, the
Seller shall use all reasonable efforts to cure such breach in all material
respects. Unless, prior to the expiration of such 60-day period, such breach has
been cured in all material respects or otherwise does not exist or continue to
exist, the Seller shall, not later than the Deposit Date in the month following
the related Due Period in which any such cure period expired, but in all events
within 90 days of the discovery of such breach (or at the election of the
Seller, an earlier Due Period), either (1) repurchase such Mortgage Loan (or, in
the case of a representation and warranty of the nature specified in clauses
(ll) and (uu), repurchase the smallest number of Mortgage Loans such that, after
giving effect to such repurchase, the related representation and warranty would
be complied with) (including any property acquired in respect thereof and any
insurance policy or insurance proceeds with respect thereto) from the Trust in
the same manner and subject to the same conditions as set forth in Section 2.03
or (2) remove such Mortgage Loan and substitute in its place a Qualified
Replacement Mortgage Loan (or, in the case of a representation and warranty of
the nature specified in clauses (dd) and (uu), remove the smallest number of
Mortgage Loans and substitute in their place Qualified Replacement Mortgage
Loans such that, after giving effect to such substitution, the related
representation and warranty would be complied with) in the same manner and
subject to the same conditions as set forth in Section 2.03. Upon making
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any such repurchase or substitution, the Seller shall be entitled to receive an
instrument of assignment or transfer from the Trustee, without recourse to the
Trustee, to the same extent as set forth in Section 2.03 with respect to the
repurchase of or substitution for Defective Mortgage Loans under that Section.
It is understood and agreed that the obligation of the Seller to repurchase or
substitute any such Defective Mortgage Loan (or property acquired in respect
thereof or insurance policy or insurance proceeds with respect thereto) shall
constitute the sole remedy against it respecting such breach of the foregoing
representations or warranties available to the Certificateholders or the
Trustee, as the case may be, and such obligation shall survive any resignation
or termination of the Company as Servicer under this Agreement. Notwithstanding
the foregoing, a substitution of a Mortgage Loan by the Seller for a breach will
not be made unless the Trustee receives an Officer's Certificate certifying that
the Qualified Replacement Mortgage Loan conforms to the requirements of this
Agreement and an Opinion of Counsel that such substitution will not be a
"prohibited transaction" as defined in Section 860F(a)(2) of the Code. Any
substitution must be effected not later than two years, or such longer period of
time as may be permitted under the REMIC Provisions for substitution of mortgage
loans, after the Closing Date.
Section 2.06. Execution and Authentication of Certificates. The Trustee
shall deliver to or upon the order of the Seller, in exchange for the Initial
Pool I Mortgage Loans, the Initial Pool II Mortgage Loans, the Initial Pool III
Mortgage Loans and the Initial Pool IV Mortgage Loans, and the other assets
comprising the Trust, simultaneously with the sale, assignment and transfer to
the Trustee of the Initial Pool I Mortgage Loans, the Initial Pool II Mortgage
Loans, the Initial Pool III Mortgage Loans and the Initial Pool IV Mortgage
Loans, Certificates duly executed by the Trustee on behalf of the Trust, not in
its individual capacity but solely as Trustee, and authenticated by the Trustee
pursuant to Section 5.01, in authorized denominations, equaling 100% of the
Percentage Interests in each Class and collectively evidencing the entire
ownership of the Trust.
Section 2.07. Designation of Certificates; Designation of Startup Day. The
Seller hereby designates the Class [A] Certificates as "regular interests" and
the Class R Certificates as the single class of "residual interests" in the
REMIC Trust comprising the REMIC established pursuant to Section 3.01 for the
purposes of Code Sections 860G(a)(1) and 860G(a)(2), respectively. The
Pre-Funding Account and the Capitalized Interest Account shall not be part of
the REMIC Trust established pursuant to Section 3.01. The Closing Date is hereby
designated as the "Startup Day" within the meaning of Code Section 860G(a)(9) of
the REMIC established pursuant to Section 3.01. The latest possible maturity
date of the Class [A] Certificates is the Final Maturity Date.
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ARTICLE THREE
ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS; CERTIFICATE ACCOUNT
Section 3.01. Administration of the Trust; Servicing of the Mortgage
Loans.
(a) The parties hereto intend that the REMIC Trust shall constitute, and
that the affairs of the REMIC Trust shall be conducted so as to qualify it as, a
REMIC in accordance with the REMIC Provisions. In furtherance of such intention,
the parties hereto each covenant and agree that they shall not knowingly take
any actions or omit to take any actions that would disqualify the Trust for
REMIC election or status and the Trustee covenants and agrees that it shall act
in its capacity as Tax Matters Person, as agent for the REMIC Trust and as the
"tax matters person" (as defined in the REMIC Provisions) and that in such
capacity it shall: (i) prepare or cause to be prepared, execute and file, in a
timely manner, an annual Tax Return and any other Tax Return required to be
filed by the Trust established hereunder using a calendar year as the taxable
year for the REMIC Trust established hereunder; (ii) in the related first such
Tax Return, make (or cause to be made) an election satisfying the requirements
of the REMIC Provisions, on behalf of the Trust, to be treated as a REMIC; (iii)
prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information, reports or Tax Returns required with respect
to the REMIC Trust as, when and in the form required to be provided to the
Certificateholders, and to the Internal Revenue Service and any other relevant
governmental taxing authority in accordance with the REMIC Provisions and any
other applicable federal, state or local laws, including, without limitation,
information reports relating to "interest" required by Section 6049 of the Code
and "original issue discount" as defined in the Code, calculated based upon the
Prepayment Assumption and by using the "issue price" (within the meaning of
Section 1273 of the Code) of the Certificates of the related Class; (iv) not
knowingly take any action or omit to take any action that would cause the
termination of the REMIC status of the REMIC Trust, except as provided under
this Agreement; (v) pay, from the sources specified in the last paragraph of
this Section 3.01(a), the amount of any and all other federal, state and local
taxes imposed on the REMIC Trust, its assets or transactions, including, without
limitation, the tax on "prohibited transactions" imposed by Section 860F of the
Code, the tax on "contributions" imposed by Section 860G(d) of the Code and the
tax on "net income from foreclosure property" imposed by Section 860G(c) of the
Code when and as the same shall be due and payable (but such obligation shall
not prevent the Trustee or any other appropriate Person from contesting any such
tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings); (vi) represent the Trust in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to a taxable year of the
Trust, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax
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item of the Trust, and otherwise act on behalf of the Trust in relation to any
tax matter involving the Trust; (vii) comply with all statutory or regulatory
requirements with regard to its conduct of activities pursuant to the foregoing
clauses of this Section 3.01(a), including, without limitation, providing all
notices and other information to the Internal Revenue Service and Holders of
Class R Certificates required of a "tax matters person" pursuant to subtitle F
of the Code and the Treasury Regulations thereunder; (viii) make available
information necessary for the computation of any tax imposed (A) on a transferor
of residual interests to certain Disqualified Organizations or (B) on
pass-through entities, any interest in which is held by a Disqualified
Organization; and (ix) in connection with any FHA Loan, timely pay to the FHA
the FHA Insurance Premium required to be paid for each FHA Loan. The obligations
of the Trustee pursuant to this Section 3.01(a) shall survive the termination or
discharge of this Agreement.
In order to enable the Trustee to perform its duties as set forth herein,
the Seller shall provide or cause to be provided to the Trustee or its designee,
within ten days after the Closing Date, all information or data that the Trustee
or its designee reasonably determines to be relevant for tax purposes as to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Seller shall provide to
the Trustee, promptly upon request therefor, any such additional information or
data that the Trustee may from time to time reasonably request in order to
enable the Trustee to perform its duties as set forth herein. The Seller shall
indemnify the Trustee and hold it harmless for any loss, liability, damage,
claim or expense of the Trustee arising from any failure of it to provide, or to
cause to be provided, in response to the reasonable requests of the Trustee made
pursuant to this paragraph, accurate information or data to the Trustee on a
timely basis. The indemnification provisions hereunder shall survive the
termination of this Agreement.
In the event that any tax is imposed on "prohibited transactions" of the
REMIC Trust as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the REMIC Trust as defined in Section 860G(c) of
the Code, on any gain recognized by the REMIC Trust pursuant to Section 860F(c)
of the Code, on any contribution to the REMIC Trust after the Startup Day
pursuant to Section 860G(d) of the Code, or any other tax is imposed, if not
paid as otherwise provided for herein, such tax shall be paid by (i) the
Trustee, if any such tax arises out of or results from the willful malfeasance,
bad faith or negligence in the performance by the Trustee of any of its
obligations under this Section 3.01(a), (ii) the Servicer or the Seller, as
applicable, if such tax arises out of or results from a breach by the Servicer
or the Seller of any of their respective obligations under this Agreement or
(iii) in all other cases, or in the event that the Trustee, the Servicer or the
Seller fails to honor its obligations under the preceding clauses (i) or (ii),
any such tax will be paid with amounts otherwise to be distributed to the
Holders of the Class R Certificates pursuant
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to Section 4.04(a)(viii) or, in the event of an insufficiency in such amounts,
such tax shall be paid directly by such Class R Certificateholders.
(b) (i) The Servicer shall service and administer the Mortgage Loans in
accordance with the terms of this Agreement and in accordance with the
respective Mortgage Loans and in accordance with the instructions of the Trustee
[AND THE CERTIFICATE INSURER]. Unless otherwise specified herein with respect to
specific obligations of the Servicer, the Servicer shall service and administer
the Mortgage Loans in the best interests of and for the benefit of the Pool I,
Pool II, Pool III or Pool IV Certificateholders, as the case may be, and [THE
CERTIFICATE INSURER] in accordance with Accepted Servicing Procedures. To the
extent consistent with the foregoing, the Servicer also shall seek to maximize
the timely and complete recovery of principal and interest on the Mortgage
Notes. Subject only to the above-described servicing standards and the terms of
this Agreement and of the respective Mortgage Loans, the Servicer shall have
full power and authority, acting alone and/or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable. The
Servicer shall promptly notify the Seller, [THE CERTIFICATE INSURER,] the
Trustee and each Rating Agency in writing of (i) any event, circumstance or
occurrence which may materially and adversely affect the ability of the Servicer
to service any Mortgage Loan or to otherwise perform and carry out its duties,
responsibilities and obligations under and in accordance with this Agreement and
(ii) any attempt by a court or by a regulatory authority of which it has actual
knowledge to assert jurisdiction over the Trust.
Without limiting the generality of the foregoing, the Servicer, in its own
name or in the name of a Sub-Servicer, is hereby authorized and empowered when
the Servicer believes it appropriate in its best judgment and subject to the
requirements of Section 3.07 hereof, to execute and deliver, on behalf of the
Certificateholders and the Trust or any of them, and upon notice to the Trustee,
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 the Mortgaged Properties and to institute foreclosure
proceedings or obtain a deed-in-lieu of foreclosure so as to convert the
ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trust and Certificateholders. The Servicer shall
service and administer the Mortgage Loans in accordance with applicable state
and federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. Subject to Section 3.16, the Trustee shall execute, at
the written direction of the Servicer, any limited or special powers of attorney
and other documents reasonably acceptable to the Trustee to enable the Servicer
or any Sub-Servicer to carry out their servicing and administrative duties
hereunder, including, without limitation, limited or special powers of attorney
with respect to any REO Property, and the Trustee shall not be accountable for
the actions of the Servicer or any Sub-Servicers under such powers of attorney
and shall be indemnified by such parties with respect to such actions.
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(ii) Subject to Section 3.24 and in accordance with the standards of
the preceding paragraph, the Servicer shall advance or cause to be advanced
funds as necessary for the purpose of effecting the payment of taxes,
assessments and insurance premiums on the Mortgaged Properties which advances
shall be made in a timely fashion so as to not adversely affect the Appraised
Value of the Mortgaged Property (other than with respect to certain Pool III
Mortgage Loans, for which no such Appraised Value applies) or the interests of
the Certificateholders and which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section 3.09,
and further as provided in Section 3.11; provided that the Servicer shall not be
required to advance such funds to the extent it reasonably believes such funds
will not be recoverable as evidenced by a certification of a Servicing Officer
delivered to the Trustee [AND THE CERTIFICATE INSURER]. Any cost incurred by the
Servicer or by Sub-Servicers in effecting the timely payment of taxes,
assessments and insurance premiums on a Mortgaged Property shall not, for the
purpose of calculating distributions to Certificateholders, be added to the Loan
Balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit.
(iii) Notwithstanding anything in this Agreement to the contrary,
the Servicer shall not make any future advances to the Mortgagors with respect
to a Mortgage Loan, and the Servicer shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Loan Rate, reduce or
increase the principal balance or change the maturity date on such Mortgage
Loan, unless (x) the Mortgagor is in default with respect to the Mortgage Loan
or such default is, in the judgment of the Servicer, imminent and (y) [THE
CERTIFICATE INSURER] consents to such modification in writing and if
modifications pursuant to this Section 3.01 or Section 3.07 have previously been
made which affect Mortgage Loans having an aggregate Loan Balance in excess of
10% of the Maximum Collateral Amount.
(iv) All accounting and loan servicing records pertaining to each
Mortgage Loan shall be maintained in such manner as will permit the Trustee, the
Seller, [THE CERTIFICATE INSURER,] the Certificateholders or their duly
authorized representatives and designees to examine and audit and make legible
reproductions of records during reasonable business hours. All such records
shall be maintained until the termination of this Agreement or such longer
period as is required under applicable law, including, but not limited to, all
transaction registers and loan ledger histories.
The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.
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Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements with
Sub-Servicers [ACCEPTABLE TO THE CERTIFICATE INSURER] with notice of any
Sub-Servicing Agreement or amendment thereof promptly sent to the Trustee, for
the servicing and administration of the Mortgage Loans. Each Sub-Servicer shall
(i) be authorized to transact business in the state or states where the related
Mortgaged Properties it is to service are situated, if and to the extent
required by applicable law to enable the Sub-Servicer to perform its obligations
hereunder and under the Sub-Servicing Agreement, (ii) have been designated an
approved seller-servicer by FHLMC or FNMA for second mortgage loans, (iii) have
equity of at least $5,000,000, as determined in accordance with generally
accepted accounting principles and (iv) be approved pursuant to the provisions
of Section 3.26 hereof. Each Sub-Servicing Agreement must impose on the
Sub-Servicer requirements conforming to the provisions set forth in Section 3.08
and provide for servicing of the Mortgage Loans consistent with the terms of
this Agreement and be approved in writing by [THE CERTIFICATE INSURER]. The
Servicer and the Sub-Servicers may enter into and make amendments to the
Sub-Servicing Agreements or enter into different forms of Sub-Servicing
Agreements; provided, however, that any such amendments or different forms shall
be consistent with and not violate the provisions of this Agreement and be
approved in writing by [THE CERTIFICATE INSURER]. [WITHOUT LIMITING THE
FOREGOING, ANY VARIATION WITHOUT THE CONSENT OF THE CERTIFICATE INSURER FROM THE
PROVISIONS SET FORTH IN SECTION 3.08 RELATING TO INSURANCE OR PRIORITY
REQUIREMENTS OF SUB-SERVICING ACCOUNTS, OR CREDITS AND CHARGES TO THE
SUB-SERVICING ACCOUNTS OR THE TIMING AND AMOUNT OF REMITTANCES BY THE
SUB-SERVICERS TO THE SERVICER, ARE CONCLUSIVELY DEEMED TO BE INCONSISTENT WITH
THIS AGREEMENT AND THEREFORE PROHIBITED.]
(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, the Seller[, THE CERTIFICATE INSURER] and the
Certificateholders, shall enforce the obligations of each Sub-Servicer under the
related Sub-Servicing Agreement, including, without limitation, any obligation
of the Sub-Servicer to make advances in respect of delinquent Mortgage Loans as
required by a Sub-Servicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims, termination of Sub-Servicing
Agreements, and the pursuit of other appropriate 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,
and shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement, 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. Anything contained in this Agreement which restricts or
prohibits
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the Servicer's right to reimbursement or indemnity shall not apply to any
reimbursement or indemnity of the Servicer by any Sub-Servicer.
Section 3.03. Termination of Sub-Servicing Agreements. The Servicer
shall be entitled to terminate any Sub-Servicing Agreement and the rights and
obligations of any Sub-Servicer pursuant to any Sub-Servicing Agreement in
accordance with the terms and conditions of such Sub-Servicing Agreement and if
such termination is without cause, only with the written consent of [THE
CERTIFICATE INSURER]. In the event of termination of any Sub-Servicer, and
unless a successor Sub-Servicer has otherwise been appointed pursuant to Section
3.26 hereof, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Servicer without any additional act or deed on the part of
such Sub-Servicer or the Servicer, and the Servicer shall service directly the
related Mortgage Loans.
Each Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer (including termination
due to an Event of Default). In no event shall any Sub-Servicing Agreement
require the Trustee, as the successor Servicer, for any reason whatsoever to pay
compensation to a Sub-Servicer in order to terminate such Sub-Servicer.
Section 3.04. 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, including,
without limitation, any provisions to the effect that the Sub-Servicer is acting
for the benefit of the Certificateholders, or reference to actions taken through
a Sub-Servicer or otherwise, the Servicer shall remain obligated and primarily
liable to the Trustee[, THE CERTIFICATE INSURER] and Certificateholders for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of this Article III 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 by such
Sub-Servicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders. Any Sub-Servicing Agreement that may be entered
into and any transactions or services relating to the Mortgage Loans involving a
Sub-Servicer in its capacity as such and not as a Seller shall be deemed to be
between the Sub-Servicer and the Servicer alone, and the Trustee[, THE
CERTIFICATE INSURER] and Certificateholders shall not be deemed parties thereto
and shall have no claims, rights, obligations, duties or liabilities with
respect to the Sub-Servicer except as set forth in Section 3.06, notwithstanding
any
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provisions hereof or in any Sub-Servicing Agreement to the effect that the
Sub-Servicer is acting for the benefit of the Certificateholders. The Servicer
shall be solely liable for all fees owed by it to any Sub-Servicer, irrespective
of whether the Servicer's compensation pursuant to this Agreement is sufficient
to pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by
Trustee. In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or any
designee consented to by the [CERTIFICATE INSURER, EXCEPT THAT IF A CERTIFICATE
INSURER DEFAULT HAS OCCURRED AND IS CONTINUING, THE CONSENT OF THE] Majority
Certificateholders, shall thereupon assume all of the rights and obligations of
the Servicer under each Sub-Servicing Agreement that the Servicer may have
entered into, unless the Trustee elects to terminate any subservicing agreement
or unless the Trustee is directed by [THE CERTIFICATE INSURER] to terminate any
Sub-Servicing Agreement and provided that the Trustee shall not be required to
assume any obligation to pay compensation to any Sub-Servicer in order to
terminate any such Sub-Servicer. To the extent any subservicing agreement is not
so terminated, the Trustee, its designee or the successor servicer for the
Trustee appointed pursuant to Section 7.02 shall be deemed to have assumed all
of the Servicer's interest therein and to have replaced the Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the assuming party, except that the Servicer
shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement with regard to events occurring prior to the date the
Servicer ceased to be the servicer hereunder.
The Servicer at its expense shall, upon request of the Trustee,
promptly deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments. The
Servicer shall make reasonably diligent efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and shall, to the
extent such procedures shall be consistent with this Agreement, follow Accepted
Servicing Procedures. The Servicer may in its discretion waive or permit to be
waived any penalty interest or any other fee or charge which the Servicer would
be entitled to retain hereunder as servicing compensation and extend the Due
Date on a Mortgage Note for a period (with respect to each payment as to which
the Due Date is extended) not greater than 90 days after the initially scheduled
due date for such payment; provided, however, that such extension shall not
result in the imposition of a tax on a "prohibited transaction" of the Trust or
affect the qualification of the Trust as a REMIC. Notwithstanding anything in
this Agreement to the contrary, the Servicer shall not permit any additional
extension or modification with respect to any Mortgage Loan other than that
permitted by the immediately preceding sentence unless [(I)] the Mortgage Loan
is in default
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or, in the judgment of the Servicer, default is imminent[, AND (II) THE SERVICER
SHALL HAVE GIVEN THE CERTIFICATE INSURER TELEPHONIC AND TELECOPIED NOTICE OF ITS
INTENT TO MAKE SUCH ADDITIONAL EXTENSION OR MODIFICATION AND THE CERTIFICATE
INSURER SHALL NOT, WITHIN TWO BUSINESS DAYS AFTER SUCH NOTICE WAS GIVEN, HAVE
GIVEN TELEPHONIC AND TELECOPIED NOTICE TO THE SERVICER THAT IT DISAPPROVES OF
SUCH EXTENSION OR MODIFICATION].
No such extension or modification shall affect the amortization of any
Mortgage Loan for the purposes of any computation hereunder. In the event of any
such extension or modification, the Servicer shall make timely Delinquency
Advances on the related Mortgage Loan during the period of such extension or
modification.
Section 3.08. Sub-Servicing Accounts. In those cases where a
Sub-Servicer is servicing a Mortgage Loan pursuant to a Sub-Servicing Agreement,
such Sub-Servicer will be required to establish and maintain one or more
accounts (collectively, the "Sub-Servicing Account"). Each Sub-Servicing Account
shall be an Eligible Account. Each Sub-Servicer will be required to deposit into
its Sub-Servicing Account no later than the first Business Day after receipt all
proceeds of Mortgage Loans received by such Sub-Servicer, less its servicing
compensation to the extent permitted by the related Sub-Servicing Agreement and
to remit such proceeds to the Servicer for deposit in the Collection Account not
later than the second Business Day following receipt thereof by the
Sub-Servicer. Notwithstanding anything in this Section 3.08 to the contrary, a
Sub-Servicer shall only be able to withdraw funds from the Sub-Servicing Account
for the purpose of remitting such funds to the Servicer for deposit into the
Collection Account. The Servicer shall require each Sub-Servicer to cause any
collection agent of such Sub-Servicer to send a copy to the Servicer of each
statement of Monthly Payments collected by or on behalf of the Sub-Servicer
within five Business Days after the end of every month, and the Servicer shall
compare the information provided in such reports with the deposits made by the
Sub-Servicer into the Collection Account for the same period. For purposes of
this Agreement other than Section 3.10, the Servicer shall be deemed to have
received payments on the Mortgage Loans on the date on which a Sub-Servicer has
received such payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts. The Servicer may and, if required by the Servicer, the
Sub-Servicers shall, establish and maintain one or more accounts (the "Servicing
Accounts"), into which any collections from the Mortgagors (or related advances
from Sub-Servicers) for the payment of taxes, assessments, hazard insurance
premiums, and comparable items for the account of the Mortgagors shall be
deposited and retained. Servicing Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from a Servicing Account may be made only to
(i) effect timely payment of taxes, assessments, hazard insurance premiums, and
comparable items; (ii) reimburse the Servicer (or a Sub-Servicer to the extent
provided in the related Sub-Servicing Agreement) out of related collections for
any advances made pursuant to Section 3.01(b) (with respect to taxes,
assessments and insurance premiums) and Section 3.13 (with
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respect to hazard insurance); (iii) refund to Mortgagors any sums as may be
determined to be overages; (iv) pay interest, if required and as described
below, to Mortgagors on balances in the Servicing Account; or (v) clear and
terminate the Servicing Account at the termination of this Agreement in
accordance with Section 10.01. As part of its servicing duties, the Servicer or
Sub-Servicers shall pay to the Mortgagors interest on funds in Servicing
Accounts, to the extent required by law and, to the extent that interest earned
on funds in the Servicing Accounts is insufficient, to pay such interest from
its or their own funds, without any reimbursement from the Trust, the Trustee,
the Seller[, THE CERTIFICATE INSURER] or any Certificateholder therefor. Upon
request of the Trustee[, THE CERTIFICATE INSURER] or the Seller, the Servicer
shall cause the bank, savings association or other depository for each Servicing
Account to forward to the Trustee [AND THE CERTIFICATE INSURER] copies of such
statements or reports as the Trustee, the Seller, the Underwriter[, THE
CERTIFICATE INSURER] or any Certificateholder shall reasonably request.
Section 3.10. Collection Account.
(a) The Servicer shall establish and maintain with respect to each Pool
an account to conform to the definition of Collection Account, held in the name
of the Cityscape Loan Trust 199_-_, on behalf of the Trustee in trust for the
benefit of the Certificateholders [AND THE CERTIFICATE INSURER, AS THEIR
INTERESTS MAY APPEAR]. The establishment of the Collection Account shall be
evidenced by a certification of the Servicer in the form attached hereto as
Exhibit F. The Servicer shall deposit or cause to be deposited in the Collection
Account as soon as practicable, but in no event later than the close of business
on the second Business Day after its receipt thereof, the following payments and
collections received or required to be made by it subsequent to the Cut-Off Date
(other than the amounts described in the penultimate paragraph of this
Sub-Section due and owing on or prior to the Cut-Off Date) with respect to the
related Pool:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans for such Pool;
(ii) all payments on account of interest on each Mortgage Loan
for such Pool;
(iii) any Delinquency Advances with respect to such Pool, as
required pursuant to Section 4.06;
(iv) any amounts required to be deposited pursuant to Section
3.23 by the Servicer in connection with any Compensating Interest for
such Pool;
(v) all Net Recovery Proceeds with respect to such Pool;
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(vi) any amounts required to be deposited by the Servicer
pursuant to the fourth paragraph of Section 3.13 in respect of any
blanket policy deductibles with respect to such Pool;
(vii) all Purchase Prices paid by the Seller or the Servicer
with respect to such Pool;
(viii) any amounts required to be deposited by the Servicer
pursuant to Section 3.10(b) in respect of investment losses with
respect to such Pool; and
(ix) with respect to Pool III, applicable amounts from the FHA
Premium Account, as permitted in Section 3.30 hereof.
For purposes of the immediately preceding sentence, the Cut-Off Date
with respect to any Qualified Replacement Mortgage Loan shall be deemed to be
the date of substitution, but the unpaid principal balance of such Qualified
Replacement Mortgage Loan shall not include the principal portion of any Monthly
Payment made, or the scheduled principal portion of any Monthly Payment that was
due to be made but was not received by the Servicer, in such month of
substitution.
It being further understood and agreed that the amounts of principal
collected and interest due on the Mortgage Loans on or before the Cut-Off Date,
need not be deposited into the Collection Account by the Servicer.
The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment or late
payment charges, penalty interest, extension fees or assumption fees need not be
deposited by the Servicer in the Collection Account.
(b) Not later than 12:00 noon, New York time, on each Deposit Date the
Servicer shall deposit in the Collection Account the amount of any net loss
incurred in connection with the investment of funds in the Collection Account
since the prior Deposit Date; such amounts shall be funded from the Servicer's
own funds without any right to reimbursement. The Servicer shall give prompt
notice to each of the Rating Agencies[, THE CERTIFICATE INSURER] and the
Underwriter of the amount of any such net loss.
(c) Funds in the Collection Account shall be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Trustee, the Underwriter, the
Certificateholders[, THE CERTIFICATE INSURER] and the Seller of the location of
the Collection Account on or before the Closing Date, and prior to any change
thereof.
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(d) Funds held in the Collection Account at any time may be delivered
by the Servicer to the Trustee for deposit in the Certificate Account and for
all purposes of this Agreement shall be deemed to be a part of the Collection
Account.
Section 3.11. Withdrawals from the Collection Account; the Certificate
Account.
(a) The Servicer or the Trustee at the written request of the Servicer
shall, from time to time, make withdrawals from the Collection Account with
respect to each Pool for any of the following purposes:
(i) to deposit into the Certificate Account established with
respect to such Pool on or prior to 12:00 noon, New York time, on the
Deposit Date, and as further provided in Section 4.03 hereof:
(A) an amount with respect to interest (the "Interest
Remittance Amount") equal to (x) the product of (1) the
aggregate Loan Balances of the Mortgage Loans of such Pool as
of the opening of business on the first day of the calendar
month preceding the calendar month in which such Deposit Date
occurs (or as of the Cut-Off Date with respect to the Deposit
Date occurring in ____, 199_) and (2) one-twelfth (or 16/360
with respect to the Deposit Date occurring in ___, 199_) of
the weighted average Net Mortgage Loan Rate on the Mortgage
Loans of such Pool as of the opening of business on the first
day of the calendar month preceding the calendar month in
which such Deposit Date occurs minus (y) the amount, if any,
by which (1) the aggregate of the Compensating Interest
resulting from Principal Prepayments with respect to such Pool
during the Due Period beginning on the first day of the
calendar month preceding the calendar month in which such
Deposit Date occurs exceeds (2) the aggregate Servicing Fee
received by the Servicer with respect to such Pool and such
Due Period; and
(B) an amount with respect to principal (the
"Principal Remittance Amount") equal to (I) the sum, without
duplication, of the amounts described in Sections 3.10(a)(i),
3.10(a)(v) (to the extent remaining after prior application
thereof to all accrued and unpaid interest on the related
Mortgage Loans of such Pool (but not in excess of the
then-outstanding Loan Balance of the related Mortgage Loan)),
3.10(a)(vi) (insofar as such amounts relate to principal),
3.10(a)(vii) (insofar as such amounts relate to principal),
and 3.10(a)(viii), in each case to the extent actually
received in the related Due Period, minus (II) the amounts
described in clause (iii) of this Section 3.11(a) (insofar as
such amounts relate to principal) withdrawn by the Servicer
from such Collection Account since the prior Deposit Date (or,
in the case of the
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first Deposit Date, since the Closing Date), but also
including the Monthly Excess Spread and the
Overcollateralization Reduction Amount with respect to
Mortgage Loans of such Pool;
(ii) to pay to the Servicer (x) when collected on the Mortgage
Loans of such Pool, all recovered and previously unreimbursed
Delinquency Advances, Servicing Advances, prepayment penalties and, as
servicing compensation, the Servicing Fee with respect to such Pool,
(y) any interest or investment income earned on funds deposited in such
Collection Account (net of investment losses) and (z) all amounts in
the nature of prepayment or late payment charges, penalty interest,
extension fees, modification fees, assumption fees or
insufficient-funds charges;
(iii) to pay to the Servicer or the Seller, as the case may
be, with respect to each Mortgage Loan in such Pool that has previously
been purchased or replaced pursuant to Section 2.03 or 2.05 or Section
3.15(c) all amounts received thereon in any month subsequent to the
month of such purchase or substitution, as the case may be;
(iv) to reimburse the Servicer for any Delinquency Advance or
Servicing Advance with respect to such Pool previously made that the
Servicer has determined to be a Nonrecoverable Delinquency Advance or a
nonrecoverable Servicing Advance;
(v) to reimburse the Servicer or the Trustee, as the case may
be, for expenses reasonably incurred in respect of the breach or defect
giving rise to the purchase obligation under Section 2.03 or 2.05 of
this Agreement that were included in the Purchase Price of the Mortgage
Loan of such Pool, including any expenses arising out of the
enforcement of the purchase obligation, but only to the extent included
in the related Purchase Price;
(vi) to pay to the Servicer the excess, if any, of any Net
Recovery Proceeds with respect to such Pool over the sum of (a) the
Loan Balance of the related Mortgage Loans of such Pool and (b) accrued
and unpaid interest on the related Mortgage Loans of such Pool;
(vii) to withdraw any amount not required to be deposited in
the Collection Account, which amount shall include all interest which
has accrued on the Mortgage Loans of such Pool prior to the Cut-Off
Date;
(viii) to clear and terminate such Collection Account pursuant
to Section 10.01;
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(ix) in the event of a prepayment or satisfaction of a
Mortgage Loan in such Pool, to pay the refunds and expenses to which
the Mortgagor is entitled as set forth on requests submitted by the
Servicer which requests shall be substantially in the form of Exhibit M
attached hereto;
(x) to reimburse the Seller, the Servicer and the Claims
Administrator, and any director, officer, employee or agent of the
foregoing, for losses, liabilities, costs and expenses reimbursable to
them pursuant to Section 6.03 hereof; and
(xi) with respect to Pool III, to make deposits into the FHA
Premium Account pursuant to Section 3.30, with respect to any FHA
Premium Amounts paid by the related Mortgagor.
(b) Amounts on deposit in the Certificate Account for each Pool shall
be withdrawn by the Trustee on each Distribution Date in accordance with the
provisions of Section 4.04 hereof.
Section 3.12. Investment of Funds in the Accounts.
(a) The Servicer may direct in writing the Trustee or any depository
institution maintaining the Collection Accounts, Distribution Accounts,
Pre-Funding Account, Capitalized Interest Account or the Certificate Accounts,
to invest the funds held therein in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on demand, (i) if
such Permitted Investments are not obligations of the institution maintaining
the account from which the funds are required to be withdrawn, no later than the
Business Day immediately preceding the earliest date on which such funds may be
required to be withdrawn from such account pursuant to this Agreement, but in no
event later than the Business Day immediately preceding the next Distribution
Date, and (ii) if such Permitted Investments are obligations of the institution
maintaining the account from which the funds are required to be withdrawn, no
later than the earliest date on which such funds may be required to be withdrawn
from such account pursuant to this Agreement or, in the case of the Pre-Funding
Account and the Capitalized Interest Account, the date on which the Seller so
designates, but, in either case, in no event later than the next Distribution
Date. All such Permitted Investments shall be held to maturity, unless payable
on demand.
If the Servicer, with respect to the Collection Accounts, the
Distribution Accounts, Pre-Funding Account, Capitalized Interest Account or the
Certificate Accounts, does not provide investment directions to the Trustee or
depository institution with respect to the funds on deposit therein, such funds
shall be invested in the Permitted Investments specified in clause (v) of the
definition thereof, which may be administered by an affiliate of such depository
institution.
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Any investment of funds on deposit in any Account shall be made in the
name of the Trustee, in trust for the benefit of the Certificateholders. With
respect to any Account held by the Trustee, the Trustee shall have sole control
(except with respect to investment direction) over each such investment, and any
certificate or other instrument evidencing any such investment shall be
delivered directly to the Trustee or its agent, together with any document of
transfer necessary to transfer title to such investment to the Trustee or its
nominee. In the event amounts from funds on deposit in any Account are at any
time invested in a Permitted Investment payable on demand, the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an amount equal
to the lesser of (1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly by a
Responsible Officer of the Trustee having actual knowledge that such
Permitted Investment would not constitute a Permitted Investment.
(b) All net income and net gain realized from investment of funds
deposited in the Collection Accounts shall be for the benefit of the Servicer
and shall be subject to its withdrawal in accordance with Section 3.11. Net
income or net gain realized from investment of funds deposited in the
Certificate Accounts shall be treated in accordance with Article IV.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee shall take such action as it is directed in writing by
the Servicer or the Seller, as appropriate, to enforce such payment or
performance, including the initiation and prosecution of appropriate
proceedings; provided, however, that the Trustee shall be indemnified and
reimbursed for any costs, expenses, losses, or liabilities as provided in
Section 8.05.
Section 3.13. Maintenance of Hazard Insurance and Errors and Omissions
and Fidelity Coverage. The Servicer shall cause to be maintained for each
Mortgage Loan, with insurers meeting FNMA or FHLMC guidelines, hazard insurance
with extended coverage on the related Mortgaged Property in an amount which is
at least equal to the least of (a) the Loan Balance of such Mortgage Loan and
any Senior Lien, (b) the maximum insurable value of such Mortgaged Property, and
(c) the amount necessary to fully compensate for any damage or loss to the
improvements which are a part of such property on a replacement cost basis, in
each case in an amount not less than such amount as is necessary to avoid the
application of any co-insurance clause contained in the related hazard insurance
policy. The Servicer shall also cause to be maintained fire insurance with
extended coverage on each
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REO Property in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements which are a part of such property
and (ii) the sum of the Loan Balance of the related Mortgage Loan and any Senior
Lien at the time it became an REO Property, plus (x) accrued interest at the
Mortgage Loan Rate as of the time the Mortgage Loan became an REO Property and
(y) related Servicing Advances as of the time the Mortgage Loan became an REO
Property.
Any amounts to be 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 amounts to be released to the Mortgagor in
accordance with Accepted Servicing Procedures, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11.
Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificateholders,
be added to the Loan Balance of the related Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is located at the time of origination of the Mortgage
Loan in a federally designated special flood hazard area (and if the flood
insurance policy referenced herein has been made available), the Servicer will
cause to be maintained flood insurance in respect thereof. Such flood insurance
shall be in an amount equal to the least of (i) the sum of the Loan Balance of
the related Mortgage Loan and any Senior Lien, (ii) the maximum insurable value
of the related Mortgaged Property, and (iii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:VIII or better in
Best's Key Rating Guide insuring against fire and hazard losses on all of the
Mortgage Loans, or such other insurer as [THE CERTIFICATE INSURER] may allow, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.13, it being understood and agreed
that such policy may contain a deductible clause that is in form and substance
consistent with standard industry practice for servicers of mortgage loans
comparable to the Mortgage Loans, in which case the Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property or
REO Property a policy complying with the first two sentences of this Section
3.13, and there shall have been one or more losses which would have been covered
by such policy, deposit to the Collection Account from its own funds the amount
not otherwise payable under the blanket policy because of such deductible clause
without any right of reimbursement therefor. In connection with its activities
as
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administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Trustee[, THE CERTIFICATE INSURER] and
Certificateholders, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.
The Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Mortgage Loans. The Servicer shall
also maintain a fidelity bond in the form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall be deemed to have complied with this provision if an
affiliate of the Servicer has such errors and omissions and fidelity bond
coverage and, by the terms of such insurance policy or fidelity bond, the
coverage afforded thereunder extends to the Servicer. Any such errors and
omissions policy and fidelity bond shall not be canceled without thirty days'
prior written notice to the Trustee [AND THE CERTIFICATE INSURER]. Upon the
request of the Trustee, any Certificateholder [OR THE CERTIFICATE INSURER], the
Servicer shall furnish to the requesting party copies of all binders and
policies or certificates evidencing that such bonds and insurance policies are
in full force and effect. The Servicer shall also cause each Sub-Servicer to
maintain a policy of insurance covering errors and omissions and a fidelity bond
which would meet the requirements set forth above.
Section 3.14. Enforcement of Due-On-Sale Clauses; Assumption
Agreements. Except as otherwise provided in the next sentence, the Servicer
will, to the extent it has knowledge of any conveyance or prospective conveyance
of any Mortgaged Property by any Mortgagor (whether by absolute conveyance or by
contract of sale, and whether or not the Mortgagor remains or is to remain
liable under the Mortgage Note and/or the Mortgage), exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause, if
any, applicable thereto. If the Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause or enforcement would
materially increase the risk of default or delinquency on, or impair the
security for, the Mortgage Loan, the Servicer will enter into an assumption and
modification agreement from or with the person to whom such property has been
conveyed or is proposed to be conveyed, pursuant to which such person becomes
liable under the Mortgage Note and, to the extent permitted by applicable state
law, the Mortgagor remains liable thereon. The Servicer is also authorized to
enter into a substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such person is
substituted as the Mortgagor and becomes liable under the Mortgage Note,
provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer as of the date of
substitution which shall not be less restrictive than such criteria as set forth
on Exhibit L hereof. In connection with any assumption or
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substitution, the Servicer shall apply Accepted Servicing Procedures. Any fee
collected by the Servicer in respect of an assumption or substitution of
liability agreement will be retained by the Servicer as Additional Servicing
Compensation. In connection with any such assumption, no material term of the
Mortgage Note (including, but not limited to, the related Mortgage Loan Rate and
the amount of the Monthly Payment) may be amended or modified, except as
otherwise required pursuant to the terms thereof. The Servicer shall notify the
Trustee that any such substitution or assumption agreement has been completed by
forwarding to the Trustee the original copy of such substitution or assumption
agreement, which copy shall be added 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.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer believes in good faith that it may be restricted
by law from preventing, for any reason whatever. For purposes of this Section
3.14, the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
Section 3.15. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standards set
forth in Section 3.01(b), foreclose upon or otherwise comparably convert the
ownership of 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 3.07, and, in the case of
FHA Loans, for which a Claim is not required to be submitted to the FHA pursuant
to Section 3.31. In connection with realization upon defaulted Mortgage Loans,
the Servicer shall follow such practices and procedures as it shall deem
necessary or advisable, as shall be normal and usual in accordance with Accepted
Servicing Practices and the requirements of insurers under any insurance policy
required to be maintained hereunder with respect to the related Mortgage Loan.
The Servicer shall be responsible for all costs and expenses incurred by it in
any such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated in this
Section 3.15.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
an Uninsured Cause, unless it shall determine in its reasonable judgment, as
evidenced by a certificate of a Servicing Officer, that such foreclosure or
restoration, as the case may be, will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for Servicing
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Advances. Any Servicing Advances made with respect to a Mortgage Loan shall be
recoverable by the Servicer only from recoveries on such Mortgage Loan.
(b) The Servicer may at its option purchase from the Trust any Mortgage
Loan which is 90 days or more Delinquent and which the Servicer determines in
good faith will otherwise become subject to foreclosure proceedings at a price
equal to the Purchase Price (evidence of such determination to be delivered in
writing to the Trustee, the Seller [AND THE CERTIFICATE INSURER] prior to
purchase). The Purchase Price for any Mortgage Loan purchased hereunder shall be
deposited into the Collection Account and the Trustee, upon (i) receipt of an
Officer's Certificate of the Servicer as to the making of such deposit and (ii)
confirmation that such deposit has been made, shall release or cause to be
released to the Servicer the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment as are furnished by the Servicer, in
each case without recourse, as shall be necessary to vest in the Servicer title
to any Mortgage Loan released pursuant hereto, and the Trustee shall have no
further responsibility or liability (except as to its own acts) with regard to
such Mortgage Loan.
(c) Unless otherwise required pursuant to the Mortgage Note, any
Property Insurance Proceeds or Liquidation Proceeds received with respect to a
Mortgage Loan or REO Property (other than received in connection with a purchase
by the Class R Certificateholders of all the Mortgage Loans and REO Properties
in the Trust Estate pursuant to Section 10.01) will be allocated in the
following order of priority, in each case to the extent of available funds:
first, to reimburse the Servicer or any Sub-Servicer for any related
unreimbursed Servicing Advances, and any related unreimbursed Delinquency
Advances theretofore funded by the Servicer or any Sub-Servicer from its own
funds, in each case, with respect to the related Mortgage Loan; second, to
accrued and unpaid interest on the Mortgage Loan, at the Mortgage Loan Rate (or
at such lesser rate as may be in effect for such Mortgage
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Loan pursuant to application of the Civil Relief Act) on the Loan Balance of
such Mortgage Loan, to the date of the Final Recovery Determination if one has
been made, or to the Due Date in the Due Period prior to the Distribution Date
on which such amounts are to be distributed if a Final Recovery Determination
has not been made, minus any accrued and unpaid Servicing Fees with respect to
such Mortgage Loan, to be distributed to the Pool I, Pool II, Pool III or Pool
IV Certificateholders, as the case may be; third, to the extent of the Loan
Balance of the Mortgage Loan outstanding immediately prior to the receipt of
such proceeds, as a recovery of principal of the related Mortgage Loan, to be
distributed to the Pool I, Pool II, Pool III or Pool IV Certificateholders, as
the case may be; and fourth, to any prepayment or late payment charges or
penalty interest payable in connection with the receipt of such proceeds and to
all other fees and charges due and payable with respect to such Mortgage Loan.
(d) The Servicer shall deliver to the Trustee[, THE CERTIFICATE
INSURER] and the Seller on each Deposit Date a Liquidation Report in the form
annexed as Exhibit G hereto as well as an electromagnetic tape in computer
readable format (along with the Officer's Certificate referenced in the
definition of Final Recovery Determination) with respect to each Mortgage Loan
as to which the Servicer made a Final Recovery Determination during the related
Due Period.
Section 3.16. Trustee to Cooperate; Release of Mortgage Files. Upon the
payment in full of any Mortgage Loan, or the receipt by the Servicer of a
notification that payment in full shall be escrowed in a manner customary for
such purposes, the Servicer will notify the Trustee by a certification in the
form of Exhibit D-2 (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
3.10 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, the Trustee shall promptly release the related Mortgage File to the
Servicer. The Servicer shall provide for preparation of the appropriate
instrument of satisfaction covering any Mortgage Loan which pays in full and the
Trustee shall cooperate in the execution and return of such instrument to
provide for its delivery or recording as may be required. No expenses incurred
in connection with any instrument of satisfaction or deed of reconveyance shall
be chargeable to any Account or shall be otherwise chargeable to the Trust, the
Trustee, the Certificateholders [OR THE CERTIFICATE INSURER].
From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Trustee shall, upon request of the Servicer and
delivery to the Trustee of a Request for Release in the form of Exhibit D-1,
release the related Mortgage File to the Servicer, and the Trustee shall, at the
direction of the Servicer, execute such documents as shall be necessary to the
prosecution of any such proceedings. Such Request for Release shall obligate the
Servicer to return each and every document previously requested from the
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Mortgage File to the Trustee when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan has been liquidated and the Net Recovery
Proceeds relating to the Mortgage Loan have been deposited in the Collection
Account or the Mortgage File or such document has been delivered to an attorney,
or to a public trustee or other public official as required by law, for purposes
of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property either judicially or non-judicially, and the Servicer
has delivered to the Trustee a certificate of a Servicing Officer certifying as
to the name and address of the Person to which such Mortgage File or such
document was delivered and the purpose or purposes of such delivery. Upon
receipt of a certificate of a Servicing Officer stating that such Mortgage Loan
was liquidated and that all amounts received or to be received in connection
with such liquidation which are required to be deposited into the Collection
Account have been so deposited, a copy of the Request for Release shall be
released by the Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Trustee shall
execute and deliver to the Servicer any court pleadings, requests for trustee's
sale or other documents 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. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not 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 3.17. Servicing Compensation. As compensation for the
activities of the Servicer hereunder, the Servicer shall be entitled to the
Servicing Fee with respect to each Mortgage Loan, subject to Section 3.23 and
Section 3.27, payable from payments of interest, Property Insurance Proceeds or
Liquidation Proceeds in respect of such Mortgage Loan and from amounts
distributable in accordance with Section 4.04(a)(v). The right to receive the
Servicing Fee may not be transferred in whole or in part except in connection
with the transfer of all of the Servicer's responsibilities and obligations
under this Agreement, although any portion thereof may be paid to a Sub-Servicer
as provided in the related Sub-Servicing Agreement.
Additional servicing compensation in the form of Net Recovery Proceeds
in excess of the Loan Balance of the related Mortgage Loan, prepayment charges,
penalty interest, assumption fees, late payment charges or otherwise shall be
retained by the Servicer only to the extent such fees or charges are received by
the Servicer (such amounts, "Additional Servicing Compensation"). The Servicer
shall also be entitled pursuant to Section 3.11(a)(ii) to interest or other
investment income earned from the investment of funds on deposit in the
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Collection Account as additional servicing compensation. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including, without limitation, (x) payment of premiums for
the insurance required by Section 3.13, to the extent such premiums are not paid
by the related Mortgagors or by a Sub-Servicer and (y) servicing compensation of
each Sub-Servicer) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
Section 3.18. Reports to the Trustee; Collection Account Statement.
(a) On or before each Determination Date, the Servicer shall deliver to
the Trustee (i) a computer-readable magnetic tape setting forth the payments and
collections received with respect to the Mortgage Loans during the Due Period
for the month immediately preceding the month in which such Determination Date
occurs (such tape, a "Servicer Remittance Report") and (ii), if not included in
the Servicer Remittance Report, a report and an electromagnetic tape in computer
readable format, setting forth the information described in clauses (A)-(G) of
Section 4.05 for the month immediately preceding the month in which such
Determination Date occurs and such other information as the Trustee may request
in order to fulfill its obligations hereunder (such report, a "Delinquency
Report").
(b) If funds in the Collection Accounts during a Due Period have been
invested in investments other than bank deposits of the depository institution
maintaining the Collection Accounts or money market funds (as described in the
definition of Permitted Investments), then, on or before the related
Distribution Date, the Servicer shall forward to the Trustee, [THE CERTIFICATE
INSURER,] each Certificateholder and the Seller a statement in the form annexed
hereto as Exhibit H setting forth the activity in the Collection Accounts during
the preceding calendar month.
Section 3.19. Statement as to Compliance and Financial Statements. The
Servicer will deliver to the Trustee[, THE CERTIFICATE INSURER] and the Seller
not later than 90 days following the end of each fiscal year of the Servicer, an
Officer's Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer and the Claims Administrator during the
preceding year and of performance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer and the Claims Administrator have fulfilled all of
their obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation by either the Servicer
or the Claims Administrator, specifying each such default known to such officer
and the nature and status thereof and the action being taken by the Servicer and
the Claims Administrator, as applicable, to cure such default.
Contemporaneously with the submission of the Officer's Certificate
required by the preceding paragraph, the Servicer shall deliver to the Trustee[,
THE CERTIFICATE INSURER] and
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the Seller a copy of its annual audited financial statements prepared in the
ordinary course of business. The Servicer shall, upon the request of any
Certificateholder, deliver to the requesting party a copy of such annual audited
financial statements or any unaudited quarterly financial statements of the
Servicer.
The Servicer agrees to make available on a reasonable basis to the
Seller [AND THE CERTIFICATE INSURER] a knowledgeable officer of the Servicer for
the purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
any Certificateholder, prospective Certificateholder[, THE CERTIFICATE INSURER]
or the Seller or the Underwriter on reasonable notice to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
such Certificateholder, prospective Certificateholder[, THE CERTIFICATE INSURER]
or the Seller that the Servicer has the ability to service the Mortgage Loans in
accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party
such other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder, (ii)
its financial condition, (iii) the Mortgage Loans and (iv) the performance of
the obligations of any Sub-Servicer under the related Sub-Servicing Agreement,
in each case as the Trustee, the Seller[, THE CERTIFICATE INSURER] or any Class
[A] Certificateholder who has a greater than 10% Percentage Interest may
reasonably request from time to time.
Section 3.20. Independent Public Accountants' Servicing Report. Not
later than 90 days following the end of each fiscal year of the Servicer, the
Servicer at its expense shall cause any nationally recognized firm of
Independent Certified Public Accountants (which may also render other services
to the Servicer) reasonably acceptable to the Trustee [AND THE CERTIFICATE
INSURER] to furnish a statement to the Trustee, [THE CERTIFICATE INSURER,] the
Seller and the Rating Agencies to the effect that such firm has with respect to
the Servicer's overall servicing operations examined such servicing operations
in accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.
Section 3.21. Access to Certain Documentation. The Servicer shall
provide to the OTS, the FDIC, and any other federal or state banking or
insurance regulatory authority that may exercise authority over any
Certificateholder [OR THE CERTIFICATE INSURER], access to the documentation
regarding the Mortgage Loans of the related Pool required by applicable state
and federal laws and regulations. The Servicer shall similarly provide to the
Trustee, the Seller, any Certificateholder, any prospective Certificateholder
[AND THE CERTIFICATE INSURER] such access to the documentation regarding the
Mortgage Loans of the related Pool as such Persons may reasonably require. Such
access shall in each case be afforded without charge,
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but only upon reasonable request and during normal business hours at the offices
of the Servicer or of a Sub-Servicer, as applicable, designated by it.
Section 3.22. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be taken
in the name of the Trustee, on behalf of the Certificateholders. The Servicer,
on behalf of the Trust, shall sell any REO Property within two years after the
Trust acquires ownership of such REO Property for purposes of Section 860G(a)(8)
of the Code, unless the Servicer has delivered to the Trustee, the Seller [AND
THE CERTIFICATE INSURER] an Independent Opinion of Counsel, addressed to the
Trustee, [THE CERTIFICATE INSURER,] the Seller and the Servicer, to the effect
that holding such REO Property for more than two years after its acquisition
will not result in the imposition of taxes on "prohibited transactions" of the
Trust as defined in Section 860F of the Code or cause the REMIC Trust to fail to
qualify as a REMIC under federal law at any time that any Certificates are
outstanding. The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO Property to fail
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or result in the receipt by the REMIC of any "income from non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code or any "net
income from foreclosure property" which is subject to taxation under the REMIC
Provisions.
(b) The Servicer shall have full power and authority, subject only to
the specific requirements and prohibitions of this Agreement, to do any and all
things in connection with any REO Property as are consistent with the manner in
which the Servicer manages and operates similar property owned by the Servicer
or any of its affiliates, all on such terms and for such period as the Servicer
deems to be in the best interests of [THE CERTIFICATE INSURER] and the Pool I,
Pool II, Pool III or Pool IV Certificateholders, as the case may be.
Notwithstanding the foregoing, the Servicer shall not:
(i) permit the Trust to enter into, renew or extend any New
Lease with respect to any REO Property, if the New Lease by its terms
will give rise to any income that does not constitute Rents from Real
Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the construction of
such building or other improvement was completed before default on the
related Mortgage Loan became imminent, all within the meaning of
Section 856(e)(4)(B) of the Code; or
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(iv) allow any Person to Directly Operate any REO Property on
any date more than 90 days after its date of acquisition by the Trust;
unless, in any such case, the Servicer has obtained an Independent Opinion of
Counsel, addressed to itself, the Trustee [AND THE CERTIFICATE INSURER], to the
effect that such action will not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code at
any time that it is held by the Trust, in which case the Servicer may take such
actions as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(A) the terms and conditions of any such contract shall not be
inconsistent herewith;
(B) any such contract shall require, or shall be administered
to require, that the Independent Contractor pay all costs and expenses
incurred in connection with the operation and management of such REO
Property, including those listed above and remit all related revenues
(net of such costs and expenses) to the Servicer as soon as
practicable, but in no event later than thirty days following the
receipt thereof by such Independent Contractor;
(C) none of the provisions of this Section 3.22(b) relating to
any such contract or to actions taken through any such Independent
Contractor shall be deemed to relieve the Servicer of any of its duties
and obligations to the Trustee on behalf of the Certificateholders with
respect to the operation and management of any such REO Property; and
(D) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such REO
Property.
The Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Servicer by such Independent
Contractor, and nothing in this Agreement shall be deemed to limit or modify
such indemnification. The Servicer shall be solely liable for all fees owed by
it to any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.17 is sufficient to pay such fees.
(c) Subject to the time constraints set forth in Section 3.22(a), each
liquidation of an REO Property shall be carried out by the Servicer at such
price and upon such terms and conditions as the Servicer shall deem necessary or
advisable, as shall be normal and usual in
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its general servicing activities, and the resulting Liquidation Proceeds shall
be distributed in accordance with Section 3.15(d).
(d) The Servicer shall prepare and file reports of foreclosure and
abandonment in accordance with Section 6050J of the Code and shall provide
written notice to the Trustee that such reports have been filed or that no
filing was required.
Section 3.23. Compensating Interest. The Servicer shall deposit into
each Collection Account on or before 12:00 noon, New York time, on each Deposit
Date an amount equal to the lesser of (i) the aggregate of the Compensating
Interest resulting from Principal Prepayments on the Mortgage Loans of the
related Pool during the related Due Period and (ii) its aggregate Servicing Fee
received in such Due Period with respect to the related Pool.
Section 3.24. Superior Liens. The Servicer shall file (or cause to be
filed) of record a request for notice of any action by a superior lienholder
under a Senior Lien for the protection of the Trustee's interest, if (i) local
law provides that the filing of such a request will result in notification of
junior lienholders in the event foreclosure proceedings are instituted and (ii)
applicable state law does not require that a junior lienholder be named as a
party defendant in foreclosure proceedings in order to foreclose such junior
lienholder's equity of redemption. The Servicer shall also notify any such
superior lienholder in writing of the existence of the Mortgage Loan and request
notification of any action (as described below) to be taken against the
Mortgagor or the Mortgaged Property by the superior lienholder.
Subject to the remainder of this Section 3.24, if the Servicer is
notified that any superior lienholder has accelerated or intends to accelerate
the obligations secured by the Senior Lien, or has declared or intends to
declare a default under the mortgage or the promissory note secured thereby, or
has filed or intends to file an election to have the Mortgaged Property sold or
foreclosed, the Servicer shall take, on behalf of the Trust, whatever actions
are necessary to protect the interests of the Certificateholders, and/or to
preserve the security of the related Mortgage Loan, subject to the application
of the REMIC Provisions. The Servicer shall advance the necessary funds to cure
the default or reinstate the superior lien, if such advance would have the
effect of increasing the Net Recovery Proceeds.
No advance shall be required to be made hereunder if such advance
would, if made, constitute a nonrecoverable Servicing Advance. The determination
by the Servicer that it has made a nonrecoverable Servicing Advance or that any
proposed advance, if made, would constitute a nonrecoverable Servicing Advance,
shall be evidenced by a certification of a Servicing Officer delivered to [THE
CERTIFICATE INSURER,] the Seller, the Rating Agencies and the Trustee no later
than the Business Day following such determination.
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Section 3.25. Indemnification.
(a) The Servicer shall indemnify the Seller, [THE CERTIFICATE INSURER,]
each Certificateholder and the Trustee (each an "Indemnified Party") and hold
harmless each of them against any and all claims, losses, damages, penalties,
fines, forfeitures, reasonable legal fees and related costs, judgments, and
other costs and expenses resulting from any claim, demand, defense or assertion
based on or grounded upon, or resulting from, a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement;
provided, however, that if the Servicer is not liable pursuant to the provisions
of Section 6.03 hereof for its failure to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement, then the
provisions of this Section 3.25 shall have no force and effect with respect to
such failure.
(b) The Seller, [THE CERTIFICATE INSURER,] any Certificateholder or the
Trustee, as the case may be, shall promptly notify the Servicer if a claim is
made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement. The
Servicer shall promptly notify [THE CERTIFICATE INSURER,] the Trustee and the
Certificateholders of any claim of which it has been notified pursuant to this
Section 3.25 [BY A PERSON OTHER THAN THE CERTIFICATE INSURER, AND, IN ANY EVENT,
SHALL PROMPTLY NOTIFY THE CERTIFICATE INSURER OF ITS INTENDED COURSE OF ACTION
WITH RESPECT TO ANY CLAIM]. [IF THE CERTIFICATE INSURER SO DIRECTS THE SERVICER
IN WRITING WITHIN TEN BUSINESS DAYS OF SUCH NOTICE TO THE CERTIFICATE INSURER,
THE SERVICER SHALL REFRAIN FROM DEFENDING, AND IN ANY CASE WHERE THE CERTIFICATE
INSURER SO DIRECTS IN WRITING AT ANY TIME, THE SERVICER SHALL CEASE DEFENDING
(BUT ONLY IF THE SERVICER IS NOT JUDICIALLY OR LEGALLY PROHIBITED FROM DOING
SO), SUCH CLAIM OR SHALL SETTLE SUCH CLAIM ON TERMS ACCEPTABLE TO THE
CERTIFICATE INSURER; PROVIDED, HOWEVER, THAT THE SERVICER NEED NOT COMPLY WITH
THE CERTIFICATE INSURER'S DIRECTIONS UNLESS IT IS INDEMNIFIED TO ITS REASONABLE
SATISFACTION BY THE CERTIFICATE INSURER AGAINST ANY LIABILITY THAT THE SERVICER
MAY INCUR AS A CONSEQUENCE OF SUCH COMPLIANCE.]
(c) The Servicer shall be entitled to participate in and, upon notice
to the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (a) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (b) the Servicer has not
in fact employed counsel to assume the defense of such action within a
reasonable time after
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receiving notice of the commencement of the action, or (c) the named parties to
any such action or proceeding (including any impleaded parties) include both the
Servicer and one or more Indemnified Parties, and the Indemnified Parties shall
have been advised by counsel that there may be one or more legal defenses
available to them which are different from or additional to those available to
the Servicer (it being understood, however, that the Servicer shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for the Class [A]
Certificateholders at any time). The Servicer shall not be liable for any
settlement of any such claim or action unless the Servicer shall have consented
thereto or be in default on its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Servicer of liability only if such failure is materially prejudicial to the
position of the Servicer and then only to the extent of such prejudice.
Section 3.26. Certain Procedures Relating to Successor Sub-Servicers
and Successor Servicers.
(a) The Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and (i) to service directly the related Mortgage Loans, as provided in
Section 3.03, or (ii) to enter into a Sub-Servicing Agreement with a successor
Sub-Servicer that qualifies under the provisions of this Agreement.
(b) In the event that the Servicer is to be replaced and the Trustee is
unwilling to so act or is unable to so act (it being acknowledged that the
Trustee is obligated to act as successor Servicer pursuant to Section 7.02
hereof, if no other successor Servicer is appointed pursuant to this Section),
[THE CERTIFICATE INSURER AND] the Trustee, and, if the Majority
Certificateholders so request, the Class [A] Certificateholders, shall consult
among themselves with respect to the appointment of a successor Servicer. In the
event that such parties cannot, with reasonable promptness (but in no event
later than 30 days), agree on the identity of the successor Servicer, the
decision of the [CERTIFICATE INSURER SHALL CONTROL EXCEPT THAT IF A CERTIFICATE
INSURER DEFAULT HAS OCCURRED AND IS CONTINUING, THE DECISION OF THE] Trustee
shall control.
(c) In connection with any change in the Servicer's servicing software,
the Servicer shall promptly deliver to the Trustee [AND THE CERTIFICATE INSURER]
an Officer's Certificate detailing the substance of such change and the Servicer
shall cooperate fully with the Trustee in any manner as the Trustee reasonably
deems necessary with respect to such change.
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Section 3.27. Additional Servicing Responsibilities for the Adjustable
Rate Mortgage Loans and the FHA Loans.
(a) The Servicer shall enforce each Adjustable Rate Mortgage Loan and
shall timely calculate, record, report and apply all Mortgage Loan Rate
adjustments in accordance with the related Mortgage Note. The Servicer's record
shall, at all times, reflect the then-current Mortgage Loan Rate and Monthly
Payment and the Servicer shall timely notify the Mortgagor of any changes to the
Mortgage Loan Rate and the Monthly Payment. If the Servicer fails to adjust the
Mortgage Loan Rate or the Monthly Payment in accordance with the terms of the
Mortgage Note for the related Adjustable Rate Mortgage Loan, or if the Servicer
fails to notify the related Mortgagor of any such adjustment as required under
the terms of such Mortgage Note, or if any liability, claim or defense arises
with respect to any Adjustable Rate Mortgage Loan solely as a result of any such
failure, the Servicer shall pay, from its own funds and without right of
reimbursement therefor, any shortage in amounts collected or collectible on the
related Adjustable Rate Mortgage Loan that results. The Servicer shall deposit
any amounts in respect of such shortage in the Certificate Account for the
related Pool on the Deposit Date with respect to the related Due Period.
(b) After the Closing Date, the Servicer shall confirm, or cause to be
confirmed, whether all on-site or off-site improvements on the Mortgaged
Properties relating to the FHA Loans have been completed and, if such
improvements have not been completed, to submit the appropriate filings to the
FHA.
Notwithstanding any other provision of this Agreement, the Servicer
shall not take any action which would adversely affect the coverage of an FHA
Loan for insurance by the FHA under Title I.
Section 3.28. Pre-Funding Account.
(a) The Trustee will establish and maintain the Pre-Funding Account. No
later than the Closing Date, the Trustee will deposit in the Pre-Funding Account
the Pre-Funding Account Deposit from the proceeds of the sale of the
Certificates. On any Subsequent Transfer Date, the Seller shall instruct the
Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of the
Subsequent Purchase Price for the Subsequent Mortgage Loans sold to the Trust on
such Subsequent Transfer Date, and make a corresponding reduction in the amount
of the Pre-Funding Account Deposit, and pay such amounts to or upon the order of
the Seller upon satisfaction of the conditions set forth in Section 2.02 of this
Agreement with respect to such transfers. In connection with such instruction,
the Seller shall additionally inform the Trustee whether such Subsequent
Mortgage Loans are being transferred in respect of Pool I, Pool II, Pool III or
Pool IV.
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(b) The Pre-Funding Account will be part of the Trust Estate but not
part of the REMIC Trust. Amounts held in the Pre-Funding Account shall be
invested in Permitted Investments of the type specified in clause (v) of the
definition of Permitted Investments, which Permitted Investments shall mature on
the Business Day next succeeding the date the Trustee receives the Addition
Notice that such monies will be needed. The Trustee shall not be liable for any
losses on amounts invested in accordance with the provisions hereof. Any losses
realized in connection with any such investment shall be for the account of the
Seller and the Seller shall deposit the amount of such loss (to the extent not
offset by income from other investments) in the Pre-Funding Account immediately
upon the realization of such loss. All interest and any other investment
earnings on amounts held in the Pre-Funding Account shall be taxed to the Seller
and for federal, state and local income tax purposes the Seller shall be deemed
to be the owner of the Pre-Funding Account. All interest and any other
investment earnings on amounts held in the Pre-Funding Account shall be paid by
the Trustee to the Seller on the __________ 199_ Distribution Date.
(c) If the Pre-Funding Account Deposit has not been reduced to zero by
the close of business on __________ __, 199_, any amounts remaining in the
Pre-Funding Account in respect of the Pre-Funding Account Deposit at such time
(net of reinvestment earnings payable to the Seller) shall be deposited at such
time into the appropriate Certificate Account relating to the Pool I, Pool II,
Pool III and Pool IV Mortgage Loans, as the case may be, for distribution as
part of the Principal Distribution Amount for the related Pool on the __________
199_ Distribution Date.
Section 3.29. Capitalized Interest Account.
(a) The Trustee shall establish and maintain the Capitalized Interest
Account. On the Closing Date, the Trustee will deposit in the Capitalized
Interest Account the Capitalized Interest Account Deposit. The Trustee shall
hold the Capitalized Interest Account Deposit for the benefit of the Class [A]
Certificates. Each Class of the Class [A] Certificateholders will be entitled to
the full Interest Distribution Amount for such Class, respectively, during the
Funding Period. On the __________ 199_ Deposit Date, (a) an amount equal to [30]
days interest on the Pre-Funding Account Deposit (and for Pool II and Pool IV,
interest calculated at the actual number of days since the last Distribution
Date, but not including the current Distribution Date), computed at a per annum
rate equal to the weighted average of the Pass-Through Rates for each Class,
shall be withdrawn from the Capitalized Interest Account and deposited into the
appropriate Certificate Account in respect of Available Funds of the related
Pool for such Distribution Date.
(b) The Capitalized Interest Account will be part of the Trust Estate
but not part of the REMIC Trust. Amounts held in the Capitalized Interest
Account shall be invested in Permitted Investments of the type specified in
clause (iv) of the definition of Permitted Investments, which Permitted
Investments shall mature no later than the next succeeding
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Deposit Date. The Trustee shall not be liable for any losses on amounts invested
in accordance with the provisions hereof. All interest and other investment
earnings on amounts held in the Capitalized Interest Account shall be paid by
the Trustee to the Seller on the __________ 199_ Distribution Date. All amounts
earned on deposit in the Capitalized Interest Account shall be taxed to the
Seller, and for federal, state and local income tax purposes the Seller shall be
deemed to be the owner of the Capitalized Interest Account. Any losses realized
in connection with any such investment shall be for the account of the Seller,
and the Seller shall deposit the amount of such loss (to the extent not offset
by income from other investments) in the Capitalized Interest Account
immediately upon the realization of such loss.
Section 3.30. Establishment of FHA Premium Account; Deposits in FHA
Premium Account; Permitted Withdrawals from FHA Premium Account.
(a) No later than the Closing Date, the Trustee will establish the FHA
Premium Account. The FHA Premium Account shall not be available for payment of
Certificates. The Trustee shall deposit into the FHA Premium Account:
(i) on each Distribution Date, prior to making the
distributions required pursuant to Section 4.04, upon receipt an amount
equal to the FHA Premium Amount;
(ii) upon receipt, amounts required to be paid by the Servicer
pursuant to Section 3.30(b) in connection with losses on investments of
amounts in the FHA Premium Account; and
(iii) amounts from the Collection Account for Pool III as
described in the next following sentence.
If the Servicer fails to pay the FHA Insurance Premium with respect to
an FHA Loan in accordance with Section 5.01 hereof, the Trustee shall, upon
written instructions from the Servicer [OR THE CERTIFICATE INSURER], withdraw an
amount from the FHA Premium Account sufficient to pay in full the FHA Insurance
Premium then due. If the amount on deposit in the FHA Premium Account is
insufficient to pay the FHA Insurance Premium then due, the Trustee shall
transfer an amount from the Collection Account for Pool III to the FHA Premium
Account sufficient to pay in full the FHA Insurance Premium then due. In the
event that there are insufficient funds in the Collection Account for Pool III,
the Trustee shall immediately notify [THE CERTIFICATE INSURER] of the amount of
the remaining insufficiency. [THE CERTIFICATE INSURER] shall have the option to
advance such insufficiency to the Trustee for payment of the FHA Insurance
Premium then due.
(b) The Trustee may invest amounts on deposit in the FHA Premium
Account in Permitted Investments to the same extent, and with the same rights
and liabilities, as the
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Certificate Account pursuant to Section 3.12(e) and the Trustee shall withdraw
amounts on deposit in the FHA Premium Account to:
(i) remit, upon certification of payment made to the FHA,
funds requested by the Servicer (including any successor to the
Servicer appointed pursuant hereto) [OR THE CERTIFICATE INSURER] as
reimbursement for the FHA Insurance Premiums paid by the Servicer [OR
THE CERTIFICATE INSURER], as the case may be, or remit to the FHA
amounts payable in respect of FHA Insurance Premiums pursuant to the
last paragraph of clause (a) above;
(ii) pay on a monthly basis to the Servicer as additional
servicing compensation interest paid and earnings realized on Permitted
Investments;
(iii) withdraw amounts not required to be deposited in the FHA
Premium Account or deposited therein in error;
(iv) clear and terminate the FHA Premium Account upon the
termination of this Agreement in accordance with the terms of Section
10.01 hereof; and
(v) deposit in the Collection Account for amounts withdrawn
from it pursuant to the last paragraph of clause (a) above.
Section 3.31. Duties of the Claims Administrator.
(a) In connection with each FHA Loan, the Seller, the Servicer and the
Claims Administrator will comply at all times with the provisions of Title 1 and
the rules and regulations promulgated thereunder in servicing each FHA Loan and
making claims for reimbursement with respect to each FHA Loan, and will at all
times hold a valid Contract of Insurance from the FHA for such purposes (unless
such Contract of Insurance is terminated so as not to affect the obligation of
FHA to provide insurance coverage with respect to the FHA Loans).
(b) If any FHA Loan becomes a 90 Day Delinquent FHA Loan, and if
sufficient coverage is available in the Reserve Amount to make an FHA Payment
with respect to such FHA Loan, the Claims Administrator may, in its sole
discretion, during any subsequent Due Period, determine to file a Claim with the
FHA with respect to such 90 Day Delinquent FHA Loan. If the Claims Administrator
determines to file such a Claim, the Claims Administrator will notify the
Trustee no later than the Determination Date following such determination by an
Officer's Certificate in the form of Exhibit O hereto and shall request delivery
of the related Mortgage File. Upon receipt of such certification and request,
the Trustee shall, no later than the related Distribution Date, release to the
Claims Administrator the related Mortgage File and the Trustee shall execute and
deliver such instruments necessary to enable the Claims Administrator to file a
Claim with the FHA on behalf of the Trustee. Within 120
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days of its receipt of the related Mortgage File, the Claims Administrator
shall, in its sole discretion, either file a Claim with the FHA for an FHA
Payment with respect to such 90 Day Delinquent FHA Loan or, if the Claims
Administrator determines not to file such a Claim, return to the Trustee the
related Mortgage File.
(c) With respect to any 90 Day Delinquent FHA Loan transferred to the
Claims Administrator pursuant to clause (b) above, the Claims Administrator
shall deposit (or, if the Claims Administrator is not also the Servicer, the
Claims Administrator shall instruct the Servicer to deposit) in the Collection
Account within 24 hours of receipt the following amounts (such amounts to be net
of any amounts that would be reimbursable to the Servicer under Section 3.10
with respect to amounts in the Collection Account): (i) any FHA Payments; (ii)
the amount, if any, by which the FHA Payment was reduced in accordance with FHA
Regulations due to the Claims Administrator enforcing a lien on the Mortgage
Property prior to the lien of the related 90 Day Delinquent FHA Loan; and (iii)
any principal and interest payments received with respect to a 90 Day Delinquent
FHA Loan after the Due Period in which the FHA Loan is transferred to the Claims
Administrator and before either the related FHA Payment is paid or the related
Mortgage File is returned to the Trustee, as the case may be (the amounts
referred to in (ii) and (iii) above are referenced to herein as "Related
Payments").
(d) If an FHA Loan becomes a 90 Day Delinquent FHA Loan when there is
insufficient coverage in the Reserve Amount, or if the Claims Administrator
determines not to file a Claim with the FHA with respect to such 90 Day
Delinquent FHA Loan, the Trustee will not transfer such FHA Loan to the Claims
Administrator, no Claim will be made to the FHA and the Servicer may take other
action, including the commencement of foreclosure proceedings, on the related
Mortgaged Property.
(e) If a Claim is rejected by the FHA and if the Claims Administrator
is no longer the Company, the Claims Administrator shall promptly notify the
Servicer and the Seller of such rejection. Further, if a Claim is rejected by
the FHA, other than as a result of depletion of the Reserve Amount, the Seller
shall be deemed to have breached its representation and warranty contained in
Section 2.05(jjj) and the Seller shall be required to repurchase the related 90
Day Delinquent FHA Loan by depositing in the Collection Account, on the next
succeeding Determination Date, an amount and in the manner specified in Section
2.03.
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Section 3.32. Trustee Not to Hold Other FHA Insured Title I Loans. For
so long as any Certificates remain outstanding under this Agreement, the Trustee
shall not own, whether as a result of its origination or by purchase, in its own
name or in any trust capacity, any other loans insured by the FHA under the
Title I program other than the FHA Loans; provided, however, that the Trustee
may own other loans insured by the FHA under the Title I program if such loans
(i) were originated or purchased by the Seller or its affiliates, (ii) are part
of a pool formed for the purpose of issuing certificates and (iii) such
certificates are insured by [THE CERTIFICATE INSURER] and receive from each
Rating Agency the same rating assigned the same rating assigned to the
Certificates.
ARTICLE FOUR
FLOW OF FUNDS
Section 4.01. Establishment of Accounts. The Trustee shall establish on
the Closing Date, and thereafter maintain the Certificate Accounts, the
Distribution Accounts and the Policy Payments Accounts, each of which shall
conform to the definition of an Eligible Account and shall be held by the
Trustee for the benefit of the Certificateholders of the related Pool [AND THE
CERTIFICATE INSURER, AS THEIR INTERESTS MAY APPEAR].
[SECTION 4.02. THE CERTIFICATE INSURANCE POLICY.
(a) NOT LATER THAN 3:00 P.M., NEW YORK TIME, ON THE THIRD BUSINESS DAY
IMMEDIATELY PRECEDING EACH DISTRIBUTION DATE, THE TRUSTEE SHALL DETERMINE THE
AMOUNT TO BE ON DEPOSIT IN THE DISTRIBUTION ACCOUNT FOR EACH POOL ON SUCH
DISTRIBUTION DATE AFTER TAKING INTO ACCOUNT THE DEPOSITS DESCRIBED IN SECTIONS
4.03 AND 4.04 HEREOF RELATING TO SUCH POOL AND SUCH DISTRIBUTION DATE (INCLUDING
NET INVESTMENT EARNINGS, IF ANY) BUT NET OF, WITHOUT DUPLICATION, (x) THE AMOUNT
OF ANY INSURED PAYMENTS WITH RESPECT TO SUCH POOL AND (y) THE AMOUNT OF ANY
INSURANCE PREMIUM, ANY TRUSTEE'S FEE, TOGETHER WITH ANY OTHER AMOUNT REQUIRED TO
BE PAID TO THE TRUSTEE PURSUANT TO SECTION 4.04(a), AND, IN THE EVENT IT IS SO
REQUIRED, THE SERVICING FEE REQUIRED TO BE PAID TO A SUCCESSOR SERVICER PURSUANT
TO SECTION 4.04(a)(v) PAID ON SUCH DISTRIBUTION DATE WITH RESPECT TO SUCH POOL
(SUCH NET AMOUNT, THE "AVAILABLE FUNDS" WITH RESPECT TO SUCH POOL).
IF THE INSURED DISTRIBUTION AMOUNT WITH RESPECT TO ANY POOL FOR ANY
DISTRIBUTION DATE EXCEEDS THE AVAILABLE FUNDS OF SUCH POOL FOR SUCH DISTRIBUTION
DATE (SUCH EVENT BEING AN "AVAILABLE FUNDS SHORTFALL"), THE TRUSTEE SHALL
COMPLETE A NOTICE IN THE FORM ATTACHED TO THE CERTIFICATE INSURANCE POLICY (THE
"NOTICE") AND SHALL SUBMIT SUCH NOTICE TO THE CERTIFICATE INSURER NO LATER THAN
10:00 A.M., NEW YORK TIME, ON THE SECOND BUSINESS DAY PRECEDING SUCH
DISTRIBUTION DATE. SUCH NOTICE MAY BE DELIVERED BY
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ELECTRONIC FACSIMILE (IN WHICH CASE THE ORIGINAL SHALL BE SENT BY OVERNIGHT
COURIER). THE NOTICE SHALL CONSTITUTE A CLAIM FOR AN INSURED PAYMENT PURSUANT TO
THE CERTIFICATE INSURANCE POLICY FOR AN AMOUNT EQUAL TO THE AVAILABLE FUNDS
SHORTFALL. UPON RECEIPT OF INSURED PAYMENTS ON BEHALF OF THE CLASS [A]
CERTIFICATEHOLDERS OF THE RELATED POOL, THE TRUSTEE SHALL DEPOSIT SUCH INSURED
PAYMENTS IN THE POLICY PAYMENTS ACCOUNT FOR SUCH POOL, AND SHALL THEREAFTER
TRANSFER SUCH INSURED PAYMENTS TO THE DISTRIBUTION ACCOUNT FOR SUCH POOL FOR
DISTRIBUTION SOLELY TO THE CLASS [A] CERTIFICATEHOLDERS IN ACCORDANCE WITH
SECTION 4.04(B).
(b) THE TRUSTEE SHALL ESTABLISH AND MAINTAIN, IN ACCORDANCE WITH
SECTION 4.01, WITH RESPECT TO EACH POOL A SEPARATE SPECIAL PURPOSE TRUST ACCOUNT
FOR THE BENEFIT OF THE HOLDERS OF THE CLASS [A] CERTIFICATES OF THE RELATED POOL
AND THE CERTIFICATE INSURER (EACH, A "POLICY PAYMENTS ACCOUNT") OVER WHICH THE
TRUSTEE SHALL HAVE EXCLUSIVE CONTROL AND SOLE RIGHT OF WITHDRAWAL. THE TRUSTEE
SHALL DEPOSIT ANY AMOUNT PAID UNDER THE CERTIFICATE INSURANCE POLICY WITH
RESPECT TO ANY POOL IN THE POLICY PAYMENTS ACCOUNT FOR SUCH POOL AND DISTRIBUTE
SUCH AMOUNT ONLY FOR PURPOSES OF PAYMENT TO THE HOLDERS OF CLASS [A]
CERTIFICATES OF SUCH POOL OF THE INSURED PAYMENT FOR WHICH A CLAIM WAS MADE AND
SUCH AMOUNT MAY NOT BE APPLIED TO SATISFY ANY COSTS, EXPENSES OR LIABILITIES OF
THE SERVICER, THE TRUSTEE OR THE TRUST. AMOUNTS PAID UNDER THE CERTIFICATE
INSURANCE POLICY WITH RESPECT TO ANY POOL SHALL BE TRANSFERRED TO THE
DISTRIBUTION ACCOUNT OF THE RELATED POOL IN ACCORDANCE WITH THE NEXT SUCCEEDING
PARAGRAPH AND THEREAFTER DISBURSED BY THE TRUSTEE TO THE HOLDERS OF THE CLASS
[A] CERTIFICATES OF SUCH POOL IN ACCORDANCE WITH SECTION 4.04(b). IT SHALL NOT
BE NECESSARY FOR SUCH PAYMENTS TO BE MADE BY CHECKS OR WIRE TRANSFERS SEPARATE
FROM THE CHECKS OR WIRE TRANSFERS USED TO PAY ANY CLASS [A] DISTRIBUTION AMOUNT
WITH RESPECT TO SUCH POOL WITH OTHER FUNDS AVAILABLE TO MAKE SUCH PAYMENT.
HOWEVER, THE AMOUNT OF ANY PAYMENT OF PRINCIPAL OF OR INTEREST ON THE CLASS [A]
CERTIFICATES OF SUCH POOL TO BE PAID FROM FUNDS TRANSFERRED FROM THE POLICY
PAYMENTS ACCOUNT OF SUCH POOL SHALL BE NOTED IN THE STATEMENT TO BE FURNISHED TO
RELATED HOLDERS OF THE CLASS [A] CERTIFICATES PURSUANT TO SECTION 4.05. FUNDS
HELD IN THE POLICY PAYMENTS ACCOUNTS SHALL NOT BE INVESTED BY THE TRUSTEE.
ON ANY DISTRIBUTION DATE WITH RESPECT TO WHICH A CLAIM HAS BEEN MADE
UNDER THE CERTIFICATE INSURANCE POLICY WITH RESPECT TO ANY POOL, THE AMOUNT OF
ANY FUNDS RECEIVED BY THE TRUSTEE AS A RESULT OF ANY CLAIM UNDER THE CERTIFICATE
INSURANCE POLICY WITH RESPECT TO SUCH POOL, TO THE EXTENT REQUIRED TO SATISFY
FULLY THE CLASS [A] DISTRIBUTION AMOUNT FOR SUCH POOL ON SUCH DISTRIBUTION DATE,
SHALL BE WITHDRAWN FROM THE POLICY PAYMENTS ACCOUNT FOR SUCH POOL AND DEPOSITED
IN RELATED DISTRIBUTION ACCOUNT FOR SUCH POOL AND APPLIED BY THE TRUSTEE,
TOGETHER WITH THE OTHER FUNDS TO BE DEPOSITED IN SUCH DISTRIBUTION ACCOUNT,
DIRECTLY TO THE PAYMENT OF THE CLASS [A] DISTRIBUTION AMOUNT DUE ON THE CLASS
[A] CERTIFICATES FOR SUCH POOL. FUNDS RECEIVED BY THE TRUSTEE AS A RESULT OF ANY
CLAIM UNDER THE CERTIFICATE INSURANCE POLICY WITH RESPECT TO ANY POOL SHALL BE
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DEPOSITED BY THE TRUSTEE IN THE POLICY PAYMENTS ACCOUNT FOR SUCH POOL AND THEN
TRANSFERRED TO THE RELATED DISTRIBUTION ACCOUNT AND USED SOLELY FOR PAYMENT TO
THE RELATED HOLDERS OF THE CLASS [A] CERTIFICATES OF SUCH POOL AND MAY NOT BE
APPLIED TO SATISFY ANY COSTS, EXPENSES OR LIABILITIES OF THE SERVICER, THE
TRUSTEE OR THE TRUST. ANY FUNDS REMAINING IN THE POLICY PAYMENTS ACCOUNT OF SUCH
POOL ON THE FIRST BUSINESS DAY FOLLOWING A DISTRIBUTION DATE SHALL BE REMITTED
TO THE CERTIFICATE INSURER, PURSUANT TO THE INSTRUCTIONS OF THE CERTIFICATE
INSURER, BY THE END OF SUCH BUSINESS DAY.
(c) THE TRUSTEE SHALL KEEP A COMPLETE AND ACCURATE RECORD OF THE AMOUNT
OF INTEREST AND PRINCIPAL PAID IN RESPECT OF ANY CERTIFICATE FROM MONEYS
RECEIVED UNDER THE CERTIFICATE INSURANCE POLICY. THE CERTIFICATE INSURER SHALL
HAVE THE RIGHT TO INSPECT SUCH RECORDS AT REASONABLE TIMES DURING NORMAL
BUSINESS HOURS UPON ONE BUSINESS DAY'S PRIOR NOTICE TO THE TRUSTEE.
(d) THE TRUSTEE SHALL RECEIVE, AS ATTORNEY-IN-FACT OF EACH HOLDER OF A
CLASS [A] CERTIFICATE, ANY INSURED PAYMENT WITH RESPECT TO THE RELATED POOL FROM
THE CERTIFICATE INSURER AND DISBURSE THE SAME TO EACH HOLDER OF A CLASS [A]
CERTIFICATE OF SUCH POOL IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE IV.
WITH RESPECT TO ANY POOL, INSURED PAYMENTS DISBURSED BY THE TRUSTEE FROM
PROCEEDS OF THE CERTIFICATE INSURANCE POLICY SHALL NOT BE CONSIDERED PAYMENT BY
THE TRUST NOR SHALL SUCH PAYMENTS DISCHARGE THE OBLIGATION OF THE TRUST WITH
RESPECT TO THE RELATED CLASS [A] CERTIFICATES, AND THE CERTIFICATE INSURER SHALL
BE ENTITLED TO RECEIVE THE REIMBURSEMENT AMOUNT WITH RESPECT TO SUCH POOL
PURSUANT TO SECTION 4.04(a)(vi). BY ACCEPTANCE OF A CERTIFICATE, EACH HOLDER OF
A CERTIFICATE AGREES AND RECOGNIZES THAT TO THE EXTENT THE CERTIFICATE INSURER
MAKES INSURED PAYMENTS WITH RESPECT TO THE RELATED POOL, EITHER DIRECTLY OR
INDIRECTLY (AS BY PAYING THROUGH THE TRUSTEE), TO THE CLASS [A]
CERTIFICATEHOLDERS OF SUCH POOL, THE CERTIFICATE INSURER WILL BE ENTITLED TO
RECEIVE THE REIMBURSEMENT AMOUNT WITH RESPECT TO SUCH POOL PURSUANT TO SECTION
4.04(a)(vi).
(e) THE TRUSTEE SHALL PROMPTLY NOTIFY THE CERTIFICATE INSURER OF ANY
PROCEEDING OR THE INSTITUTION OF ANY ACTION, OF WHICH A RESPONSIBLE OFFICER OF
THE TRUSTEE HAS ACTUAL KNOWLEDGE, SEEKING THE AVOIDANCE AS A PREFERENTIAL
TRANSFER UNDER APPLICABLE BANKRUPTCY, INSOLVENCY, RECEIVERSHIP OR SIMILAR LAW (A
"PREFERENCE CLAIM") OF ANY DISTRIBUTION MADE WITH RESPECT TO THE CLASS [A]
CERTIFICATES. EACH HOLDER OF A CLASS [A] CERTIFICATE, BY ITS PURCHASE OF SUCH
CERTIFICATE, THE SERVICER AND THE TRUSTEE AGREE THAT, THE CERTIFICATE INSURER
(SO LONG AS NO CERTIFICATE INSURER DEFAULT EXISTS) MAY AT ANY TIME DURING THE
CONTINUATION OF ANY PROCEEDING RELATING TO A PREFERENCE CLAIM DIRECT ALL MATTERS
RELATING TO SUCH PREFERENCE CLAIM, INCLUDING, WITHOUT LIMITATION, (i) THE
DIRECTION OF ANY APPEAL OF ANY ORDER RELATING TO SUCH PREFERENCE CLAIM AND (ii)
THE POSTING OF ANY SURETY, SUPERSEDEAS OR PERFORMANCE BOND PENDING ANY SUCH
APPEAL. IN ADDITION AND WITHOUT LIMITATION OF THE FOREGOING, THE CERTIFICATE
INSURER SHALL BE SUBROGATED TO, AND EACH HOLDER, THE SERVICER AND THE TRUSTEE
HEREBY DELEGATE AND
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ASSIGN TO THE CERTIFICATE INSURER, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
RIGHTS OF THE SERVICER, THE TRUSTEE AND EACH HOLDER IN THE CONDUCT OF ANY SUCH
PREFERENCE CLAIM, INCLUDING, WITHOUT LIMITATION, ALL RIGHTS OF ANY PARTY TO ANY
ADVERSARY PROCEEDING OR ACTION WITH RESPECT TO ANY COURT ORDER ISSUED IN
CONNECTION WITH ANY SUCH PREFERENCE CLAIM.
(f) IT IS UNDERSTOOD AND AGREED THAT THE INTENTION OF THE PARTIES IS
THAT THE CERTIFICATE INSURER SHALL NOT BE ENTITLED TO REIMBURSEMENT ON ANY
DISTRIBUTION DATE FOR AMOUNTS PREVIOUSLY PAID BY IT UNLESS ON SUCH DISTRIBUTION
DATE THE CLASS [A] CERTIFICATEHOLDERS WITH RESPECT TO ANY POOL SHALL ALSO HAVE
RECEIVED THE FULL AMOUNT OF THE INSURED DISTRIBUTION AMOUNT WITH RESPECT TO SUCH
POOL FOR SUCH DISTRIBUTION DATE.]
Section 4.03. Deposits to, and Transfers Among, the Accounts.
(a) The Trustee shall deposit to the Certificate Account with respect
to each Pool, upon receipt, the Interest Remittance Amount, the Principal
Remittance Amount, the Termination Price received by the Trustee in connection
with a termination of the Trust pursuant to Article X hereof and any amounts
received by the Trustee from the Servicer pursuant to Section 4.04(a) hereof, in
each case, with respect to such Pool. The Servicer shall deposit to the
Certificate Accounts amounts required to be paid by the Servicer pursuant to
Section 3.27.
(b) Prior to 1:00 p.m. New York time on any Distribution Date, the
Trustee shall make all transfers required in order to make the payments required
pursuant to Section 4.04.
Section 4.04. Flow of Funds and Distributions.
(a) No later than 1:00 p.m., New York time, on each Distribution Date
(or as described below) the Trustee shall apply the amounts on deposit in the
Certificate Account for each Pool in the following order of priority:
(i) first, [FROM AMOUNTS THEN ON DEPOSIT IN SUCH CERTIFICATE
ACCOUNT, THE TRUSTEE SHALL PAY TO THE CERTIFICATE INSURER THE INSURANCE
PREMIUM WITH RESPECT TO SUCH POOL, PROVIDED THAT NO CERTIFICATE INSURER
DEFAULT HAS OCCURRED AND IS CONTINUING];
(ii) second, from amounts then on deposit in the Certificate
Account, the Trustee shall pay itself the Trustee's Fee then due with
respect to such Pool and any related payments required to be paid from
the Trust pursuant to Section 8.05, up to $_______________ in
cumulative payments for the preceding 12 month period[, AND ANY
EXPENSES INCURRED AT THE DIRECTION OF THE CERTIFICATE INSURER];
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(iii) third, the Trustee shall distribute, from funds then on
deposit in the Certificate Account as follows:
(A) to the Distribution Account for such Pool, an
amount equal to the Interest Distribution Amount with respect
to such Pool for such Distribution Date (other than any
portion thereof to be funded from transfers directly to the
Distribution Account pursuant to Section 4.02(b)); and
(B) to the Distribution Account for such Pool, the
Principal Distribution Amount with respect to such Pool (other
than any portion thereof to be funded from transfers directly
to the Distribution Account pursuant to Section 4.02(b));
(iv) fourth, to the Trustee any payments required to be paid
from the Trust pursuant to Section 8.05 which are not paid pursuant to
(ii) above;
(v) fifth, [TO THE CERTIFICATE INSURER, THE AMOUNT OF ANY
REIMBURSEMENT AMOUNT WITH RESPECT TO SUCH POOL THEN OWED TO THE
CERTIFICATE INSURER];
(vi) sixth, to the Servicer, reimbursement for any indemnity
payments made by it hereunder with respect to such Pool, to the extent
the Servicer has certified to the Trustee that such amounts are owing
to it;
(vii) seventh, to the Trustee for deposit in the Distribution
Accounts of the other Pools, amounts equal to the deficiencies on such
Distribution Date, if any, in the amounts available in the Certificate
Accounts related to such other Pools to make the payments set forth in
clauses (i) through (iii) above with respect to such other Pools (if
the aggregate amount of such deficiencies exceeds the amount to be
distributed pursuant to this clause (vii), such amount shall be
distributed pro rata according to the amount of such deficiencies); and
(viii) eighth, pro rata to the Holders of the Class R
Certificates, the amount remaining, if any, in the Certificate Account
after making the distributions in (i) through (vii) above.
(b) After making the transfers to the Distribution Account with respect
to each Pool pursuant to Section 4.04(a)(iii) above and, if an Insured Payment
was made with respect to such Pool on such Distribution Date, such amount is
deposited to the Distribution Account for such Pool from the related Policy
Payments Account pursuant to Section 4.02(b) above, the Trustee shall distribute
such amounts as follows:
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(i) to the Holders of each Class of Class [A] Certificates in
such Pool, pro rata, an amount equal to the portion of the Interest
Distribution Amount with respect to such Pool and for such Distribution
Date that each such Class is entitled to receive; and
(ii) sequentially, to the Holders of each Class of Class [A]
Certificates in such Pool, an amount equal to the Principal
Distribution Amount for such Pool, to each such Class in the order of
the number of such Class (the lowest numbered Class in such Pool
first), until the Certificate Principal Balance of each such Class has
been reduced to zero.
[NOTWITHSTANDING THE FOREGOING SUBCLAUSE (ii), IN THE EVENT THAT AN
OVERCOLLATERALIZATION DEFICIT WITH RESPECT TO ANY POOL EXISTS ON ANY
DISTRIBUTION DATE AND THE PRINCIPAL DISTRIBUTION AMOUNT WITH RESPECT TO ANY
CLASS OF SUCH POOL ON SUCH DISTRIBUTION DATE IS NOT SUFFICIENT TO REDUCE SUCH
OVERCOLLATERALIZATION DEFICIT TO ZERO, THEN THE PRINCIPAL DISTRIBUTION AMOUNT
WITH RESPECT TO THE CERTIFICATES OF SUCH POOL ON SUCH DISTRIBUTION DATE, AS
OTHERWISE PROVIDED IN SUBCLAUSE (ii) ABOVE, WILL FIRST BE ALLOCATED CONCURRENTLY
TO THE OUTSTANDING CLASSES OF SUCH POOL CERTIFICATES, PRO RATA, ON THE BASIS OF
THEIR RESPECTIVE CLASS CERTIFICATE PRINCIPAL BALANCES.]
(c) Notwithstanding Section 4.04(b)(ii) above, the aggregate amounts
distributed on all Distribution Dates to the Holders of each Class of Class [A]
Certificates on account of principal shall not exceed the related Original Class
Certificate Principal Balance for each such Class existing on the Closing Date.
(d) Whenever in the administration of the Trust the Trustee comes into
possession of money or other property not otherwise required to be paid to the
Class [A] Certificateholders, [THE CERTIFICATE INSURER,] the Servicer or any
other Person, or not required to be otherwise applied at any time pursuant to
the provisions of this Agreement, the Trustee shall promptly distribute such
money or other property to the Class R Certificateholders pro rata.
(e) Payments to the Certificateholders of each Class on each
Distribution Date will be made to the Certificateholders of record of the
respective Class on the related Record Date (other than as provided in Section
4.04(g) or Section 10.01 respecting the final distribution on such Class), and
shall be made to each such Certificateholder (x) by wire transfer of immediately
available funds to the account of such Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder shall
have so notified the Trustee in writing in the case of the first Distribution
Date, by the Closing Date, and, in the case of all subsequent Distribution
Dates, at least five Business Days prior to the Record Date immediately prior to
such Distribution Date and is the registered owner of a Class R Certificate, or
the registered owner of Class [A] Certificates evidencing a Percentage
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Interest aggregating at least 10%; or (y) otherwise by check mailed by first
class mail to the address of such Certificateholder appearing in the Certificate
Register. [PAYMENTS TO THE CERTIFICATE INSURER ON ANY DISTRIBUTION DATE WILL BE
MADE BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS TO THE ACCOUNT DESIGNATED
BY THE CERTIFICATE INSURER.]
(f) The rights of the Certificateholders to receive distributions from
the proceeds of the Trust in respect of the Certificates, and all interests of
the Certificateholders in and to such distributions, shall be as set forth in
this Agreement. In no event shall the Holders of any Class of Certificates, the
Trustee, [THE CERTIFICATE INSURER,] the Seller or the Servicer in any way be
responsible or liable to the Holders of any other Class of Certificates in
respect of amounts previously distributed properly on the Certificates.
(g) Except as otherwise provided in Section 10.01, whenever the Trustee
expects that the final distribution with respect to any Class of Certificates
will be made on the next Distribution Date, the Trustee shall, no later than
four days prior to the related Distribution Date, send, by overnight delivery or
by registered mail, to each Holder on such date of such Class of Certificates
[AND TO THE CERTIFICATE INSURER] a notice to the effect that:
(i) the Trustee expects that the final distribution with
respect to such Class of Certificates will be made on such Distribution
Date, and requesting that such Holder send its Certificates to the
Trustee immediately following such final Distribution Date, and
(ii) no interest shall accrue on such Certificates from and
after the end of the related Due Period, and upon the Trustee's making
of such final distribution with respect to such Class of Certificates,
such Certificates will be absolutely null and void and of no further
effect thereafter.
(h) [THE TRUSTEE SHALL DISTRIBUTE TO THE RESPECTIVE CLASS [A]
CERTIFICATEHOLDER ANY PAYMENT DISBURSED TO IT BY THE CERTIFICATE INSURER IN
RESPECT OF ANY PREVIOUS DISTRIBUTION TO A CLASS [A] CERTIFICATEHOLDER THAT WAS
AVOIDED AS A PREFERENCE PURSUANT TO A FINAL, NON-APPEALABLE ORDER OF A COURT OF
COMPETENT JURISDICTION UNDER APPLICABLE BANKRUPTCY, INSOLVENCY, RECEIVERSHIP OR
SIMILAR LAW, AND THAT SUCH CERTIFICATEHOLDER HAS REPAID TO THE RECEIVER,
CONSERVATOR, DEBTOR-IN-POSSESSION OR TRUSTEE IN BANKRUPTCY, AS THE CASE MAY BE.]
(i) With respect to the Certificate Account with respect to any Pool,
the Servicer shall deliver to the Trustee for deposit in such Certificate
Account the amount of any losses incurred in connection with the investment of
funds in such Certificate Account within one Business Day of receipt from the
Trustee of notice of any such losses. The Trustee shall not be responsible for
and shall be indemnified by the Servicer for any expenses or liability incurred
with respect to such investment losses.
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Section 4.05. Statements to Certificateholders. On each Distribution
Date the Trustee shall forward by mail to each Holder of a Class [A] Certificate
[AND TO THE CERTIFICATE INSURER], a statement, parts of which shall be based
upon Servicer Information and upon which the Trustee shall conclusively rely
without independent verification, as to the distributions made on such
Distribution Date setting forth the following information:
(a) the Class [A] Distribution Amount with respect to each
Pool;
(b) the Principal Distribution Amount for each Pool,
separately identifying in the aggregate and listed separately for the
portions relating to each Class of Class [A] Certificates the amount of
any Principal Prepayments or other recoveries of principal included
therein and any Overcollateralization Increase Amounts;
(c) the Interest Distribution Amount for each Pool;
(d) the amount of any Insured Payment included in the Class
[A] Distribution Amount on such Distribution Date for each Pool;
(e) the Class Certificate Principal Balance for each Class of
Class [A] Certificate (based on a Certificate in the original principal
amount of $1,000) which will be outstanding and the Class [A]
Certificate Principal Balance, in each case after giving effect to any
payment of principal on such Distribution Date;
(f) the amount of any Overcollateralization Reduction Amount
with respect to each Pool;
(g) the amount of any Overcollateralization Deficit with
respect to each Pool;
(h) the amount of any Specified Overcollateralization
Deficiency Amount with respect to each Pool;
(i) the amount, if any, of any Realized Losses with respect to
each Pool for the related Due Period;
(j) the Overcollateralized Amount with respect to each Pool,
if any, remaining after giving effect to all distributions on such
Distribution Date;
(k) the total of any Purchase Price amounts paid or received
by the Servicer with respect to the related Due Period;
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(l) the weighted average Mortgage Loan Rates for each Pool, as
of the last day of the calendar month preceding the month of such
Distribution Date;
(m) the current weighted average of the remaining terms of the
Mortgage Loans in each Pool;
(n) the number of Mortgage Loans outstanding in each Pool;
(o) the cumulative number and Loan Balances of Liquidated
Mortgage Loans in each Pool;
(p) the amount of cumulative Realized Losses, stated
separately for each Pool, and its percentage of the Maximum Collateral
Amount and total dollar amount;
(q) the sum of the outstanding Loan Balances of the three
Mortgage Loans having the largest Loan Balances as of the last day of
the immediately preceding Due Period with respect to each Pool;
(r) the amount of the Monthly Excess Spread with respect to
each Pool for such Distribution Date;
(s) the current outstanding aggregate Loan Balances of the
Mortgage Loans in each Class of Class [A] Certificates and in each
Pool, as of the last day of the related Due Period;
(t) the Remittance Report (defined in Section 4.06);
(u) the Reimbursement Amount with respect to each Pool, if
any;
(v) with respect to Pool III, the amount to be deposited into
the FHA Premium Account on the related Distribution Date and the amount
reimbursable to the Servicer [AND/OR THE CERTIFICATE INSURER] from the
FHA Premium Account pursuant to Section 3.30(b)(i);
(w) the amount of FHA Payments and Related Payments received
during the related Due Period;
(x) the Reserve Amount for the related Distribution Date;
(y) Claims filed during the Due Period;
(z) Claims paid during the Due Period;
(aa) Claims denied by the FHA during the Due Period;
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(bb) Claims pending payment by the FHA during the Due Period;
(cc) with respect to Pool II and Pool IV, the Index and the
Gross Margin;
(dd) the Carry-Forward Amount with respect to each Pool; and
(ee) such other information as [THE CERTIFICATE INSURER] and
the Certificateholders may reasonably require.
Items (a), (b), (c), (e), (l), (o) and (s) above shall be expressed in
a separate section of the report on the basis of a certificate having a $1,000
denomination.
In addition, on each Distribution Date the Trustee shall distribute to
each Holder, together with the information described above, the following
information based solely upon Servicer Information provided to the Trustee
pursuant to Section 3.18(a) hereof upon which the Trustee may conclusively rely
without independent verification:
(A) with respect to each Pool, the number, percent of the
aggregate Loan Balance of such Mortgage Loans to the aggregate Loan
Balances of all Mortgage Loans in such Pool and aggregate Loan Balances
of Mortgage Loans (i) 30-59 days Delinquent, (ii) 60-89 days Delinquent
and (iii) 90 days or more Delinquent (which statistics shall include
Mortgage Loans in foreclosure but which shall exclude REO Properties),
as of the close of business on the last day of the calendar month next
preceding such Distribution Date and the aggregate Loan Balances of all
Mortgage Loans in such Pool as of such date;
(B) the number of and aggregate Loan Balance of all Mortgage
Loans in foreclosure proceedings for each Pool (other than any Mortgage
Loans described in clause (C)) and the percent of the aggregate Loan
Balances of such Mortgage Loans to the aggregate Loan Balances of all
Mortgage Loans in such Pool, all as of the close of business on the
last day of the calendar month next preceding such Distribution Date;
(C) with respect to each Pool, the number of and the aggregate
Loan Balance of the related Mortgage Loans in bankruptcy proceedings
(other than any Mortgage Loans described in clause (B)) and the percent
of the aggregate Loan Balances of such Mortgage Loans to the aggregate
Loan Balances of all Mortgage Loans in such Pool, all as of the close
of business on the last day of the calendar month next preceding such
Distribution Date;
(D) with respect to each Pool, the number of REO Properties,
the aggregate Loan Balances of the related Mortgage Loans, the book
value of such REO Properties and the percent of the aggregate Loan
Balances of such Mortgage Loans to
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the aggregate Loan Balances of all Mortgage Loans in such Pool, all as
of the close of business on the last day of the calendar month next
preceding such Distribution Date;
(E) for each Mortgage Loan which is an REO Property, the Loan
Balance of such Mortgage Loan, the Appraised Value of the Mortgaged
Property, the value established by any new appraisal, the estimated
cost of disposing of the Mortgage Loan and the amount of any
unreimbursed Delinquency Advances and Servicing Advances;
(F) for each Mortgage Loan which is in foreclosure, the Loan
Balance of such Mortgage Loan, the Appraised Value of the Mortgaged
Property, the Combined Loan-to-Value Ratio as of the date of
origination, the Combined Loan-to-Value Ratio as of the close of
business on the last day of the calendar month next preceding such
Distribution Date and the last paid-to-date; and
(G) the Loan Balance of each Mortgage Loan that was modified
or extended pursuant to Section 3.01 hereof.
Within a reasonable period (which shall not be more than 45 days) of
time after the end of each calendar year, the Trustee shall furnish to each
Person who at any time during the calendar year was a Holder of a Class [A]
Certificate a statement containing the information set forth in subclauses
(a)-(c) above, aggregated for such calendar year or applicable portion thereof
during which such person was a Class [A] Certificateholder. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee pursuant
to any requirements of the Code as from time to time are in force.
On each Distribution Date the Trustee shall forward [TO THE CERTIFICATE
INSURER,] to the Seller, to each Holder of a Class R Certificate and to the
Servicer a copy of the reports forwarded to the Class [A] Certificateholders on
such Distribution Date, and a report of the amounts, if any, actually
distributed with respect to the Class R Certificates on such Distribution Date.
Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to any Person who at any time during the calendar year
was a Holder of a Class R Certificate a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
The Trustee shall forward to each Certificateholder within five
Business Days after the furnishing or receipt thereof by the Trustee, as the
case may be, copies of any (i) directions, notices, certificates, opinions or
reports furnished hereunder by the Trustee to the Servicer, the Seller[, THE
CERTIFICATE INSURER] or to the Rating Agencies, (ii) directions,
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notices, certificates, reports, opinions or any other information or document
furnished to the Trustee by the Servicer, the Seller[, THE CERTIFICATE INSURER]
or the Rating Agencies and (iii) anything requested in writing by any
Certificateholder which the Trustee otherwise sends to some other Person
pursuant to this Agreement (excluding, however, routine items sent to
Mortgagors, taxing or local property records authorities and similar items)
which, in the case of clause (iii), such Certificateholder is not otherwise
receiving; provided, however, that any such documents or information requested
under clause (iii) shall be at the expense of the requesting Certificateholder;
provided, further, that the Trustee shall not be required to provide any
document or information which it is otherwise legally prohibited from providing.
Section 4.06. Remittance Reports; Delinquency Advances by the Servicer
and Insurance Claims.
(a) The Trustee shall, not later than four Business Days prior to each
Distribution Date, prepare and furnish by telecopy a statement (with respect to
such Distribution Date, the "Remittance Report") to the Seller[, THE CERTIFICATE
INSURER] and the Servicer setting forth: (i) [THE INSURED DISTRIBUTION AMOUNT
FOR EACH POOL AND SUCH DISTRIBUTION DATE, SEPARATELY IDENTIFYING THE PORTIONS
THEREOF ALLOCABLE TO PRINCIPAL AND INTEREST]; (ii) [WHETHER THE AVAILABLE FUNDS
FOR EACH POOL EXPECTED TO BE ON DEPOSIT IN THE RELATED CERTIFICATE ACCOUNT FOR
SUCH POOL ON SUCH DISTRIBUTION DATE WILL BE SUFFICIENT TO COVER THE RELATED
INSURED DISTRIBUTION AMOUNT AND, IF NOT, THE AMOUNT OF THE RESULTING AVAILABLE
FUNDS SHORTFALL FOR SUCH POOL]; (iii) the amount of Delinquency Advances to be
made by the Servicer for each Pool in respect of the related Distribution Date,
the aggregate amount of Delinquency Advances for each Pool outstanding after
giving effect to such Delinquency Advances, and the aggregate amount of
Nonrecoverable Delinquency Advances for each Pool in respect of such
Distribution Date; (iv) [THE REIMBURSEMENT AMOUNT WITH RESPECT TO EACH POOL DUE
AND OWING TO THE CERTIFICATE INSURER ON SUCH DISTRIBUTION DATE]; (v) [WITH
RESPECT TO ANY REIMBURSEMENT TO BE MADE TO THE CERTIFICATE INSURER FOR ANY PART
OR ALL OF THE REIMBURSEMENT AMOUNT FOR EACH POOL ON SUCH DISTRIBUTION DATE, THE
AMOUNT, IF ANY, ALLOCABLE TO PRINCIPAL AND THE AMOUNT ALLOCABLE TO INTEREST];
(vi) the aggregate amount of payments in respect of Compensating Interest for
each Pool to be deposited in the Collection Account by the Servicer on the
related Deposit Date pursuant to Section 3.23; and (vii) for each Pool, the
amount of any Overcollateralization Increase Amount to be paid from Monthly
Excess Spread for such Pool on such Distribution Date and the Overcollateralized
Amount for each Pool after giving effect to all distributions on such
Distribution Date.
(b) On or before 12:00 noon, New York time, on the Deposit Date, the
Servicer shall deposit to each Collection Account, for inclusion in the Interest
Remittance Amount with respect to the related Pool on such Deposit Date, in
immediately available funds, the amount necessary to make (x) the sum of (i) the
amount then on deposit in such Collection Account with respect to interest
collections received on the Mortgage Loans for such Pool
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during the immediately preceding Due Period, (ii) with respect to the
_______________ 1997 Distribution Date, the Closing Date Deposit relating to
such Distribution Date and the related Pool and (iii) with respect to any
subsequent transfer date, any Subsequent Transfer Deposit relating to the
related Distribution Date, if applicable, (y) equal to the Interest Remittance
Amount with respect to such Pool and for such Due Period, after taking into
account all amounts in respect of Compensating Interest for such Pool paid by
the Servicer pursuant to Section 3.23 (any such deposit made by the Servicer, a
"Delinquency Advance"). The Servicer is permitted to fund its payment of
Delinquency Advances with respect to each Pool from amounts then on deposit in
the related Collection Account representing collections on the Mortgage Loans of
such Pool relating to the then-current or any subsequent Due Period; any such
amounts shall be replaced by Servicer on or prior to the next Deposit Date. The
Servicer shall be required to make Delinquency Advances from its own funds
(subject to reimbursement from subsequent collections on the Mortgage Loans,
when available) to the extent that amounts in the related Collection Account are
insufficient.
(c) The obligation of the Servicer to make Delinquency Advances is
mandatory, notwithstanding any other provision of this Agreement and, with
respect to any Mortgage Loan or REO Property, shall continue until a Final
Recovery Determination or an REO Disposition in connection therewith or the
purchase or repurchase thereof from the Trust pursuant to any applicable
provision of this Agreement.
Section 4.07. Compliance with Withholding Requirements. Notwithstanding
any other provision of this Agreement, the Trustee shall comply with all federal
withholding requirements respecting payments to Certificateholders of interest
or original issue discount that the Trustee reasonably believes are applicable
under the Code. The consent of Certificateholders shall not be required for such
withholding. In the event the Trustee does withhold any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trustee shall indicate to such
Certificateholders the amount withheld. Any amounts so withheld shall be deemed
to have been distributed to the related Certificateholders for all purposes of
this Agreement [AND THE CERTIFICATE INSURANCE POLICY].
Section 4.08. Excess Claim Amounts.
(a) If Claims filed by the Claims Administrator with respect to FHA
Loans exceed 10% of the aggregate Loan Balances of the FHA Loans measured as of
the Cut-off Date or related Subsequent Cut-off Date, as the case may be, at the
termination of the Trust, the Trustee shall withdraw from the Pool III
Collection Account the lesser of (x) the Excess Claim Amount and (y) the amount
remaining in such Collection Account and deposit such amount on behalf of the
Class R Certificateholders as directed by [THE CERTIFICATE INSURER] into an
account for the remaining outstanding Title I transactions of the Company which
are insured by [THE CERTIFICATE INSURER]. The "Excess Claim Amount" will equal
90% of the
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excess of (x) the total Claims filed with respect to FHA Loans over (y) 10% of
the aggregate Loan Balances of the FHA Loans measured as of the Cut-off Date or
related Subsequent Cut-off Date, as the case may be.
(b) At the direction of the Class R Certificateholders, the Trustee
shall immediately deposit into the Pool III Collection Account any Excess Claim
Amounts received from any other Title I transaction of the Company which is
insured by [THE CERTIFICATE INSURER]; provided that the Trustee receives an
Opinion of Counsel at the expense of the Class R Certificateholders that such
deposit will not adversely affect the REMIC status of the REMIC Trust.
(c) The Class R Certificateholders hereby consent to funds being
withdrawn from or deposited in the Pool III Collection Account at the direction
of [THE CERTIFICATE INSURER] pursuant to subsections (a) and (b) above.
(d) The Class R Certificateholders are deemed to have directed the
Trustee to withdraw funds from the Pool III Collection Account pursuant to
subsection (a) above and to deposit such funds into such Collection Account
pursuant to subsection (b) above.
ARTICLE FIVE
THE CERTIFICATES
Section 5.01. The Certificates. The Certificates consist of the Class
[A] Certificates and the Class R Certificates. The Certificates in the aggregate
will represent the entire beneficial ownership interest in the Mortgage Loans
and all other assets included in the Trust Estate.
The Certificates will be substantially in the forms annexed hereto as
Exhibits A, B and C. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.
Upon original issue, the Certificates shall be executed, authenticated
and delivered by the Trustee upon the Written Order to Authenticate and upon
receipt of the documents specified in Section 2.01. The Certificates shall be
executed by manual or facsimile signature on behalf of the Trustee by an
authorized signatory. Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Certificates
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 certificate of
authentication substantially in the form provided herein executed
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by the Trustee by manual signature, and such certificate of authentication 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.
Interest shall accrue on the Pool I and Pool III Certificates on the
basis of a 360-day year consisting of twelve 30-day months except as otherwise
provided herein. Interest shall accrue on the Pool II and Pool IV Certificates
on the basis of the actual number of days elapsed in the related interest
accrual period. The interest accrual period with respect to the Certificates
shall be the related Due Period.
Section 5.02. Registration of Transfer and Exchange of Certificate.
(a) The Trustee shall cause to be kept at the office or agency
appointed by the Trustee in accordance with the provisions of Section 8.12 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 Seller, each
Certificateholder [AND THE CERTIFICATE INSURER] shall have the right to inspect
the Certificate Register or to obtain a copy thereof at all reasonable times,
and to rely conclusively upon a certificate of the Trustee as to the information
set forth in the Certificate Register. The Trustee shall furnish or cause to be
furnished to the Seller [AND TO THE CERTIFICATE INSURER] and to any
Certificateholder a listing of the names and addresses of the Certificateholders
on reasonable request.
(b) (i) The Class R Certificates have not been registered or qualified
under the Securities Act or any state securities laws or "Blue Sky" laws. No
transfer, sale, pledge or other disposition of any Class R Certificate shall be
made unless such disposition is made pursuant to an effective registration
statement under the Securities Act and effective registration or qualification
under applicable state securities laws or "Blue Sky" laws, or is made in a
transaction which does not require such registration or qualification. In the
event that a transfer is to be made in reliance upon an exemption from the
Securities Act, the Trustee shall not register such transfer unless:
(A) the Class R Certificateholder desiring to effect
such disposition and such Class R Certificateholder's
prospective transferee each certify to the Trustee in writing
the facts surrounding such disposition, which certification
shall be substantially in the form of Exhibit I hereto; or
(B) the Class R Certificateholder desiring to effect
such disposition delivers to the Trustee an Opinion of Counsel
satisfactory to the Trustee that such transfer may be made
pursuant to an exemption from the Securities Act, which
Opinion of Counsel shall not be an expense of the Trustee.
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Neither the Seller, the Servicer nor the Trustee are obligated under this
Agreement to register the Class R Certificates under the Securities Act or any
other securities law or to take any action not otherwise required under this
Agreement to permit the transfer of Class R Certificates without such
registration or qualification. Any such Class R Certificateholder desiring to
effect such transfer shall, and does hereby agree to, promptly indemnify and
reimburse the Trustee, the Seller and the Servicer for costs and expenses
incurred in connection with any liability that results if the transfer is not so
exempt or is not made in accordance with such applicable federal and state laws.
(ii) Notwithstanding anything to the contrary herein, the
Trustee shall not register the transfer of any Certificate unless it shall have
received (a) a representation letter substantially in the form of Exhibit I
hereto or (b) in the case of a transfer to an insurance company general account,
either a representation letter as described in (a) above or, if such
representation letter does not contain the representation provided for in item D
of such Exhibit I, then in lieu thereof, an Opinion of Counsel from the
prospective transferee of such Certificate, acceptable to, and in form and
substance satisfactory to, the Trustee and the Seller, to the effect that the
acquisition and holding of the Certificate and the servicing, management and
operation of the Trust with respect to such prospective transferee are exempt
from the "prohibited transaction" provisions of ERISA and the Code pursuant to
Prohibited Transaction Class Exemption 95-60 (relating to insurance company
general accounts).
(c) Notwithstanding anything to the contrary contained herein, except
for the transfer on the Closing Date of the Class R Certificates to the Seller,
prior to registration of any transfer, sale or other disposition of a Class R
Certificate, the proposed transferee shall provide to the Servicer, the Seller,
the Class R Certificateholders and the Trustee: (i) an affidavit substantially
in the form of Exhibit J hereto to the effect that such transferee is not a
Disqualified Organization or a non-U.S. Person or an agent or a non-U.S. Person
(including a broker, nominee or middleman) of a Disqualified Organization; and
(ii) a certificate which acknowledges that (A) the Class R Certificates have
each been designated as a residual interest in a REMIC, (B) it will include in
its income the entire net income of the REMIC Trust and that such income may be
an "excess inclusion", as defined in the Code, that, with certain exceptions,
cannot be offset by other losses or benefits from any tax exemption, (C) it
expects to have the financial means to satisfy all of its tax obligations
including those relating to holding Class R Certificates, and (D) no purpose of
the acquisition of a Class R Certificate is to avoid or impede the assessment or
collection of tax. Notwithstanding the registration in the Certificate Register
of any transfer, sale or other disposition of a Class R Certificate to a
Disqualified Organization or an agent or a non-U.S. Person (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose hereunder, including, but not
limited to, the receipt of distributions in respect of such Class R Certificate.
If any purported transfer shall be in
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violation of the provisions of this Section 5.02(c), then the prior Holder of
the Class R Certificate purportedly transferred shall, upon discovery that the
transfer of the Class R Certificate was not in fact permitted by this Section
5.02(c), be restored to all rights as Holder thereof retroactive to the date of
the purported transfer of the Class R Certificate. The Trustee, the Seller
(except in its capacity as transferor of such Certificate), the Seller and the
Servicer shall have no liability to any Person for any registration or transfer
of a Class R Certificate that is not permitted by this Section 5.02(c) or for
making payments due on such Class R Certificate to the purported Holder thereof
or taking any other action with respect to such purported Holder under the
provisions of this Agreement if the Trustee, the Seller and the Servicer have
received the affidavit and certificate referenced above. The prior Holder shall
be entitled to recover from any purported Holder of a Class R Certificate that
was in fact not a permitted transferee under this Section 5.02(c) at the time it
became a Holder, all payments made on the Class R Certificate. The Holder of a
Class R Certificate, by its acceptance thereof, shall be deemed for all purposes
to have consented to the provisions of this Section 5.02(c) and to any amendment
of this Agreement deemed necessary by counsel to the Seller to ensure that the
transfer of a Class R Certificate to a Disqualified Organization or any other
Person will not cause the REMIC Trust to cease to qualify as a REMIC or cause
the imposition of a tax upon the REMIC Trust.
(d) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate (duly endorsed, or accompanied by an
executed assignment, as specified in the Certificate) at any agency or office
appointed by the Trustee for such purpose pursuant to Section 8.12, the Trustee
or its agent shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class of a like aggregate Percentage Interest.
(e) At the option of the Certificateholders, each Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency appointed by the Trustee for such purpose
pursuant to Section 8.12. Whenever any Certificates are so surrendered for
exchange the Trustee shall execute, authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee or its agent) be duly endorsed by, or be accompanied by
an assignment in the form attached to the Certificate or by a written instrument
of transfer in the form reasonably satisfactory to the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing.
(f) No service charge to the Certificateholders shall be made for any
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
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(g) All Certificates surrendered for transfer and exchange shall be
canceled and destroyed by the Trustee in accordance with its customary
procedures.
(h) The Trustee shall not register any Class [A] Certificate in the
name of the Trust, the Servicer, the Seller, any Sub-Servicer or any of their
respective affiliates, (the Trustee may require any prospective transferee of
any Class [A] Certificate to certify that it is not such an affiliate).
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
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 (ii) there is delivered to the Trustee [AND THE CERTIFICATE
INSURER] such security or indemnity (provided that an unsecured letter of
indemnity in a form reasonably satisfactory to the Trustee from a Holder which
is an insurance company having long-term unsecured debt which is rated at least
investment grade (or having a comparable claim-paying ability rating) and having
a minimum net worth of $100,000,000 shall satisfy such requirement) as may be
required by them to save each of them harmless, then, in the absence of actual
knowledge by a Responsible Officer of the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of the same Class and of like denomination
and Percentage Interest. Upon the issuance of any new Certificate under this
Section, the Trustee may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. Any replacement Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Certificateholders. The Seller, the
Servicer, the Trustee[, THE CERTIFICATE INSURER] and any agent of any of them
may treat the Person in whose name any Certificate is registered in the
Certificate Register as the Certificateholder for the purpose of receiving
distributions pursuant to Section 4.04 and for all other purposes whatsoever,
and neither the Seller, the Servicer, the Trustee[, THE CERTIFICATE INSURER] nor
any agent of any of them shall be affected by notice to the contrary.
Section 5.05. Book-Entry Certificates. Each Class of Class [A]
Certificates, upon original issuance, shall be issued in the form of one or more
typewritten Certificates representing the Book-Entry Certificates, to be
delivered to the Seller. Such Certificates shall initially be registered on the
Certificate Register in the name of the Seller or its nominee, and no
Certificate Owner will receive a definitive certificate representing such
Certificate Owner's interest in such Certificates, except as provided in Section
5.07. Unless
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and until definitive, fully registered Certificates ("Definitive Certificates")
have been issued to the Certificate Owners of such Certificates pursuant to
Section 5.07:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Seller, the Servicer[, THE CERTIFICATE INSURER] and
the Trustee may deal with the Seller and the Depository Participants
for all purposes (including the making of distributions) as the
authorized representative of the respective Certificate Owners of such
Certificates;
(c) registration of the Book-Entry Certificates may not be
transferred by the Trustee except to another Depositary;
(d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depositary and the
Depository Participants and shall be limited to those established by
law and agreements between such Certificate Owners and the Depositary
and/or the Depository Participants. Pursuant to the Depository
Agreement, unless and until Definitive Certificates are issued with
respect to any Class of Class [A] Certificates pursuant to Section
5.07, the Depositary will make book-entry transfers among the
Depository Participants and receive and transmit distributions of
principal and interest on the related Certificates to such Depository
Participants;
(e) the Depositary may collect its usual and customary fees,
charges and expenses from its Depository Participants;
(f) the Trustee may rely and shall be fully protected in
relying upon information furnished by the Depositary with respect to
its Depository Participants; and
(g) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this
Section shall control.
For purposes of any provision of this Agreement requiring or permitting
actions with the consent of, or at the direction of, Certificateholders
evidencing a specified percentage of the Voting Interests such direction or
consent may be given by Certificate Owners (acting through the Depositary and
the Depository Participants) owning Book-Entry Certificates evidencing the
requisite percentage of Class Certificate Principal Balance of such Class.
Section 5.06. Notices to Depositary. Whenever any notice or other
communication is required to be given to Certificateholders of any Class with
respect to which Book-Entry Certificates have been issued, unless and until
Definitive Certificates shall have been issued
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to the related Certificate Owners, the Trustee shall give all such notices and
communications to the Depositary.
Section 5.07. Definitive Certificates. If after Book-Entry Certificates
have been issued with respect to the Class [A] Certificates, (a) the Seller
advises the Trustee that the Depositary is no longer willing or able to
discharge properly its responsibilities under the Depository Agreement with
respect to such Certificates and the Trustee or the Seller is unable to locate a
qualified successor, (b) the Seller, at its sole option, advises the Trustee
that it elects to terminate the book-entry system with respect to such
Certificates through the Depositary or (c) after the occurrence and continuation
of an Event of Default, Certificate Owners of any Class of Certificates
evidencing at least 51% of the Voting Interests of such Class advise the Trustee
and the Depositary in writing through the Depository Participants that the
continuation of a book-entry system with respect to such Certificates through
the Depositary (or its successor) is no longer in the best interests of the
Certificate Owners with respect to such Certificates, then the Trustee shall
notify all Certificate Owners of such Certificates, through the Depositary, of
the occurrence of any such event and of the availability of Definitive
Certificates to Certificate Owners requesting the same. The Seller shall provide
the Trustee with an adequate inventory of certificates to facilitate the
issuance and transfer of Definitive Certificates. Upon surrender to the Trustee
of any such Certificates by the Depositary, accompanied by registration
instructions from the Depositary for registration, the Trustee shall
authenticate and deliver such Definitive Certificates. Neither the Seller nor
the Trustee shall be liable for any delay in delivery of such instructions and
each may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of such Definitive Certificates, all references
herein to obligations imposed upon or to be performed by the Depositary shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates and the Trustee shall recognize the
Holders of such Definitive Certificates as Certificateholders hereunder.
ARTICLE SIX
THE SELLER, THE SERVICER AND THE CLAIMS ADMINISTRATOR
Section 6.01. Liability of the Seller, the Claims Administrator and the
Servicer. The Seller, the Claims Administrator and the Servicer each shall be
severally liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement and undertaken hereunder by the Seller,
the Claims Administrator and the Servicer, respectively, herein.
Section 6.02. Merger or Consolidation of the Seller, the Claims
Administrator or the Servicer. Subject to the following paragraph, the Seller
will keep in full effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation.
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The Claims Administrator and Servicer will each keep in full effect its
existence, rights and franchises as a corporation organized under the laws of
the State of New York (or under the laws of such other jurisdiction as may in
the future issue a charter for the Servicer). The Seller, Claims Administrator
and the Servicer each will (and the Servicer will require each Sub-Servicer in
the related Sub-Servicing Agreement to) 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 respective duties under this Agreement.
The Seller, the Claims Administrator or the Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Seller, the Claims Administrator or the Servicer
shall be a party, or any Person succeeding to the business of the Seller, the
Claims Administrator or the Servicer, shall be the successor of the Seller, the
Claims Administrator or the Servicer, as the case may be, hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding; provided,
however, that the successor or surviving Person to the Servicer shall satisfy
the requirements of Sections 6.06 and 7.02 hereof with respect to the
qualifications of a successor Servicer.
Section 6.03. Limitation on Liability of the Seller, the Servicer and
Others. Neither the Seller, the Claims Administrator or the Servicer nor any of
the directors, officers, employees or agents of the Seller, the Claims
Administrator or the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Seller, the Claims
Administrator, the Servicer or any such person against the remedies provided
herein for the breach of any warranties, representations or covenants made
herein, or against any specific liability imposed on the Seller, the Claims
Administrator or the Servicer herein, or against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties of the Servicer, the Claims Administrator or the
Seller, as the case may be, or by reason of reckless disregard of obligations
and duties of the Servicer, the Claims Administrator or the Seller, as the case
may be, hereunder. The Seller, the Claims Administrator, the Servicer and any
director, officer, employee or agent of the Seller, the Claims Administrator or
the Servicer may rely in good faith on any document of any kind which, prima
facie, is properly executed and submitted by any Person respecting any matters
arising hereunder.
The Servicer, the Seller and the Claims Administrator and any director,
officer, employee or agent of the Servicer, the Seller or the Claims
Administrator shall be indemnified by the Trust and held harmless against any
loss, liability or expense incurred in
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connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the Certificates, other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Except as otherwise provided
herein, neither of the Seller, the Claims Administrator nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action that
is not related to its respective duties under this Agreement; provided, however,
that, except as otherwise provided herein, any of the Seller, the Claims
Administrator, or the Servicer may, with the prior consent of the Trustee [AND
THE CERTIFICATE INSURER], in its discretion 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 and the interests of the Certificateholders
[AND THE CERTIFICATE INSURER] hereunder. In such event, the legal expenses and
costs of such action, with the prior written consent of [THE CERTIFICATE
INSURER], and any liability resulting therefrom shall be, expenses, costs and
liabilities of the Trust, and the Seller, the Claims Administrator and the
Servicer shall be entitled to be reimbursed therefor out of the Certificate
Account.
Section 6.04. Limitation on Resignation of the Servicer or the Claims
Administrator; No Assignment or Delegation of Duties by Servicer. Neither the
Servicer nor the Claims Administrator shall resign from the obligations and
duties hereby imposed on it except [(a) BY THE MUTUAL CONSENT OF THE CERTIFICATE
INSURER (EXCEPT THAT IF A CERTIFICATE INSURER DEFAULT HAS OCCURRED AND IS
CONTINUING, THE DECISION OF THE TRUSTEE AND THE MAJORITY CERTIFICATEHOLDERS
SHALL CONTROL), THE TRUSTEE AND THE MAJORITY CERTIFICATEHOLDERS OR (b)] upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination [PURSUANT TO CLAUSE (b) OF THE PRECEDING
SENTENCE PERMITTING THE RESIGNATION OF THE SERVICER OR THE CLAIMS ADMINISTRATOR]
shall be evidenced by an Independent Opinion of Counsel to such effect delivered
(at the expense of the Servicer or the Claims Administrator, as the case may be)
to the Trustee [AND THE CERTIFICATE INSURER]. No resignation of the Servicer
shall become effective until the Trustee or a successor Servicer, appointed
pursuant to the provisions of 3.26(b) and satisfying the requirements of
Sections 6.06 and 7.02 hereof with respect to the qualifications of a successor
Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or (except as permitted by Section 3.02) delegate to or subcontract
with, or authorize or appoint any other Person to perform any of the duties,
covenants or obligations to be performed by the Servicer hereunder, without the
prior written consent of [EACH OF THE CERTIFICATE INSURER, EXCEPT THAT
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IF A CERTIFICATE INSURER DEFAULT HAS OCCURRED AND IS CONTINUING, THE WRITTEN
CONSENT OF THE CERTIFICATE INSURER SHALL NOT BE REQUIRED, AND] the Trustee, and
absent such written consent, any agreement, instrument or act purporting to
effect any such assignment, transfer, delegation or appointment shall be void.
Section 6.05. Rights of the Seller, the Certificateholders and Others
in Respect of the Servicer. The Servicer shall (and shall require any
Sub-Servicer in the related Sub-Servicing Agreement to) afford, the Seller, the
Trustee and any Class [A] Certificateholder who has a greater than 10%
Percentage Interest in the related Class and any representative or agent of the
foregoing [AND THE CERTIFICATE INSURER], upon reasonable notice, during normal
business hours, access to all records maintained by the Servicer in respect of
its rights and obligations hereunder and access to officers of the Servicer and
each Sub-Servicer responsible for such obligations. Upon request and at such
requesting party's expense, the Servicer shall furnish to the Seller, [THE
CERTIFICATE INSURER,] any Certificateholder and the Trustee the Servicer's most
recent publicly available financial statements and each Sub-Servicer's most
recent financial statements (annual or quarterly statements, as the case may be)
and such other information relating to their capacity to perform their
obligations under this Agreement as the Servicer or such Sub-Servicer possesses.
To the extent such information is not otherwise available to the
public, the Seller, the Certificateholders, the Servicer (with respect to
information of any Sub-Servicer) and the Trustee [AND THE CERTIFICATE INSURER]
shall not disseminate any information obtained pursuant to the preceding two
sentences without the Servicer's or the Sub-Servicer's (only with respect to
information of such Sub-Servicer) written consent, except as required pursuant
to this Agreement or to the extent that it is necessary to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
for reasons consistent with the performance of their respective duties or (ii)
pursuant to any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority, or as may be required in any
report submitted to any regulatory body, having jurisdiction over the Seller,
the Servicer, the Trustee, any Certificateholder or the Trust Estate, as the
case may be, and in any case, the Seller, the Servicer (with respect to
information of any Sub-Servicer) or the Trustee, as the case may be, shall use
its best efforts to assure the confidentiality of any such disseminated
non-public information.
Section 6.06. Eligibility Requirements for Servicer. The Servicer
hereunder shall at all times be a corporation or a state-chartered or national
bank acceptable to [THE CERTIFICATE INSURER EXCEPT THAT IF A CERTIFICATE INSURER
DEFAULT HAS OCCURRED AND IS CONTINUING, SUCH ENTITY SHALL BE ACCEPTABLE TO] the
Trustee. The Servicer shall (i) be organized and doing business under the laws
of any state or the United States of America, (ii) have a net worth of at least
$50,000,000 (other than the original Servicer) (or such lower level as may be
acceptable to [THE CERTIFICATE INSURER], or, if a [CERTIFICATE INSURER] Default
has occurred and is continuing, to the Trustee) and (iii) be a Title I approved
Lender pursuant to the FHA
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Regulations. In case at any time the Servicer shall cease to be eligible in
accordance with the provisions of this Section, the Servicer shall resign
immediately in the manner and with the effect specified in Section 6.04.
ARTICLE SEVEN
DEFAULT
Section 7.01. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
(a) Any failure by the Servicer or the Claims Administrator,
as appropriate, to (i) make the payment of, with respect to any Pool,
an Interest Remittance Amount or a Principal Remittance Amount on any
Deposit Date, (ii) deposit in the Collection Account or the Certificate
Account of the related Pool any other amount required to be deposited
therein under this Agreement, (iii) pay the Trustee Fee or (iv) pay the
FHA Insurance Premium relating to any FHA Loan, which failure, in the
case of only clause (ii) hereof (except with respect to FHA Payments to
which no grace period shall apply), continues unremedied for a period
of two Business Days after the date upon which written notice of such
failure shall have been given to the Servicer or the Claims
Administrator by the Trustee [OR THE CERTIFICATE INSURER] or to the
Servicer or the Claims Administrator[, THE CERTIFICATE INSURER] and the
Trustee by Holders of Certificates evidencing Voting Interests
represented by all Certificates aggregating not less than 51%;
(b) Failure on the part of the Servicer or the Claims
Administrator duly to observe or perform in any material respect any
other covenants or agreements of the Servicer or the Claims
Administrator set forth in the Certificates or in this Agreement, which
failure to observe or perform such covenants or agreements (i)
materially and adversely affects the Certificateholders [OR THE
CERTIFICATE INSURER] and (ii) continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer or the
Claims Administrator by the Trustee [OR THE CERTIFICATE INSURER] (which
notice shall refer specifically to this Section), or to the Servicer or
the Claims Administrator[, THE CERTIFICATE INSURER] and the Trustee by
the Holders of Certificates evidencing Voting Interests represented by
all Certificates aggregating not less than 51%;
(c) The entry against the Servicer or the Claims Administrator
of a decree or order by a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar
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proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days;
(d) The consent by the Servicer or the Claims Administrator to
the appointment of a trustee, conservator or receiver or liquidator in
any bankruptcy, insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Servicer
or the Claims Administrator or of or relating to substantially all of
its property; or the Servicer or the Claims Administrator shall admit
in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations;
(e) [THE PAYMENT BY THE CERTIFICATE INSURER OF ANY INSURED
PAYMENT, UNLESS THE CERTIFICATE INSURER DETERMINES THAT THE RELATED
INSUFFICIENCY IN AVAILABLE FUNDS RESULTED FROM CAUSES BEYOND THE
REASONABLE CONTROL OF THE SERVICER;]
(f) For so long as the Company is the Servicer and/or the
Claims Administrator, failure on the part of the Seller duly to observe
or perform in any material respect any covenants or agreements of the
Seller set forth in the Certificates or in this Agreement, which
failure to observe or perform such covenants or agreements (i)
materially and adversely affects the Certificateholders [OR THE
CERTIFICATE INSURER] and (ii) continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer or the
Claims Administrator by the Trustee [OR THE CERTIFICATE INSURER] (which
notice shall refer specifically to this Section), or to the Servicer or
the Claims Administrator[, THE CERTIFICATE INSURER] and the Trustee by
the Holders of Certificates evidencing Voting Interests represented by
all Certificates aggregating not less than 51%; or
[(g) A FAILURE OF THE SERVICER TO MEET THE SERVICER
TERMINATION TEST.]
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer or the Claims Administrator, [EITHER (1)
THE CERTIFICATE INSURER OR (2) WITH THE PRIOR WRITTEN CONSENT OF [THE
CERTIFICATE INSURER],] either the Trustee or the Holders of Certificates
evidencing Voting Interests represented by all Certificates aggregating not less
than 51%, by notice then given in writing to the Servicer or the Claims
Administrator with a copy to [THE CERTIFICATE INSURER AND TO] the Trustee, in
the case of written consent from the Holders of Certificates, may terminate all
of the rights, responsibilities and obligations of the Servicer as servicer or
the Claims Administrator as the claims administrator under this Agreement. On or
after the receipt by the Servicer or the
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Claims Administrator of such written notice, all authority and power of the
Servicer or the Claims Administrator under this Agreement, whether with respect
to the Certificates or the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee pursuant to and under this Section; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer or the Claims Administrator, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Mortgage Loans and related documents, or otherwise. The
Servicer and the Claims Administrator agree to cooperate with the Trustee in
effecting the termination of the responsibilities and rights of the Servicer or
the Claims Administrator hereunder, including, without limitation, the transfer
to the Trustee for the administration by it of all cash amounts that shall at
the time be held by the Servicer or the Claims Administrator that have been
deposited by the Servicer or the Claims Administrator in the related Collection
Account or the Certificate Account or thereafter received by the Servicer or the
Claims Administrator with respect to the Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Mortgage Files to the successor Servicer,
amending this Agreement to reflect such successor as Servicer or Claims
Administrator pursuant to this Section 7.01 or otherwise in connection with the
successor Servicer or Claims Administrator assuming the duties of the
predecessor Servicer or Claims Administrator hereunder shall be paid by the
predecessor Servicer or Claims Administrator upon presentation of reasonable
documentation of such costs and expenses.
For purposes of this Section 7.01, the Trustee shall not be deemed to
have knowledge of an Event of Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice of any event which
is in fact such an Event of Default is received at the notice address of the
Trustee provided herein and such notice references the Certificates, the Seller,
the Trust or this Agreement.
[FOR PURPOSES OF THIS SECTION 7.01, ANY CONSENT OR DETERMINATION BY THE
CERTIFICATE INSURER SHALL BE REPLACED BY CONSENT OR DETERMINATION OF THE
MAJORITY CERTIFICATEHOLDERS IF A CERTIFICATE INSURER DEFAULT HAS OCCURRED AND IS
CONTINUING.]
Section 7.02. Trustee to Act; Appointment of Successor. On and after
the day the Servicer or the Claims Administrator receives a notice of
termination pursuant to Section 7.01 or on and after the day the Servicer
becomes ineligible to act as Servicer due to an inability to meet the
eligibility requirements of Section 6.06, and unless a successor Servicer or
Claims Administrator other than the Trustee has been appointed pursuant to
Section 3.26 hereof, the Trustee shall be the successor in all respects to the
Servicer in its capacity as Servicer or to the Claims Administrator in its
capacity as claims administrator, as the case
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may be, under this Agreement (until replaced by [THE CERTIFICATE INSURER]) and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto and arising
thereafter placed on the Servicer (except for any representations or warranties
of the Servicer and any obligation to repurchase a Mortgage Loan for any reason
hereunder) or the Claims Administrator by the terms and provisions hereof,
including, without limitation, the Servicer's obligations to make Delinquency
Advances pursuant to Section 4.06 (but only to the extent that it determines
that such Delinquency Advance would not be a Nonrecoverable Delinquency Advance)
and payments of Compensating Interest pursuant to Section 3.23; provided,
however, that if the Trustee is prohibited by law or regulation (as evidenced by
an Independent Opinion of Counsel) from obligating itself to make advances
regarding delinquent Mortgage Loans, then the Trustee shall not be obligated to
make Delinquency Advances or payments in respect of Compensating Interest; and
provided, further, that any failure to perform such duties or responsibilities
caused by the Servicer's failure to provide the documents and records required
by Section 7.01 shall not be considered a default by the Trustee as successor to
the Servicer hereunder.
Notwithstanding the above, if the Trustee shall be unable to so act as
successor Servicer or Claims Administrator or if the Trustee is prohibited by
law from making advances regarding delinquent Mortgage Loans or making payments
in respect of Compensating Interest, and in such event that the procedures
described in Section 3.26 have not commenced within a reasonable period of time,
then the Trustee shall petition a court of competent jurisdiction to appoint, as
the successor to the Servicer under this Agreement in the assumption of all or
any part of the responsibilities, duties or liabilities of the Servicer or the
Claims Administrator, as the case may be, under this Agreement, any established
mortgage loan servicing institution qualified to service mortgage loans such as
the Mortgage Loans which meets the eligibility requirements of Section 6.06
hereof; provided, that such appointment of any such successor Servicer or Claims
Administrator shall not result in the qualification, reduction or withdrawal of
the ratings assigned to the Class [A] Certificates by any Rating Agency.
In connection with such appointment made by such court, the Trustee may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Servicer as such
hereunder. The Seller, [THE CERTIFICATE INSURER,] the Trustee, and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Upon a successor Servicer's
acceptance of its appointment by such court, the Trustee shall notify in writing
the Seller, each Certificateholder[, THE CERTIFICATE INSURER] and each Rating
Agency of such appointment.
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No appointment of a successor to the Servicer or the Claims
Administrator under this Agreement shall be effective until the assumption by
the successor to the Servicer or the Claims Administrator, as the case may be,
of all the responsibilities, duties and liabilities hereunder, except as
otherwise provided herein.
Any successor to the Servicer, other than a successor appointed by a
court of competent jurisdiction upon the petition of the Trustee, shall be
entitled to receive, as compensation therefor, the Servicing Fee, calculated at
a servicing fee rate to be agreed upon at the time between such successor and
the Seller (it being acknowledged that the Trustee as the successor Servicer
shall be entitled to the Servicing Fee Rate provided for herein), but not in
excess of the Servicing Fee Rate, and all funds relating to the Mortgage Loans
which the Servicer would have been entitled to if the Servicer had continued to
act hereunder.
The successor Servicer (other than the Trustee) shall be solely liable
for any costs and expenses associated with the transfer of servicing to such
successor Servicer.
Section 7.03. Notification to Mortgagors and Certificateholders.
(a) Upon any such termination pursuant to Section 7.02 above or
appointment of a successor to the Servicer, the Trustee shall, at the expense of
the Servicer, give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register and to each Mortgagor
at their respective addresses appearing in the Mortgage Loan Schedule.
(b) Within three Business Days after the occurrence of any event which
constitutes or which, with notice or lapse of time or both, would constitute an
Event of Default, the Trustee shall transmit by mail, at the expense of the
Servicer, to all Holders of Certificates [AND THE CERTIFICATE INSURER], notice
of any Event of Default actually known to a Responsible Officer of the Trustee.
Section 7.04. Additional Remedies of Trustee Upon Event of Default.
Upon any Event of Default, the Trustee shall have the right to the extent
consistent with the rights reserved to [THE CERTIFICATE INSURER] hereunder, in
its own name and as Trustee, to take all actions now or hereafter existing at
law, in equity or by statute to enforce its rights and remedies and to protect
the interests, and enforce the rights and remedies, of the Certificateholders
(including the institution and prosecution of all judicial, administrative and
other proceedings and the filings of proofs of claim and debt in connection
therewith). No remedy provided for by this Agreement shall be exclusive of any
other remedy, and each and every remedy shall be cumulative and in addition to
any other remedy and no delay or omission to exercise any right or remedy shall
impair any such right or remedy or shall be deemed to be a waiver of any Event
of Default.
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Section 7.05. Waiver of Events of Default. The [CERTIFICATE INSURER
AND, SUBJECT TO THE CONSENT OF THE TRUSTEE, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD, THE] Majority Certificateholders, may waive any Event of
Default and its consequences, except that if a default in the making of any
required deposit to the Collection Account or the Certificate Account of any
Pool that would result in a failure of the Trustee to make any required
distribution on the Certificates may be waived only by all of the
Certificateholders. Upon any waiver of a past Event of Default, such Event of
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 Event of Default or impair any
right consequent thereto except to the extent expressly so waived. Notice of any
such waiver shall be given by the Trustee to each Rating Agency and to all
Certificateholders.
ARTICLE EIGHT
THE TRUSTEE
Section 8.01. Duties of the Trustee. The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Event of Defaults
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. During an Event of Default, 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 person would exercise or use under the circumstances in the conduct of
such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are in
the form specified in this Agreement.
The Trustee may, in accordance with its duties hereunder, do all things
necessary and proper as may be required in connection with any secondary
mortgage licensing laws and similar requirements, including, but not limited, to
consenting to jurisdiction, and the appointment of agents for service of
process, in jurisdictions in which the Mortgaged Properties are located.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
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(i) Prior to the occurrence of an Event of Default, and after
the curing of all such Event of Defaults 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 contained therein (including, but not
limited to, Servicer Information), upon any certificates or opinions
furnished to the Trustee that are in the form specified in this
Agreement;
(ii) The Trustee shall not be personally 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 [THE CERTIFICATE INSURER OR] the
Majority Certificateholders issued to the Trustee pursuant to Section
8.13 hereof.
The Trustee shall, upon receipt of the request substantially in the
form of Exhibit M attached hereto, prepare, issue and forward to the Servicer
checks for refunds and expenses indicated on such request.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document (including,
but not limited to, Servicer Information) reasonably believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to make any
investigation of matters
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arising hereunder 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 (provided that
an unsecured letter of indemnity in a form reasonably satisfactory to
the Trustee from a Holder which is an insurance company having
long-term unsecured debt which is rated at least investment grade (or
having a comparable claim-paying ability rating) and having a minimum
net worth of $100,000,000 shall satisfy such requirement); nothing
contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default of which the Trustee has
actual knowledge (which has not been cured or waived), 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 person
would exercise or use under the circumstances in the conduct of such
person's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Event of Defaults 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 [THE CERTIFICATE INSURER OR BY] the Majority Certificateholders;
provided, however, that if the payment 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 (provided that
an unsecured letter of indemnity in a form reasonably satisfactory to
the Trustee from a Holder which is an insurance company having
long-term unsecured debt which is rated at least investment grade (or
having a comparable claim-paying ability rating) and having a minimum
net worth of $100,000,000 shall satisfy such requirement) against such
expense or liability as a condition to taking any such action. The
reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be repaid by the Servicer
upon demand;
(vi) 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
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(vii) The Trustee shall not be personally liable for any loss
resulting from the investment of funds at the direction of the Servicer
or the Seller held in any Account; provided, however, that the Trustee
shall be personally liable on any investment on which it is the
obligor.
(b) Following the Startup Day, and except as otherwise provided in this
Agreement, the Trustee shall not knowingly accept any contribution of assets to
the Trust unless it shall have been provided with an Opinion of Counsel at the
expense of the party delivering such assets acceptable to it and [THE
CERTIFICATE INSURER] to the effect that the inclusion of such assets in the
REMIC Trust will not cause the REMIC Trust to fail to qualify as a REMIC at any
time that any Certificates are outstanding or subject the Trust to any tax under
the REMIC Provisions or other applicable provisions of federal, state and local
law or ordinances.
(c) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the signature
on the Certificates) shall be taken as the statements of the Seller, 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 (other than the signature of the Trustee on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Seller 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 Seller or the Servicer in respect of the
Mortgage Loans or for the use or application of any funds deposited in or
withdrawn from the Collection Account by the Servicer.
Section 8.04. Trustee May Own Certificates. The Trustee in its
individual capacity 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 8.05. Expenses of Trustee. The Trustee's Fee shall be paid as
described in Section 4.04. In addition, the Servicer covenants and agrees to pay
or reimburse the Trustee, upon request, all reasonable expenses, disbursements
and advances incurred or made by the Trustee, and any director, officer,
employee or agent acting for and on behalf of the Trustee, in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ, whether or not such expenses are incurred in connection
with any
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Opinion of Counsel acquired or permitted to be obtained by the Trustee) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified by the Servicer and held harmless against any loss,
liability or expense incurred in connection with or relating to this Agreement
or the Certificates, or the performance of any of the Trustee's duties
hereunder, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties
hereunder; provided that (i) with respect to any such loss, liability or
expense, the Trustee shall have given to the Seller, the Servicer[, THE
CERTIFICATE INSURER] and the Certificateholders written notice thereof promptly
after the Trustee shall have knowledge thereof and (ii) while maintaining
control over its own defense, the Trustee shall cooperate and consult fully with
[THE CERTIFICATE INSURER] in preparing such defense. Such indemnity shall
survive the termination or discharge of this Agreement and the resignation or
removal of the Trustee.
Section 8.06. Trustee Eligibility Requirements. The Trustee hereunder
shall at all times be a corporation or a state-chartered or national bank
acceptable to [THE CERTIFICATE INSURER], which is not an affiliate of the Seller
or the Servicer, organized and doing business under the laws of any state (or
the District of Columbia) or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $100,000,000 and subject to supervision or examination by federal or
state authority. The Trustee shall at all times have and maintain a valid FHA
Contract of Insurance or appoint a co-trustee that is so insured to act as
trustee with respect to FHA Loans. The Trustee shall at all times have ratings
assigned to its long-term, unsecured debt obligations of at least "A" by S&P and
"A2" by Moody's. If such corporation or association publishes reports of
conditions 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 or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time any 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 8.07. The corporation or national banking association serving as Trustee
may have normal banking and trust relationships with the Seller and the Servicer
and the respective affiliates.
Section 8.07. Resignation and Removal of the Trustee. The Trustee may
at any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Seller, [THE CERTIFICATE INSURER,] the Servicer
and to all Certificateholders. Upon receiving such notice of any such
resignation, the Seller shall select a successor Trustee and shall present such
party to [THE CERTIFICATE INSURER AND] the Majority Certificateholders and upon
their joint approval such party shall promptly be appointed successor trustee by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders[,
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THE CERTIFICATE INSURER] and the Seller by the Servicer. 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 8.06 and shall fail to resign after written
request therefor, or if at any time the Trustee shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public officer shall take charge
or control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer shall solicit and
present to [THE CERTIFICATE INSURER AND] the Majority Certificateholders and
upon their joint written approval, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders[, THE CERTIFICATE
INSURER] and the Seller by the Servicer.
The Majority Certificateholders may, with the written consent of [THE
CERTIFICATE INSURER] (which shall only be required if no [CERTIFICATE INSURER]
Default has occurred and is continuing), at any time remove the Trustee and
appoint a successor 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 Seller, one complete set to the
Trustee so removed and one complete set to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
Notwithstanding anything to the contrary contained herein, so long as
no [CERTIFICATE INSURER] Default exists and is continuing, the Trustee may not
be removed by the Certificateholders without the prior written consent of [THE
CERTIFICATE INSURER], which consent shall not be unreasonably withheld.
Section 8.08. Successor Trustee. Any successor trustee appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the
Certificateholders, [THE CERTIFICATE INSURER,] the Servicer and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder (other than any Mortgage Files at the time held by a custodian, which
shall become the agent of any successor trustee hereunder), and
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the Seller, the Servicer and the predecessor trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for 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 8.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the predecessor trustee shall mail notice of the succession of
such trustee hereunder to each Holder of Certificates at their respective
addresses as shown in the Certificate Register and to each Rating Agency. If the
predecessor trustee fails to mail such notice within ten (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 resigning trustee.
Section 8.09. Merger or Consolidation of Trustee. Any corporation or
association into which the Trustee may be merged or converted or with which it
may be consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation or association succeeding to the business of the Trustee, shall be
the successor of the Trustee hereunder, provided such corporation or association
shall be eligible under the provisions of Section 8.06, 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 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Estate or property securing the same may at the time be located, the
Servicer and the Trustee with the consent of [THE CERTIFICATE INSURER] shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust Estate, and to vest in such Person or Persons, in such
capacity, such title to the Trust Estate, or any part thereof, and, subject to
the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Seller and the Trustee may consider necessary or
desirable. If the Trustee shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, [THE CERTIFICATE INSURER]
shall have the power to make such appointment. Any co-trustee with respect to
FHA Loans must at all times have a valid FHA Contract of Insurance. Subject to
[THE CERTIFICATE INSURER]'s prior approval, no co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06 hereunder and no notice to Holders of Certificates of
the appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof.
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In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall
be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the direction of the
Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. 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. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Trustee Records. The Trustee shall afford the Seller, the
Servicer[, THE CERTIFICATE INSURER] and each Certificateholder upon reasonable
notice during normal business hours, access to all records maintained by the
Trustee in respect of its duties hereunder and access to officers of the Trustee
responsible for performing such duties, such inspection to take place at
____________________________ or such other place as designated by the Trustee.
Upon request, the Trustee shall furnish the Servicer[, THE CERTIFICATE INSURER]
and any requesting Certificateholder with its most recent financial statements.
The Trustee shall cooperate fully with the Seller, the Servicer[, THE
CERTIFICATE INSURER] and such Certificateholder and shall make available to the
Seller, the Servicer[, THE CERTIFICATE INSURER] and such Certificateholder for
review and copying such books, documents or records as may be requested with
respect to the Trustee's duties hereunder. The Seller, the Servicer[, THE
CERTIFICATE INSURER] and the Certificateholders shall not have
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any responsibility or liability for any action or failure to act by the Trustee
and are not obligated to supervise the performance of the Trustee under this
Agreement or otherwise.
Section 8.12. Appointment of Office or Agency. The Trustee designates
its office at _________________ as its agency in the City of New York where the
Certificates may be surrendered for registration of transfer or exchange, and
presented for final distribution. The Trustee designates its offices at
____________, as the office at which notices and demands to or upon the Trustee
in respect of the Certificates may be served and will notify [THE CERTIFICATE
INSURER AND] the Certificateholders of any change in the location of such office
or agency.
Section 8.13. Exercise of Trustee Powers by [CERTIFICATE INSURER AND]
Certificateholders. Subject to the provisions of this Article VIII, [THE
CERTIFICATE INSURER, OR] the Majority Certificateholders [WITH THE CONSENT OF
THE CERTIFICATE INSURER, WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD
(PROVIDED THAT SUCH CONSENT OF THE CERTIFICATE INSURER SHALL NOT BE REQUIRED IF
A CERTIFICATE INSURER DEFAULT HAS OCCURRED AND IS CONTINUING),] may direct the
time, method and place of conducting any proceeding relating to the Trust or the
Certificates or for any remedy available to the Trustee in its capacity as
Trustee (and not in its individual capacity) with respect to the Certificates or
exercising any trust or power conferred on the Trustee with respect to the
Certificates of the Trust [(EXCEPT THAT IF A CERTIFICATE INSURER DEFAULT HAS
OCCURRED AND IS CONTINUING, THEN THE DIRECTION OF THE MAJORITY
CERTIFICATEHOLDERS SHALL CONTROL AND THE CERTIFICATE INSURER SHALL HAVE NO RIGHT
TO ACT)]; provided that:
(i) such direction shall not be in conflict with any rule of
law or with this Agreement; and
(ii) the Trustee shall have been provided with indemnity
satisfactory to it (provided that an unsecured letter of indemnity in a
form reasonably satisfactory to the Trustee from a Holder which is an
insurance company having long-term unsecured debt which is rated at
least investment grade (or having a comparable claim-paying ability
rating) and having a minimum net worth of $100,000,000 shall satisfy
such requirement).
[ARTICLE NINE
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. CERTAIN RIGHTS OF THE CERTIFICATE INSURER. BY ACCEPTING
ITS CERTIFICATE, EACH HOLDER OF A CLASS [A] CERTIFICATE AGREES THAT UNLESS A
CERTIFICATE INSURER DEFAULT EXISTS, THE CERTIFICATE INSURER SHALL HAVE THE
FOLLOWING RIGHTS, WITHOUT ANY CONSENT OF THE HOLDERS OF CLASS [A] CERTIFICATES:
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(a) THE RIGHT TO DIRECT FORECLOSURES UPON MORTGAGE LOANS UPON
FAILURE OF THE SERVICER TO DO SO FOR ANY REASON, EXCEPT THAT IN THE
CASE OF SECTION 3.15(b) HEREOF;
(b) THE RIGHT TO REQUIRE THE SELLER TO REPURCHASE OR
SUBSTITUTE FOR, OR TO REQUIRE THE SERVICER TO PURCHASE, MORTGAGE LOANS
PURSUANT TO SECTION 2.05;
(c) THE RIGHT TO GIVE NOTICES OF BREACH OR TO TERMINATE THE
RIGHTS AND OBLIGATIONS OF THE SERVICER PURSUANT TO SECTION 7.01;
(d) THE RIGHT TO DIRECT THE ACTIONS OF THE TRUSTEE DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT PURSUANT TO SECTIONS 7.01 AND 7.02;
AND
(e) THE RIGHT TO DIRECT THE TRUSTEE TO INVESTIGATE CERTAIN
MATTERS PURSUANT TO SECTION 8.02(a)(v).
IN ADDITION, EACH HOLDER OF A CLASS [A] CERTIFICATE AGREES THAT, UNLESS
A CERTIFICATE INSURER DEFAULT EXISTS, THE RIGHT TO REMOVE THE TRUSTEE PURSUANT
TO SECTION 8.07 HEREOF MAY BE EXERCISED BY THE MAJORITY CERTIFICATEHOLDERS ONLY
WITH THE PRIOR WRITTEN CONSENT OF THE CERTIFICATE INSURER, WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD.
SECTION 9.02. TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CERTIFICATE
INSURER.
(a) UNLESS A CERTIFICATE INSURER DEFAULT EXISTS, THE TRUSTEE SHALL NOT:
(i) TERMINATE THE RIGHTS AND OBLIGATIONS OF THE SERVICER AS
SERVICER PURSUANT TO SECTION 7.01 OR CONSENT TO THE RESIGNATION OF THE
SERVICER PURSUANT TO SECTION 6.04;
(ii) TERMINATE ANY SUB-SERVICING AGREEMENTS PURSUANT TO
SECTION 3.03;
(iii) ASSUME ANY SUB-SERVICING AGREEMENTS PURSUANT TO SECTION
3.06; OR
(iv) UNDERTAKE ANY LITIGATION PURSUANT TO EITHER SECTION 7.04
OR 8.02(a)(iii);
WITHOUT THE PRIOR WRITTEN CONSENT OF THE CERTIFICATE INSURER WHICH CONSENT SHALL
NOT BE UNREASONABLY WITHHELD.
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(b) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT AND UNTIL SUCH TIME AS ALL EVENT OF DEFAULTS
HAVE BEEN CURED, NO PROVISION OF THIS AGREEMENT SHALL REQUIRE THE TRUSTEE TO
TAKE ANY ACTION OR OMIT TO TAKE ANY ACTION AT THE REQUEST OF THE CERTIFICATE
INSURER OR ANY CERTIFICATEHOLDER TO THE EXTENT THE TRUSTEE BELIEVES IN GOOD
FAITH SUCH ACTION OR OMISSION WOULD CAUSE THE TRUSTEE TO VIOLATE ANY LAW OR
REGULATION APPLICABLE TO IT OR TO BREACH THEIR RESPECTIVE OBLIGATIONS OWED BY IT
TO THE CERTIFICATEHOLDERS AND TO THE CERTIFICATE INSURER, PURSUANT TO THIS
AGREEMENT OR OTHERWISE.
SECTION 9.03. TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF THE
CERTIFICATE INSURER AND THE CERTIFICATEHOLDERS. THE TRUSTEE SHALL HOLD THE TRUST
ESTATE AND THE MORTGAGE FILES, AND SHALL MAINTAIN THE ACCOUNTS, FOR THE BENEFIT
OF THE CERTIFICATEHOLDERS AND THE CERTIFICATE INSURER AND ALL REFERENCES IN THIS
AGREEMENT (INCLUDING, WITHOUT LIMITATION, IN SECTIONS 2.02, 2.03, 3.10 AND 4.02)
AND IN THE CERTIFICATES TO THE BENEFIT OF HOLDERS OF THE CERTIFICATES SHALL BE
DEEMED TO INCLUDE THE CERTIFICATE INSURER. THE TRUSTEE SHALL COOPERATE IN ALL
REASONABLE RESPECTS WITH ANY REASONABLE REQUEST BY THE CERTIFICATE INSURER OR
THE CLASS [A] CERTIFICATEHOLDERS (WHEN OTHER THAN THE SELLER, THE SERVICER OR
ANY AFFILIATE THEREOF), FOR ACTION TO PRESERVE OR ENFORCE THE RESPECTIVE RIGHTS
AND INTERESTS OF THE CERTIFICATE INSURER OR THE CLASS [A] CERTIFICATEHOLDERS
(WHEN OTHER THAN THE SELLER, THE SERVICER OR ANY AFFILIATE THEREOF) UNDER THIS
AGREEMENT AND THE CERTIFICATES.
THE SERVICER HEREBY ACKNOWLEDGES AND AGREES THAT IT SHALL SERVICE AND
ADMINISTER THE MORTGAGE LOANS AND ANY REO PROPERTIES FOR THE BENEFIT OF THE
CERTIFICATEHOLDERS AND FOR THE BENEFIT OF THE CERTIFICATE INSURER, AND ALL
REFERENCES IN THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, IN SECTIONS 3.01(b)
AND 3.22) TO THE BENEFIT OF OR ACTIONS ON BEHALF OF THE CERTIFICATEHOLDERS SHALL
BE DEEMED TO INCLUDE THE CERTIFICATE INSURER. UNLESS A CERTIFICATE INSURER
DEFAULT EXISTS, THE SERVICER SHALL NOT TERMINATE ANY SUB-SERVICING AGREEMENTS
WITHOUT CAUSE OR UNDERTAKE ANY LITIGATION PURSUANT TO SECTION 3.12(c), WITHOUT
THE PRIOR WRITTEN CONSENT OF THE CERTIFICATE INSURER. UNLESS A CERTIFICATE
INSURER DEFAULT EXISTS, NEITHER THE SERVICER NOR THE SELLER SHALL UNDERTAKE ANY
LITIGATION PURSUANT TO SECTION 6.03 (OTHER THAN LITIGATION TO ENFORCE THEIR
RESPECTIVE RIGHTS HEREUNDER) WITHOUT THE PRIOR WRITTEN CONSENT OF THE
CERTIFICATE INSURER.
SECTION 9.04. EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER;
SUBROGATION. ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, ANY PAYMENT WITH
RESPECT TO PRINCIPAL OF OR INTEREST ON THE CLASS [A] CERTIFICATES WHICH IS MADE
WITH MONEYS RECEIVED PURSUANT TO THE TERMS OF THE CERTIFICATE INSURANCE POLICY
SHALL NOT BE CONSIDERED PAYMENT OF THE CLASS [A] CERTIFICATES FROM THE TRUST
ESTATE AND SHALL NOT RESULT IN THE PAYMENT OF OR THE PROVISION FOR THE PAYMENT
OF THE PRINCIPAL OF OR INTEREST ON THE CLASS [A] CERTIFICATES WITHIN THE MEANING
OF SECTION 4.04. THE SELLER, THE
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SERVICER AND THE TRUSTEE ACKNOWLEDGE, AND EACH HOLDER BY ITS ACCEPTANCE OF A
CLASS [A] CERTIFICATE AGREES, THAT WITHOUT THE NEED FOR ANY FURTHER ACTION ON
THE PART OF THE CERTIFICATE INSURER, THE SELLER, THE SERVICER OR THE TRUSTEE, TO
THE EXTENT THE CERTIFICATE INSURER MAKES PAYMENTS, DIRECTLY OR INDIRECTLY, ON
ACCOUNT OF PRINCIPAL OF OR INTEREST ON THE CLASS [A] CERTIFICATES TO THE HOLDERS
OF SUCH CERTIFICATES, THE CERTIFICATE INSURER WILL BE FULLY SUBROGATED TO THE
RIGHTS OF SUCH HOLDERS TO RECEIVE SUCH PRINCIPAL AND/OR INTEREST FROM THE TRUST
ESTATE.
THE TRUSTEE AND THE SERVICER SHALL REASONABLY COOPERATE IN ALL RESPECTS
WITH ANY REASONABLE REQUEST BY THE CERTIFICATE INSURER OR THE CLASS [A]
CERTIFICATEHOLDERS (WHEN OTHER THAN THE SELLER, THE SERVICER OR ANY AFFILIATE
THEREOF) FOR ACTION TO PRESERVE OR ENFORCE THE RESPECTIVE RIGHTS OR INTERESTS OF
THE CERTIFICATE INSURER OR THE CLASS [A] CERTIFICATEHOLDERS UNDER THIS AGREEMENT
WITHOUT LIMITING THE RIGHTS OR AFFECTING THE INTERESTS OF THE HOLDERS AS
OTHERWISE SET FORTH HEREIN.
SECTION 9.05. NOTICES TO THE CERTIFICATE INSURER. ALL NOTICES,
STATEMENTS, REPORTS, CERTIFICATES OR OPINIONS REQUIRED BY THIS AGREEMENT TO BE
SENT TO ANY OTHER PARTY HERETO OR TO THE CERTIFICATEHOLDERS AND, IF NOT
OTHERWISE REQUIRED TO BE SENT TO THE CERTIFICATE INSURER, SHALL ALSO BE SENT TO
THE CERTIFICATE INSURER.
SECTION 9.06. THIRD-PARTY BENEFICIARY. THE CERTIFICATE INSURER SHALL BE
A THIRD-PARTY BENEFICIARY OF THIS AGREEMENT, ENTITLED TO ENFORCE THE PROVISIONS
HEREOF AS IF A PARTY HERETO.]
ARTICLE TEN
TERMINATION
Section 10.01. Termination
(a) Subject to Section 10.02, this Agreement shall terminate upon
notice to the Trustee of either: (i) the later of the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or advances of same by the Servicer), or the disposition of all
funds with respect to the last Mortgage Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to [THE CERTIFICATE
INSURER] and the Trustee or (ii) mutual consent of the Servicer, the Seller[,
THE CERTIFICATE INSURER,] and all Certificateholders in writing; provided,
however, that in no event shall the Trust established by this Agreement
terminate later than twenty-one years after the death of the last surviving
lineal descendant of John D. Rockefeller, Sr., the late President of Standard
Oil Corporation, alive as of the date hereof.
(b) Subject to Section 10.02, the Majority Class R Certificateholders
may, at their option, terminate this Agreement on any Distribution Date
following the date on which the
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aggregate Loan Balance of the Mortgage Loans is less than 10% of the Original
Class [A] Certificate Principal Balance by purchasing, on the Deposit Date
preceding such Distribution Date, and provided that such purchase occurs
pursuant to a "Qualified Liquidation" of the REMIC Trust as such term is defined
in the REMIC Provisions, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the sum of (x) the greater of (i) 100% of the
Loan Balance of each outstanding Mortgage Loan and each REO Property as of the
last day of the preceding Due Period, including the portion of the Loan Balance
of each 90 Day Delinquent FHA Loan for which the Certificateholders have not
received payment and for which a Claim was submitted to the FHA, and (ii) the
fair market value (disregarding accrued interest) of the Mortgage Loans and REO
Properties, determined as the average of three written bids (copies of which
shall be delivered to the Trustee[, THE CERTIFICATE INSURER] and the Servicer)
made by nationally recognized dealers, (y) 30 days' interest thereon at a rate
equal to the weighted average Mortgage Loan Rate for each Class of Class [A]
Certificates within each Pool (or, with respect to the Pool II Mortgage Loans
and the Pool IV Mortgage Loans, interest for the actual number of days since the
last Distribution Date to but not including the upcoming Distribution Date), and
(z) the aggregate amount of (i) all unreimbursed Delinquency Advances, (ii) all
unreimbursed Servicing Advances relating, in the case of unreimbursed Servicing
Advances, only to the Mortgage Loans and REO Properties then held as part of the
Trust Estate, (iii) any accrued and unpaid Servicing Fees and (iv) the
Reimbursement Amount (the "Termination Price").
(c) In connection with any such purchase pursuant to paragraph (b)
above, the Servicer shall deposit in the applicable Certificate Account all
amounts then on deposit in the Collection Account (less amounts permitted to be
withdrawn by the Servicer pursuant to Section 3.11), which deposit shall be
deemed to have occurred immediately preceding such purchase.
Any such purchase shall be accomplished by the deposit of the
Termination Price into the related Certificate Account on the applicable Deposit
Date, which amount shall be applied to the distributions to be made on the
Distribution Date immediately following such Deposit Date. Upon such deposit of
the Termination Price, the Trustee shall pay the Servicer the amount described
in clause (z) of the definition of "Termination Price" from the amounts on
deposit in the Certificate Amount.
(d) [IN CONNECTION WITH ANY SUCH PURCHASE BY THE CLASS R
CERTIFICATEHOLDERS PURSUANT TO PARAGRAPH (b) ABOVE, THE CERTIFICATE INSURER
SHALL PROVIDE TO THE TRUSTEE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE TRUSTEE TO THE EFFECT THAT SUCH PURCHASE CONSTITUTES A
"QUALIFIED LIQUIDATION," AS SUCH TERM IS DEFINED IN THE REMIC PROVISIONS.]
(e) Notice of any termination, specifying the Distribution Date upon
which the Trust will terminate shall, after the Trustee's receipt of any such
notice, be given promptly by
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the Trustee by letter to the Certificateholders by first class mail or overnight
delivery during the month of such final distribution two Business Days after the
Determination Date in such month, specifying (i) the Distribution Date upon
which final payment of the Certificates will be made, (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 such Certificates at the office of the Trustee therein
specified. The Servicer shall give such notice to the Trustee at the time such
notice is given to the Certificateholders.
(f) In the event that not all of the Class R Certificateholders pay the
Termination Price, the non-purchasing Class R Certificateholder shall not be
entitled to, and the Trustee shall not distribute to such non-purchasing Class R
Certificateholder, any of the remaining Mortgage Loans, REO Properties or
Mortgage files, or any amount in excess of the amount such Class R
Certificateholder would have been entitled to receive on such Distribution Date
had such termination not occurred.
(g) Each Holder is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has provided notice of
the final distribution thereon. In any event, any such Certificate as to which
the Trustee has made the final distribution thereon shall be deemed canceled and
shall no longer be outstanding for any purpose of this Agreement, whether or not
such Certificate is ever returned to the Trustee.
(h) In the event that any amount due to any Class [A] Certificateholder
remains unclaimed, the Trustee shall, at its expense, use its best efforts to
contact each such Class [A] Certificateholder by mail or telephone and if such
efforts fail shall cause to be published once, in the eastern edition of The
Wall Street Journal, notice that such money remains unclaimed. Such funds may be
invested in Permitted Investments, with the Servicer entitled to the proceeds
thereof. If, within six months after such publication, such amount remains
unclaimed, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets which remain subject hereto and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds, and the
Certificateholders shall look to the Class R Certificateholders for payment.
(i) Following any purchase by the Class R Certificateholders as
described above, the Trustee shall promptly release to the Class R
Certificateholders the Mortgage Files for the remaining Mortgage Loans, and the
Trustee shall execute all assignments, endorsements and other instruments
necessary to effectuate such transfer as are furnished by the Class R
Certificateholders.
(j) The Trustee shall return the [CERTIFICATE INSURANCE POLICY] to [THE
CERTIFICATE INSURER] no later than five Business Days following the termination
of this Agreement.
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Section 10.02. Additional Termination Requirements.
(a) In the event the Class R Certificateholders purchase the Mortgage
Loans as provided in Section 10.01(b), the Trust shall be terminated in
accordance with the following additional requirements, unless an Opinion of
Counsel is furnished, addressed to the Trustee and to the effect that the
failure of the REMIC Trust to comply with the requirements of this Section 10.02
will not (x) result in the imposition of taxes on "prohibited transactions" of
the REMIC Trust as defined in Section 860F of the Code or (y) cause the REMIC
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(i) Within 90 days prior to the time of the making of the
final payment on the Certificates, the Trustee, on behalf the REMIC
Trust shall adopt a plan of complete liquidation of the REMIC Trust,
meeting the requirements of a qualified liquidation under Section 860F
of the Code and any regulations thereunder and shall specify the first
day of such period in a statement attached to the REMIC Trust's final
Tax Returns pursuant to Treasury Regulations Section 1.860F-1;
(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the time of making of the final
payment on the Certificates, the Servicer, with the cooperation of the
Trustee, shall conduct a sale of the assets of the Trust Estate (other
than the [CERTIFICATE INSURANCE POLICY]) to the Class R
Certificateholders for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Holders of the Class R Certificates all
cash on hand in any Account not required to be paid to the Servicer,
the Class [A] Certificateholders, or any other Person, and the Trust
shall terminate at that time.
(b) By their acceptance of Class R Certificates, the Holders thereof
hereby agree to authorize the Trustee on behalf the REMIC Trust to adopt a plan
of complete liquidation of the REMIC Trust, which authorization shall be binding
upon all successor Class R Certificateholders.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Servicer, the Seller and the Trustee, without the consent of any of
the Certificateholders [BUT WITH THE PRIOR WRITTEN CONSENT OF THE CERTIFICATE
INSURER (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD),] (a) to cure any
error or any ambiguity or to correct or supplement any provisions
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herein which may be inconsistent with any other provisions herein; (b) to add to
the duties or obligations of the Servicer hereunder; (c) to maintain or improve
the rating of the Class [A] Certificates then given by a Rating Agency; (d) to
add any other provisions with respect to matters or questions arising under this
Agreement [OR THE CERTIFICATE INSURANCE POLICY], as the case may be (including
specifically amendments or supplements pursuant to the second paragraph of
Section 5.02(b)); (e) to modify, eliminate or add to any of its provisions to
such extent as shall be necessary to maintain the qualification of the REMIC
Trust as a REMIC at all times that any Certificates are outstanding or to avoid
or minimize the risk of the imposition of any tax on the REMIC Trust pursuant to
the Code that would be a claim against the REMIC Trust; provided that in the
case of this clause (e) the Trustee has received an Opinion of Counsel to the
effect that such action is necessary or desirable to maintain such qualification
or to avoid or minimize the risk of the imposition of any such tax; or (f) to
modify, eliminate or add to the provisions of Section 5.02(c) or any other
provisions hereof restricting transfer of the Class R Certificates; provided
that in all such cases such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder [OR THE CERTIFICATE INSURER].
This Agreement may also be amended from time to time by the Servicer,
the Seller and the Trustee, [WITH THE CONSENT OF THE CERTIFICATE INSURER (WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD) AND] the Holders of Certificates
evidencing Voting Interests of each Class affected thereby aggregating not less
than 51%, 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 (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or distributions
which are required to be made on any Certificate without the consent of the
Holder of such Certificate or (b) reduce the aforesaid percentage of each Class
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the next preceding paragraph, 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 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
[AND THE CERTIFICATE Insurer] shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The
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Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustee's own rights, duties or immunities under this Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer, at its
expense, but only upon the determination of the Servicer accompanied by an
Opinion of Counsel to the effect that such recordation is legally required to
protect the Trustee's interest in the Mortgage Loans.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, 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 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement, the Trust or the REMIC established pursuant to Section 3.01, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust or the REMIC established pursuant to
Section 3.01, nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them.
Except as otherwise expressly provided herein, no Certificateholder,
solely by virtue of its status as a Certificateholder, shall have any right to
vote or in any manner otherwise control the operation and management of the
Trust or the REMIC established pursuant to Section 3.01, 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 unless also the Holders of
Certificates entitled to at least 25% of the Voting Interest shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity (provided that an unsecured letter of indemnity in a form
reasonably satisfactory to the Trustee from a Holder which is an insurance
company having long-term unsecured debt which is rated at
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least investment grade (or having a comparable claim-paying ability rating) and
having a minimum net worth of $100,000,000 shall satisfy such requirement) as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee for 15 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 is understood and intended, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
which priority or preference is not otherwise provided for herein, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 11.04. Governing Law; Jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of New York (without regard
to conflict of laws principles and the application of the laws of any other
jurisdiction), and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws. With respect to any claim
arising out of this Agreement each party irrevocably submits to the exclusive
jurisdiction of the courts of the state of New York and the United States
District Court located in the borough of Manhattan, city of New York, and each
party irrevocable waives any objection which it may have at any time to the
laying of venue of any suit, action or proceeding arising out of or relating
hereto brought in any such courts, irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum and further irrevocably waives the right to object, with
respect to such claim, suit, action or proceeding brought in any such court,
that such court does not have jurisdiction over such party; provided that
service of process has been made by any lawful means.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (a) in the case of the Seller, the Servicer and the Claims
Administrator, at 565 Taxter Road, Elmsford, New York 10523-5200, Attention:
___________________ (telecopy number: 914-592-7101); (b) in the case of the
Trustee, at the Corporate Trust Office at _____________________________; [(c) IN
THE CASE OF THE CERTIFICATE INSURER, ______________________________________;]
(d) in the case of S&P, to Standard & Poor's Ratings Group, 26 Broadway, 15th
Floor, New York, New York 10004, Attention: Mortgage Surveillance Group; and (e)
in the case of Moody's, to Moody's Investors Service Inc., 99 Church Street, New
York, New York 10007, Attention: Residential Mortgage Pass-Through Monitoring,
or, as to each party, at such other address as shall be designated by such
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party in a written notice to each other party. Any notice required or permitted
to be mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at its address shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
Notice of any Event of Default shall be given by telecopy and by certified mail.
Any notice or other document required to be delivered or mailed by the Trustee
to any Rating Agency shall be given on a best efforts basis and only as a matter
of courtesy and accommodation and the Trustee shall have no liability for
failure to deliver such notice or document to any such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Certificates or
the rights of the Holders thereof.
Section 11.07. Article and Section References. All article and section
references used in this Agreement, unless otherwise provided, are to articles
and sections in this Agreement.
Section 11.08. Notice to S&P and Moody's.
(a) The Trustee and the Servicer shall each be obligated to use their
best reasonable efforts promptly to provide notice to S&P and Moody's with
respect to each of the following of which a Responsible Officer of the Trustee
or Servicer, as the case may be, has actual knowledge:
(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Event of Default that has not been
cured or waived;
(iii) The resignation or termination of the Servicer or the
Trustee;
(iv) The final payment to Holders of the Certificates of any
Class;
(v) Any change in the location of any Account; and
(vi) Any event that would result in the inability of the
Trustee to make advances regarding delinquent Mortgage Loans.
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(b) In addition, (i) the Trustee shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual report to Certificateholders described in
Section 4.05; and
(B) Each Statement to Certificateholders described in Section
4.05; and
(ii) the Servicer shall promptly furnish to each Rating Agency copies of the
following:
(A) Each annual statement as to compliance described in
Section 3.19;
(B) Each annual independent public accountants' servicing
report described in Section 3.20;
(C) Each Collection Account Statement described in Section
3.18;
(D) Each notice delivered pursuant to Section 7.01(a) which
relates to the fact that the Servicer has not made a Delinquency
Advance; and
(E) On a quarterly basis, a report listing each Mortgage Loan
that is 30 days or more Delinquent that is secured by a Small Mixed-Use
Property identifying such Mortgage Loan by loan number and principal
balance and specifying the number of days delinquent.
Section 11.09. Further Assurances. Notwithstanding any other provision
of this Agreement, [NEITHER THE CERTIFICATE INSURER NOR] the Class [A]
Certificateholders nor the Trustee shall have any obligation to consent to any
amendment or modification of this Agreement unless it has been provided
reasonable security or indemnity against its out-of-pocket expenses (including
reasonable attorneys' fees) to be incurred in connection therewith. [TO THE
EXTENT PERMITTED BY LAW, EACH OF THE SELLER, THE TRUSTEE, AND THE SERVICER
AGREES THAT IT WILL, FROM TIME TO TIME, EXECUTE, ACKNOWLEDGE AND DELIVER, OR
CAUSE TO BE EXECUTED, ACKNOWLEDGED AND DELIVERED, SUCH FURTHER INSTRUMENTS AS
THE CERTIFICATE INSURER MAY REASONABLY REQUEST TO EFFECTUATE THE INTENTION OF OR
FACILITATE THE PERFORMANCE OF THIS AGREEMENT.]
Section 11.10. Benefits of Agreement. Nothing in this Agreement or in
the Certificates, expressed or implied, shall give to any Person, other than the
Certificateholders[, THE CERTIFICATE INSURER] and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
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Section 11.11. Acts of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and such action shall become effective when
such instrument or instruments are delivered to the Trustee, the Seller, [THE
CERTIFICATE INSURER] and the Servicer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "act" of the Certificateholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee and the Trust, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by a signer acting in a capacity other than his or her
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Certificateholder shall bind every future Holder
of such Certificate and the holder of every Certificate issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done, omitted or suffered to be done by the Trustee or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Certificates.
Section 11.12. Appointment of Tax Matters Person. The Holders of the
Class R Certificates hereby appoint the Trustee to act, as their agent, as the
Tax Matters Person for the REMIC Trust for all purposes of the Code. The Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the Code. The Holders of the Class R Certificates may
hereafter appoint a different entity as their agent, or may appoint a Class R
Certificateholder to be the Tax Matters Person for the REMIC Trust.
Section 11.13. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for the
obligations of the Trust, that the beneficial ownership interests represented by
the Certificates shall be nonassessable for any losses or expenses of the Trust
or for any reason whatsoever, and that Certificates upon
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execution, authentication and delivery thereof by the Trustee pursuant to
Section 2.06 are and shall be deemed fully paid.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
CITYSCAPE CORP., as Seller, Servicer and
Claims Administrator
By:____________________________________
Name:
Title:
[TRUSTEE], as Trustee and not in its
individual capacity
By:____________________________________
Name:
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF __________ )
On __________ __, 199_ before me, ________________, Notary Public,
personally appeared ________________, proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that [HE/SHE] executed the same in [HIS/HER] authorized
capacity, and that by [HIS/HER] signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
<PAGE> 163
STATE OF NEW YORK )
) ss.:
COUNTY OF __________ )
On __________ __, 199_ before me, ________________, Notary Public,
personally appeared ________________, proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that [HE/SHE] executed the same in [HIS/HER] authorized
capacity, and that by [HIS/HER] signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
<PAGE> 164
Schedule I
List of Sub-Servicers
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Schedule II
Representations and Warranties of Seller
Regarding Subsequent Mortgage Loans
A. The Seller represents and warrants to the Trustee[, THE CERTIFICATE
INSURER] and the Certificateholders as of any Subsequent Transfer Date
(except as otherwise expressly stated) that as to each Subsequent
Mortgage Loan conveyed to the Trust by it:
(i) no Subsequent Mortgage Loan provides for negative
amortization;
(ii) each Subsequent Mortgage Loan which is an Adjustable Rate
Mortgage Loan has a Mortgage Loan Rate based on a ___-month Index and
provides for _____% rate cap every 6 months;
(iii) no Subsequent Mortgage Loan which is an Adjustable Rate
Mortgage Loan has a Gross Margin less than _____%;
(iv) each Subsequent Mortgage Loan will have been serviced
since origination or purchase by the Servicer;
(v) no Subsequent Mortgage Loan has been originated for the
purpose of facilitating the purchase of real estate owned by the
originator;
(vi) no Subsequent Mortgage Loan will have a Cut-off Date of
later than __________ __, 199_; and
(vii) each Subsequent Mortgage Loan which is an FHA Loan is
authorized and approved by the FHA for participation in the FHA Title I
loan program and the Seller holds a valid Contract of Insurance from
the FHA for such purposes.
B. The Seller represents and warrants to the Trustee[, THE CERTIFICATE
INSURER] and the Certificateholders that following the purchase of all
Subsequent Mortgage Loans by the Trust, as of the end of the Funding
Period:
(i) the Pool I and Pool III Mortgage Loans (including the
Subsequent Mortgage Loans with respect to each Pool):
(a) will have a weighted average Mortgage Loan Rate
of at least _____% and _____%, respectively;
(b) will have a weighted average original term to
stated maturity of not more than _____ months and _____
months, respectively;
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(c) will have a weighted average Combined
Loan-to-Value Ratio of not more than _____% and _____%,
respectively, and a weighted average second loan-to-value
ratio of not less than _____% and _____%, respectively;
(d) will have no Mortgage Loan with a Loan Balance
less than $__________ and $__________, respectively, or
greater than $__________ and $__________, respectively;
(e) will not have in excess of _____% and _____%,
respectively, by aggregate Loan Balance Mortgage Loans secured
by non-owner occupied Mortgaged Properties;
(f) will not have a concentration in a single zip
code in excess of _____% and _____%, respectively, by
aggregate Loan Balance;
(g) will not have an aggregate concentration in
excess of ___% in zip codes beginning with the following 3
digits: _________________________;
(h) will not have a concentration in a single State,
other than New York, in excess of _____% and _____%,
respectively, by aggregate Loan Balance;
(i) will not have a concentration in New York in
excess of _____% and _____%, respectively;
(j) with respect to Pool I Mortgage Loans, no more
than _____%, _____% and _____% of the aggregate Loan Balance
of Pool I Mortgage Loans will be secured by Mortgaged
Properties that are two-family properties or condominiums
(less than four stories), three- and four-family properties or
condominiums (greater than four stories), and mobile homes or
manufactured housing treated as real estate under applicable
state law, respectively;
(k) with respect to Pool I Mortgage Loans, at least
_____% by Aggregate Principal Balance Mortgage Loans secured
by fee simple interests in detached single family dwelling
units (including units in de minimis planned unit
developments);
(l) with respect to Pool I Mortgage Loans, will have
no more than _____%, _____% and _____% by Aggregate Principal
Balance Mortgage Loans graded by the originator as Class C,
Class C- and Class D, respectively (_____%, _____% and _____%,
respectively, with respect to Pool III Mortgage Loans), and no
less than _____% and _____% by Aggregate Principal Balance
Mortgage Loans graded by the originator as Class A (including
in Class A any loan graded Class A-) and Class B (including in
Class B any loan graded Class B-),
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<PAGE> 167
respectively (_____% and _____%, respectively, with respect to
Pool III Mortgage Loans);
(m) with respect to Pool I Mortgage Loans, will have
no more than _____% and _____% by Aggregate Principal Balance
Mortgage Loans to self-employed borrowers and non-income
verified Mortgage Loans, respectively (_____% and _____%,
respectively, with respect to Pool III Mortgage Loans);
(n) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360-month amortization schedule and has a
balloon payment prior to month 60;
(o) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360 month amortization schedule and have a
balloon payment between months 61-120;
(p) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360 month amortization schedule and have a
balloon payment between months 121-150;
(q) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360 month amortization schedule and have a
balloon payment between months 151-180;
(r) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360-month amortization schedule and have a
balloon payment between months 181-240;
(s) will have no less than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that provide for the payment of principal and interest on a
level basis to fully amortize such Mortgage Loan over its
stated maturity; and
(t) will have a weighted average term since
origination not in excess of _____ months and _____ months,
respectively.
(ii) the Pool II and Pool IV Mortgage Loans (including the
Subsequent Mortgage Loans with respect to each Pool):
(a) will have a weighted average Mortgage Loan Rate
of at least _____% and _____%, respectively;
(b) will have a weighted average original term to
stated maturity of not more than 360 months;
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<PAGE> 168
(c) will have a weighted average Combined
Loan-to-Value Ratio of not more than _____% and _____%,
respectively, and a weighted average second loan-to-value
ratio of not less than _____% and _____%, respectively;
(d) will have no Mortgage Loan with a Principal
Balance less than $__________ and $__________, respectively,
or more than $__________ and $__________, respectively;
(e) will have not in excess of _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
secured by non-owner occupied Mortgage Properties;
(f) will not have a concentration in a single ZIP
code in excess of _____% and _____%, respectively, by
Aggregate Principal Balance;
(g) will not have an aggregate concentration in
excess of ___% in ZIP codes beginning with the following 3
digits: ________________________;
(h) will not have a concentration in a single State,
other than New York, in excess of _____% and _____%,
respectively, by Aggregate Principal Balance;
(i) will not have a concentration in New York in
excess of _____% and _____%, respectively;
(j) with respect to Pool II Mortgage Loans, will not
have in excess of _____%, _____% and _____% by Aggregate
Principal Balance Mortgage Loans secured by Mortgaged
Properties that are two-family properties or condominiums
(less than four stories), three- and four-family properties or
condominiums (greater than four stories) and mobile homes or
manufactured housing treated as real estate under applicable
state law, respectively (_____%, _____% and _____%,
respectively, with respect to Pool IV Mortgage Loans);
(k) will have at least _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
secured by fee simple interests in detached single-family
dwelling units (including units in de minimis planned unit
development);
(l) will have a weighted average Gross Margin of at
least _____%;
(m) with respect to Pool II Mortgage Loans, will have
no more than _____%, _____% and _____% by Aggregate Principal
Balance Mortgage Loans graded by the originator as Class C,
Class C- and Class D, respectively (_____%, _____% and _____%,
respectively, with respect to Pool IV Mortgage Loans), and
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<PAGE> 169
no less than _____% and _____% by Aggregate Principal Balance
Mortgage Loans graded by the originator as Class A (including
in Class A any loan graded Class A-) and Class B (including in
Class B any loan graded Class B-), respectively (_____%,
_____% and _____%, respectively, with respect to Pool IV
Mortgage Loans);
(n) with respect to Pool II Mortgage Loans, will have
no more than _____% and _____% by Aggregate Principal Balance
Mortgage Loans to self-employed borrowers and non-income
verified Mortgage Loans, respectively (_____% and _____%,
respectively, with respect to Pool IV Mortgage Loans);
(o) will have no more than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that are based on a 360-month amortization schedule and have a
180-month balloon payment;
(p) will have no less than _____% and _____%,
respectively, by Aggregate Principal Balance Mortgage Loans
that have no balloon payment; and
(q) will have a weighted average term since
origination not in excess of _____ months and _____ months,
respectively.
For purposes of this Schedule II, "Aggregate Principal Balance" means
the aggregate of the Loan Balances of each of the Pool I Mortgage Loans, Pool II
Mortgage Loans, Pool III Mortgage Loans and Pool IV Mortgage Loans (determined
as of the Cut-off Date for the Initial Pool I Mortgage Loans, Initial Pool II
Mortgage Loans, Initial Pool III Mortgage Loans and Initial Pool IV Mortgage
Loans, and as of the Subsequent Cut-off Date for the Subsequent Pool I Mortgage
Loans, Subsequent Pool II Mortgage Loans, Subsequent Pool III Mortgage Loans and
Subsequent Pool IV Mortgage Loans), respectively.
II-5
<PAGE> 1
Exhibit 4.2
INDENTURE
between
CITYSCAPE LOAN TRUST 199_-_,
as Issuer
and
______________________________,
as Indenture Trustee
Dated as of _______________ __, 199_
CITYSCAPE LOAN TRUST 199_-_
Mortgage Loan Asset Backed Notes, Series 199_-_
<PAGE> 2
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Definitions................................................. 2
Section 1.02. Incorporation by Reference of Trust Indenture Act........... 9
Section 1.03. Rules of Construction....................................... 10
ARTICLE II
THE NOTES
Section 2.01. Form........................................................ 11
Section 2.02. Execution, Authentication, Delivery and Dating.............. 11
Section 2.03. Registration; Registration of Transfer and Exchange......... 12
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes.................. 13
Section 2.05. Persons Deemed Owner........................................ 14
Section 2.06. Payment of Principal and Interest; Defaulted Interest....... 14
Section 2.07. Cancellation................................................ 15
Section 2.08. Conditions Precedent to the Authentication.................. 15
Section 2.09. Release of Collateral....................................... 17
Section 2.10. Registration of Notes....................................... 18
Section 2.11. Notices to Clearing Agency.................................. 19
Section 2.12. Definitive Notes............................................ 19
Section 2.13. Tax Treatment............................................... 20
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest........................... 21
Section 3.02. Maintenance of Office or Agency............................. 21
Section 3.03. Money for Payments to Be Held in Trust...................... 21
Section 3.04. Existence................................................... 23
Section 3.05. Protection of Collateral.................................... 23
Section 3.06. Annual Opinions as to Collateral............................ 24
Section 3.07. Performance of Obligations; Servicing of Mortgage Loans..... 24
Section 3.08. Negative Covenants.......................................... 26
Section 3.09. Annual Statement as to Compliance........................... 27
Section 3.10. Covenants of the Issuer..................................... 28
Section 3.11. Servicer's Obligations...................................... 28
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Page
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Section 3.12. Restricted Payments......................................... 28
Section 3.13. Treatment of Notes as Debt for Tax Purposes................. 28
Section 3.14. Notice of Events of Default................................. 28
Section 3.15. Further Instruments and Acts................................ 29
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture..................... 30
Section 4.02. Application of Trust Money.................................. 31
Section 4.03. Repayment of Moneys Held by Paying Agent.................... 31
ARTICLE V
REMEDIES
Section 5.01. Events of Default........................................... 32
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......... 33
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee......................................... 33
Section 5.04. Remedies; Priorities........................................ 36
Section 5.05. Optional Preservation of the Collateral..................... 37
Section 5.06. Limitation of Suits......................................... 37
Section 5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest.................................................. 38
Section 5.08. Restoration of Rights and Remedies.......................... 38
Section 5.09. Rights and Remedies Cumulative.............................. 38
Section 5.10. Delay or Omission Not a Waiver.............................. 39
Section 5.11. Control by Noteholders...................................... 39
Section 5.12. Waiver of Past Defaults..................................... 39
Section 5.13. Undertaking for Costs....................................... 40
Section 5.14. Waiver of Stay or Extension Laws............................ 40
Section 5.15. Action on Notes............................................. 40
Section 5.16. Performance and Enforcement of Certain Obligations.......... 40
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee................................. 42
Section 6.02. Rights of Indenture Trustee................................. 43
Section 6.03. Individual Rights of Indenture Trustee...................... 43
Section 6.04. Indenture Trustee's Disclaimer.............................. 44
Section 6.05. Notice of Defaults.......................................... 44
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<PAGE> 4
Page
----
Section 6.06. Reports by Indenture Trustee to Holders..................... 44
Section 6.07. Compensation and Indemnity.................................. 44
Section 6.08. Replacement of Indenture Trustee............................ 45
Section 6.09. Successor Indenture Trustee by Merger....................... 46
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee................................................... 46
Section 6.11. Eligibility; Disqualification............................... 48
Section 6.12. Preferential Collection of Claims Against Issuer............ 48
Section 6.13. No Conflict with Administrator.............................. 48
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders............................................... 49
Section 7.02. Preservation of Information; Communications to Noteholders.. 49
Section 7.03. Reports by Issuer........................................... 49
Section 7.04. Reports by Indenture Trustee................................ 50
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money......................................... 51
Section 8.02. Trust Accounts; Distributions............................... 51
Section 8.03. General Provisions Regarding Accounts....................... 52
Section 8.04. Servicer's Monthly Remittance Report........................ 53
Section 8.05. Release of Collateral....................................... 53
Section 8.06. Opinion of Counsel.......................................... 53
ARTICLE IX
INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders...... 54
Section 9.02. Supplemental Indentures with Consent of Noteholders......... 55
Section 9.03. Execution of Supplemental Indentures........................ 56
Section 9.04. Effect of Supplemental Indentures........................... 56
Section 9.05. Conformity with Trust Indenture Act......................... 57
Section 9.06. Reference in Notes to Supplemental Indentures............... 57
Section 9.07. Amendments to Trust Agreement............................... 57
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Page
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ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.................................................. 58
Section 10.02. Form of Redemption Notice................................... 58
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee......................................... 59
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc................... 60
Section 11.02. Form of Documents Delivered to Indenture Trustee............ 61
Section 11.03. Acts of Noteholders......................................... 62
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies.................................................. 62
Section 11.05. Notices to Noteholders; Waiver.............................. 63
Section 11.06. Conflict with Trust Indenture Act........................... 64
Section 11.07. Effect of Headings and Table of Contents.................... 64
Section 11.08. Successors and Assigns...................................... 64
Section 11.09. Separability................................................ 64
Section 11.10. Benefits of Indenture....................................... 64
Section 11.11. Legal Holidays.............................................. 64
Section 11.12. GOVERNING LAW............................................... 64
Section 11.13. Counterparts................................................ 65
Section 11.14. Recording of Indenture...................................... 65
Section 11.15. Trust Obligation............................................ 65
Section 11.16. No Petition................................................. 65
Section 11.17. Inspection.................................................. 65
EXHIBITS
SCHEDULE A - Schedule of Mortgage Loans
EXHIBIT A - Form of Notes
iv
<PAGE> 6
THIS INDENTURE (this "Indenture"), dated as of _______________ __,
199_, between CITYSCAPE LOAN OWNER TRUST 199_-_, a Delaware business trust, as
Issuer (the "Issuer"), and ______________________________, as Indenture Trustee
(the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the holders of the Issuer's Class A-_
Variable Rate Mortgage Loan Asset Backed Notes (the "Class A-[ ] Notes") [Add
any additional Classes of Notes applicable] and Class _ _____% Mortgage Loan
Asset Backed Notes (the "Class [ ] Notes" and, together with the Class A-[ ]
Notes [Add any additional Classes of Notes applicable], the "Notes"):
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants to the
Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of
the holders of the Notes, all of the Issuer's right, title and interest in and
to: (i) the Trust Estate (as defined in the Sale and Servicing Agreement); (ii)
all right, title and interest of the Issuer in the Sale and Servicing Agreement
(including the Issuer's right to cause the Transferor or Cityscape to repurchase
Mortgage Loans from the Issuer under certain circumstances described therein);
(iii) all present and future claims, demands, causes of action and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing; (iv) all funds on deposit from time to time in
the Trust Accounts (including the Certificate Distribution Account); and (v) all
other property of the Trust from time to time (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the holders of
the Notes, acknowledges such Grant, accepts the trusts hereunder and agrees to
perform its duties required in this Indenture to the best of its ability to the
end that the interests of the holders of the Notes may be adequately and
effectively protected. The Indenture Trustee agrees and acknowledges that the
Trustee Mortgage Loan Files will be held by the Custodian for the benefit of the
Indenture Trustee in _______________, _______________. The Indenture Trustee
further agrees and acknowledges that each other item of Collateral that is
physically delivered to the Indenture Trustee will be held by the Indenture
Trustee in _______________, _______________.
<PAGE> 7
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this Indenture,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Sale and Servicing Agreement. All other
capitalized terms used herein shall have the meanings specified herein.
"Act" has the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement dated as
of _______________ __, 199_, among the Administrator, the Issuer and Cityscape
Corp.
"Administrator" means _____________________________________________, a
______________________________, or any successor Administrator under the
Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President, any
Assistant Vice President or more senior officer of the Administrator who is
authorized to act for the Administrator in matters relating to the Issuer and to
be acted upon by the Administrator pursuant to the Administration Agreement and
who is identified on the list of Authorized Officers delivered by the
Administrator to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
"Available Collection Amount" shall have the meaning set forth in the
Sale and Servicing Agreement.
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
this Indenture, the Sale and Servicing Agreement, the Administration Agreement,
the Custodial Agreement, the Note Depository Agreement and other documents and
certificates delivered in connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-[ ] Notes
[Add names of any other Classes of Notes applicable] or Class [ ] Notes,
ownership and transfers of
2
<PAGE> 8
which, after delivery of the final Prospectus Supplement, shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions are authorized or obligated by law or
executive order to be closed in New York City or the city in which the Corporate
Trust Office of the Indenture Trustee is located.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Cityscape" means Cityscape Corp.
"Class A-[ ] Notes" [Add any other Classes of Notes applicable] and
"Class [ ] Notes" shall each have the meaning assigned thereto in the
"WITNESSETH THAT" clause of this Indenture.
"Class" shall mean, with respect to the Notes, all Notes bearing the
same Class designation.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means _______________ __, 199_.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Company" means Cityscape Corp., a New York corporation, or any
successor in interest thereto.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
__________________________________________, or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders
and the Issuer, or the principal corporate trust office of any successor
Indenture Trustee at the address designated by such successor Indenture Trustee
by notice to the Noteholders and the Issuer.
"DCR" means, Duff & Phelps Credit Rating Co., or any successor thereto
[Add or substitute definitions for other rating agencies where appropriate].
3
<PAGE> 9
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Depositor" shall mean _____________________________________________, a
______________________________, in its capacity as depositor under the Sale and
Servicing Agreement, or any successor in interest.
"Depository Institution" means any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations that are rated A-1 by Standard & Poor's and DCR [Add or substitute
other rating agencies where appropriate] (or comparable ratings if Standard &
Poor's and DCR [Add or substitute other rating agencies where appropriate] are
not the Rating Agencies).
"Distribution Date" means the 25th day of any month, or if such 25th
day is not a Business Day, the first Business Day immediately following such
day, commencing in _______________ 199_.
"Servicer's Monthly Remittance Report" means that certain Distribution
Statement specified in the Sale and Servicing Agreement.
"Due Period" means, with respect to any Distribution Date and any Class
of Notes (other than the first such date), the calendar month immediately
preceding the month of such Distribution Date. With respect to the first
Distribution Date, the period from _______________ through _______________
[Insert period from the Closing Date through the end of the month in which the
Closing is held].
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other
4
<PAGE> 10
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the granting party or otherwise,
and generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indemnified Party" has the meaning specified in Section 6.07.
"Indemnifying Party" has the meaning specified in Section 6.07.
"Indenture Trustee" means ___________________________________________,
a ______________________________, as Indenture Trustee under this Indenture, or
any successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor on
the Notes, the Transferor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01, made by
an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Issuer" means Cityscape Loan Trust 199_-_ until a successor replaces
it and, thereafter, means the successor and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" mean a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Loan Purchase Agreement" means The Loan Purchase Agreement between the
Transferor, as seller, the Servicer and the Depositor, as purchaser, dated as of
_______ ___, 199__.
"Maturity Date" means, with respect to any Class of Notes, the
Distribution Date in _______________ _____.
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<PAGE> 11
"Note" has the meaning assigned thereto in the "WITNESSETH THAT" clause
of this Indenture.
"Note Depository Agreement" means the agreement among the Issuer, the
Administrator, the Indenture Trustee and The Depository Trust Company, as the
initial Clearing Agency, relating to the Book Entry Notes.
"Note Distribution Account" shall have the meaning set forth in the
Sale and Servicing Agreement.
"Note Interest Rate" means, with respect to any Class of Notes, the
applicable per annum rate specified below (computed on the basis of a 360-day
year assumed to consist of twelve 30-day months):
Class A-[ ] Notes: [Specify interest rate or formula used to
calculate the interest rate]
Class [ ] Notes: [Specify interest rate or formula used to
calculate the interest rate]
[Add any other Classes of Notes and their corresponding interest rates
as applicable]
"Note Owner" means, with respect to a Book-Entry Note, the Person who
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.03.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01,
and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer or the Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
and which opinion or opinions shall be addressed to the Indenture Trustee, as
Indenture Trustee, and shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
6
<PAGE> 12
"Outstanding" means, with respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) any Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) any Notes, or portions thereof, the payment for which money
in the necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the Holders of such
Notes (provided, however, that if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made satisfactory to the Indenture
Trustee);
(iii) any Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser; provided that in determining
whether the Holders of the requisite Outstanding Amount of the Notes
have given any request, demand, authorization, direction, notice,
consent, or waiver hereunder or under any Basic Document, Notes owned
by the Issuer, any other obligor upon the Notes, the Transferor or any
Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, or waiver, only
Notes that the Indenture Trustee knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction
of the Indenture Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor
upon the Notes, the Transferor or any Affiliate of any of the foregoing
Persons; and
(iv) any Notes for which the related Maturity Date has occurred.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or any Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means ______________________________, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, or
any successor Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Note Distribution Account, including payment of principal of or interest on
the Notes on behalf of the Issuer.
"Payment Date" means any Distribution Date.
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"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, limited liability company, limited
liability partnership, or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.04 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency" means any or all of (i) Standard & Poor's or (ii) DCR
[Add or substitute other rating agencies as appropriate]. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
rating the Notes.
"Rating Agency Condition" means, with respect to any applicable action,
that each Rating Agency shall have been given 10 days (or such shorter period as
is acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Depositor, the Servicer and the Issuer
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Notes.
"Record Date" means, as to each Distribution Date, the last Business
Day of the month immediately preceding the month in which such Distribution Date
occurs.
"Redemption Date" means in the case of a redemption of the Notes
pursuant to Section 10.01 or a payment to Noteholders pursuant to Section 10.03,
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.01 or 10.03, as applicable.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Regular Distribution Amount" shall have the meaning set forth in the
Sale and Servicing Agreement.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture Trustee 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 to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
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"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of _______________ __, 199_, among the Issuer, Depositor, Transferor,
Servicer, Indenture Trustee and Co-Owner Trustee.
"Schedule of Mortgage Loans" means the listing of the Mortgage Loans
set forth in Schedule A, as supplemented as of any date on which a Defective
Mortgage Loan has been repurchased from the Trust or substituted with a
Qualified Mortgage Loan pursuant to Section 3.05 of the Sale and Servicing
Agreement or after any Subsequent Transfer Date pursuant to Section 2.07.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" means Cityscape Corp. in its capacity as servicer under the
Sale and Servicing Agreement, and any Successor Servicer thereunder.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies, Inc, or any successor thereto [Add or substitute
definitions for other credit rating agencies where appropriate].
"State" means any one of the states of the United States of America or
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"Termination Price" has the same meaning ascribed thereto in the Sale
and Servicing Agreement.
"Transferor" means Cityscape Corp. and any successor thereto under the
Sale and Servicing Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein have
the respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
Section 1.02. Incorporation by Reference of Trust Indenture Act. (a)
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
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"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are defined in the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented (as provided in such agreements)
and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and
assigns.
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ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the "Cityscape
Loan Trust 199_-_ Mortgage Loan Asset Backed Notes, Series 199_-_". Each Class
of Notes shall be in substantially the form set forth in Exhibit A hereto, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution thereof. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined by
the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes are set forth in Exhibit A. The terms of each Class of Notes are part
of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or the Co-Owner Trustee. The signature of any such Authorized Officer on
the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Owner Trustee or the Co-Owner Trustee
shall bind the Issuer, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section
2.08, the Indenture Trustee shall upon Issuer Order authenticate and deliver for
original issue each of the following Classes of Notes in the following principal
amounts: Class A-[ ] Notes, $_______________; and Class [ ] Notes,
$_______________ [Add any additional Classes of Notes and their respective
principal amounts as appropriate]. The aggregate principal amounts of such
Classes of Notes outstanding at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture Trustee
to or upon the order of the Issuer on the Closing Date shall be dated
_______________ __, 199_. All other Notes that are authenticated after the
Closing Date for any other purpose under the Indenture shall be dated the date
of their authentication. The Notes shall be issuable as registered Notes in the
minimum denomination of $100,000 and integral multiples of $1,000 in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual
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signature of one (1) of its authorized signatories, and such certificate upon
any Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
Section 2.03. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee initially shall be the "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon the
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Owner
Trustee or the Co-Owner Trustee on behalf of the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, in the name of the designated transferee or transferees, one
or more new Notes of the same Class in any authorized denominations, of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Owner Trustee or the
Co-Owner Trustee on behalf of the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
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No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.04 or Section 9.06 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be reasonably required by it to hold the Issuer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Note Registrar or the Indenture Trustee that such Note has been acquired by a
bona fide purchaser, either an Authorized Officer of the Owner Trustee or the
Administrator, on behalf of the Issuer, shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a replacement Note of the
same Class; provided, however, that if any such destroyed, lost or stolen Note,
but not a mutilated Note, shall have become, or within seven (7) days shall be,
due and payable or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Indenture Trustee shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and none of the Issuer, the Indenture Trustee or any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 2.06. Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest at the related Note Interest Rate,
and such interest shall be due and payable on each Distribution Date as
specified in Exhibit A hereto, subject to Section 3.01. Any installment of
interest or principal, if any, payable on any Note that is punctually paid or
duly provided for by the Issuer on the applicable Distribution Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date by check, mailed first-class postage prepaid to
such Person's address as it appears on the Note Register on such Record Date;
except that, unless Definitive Notes have been issued pursuant to Section 2.12,
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will
be made by wire transfer in immediately available funds to the account
designated by such nominee; and except for the final installment of principal
payable with respect to such Note on a Distribution Date or on the applicable
Maturity Date for such Class of Notes (and except for the Termination Price for
any Note called for redemption pursuant to Section 10.01), which shall be
payable as provided in Section 2.06(b) below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on
each Distribution Date as provided in the forms of the Notes set forth in
Exhibit A hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes of a Class of Notes shall be due and payable, if not
previously paid, on the earlier of (i) the applicable Maturity Date of such
Class, (ii) the Redemption Date or (iii) the date on which an Event of Default
shall have occurred and be continuing, if the Indenture Trustee or the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02. All principal payments on each Class of Notes shall be
made pro rata to the Noteholders of such Class entitled thereto. The Indenture
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Distribution Date on which the
Issuer expects that the final installment of principal of and interest on such
Note will be paid. Such notice shall be mailed or transmitted by facsimile prior
to such Maturity Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify the
place where such Note may be presented and surrendered for payment of such
installment.
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Notices in connection with redemptions of Notes shall be mailed to Noteholders
as provided in Section 10.02.
Section 2.07. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Indenture Trustee shall be directed by an Issuer
Order that they be destroyed or returned to it; provided that such Issuer Order
is timely and the Notes have not been previously disposed of by the Indenture
Trustee.
Section 2.08. Conditions Precedent to the Authentication. The Notes may
be authenticated by the Indenture Trustee upon receipt by the Indenture Trustee
of the following:
(a) An Issuer Order authorizing the execution and authentication
of such Notes by the Issuer.
(b) All of the items of Collateral, which shall be delivered to
the Indenture Trustee or its designee.
(c) An executed counterpart of the Trust Agreement.
(d) An Opinion of Counsel addressed to the Indenture Trustee to
the effect that:
(i) all instruments furnished to the Indenture Trustee as
conditions precedent to the authentication of the Notes by the
Indenture Trustee pursuant to the Indenture conform to the
requirements of this Indenture and constitute all the documents
required to be delivered hereunder for the Indenture Trustee to
authenticate the Notes;
(ii) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied
with;
(iii) the Owner Trustee and Co-Owner Trustee have power and
authority to execute, deliver and perform their respective
obligations under the Trust Agreement;
(iv) the Issuer has been duly formed, is validly existing as
a business trust under the laws of the State of Delaware, 12 Del.
C. Section 3801, et seq., and has
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power, authority and legal right to execute and deliver this
Indenture, the Administration Agreement and the Sale and Servicing
Agreement;
(v) assuming due authorization, execution and delivery
thereof by the Indenture Trustee, the Indenture is the valid,
legal and binding obligation of the Issuer, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general
application affecting the rights of creditors generally and to
general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(vi) the Notes, when executed and authenticated as provided
herein and delivered against payment therefor, will be the valid,
legal and binding obligations of the Issuer pursuant to the terms
of this Indenture, entitled to the benefits of this Indenture, and
will be enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent or preferential conveyance and other similar laws of
general application affecting the rights of creditors generally
and to general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(vii) the Trust Agreement authorizes the Issuer to Grant the
Collateral to the Indenture Trustee as security for the Notes and
the Owner Trustee has taken all necessary action under the Trust
Agreement to Grant the Collateral to the Indenture Trustee;
(viii) this Indenture has been duly qualified under the Trust
Indenture Act;
(ix) this Indenture, together with the Grant of the
Collateral to the Indenture Trustee, creates a valid security
interest in the Collateral in favor of the Indenture Trustee for
the benefit of the Noteholders;
(x) such action has been taken with respect to delivery of
possession of the Collateral, and with respect to the execution
and filing of this Indenture and any financing statements as are
necessary to make effective and to perfect a first priority
security interest created by this Indenture in the Collateral in
favor of the Indenture Trustee, except that with respect to the
Debt Instruments, possession of such Debt Instruments must be
maintained by the Indenture Trustee or an agent of the Indenture
Trustee (other than the Issuer), an Affiliate of the Issuer, or a
"securities intermediary," as defined in Section 8.102 of the UCC,
as an agent of the Indenture Trustee; and
(xi) no authorization, approval or consent of any
governmental body having jurisdiction in the premises which has
not been obtained by the Issuer is required to be obtained by the
Issuer for the valid issuance and delivery of the Notes, except
that no opinion need be expressed with respect to any such
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authorizations, approvals or consents as may be required under any
state securities "blue sky" laws.
(e) An Officer's Certificate stating that:
(i) the Issuer is not in Default under this Indenture and
the issuance of the Notes applied for will not result in any
breach of any of the terms, conditions or provisions of, or
constitute a default under, the Trust Agreement, any indenture,
mortgage, deed of trust or other agreement or instrument to which
the Issuer is a party or by which it is bound, or any order of any
court or administrative agency entered in any proceeding to which
the Issuer is a party or by which it may be bound or to which it
may be subject, and that all conditions precedent provided in this
Indenture relating to the authentication and delivery of the Notes
applied for have been complied with;
(ii) the Issuer is the owner of all of the Mortgage Loans,
has not assigned any interest or participation in the Mortgage
Loans (or, if any such interest or participation has been
assigned, it has been released) and has the right to Grant all of
the Mortgage Loans to the Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of
its right, title, and interest in the Collateral, and has
delivered or caused the same to be delivered to the Indenture
Trustee;
(iv) attached thereto are true and correct copies of letters
signed by Standard & Poor's and DCR [Add or substitute other
rating agencies where appropriate] confirming that the Class A-[ ]
Notes have been rated "____" [Where ratings differ, add: and "___"
by Standard & Poor's and DCR, respectively [Add or substitute
other rating agencies where appropriate]] and that the Class [ ]
Notes have been rated "____" [Where ratings differ, add: and
"____" by Standard & Poor's and DCR, respectively [Add or
substitute other rating agencies where appropriate]] [Add any
other Classes of Notes applicable]; and
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied
with.
Section 2.09. Release of Collateral. (a) Except as otherwise
provided in subsections (b) and (c) hereof and Section 11.01 and the terms of
the Basic Documents, the Indenture Trustee shall release property from the lien
of this Indenture only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel, in
lieu of such Independent Certificates, to the effect that the TIA does not
require any such Independent Certificates.
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(b) The Servicer, in accordance with Accepted Servicing Procedures, on
behalf of the Issuer, shall be entitled to obtain a release from the lien of
this Indenture for any Mortgage Loan and the related Mortgaged Property at any
time (i) after a payment by the Transferor or Cityscape of the Purchase Price of
the Mortgage Loan, (ii) after a Qualified Substitute Mortgage Loan is
substituted for such Mortgage Loan and payment of the Substitution Adjustment,
if any, (iii) after liquidation of the Mortgage Loan in accordance with Section
4.02 of the Sale and Servicing Agreement and the deposit of all proceeds
received thereon in the Collection Account, or (iv) upon the termination of a
Mortgage Loan (due to, among other causes, a prepayment in full of the Mortgage
Loan and sale or other disposition of the related Mortgaged Property), if, in
the case of any of (i), (ii), (iii) or (iv) above, the Issuer delivers to the
Indenture Trustee an Issuer Request (A) identifying the Mortgage Loan and the
related Mortgaged Property to be released, (B) requesting the release thereof,
(C) setting forth the amount deposited in the Collection Account with respect
thereto, and (D) certifying that the amount deposited in the Collection Account
(x) equals the Purchase Price of the Mortgage Loan, in the event a Mortgage Loan
and the related Mortgaged Property are being released from the lien of this
Indenture pursuant to item (i) above, (y) equals the Substitution Adjustment
related to the Qualified Substitute Mortgage Loan and the Defective Mortgage
Loan released from the lien of the Indenture pursuant to item (ii) above, or (z)
equals the entire amount of Recoveries received with respect to such Mortgage
Loan and the related Mortgaged Property in the event of a release from the lien
of this Indenture pursuant to item (iii) or (iv) above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian to temporarily release to the
Servicer the Trustee Mortgage Loan File pursuant to the provisions of Section
7.02 of the Sale and Servicing Agreement upon compliance by the Servicer with
the provisions thereof, provided that the Trustee Mortgage Loan File shall have
been stamped to signify the Issuer's pledge to the Indenture Trustee under the
Indenture.
Section 2.10. Registration of Notes. Upon original issuance, the Notes
will be issued in definitive, fully-registered form. Prior to the availability
of the final Prospectus Supplement, the Notes will be issued in the form of
typewritten or printed Notes representing the Book-Entry Notes, to be delivered
to The Depository Trust Company, the initial Clearing Agency, by or on behalf of
the Issuer. The Book-Entry Notes shall be registered initially on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Owner thereof will receive a definitive Note representing such Note
Owner's interest in such Note, except as provided in Section 2.12. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to such Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole holder of the Notes, and shall have no obligation to the Note
Owners;
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(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants pursuant to the Note Depository
Agreement. Unless and until Definitive Notes are issued pursuant to
Section 2.12, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, Owners of the Book-Entry Notes
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of such Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
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Section 2.13. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for all
purposes, including federal, State and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance
of an interest in the applicable Book-Entry Note), agree to treat the Notes for
all purposes, including federal, State and local income, single business and
franchise tax purposes, as indebtedness of the Issuer.
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ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly
and punctually pay (or will cause to be duly and punctually paid) the principal
of and interest, if any, on the Notes in accordance with the terms of the Notes,
the Sale and Servicing Agreement and this Indenture. Without limiting the
foregoing, subject to and in accordance with Section 8.02(c), the Issuer will
cause to be distributed all amounts on deposit in the Note Distribution Account
on each Distribution Date deposited therein pursuant to the Sale and Servicing
Agreement (i) for the benefit of the Class A-[ ] Notes, to the Class A-[ ]
Noteholders, and (ii) for the benefit of the Class [ ] Notes, to the Class [ ]
Noteholders [Add additional Classes of Notes as applicable]. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Collateral, as
provided in this Indenture. The Issuer shall not otherwise be liable for
payments on the Notes. If any other provision of this Indenture shall be deemed
to conflict with the provisions of this Section 3.01, the provisions of this
Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Issuer will or will
cause the Administrator to maintain in _______________, _______________ an
office or agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of the
Notes and this Indenture may be served. The Issuer hereby initially appoints the
Administrator to serve as its agent for the foregoing purposes and to serve as
Paying Agent with respect to the Notes and the Certificates. The Issuer will
give prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
Section 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by the Paying Agent, and no
amounts so withdrawn from the Collection Account and the Note Distribution
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Paying Agent shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts due on
such Distribution Date or Redemption Date under the Notes, such sum to be held
in trust for the benefit of the Persons entitled thereto,
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and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee. Any Paying Agent appointed by the Issuer shall
be a Person who would be eligible to be Indenture Trustee hereunder as provided
in Section 6.11. The Issuer shall not appoint any Paying Agent (other than the
Indenture Trustee) which is not, at the time of such appointment, a Depository
Institution.
The Issuer will cause each Paying Agent other than the Administrator to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons, or be otherwise
disposed of as herein provided, and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; provided, however, that
with respect to withholding and reporting requirements applicable to
original issue discount (if any) on the Notes, the Issuer shall have
first provided the calculations pertaining thereto to the Indenture
Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
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Subject to applicable laws with respect to escheat of funds or
abandoned property, any money held by the Indenture Trustee or any Paying Agent
in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two (2) years after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer on Issuer
Request; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent of
the amounts so paid to the Issuer), and all liability of the Indenture Trustee
or such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ,
at the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence. (a) Subject to Section 3.04(b), the Issuer
will keep in full effect its existence, rights and franchises as a business
trust under the laws of the State of Delaware (unless it becomes, or any
successor Issuer hereunder is or becomes, organized under the laws of any other
State or of the United States of America, in which case the Issuer will keep in
full effect its existence, rights and franchises under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes and the
Collateral.
(b) Any successor to the Owner Trustee or Co-Owner Trustee appointed
pursuant to Section 10.02 of the Trust Agreement shall be the successor Owner
Trustee or Co-Owner Trustee, respectively, under this Indenture without the
execution or filing of any paper, instrument or further act to be done on the
part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the
Owner Trustee or Co-Owner Trustee, the Person succeeding to the Owner Trustee or
Co-Owner Trustee under the Trust Agreement may exercise every right and power of
the Owner Trustee under this Indenture with the same effect as if such Person
had been named as the Owner Trustee or Co-Owner Trustee herein.
Section 3.05. Protection of Collateral. The Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
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(i) provide further assurance with respect to the Grant of all
or any portion of the Collateral;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the rights
of the Indenture Trustee and the Noteholders in such Collateral against
the claims of all persons and parties.
The Issuer hereby designates the Administrator its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
Section 3.06. Annual Opinions as to Collateral. On or before
_______________ __ in each calendar year, beginning in 199_, the Issuer shall
furnish to the Indenture Trustee an Opinion of Counsel either stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to maintain the lien and security interest created by this
Indenture and reciting the details of such action or stating that in the opinion
of such counsel no such action is necessary to maintain such lien and security
interest. Such Opinion of Counsel shall also describe the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Indenture until _______________ __ of the following calendar year.
Section 3.07. Performance of Obligations; Servicing of Mortgage Loans.
(a) The Issuer will not take any action and will use its best efforts not to
permit any action to be taken by others that would release any Person from any
of such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer and the
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Administrator to assist the Issuer in performing its duties under this
Indenture. The Administrator must at all times be the same Person as the
Indenture Trustee.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Collateral, including but not
limited to (i) filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement and (ii) recording or causing to be recorded
all Mortgages, Assignments of Mortgage, intervening Assignments of Mortgage, and
assumption and modification agreements required to be recorded by the terms of
the Sale and Servicing Agreement, in accordance with and within the time periods
provided for in this Indenture and/or the Sale and Servicing Agreement, as
applicable. Except as otherwise expressly provided therein, the Issuer shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the consent of the Indenture Trustee and the Holders
of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event
of Default under the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee and the Rating Agencies thereof, and shall specify
in such notice the action, if any, the Issuer is taking with respect to such
default. If such an Event of Default shall arise from the failure of the
Servicer to perform any of its duties or obligations under the Sale and
Servicing Agreement with respect to the Mortgage Loans, the Issuer shall take
all reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to Section 10.01 of
the Sale and Servicing Agreement, the Indenture Trustee shall appoint a
successor servicer (the "Successor Servicer"), and such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Indenture Trustee. In the event that a Successor Servicer has not been appointed
and accepted its appointment at the time when the Servicer ceases to act as
Servicer, the Indenture Trustee, without further action, shall automatically be
appointed the Successor Servicer. The Indenture Trustee may resign as the
Servicer by giving written notice of such resignation to the Issuer and, in such
event, will be released from such duties and obligations, such release not to be
effective until the date a new servicer enters into a servicing agreement with
the Issuer as provided below. Upon delivery of any such notice to the Issuer,
the Issuer shall obtain a new servicer as the Successor Servicer under the Sale
and Servicing Agreement. Any Successor Servicer, other than the Indenture
Trustee, shall (i) satisfy the criteria specified in Section 9.04(b) of the Sale
and Servicing Agreement and (ii) enter into a servicing agreement with the
Issuer having substantially the same provisions as the provisions of the Sale
and Servicing Agreement applicable to the Servicer. If within 30 days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer, the Indenture Trustee may appoint, or may petition a court
of competent jurisdiction to appoint, a Successor Servicer. In connection with
any such appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, subject to
the limitations set forth below and in the Sale and Servicing Agreement, and in
accordance with
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Section 10.02 of the Sale and Servicing Agreement, the Issuer shall enter into
an agreement with such successor for the servicing of the Mortgage Loans (such
agreement to be in form and substance satisfactory to the Indenture Trustee).
The servicing fee paid to any Successor Servicer shall not be in excess of the
Servicing Fee being paid to the initial Servicer. If the Indenture Trustee shall
succeed to the Servicer's duties as servicer of the Mortgage Loans as provided
herein, it shall do so in its individual capacity and not in its capacity as
Indenture Trustee and, accordingly, the provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in its duties as Successor Servicer and
the servicing of the Mortgage Loans. In case the Indenture Trustee shall become
successor Servicer under the Sale and Servicing Agreement, the Indenture Trustee
shall be entitled to appoint as Servicer any one of its Affiliates, provided
that it shall be fully liable for the actions and omissions of such Affiliate in
such capacity as Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee of such appointment, specifying in such
notice the name and address of such successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Collateral
(except to the extent otherwise provided in the Sale and Servicing Agreement) or
the Basic Documents, or waive timely performance or observance by the Servicer
or the Depositor under the Sale and Servicing Agreement; and (ii) that any such
amendment shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the
Notes that is required to consent to any such amendment, without the consent of
the Holders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee, the
Issuer agrees, promptly following a request by the Indenture Trustee to do so,
to execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale
and Servicing Agreement (including, but not limited to, the Servicer's
rights as set forth therein), sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer, including
those included in the Collateral, unless directed to do so by the
Indenture Trustee;
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(ii) claim any credit on, or make any deduction from, the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of taxes levied or assessed upon any part of the Collateral;
(iii) engage in any business or activity other than as permitted
by the Trust Agreement or other than in connection with, or relating
to, the issuance of Notes pursuant to this Indenture, or amend the
Trust Agreement as in effect on the Closing Date other than in
accordance with Section 11.1 thereof;
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any
indebtedness of any Person, except for such indebtedness as may be
incurred by the Issuer in connection with the issuance of the Notes
pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture, except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture)
to be created on or extend to or otherwise arise upon or burden the
Collateral or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Mortgaged
Properties and arising solely as a result of an action or omission of
the related Obligor) or (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any such
tax, mechanics' or other liens) security interest in the Collateral;
(viii) remove the Administrator without cause unless the Rating
Agency Condition shall have been satisfied in connection with such
removal; or
(ix) take any other action or fail to take any action which may
cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code and the corresponding regulations or (b) as a
taxable mortgage pool pursuant to Section 7701(i) of the Code and the
corresponding regulations.
Section 3.09. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the end of the fiscal year in which the
Closing Date occurs), an Officer's Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that:
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(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.10. Covenants of the Issuer. All covenants of the Issuer in
this Indenture are covenants of the Issuer and are not covenants of the Owner
Trustee. The Owner Trustee is, and any successor Owner Trustee under the Trust
Agreement will be, entering into this Indenture solely as Owner Trustee under
the Trust Agreement and not in its respective individual capacity, and in no
case whatsoever shall the Owner Trustee or any such successor Owner Trustee be
personally liable for, or for any loss in respect of, any of the statements,
representations, warranties or obligations of the Issuer hereunder, as to any of
which the parties hereto agree to look solely to the property of the Issuer.
Section 3.11. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with the Sale and Servicing Agreement.
Section 3.12. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Indenture Trustee, the Owner Trustee, the
Noteholders and the holders of the Residual Interest as contemplated by, and to
the extent funds are available for such purpose under, the Sale and Servicing
Agreement or the Trust Agreement and (y) payments to the Indenture Trustee
pursuant to Section 1(a)(ii) of the Administration Agreement. The Issuer will
not, directly or indirectly, make or cause to be made payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.13. Treatment of Notes as Debt for Tax Purposes. The Issuer
shall, and shall cause the Administrator to, treat the Notes as indebtedness for
all purposes.
Section 3.14. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer or the Transferor of
its obligations under the Sale and Servicing Agreement and each default on the
part of the Transferor of its obligations under the Loan Purchase Agreement.
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Section 3.15. Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes (except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08
and 3.10 hereof, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them), and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes when all of the following have occurred:
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 2.04 and
(ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.03) have been delivered
to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable, or
b. are to be called for redemption within one (1) year
under arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of
the Issuer,
c. and the Issuer, in the case of a. or b. above, has
irrevocably deposited or caused to be irrevocably
deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the
United States of America (which will mature prior to
the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore
delivered to the Indenture Trustee for cancellation
when due on the applicable Maturity Date of each
Class of such Notes or on the Redemption Date (if
Notes shall have been called for redemption pursuant
to Section 10.01), as the case may be; and
(B) the later of (a) eighteen (18) months after payment in full of all
outstanding obligations under the Notes, (b) the payment in full of all
unpaid Trust Fees and Expenses and (c) the
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date on which the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section
11.01 and, subject to Section 11.02, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to the Notes have been
complied with.
Section 4.02. Application of Trust Money. All moneys deposited
with the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be
held in trust and applied by it, in accordance with the provisions of the Notes,
the Sale and Servicing Agreement and this Indenture, to the payment, either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Holders of the particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all sums due and to
become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 and, thereupon, such Paying Agent shall be
released from all further liability with respect to such moneys.
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ARTICLE V
REMEDIES
Section 5.01. Events of Default. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest on any Note when the
same becomes due and payable, and continuance of such default for a
period of [THIRTY (30)] days; or
(b) default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable, and
continuance of such default for a period of five (5) days; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant
or agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture, the
Sale and Servicing Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have
been incorrect in any material respect as of the time when the same
shall have been made, and such default shall continue or not be cured,
or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of [SIXTY (60)] days after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the Holders of at least [51%] of the Outstanding Amount of
the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a notice of Default hereunder; or
(d) breach or default in the observance of any one or more of the
covenants set forth in clauses (i) through (viii) of Section 3.08;
(e) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Collateral, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(f) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the Issuer to the entry
of an order for relief in an involuntary case under
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any such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Collateral, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five (5)
days after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (c) above, its status and what
action the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee may, and on request of Holders of Notes representing
not less than 51% of the Outstanding Amount of the Notes shall, declare all the
Notes to be immediately due and payable by a notice in writing to the Issuer
(and to the Indenture Trustee if given by Noteholders), and upon any such
declaration the unpaid principal amount of such Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee, as hereinafter in this Article V provided,
the Holders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
1. all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
2. all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair
any right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee. (a) The Issuer covenants that if (i) default is made in
the payment of any interest on any
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Note when the same becomes due and payable, and such default continues for a
period of [THIRTY (30)] days, or (ii) default is made in the payment of the
principal of or any installment of the principal of any Note when the same
becomes due and payable, and such default continues for a period of five (5)
days, then in the case of either (i) or (ii), the Issuer will, upon demand of
the Indenture Trustee, pay to the Indenture Trustee, for the benefit of the
Holders of the Notes, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee may, and shall at the direction of the
majority of the Holders of the Notes, institute a Proceeding for the collection
of the sums so due and unpaid, and may prosecute such Proceeding to judgment or
final decree, and may enforce the same against the Issuer or other obligor upon
such Notes and collect in the manner provided by law out of the property of the
Issuer or other obligor upon such Notes, wherever situated, the moneys adjudged
or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may and shall at the direction of Holders of Notes representing a
majority of the Outstanding Amount of the Notes, as more particularly provided
in Section 5.04, in its discretion, proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee, and its agents,
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attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Indenture Trustee
and each predecessor Indenture Trustee, except as a result of
negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property; and
any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders
to make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders, to pay to the Indenture Trustee such amounts as shall
be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad
faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture
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Trustee shall be a party), the Indenture Trustee shall be held to represent all
the Noteholders, and it shall not be necessary to make any Noteholder a party to
any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
have occurred and be continuing, the Indenture Trustee may, and at the direction
of the Holders of a majority of the Outstanding Amount of the Notes shall, do
one or more of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee or the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights or
interest therein in a commercially reasonable manner, at one or more
public or private sales called and conducted in any manner permitted by
law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral as permitted under this Section 5.04 following an Event
of Default, unless (A) the Holders of 100% of the Outstanding Amount of the
Notes consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge in full all amounts
then due and unpaid upon such Notes with respect to principal and interest or
(C) the Indenture Trustee determines that the Collateral will not continue to
provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of Holders of 66-2/3% of
the Outstanding Amount of the Notes. In determining such sufficiency or
insufficiency with respect to clauses (B) and (C) above, the Indenture Trustee
may, but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant
to this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee then
due and any costs or expenses incurred by it in connection with the
enforcement of the remedies provided for in this Article V and to the
Owner Trustee for the Owner Trustee Fee then due;
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SECOND: to the Servicer for the Servicing Fee then due and unpaid;
THIRD: to the Custodian for the Custodian Fee then due and unpaid;
FOURTH: to the Servicer for any amounts then due and payable as
Servicing Advances under the Sale and Servicing Agreement;
FIFTH: to Noteholders for amounts due and unpaid on the Notes for
interest, pro rata, according to the amounts due and payable on the
Notes for interest;
SIXTH: to Noteholders for amounts due and unpaid on the Notes for
principal, according to the amounts due and payable and in the order
and priorities set forth in Sections 5.01(d) and (e) of the Sale and
Servicing Agreement, until the Class Principal Balance of each such
Class is reduced to zero;
SEVENTH: to the Owner Trustee or Co-Owner Trustee, as applicable,
for any amounts to be distributed, pro rata, to the holders of the
Residual Interest.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15 days
before such record date, the Indenture Trustee shall mail to each Noteholder and
the Issuer a notice that states the record date, the payment date and the amount
to be paid.
Section 5.05. Optional Preservation of the Collateral. If the Notes
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Collateral. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the
Collateral. In determining whether to maintain possession of the Collateral, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
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(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the applicable Maturity Date thereof expressed in such
Note or in this Indenture (or, in the case of redemption, on or after the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Indenture Trustee or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or
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remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission
of the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law
or with this Indenture;
(b) subject to the express terms of Section 5.04, any direction to
the Indenture Trustee to sell or liquidate the Collateral shall be by
Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(c) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Collateral
pursuant to such Section, then any direction to the Indenture Trustee
by Holders of Notes representing less than 100% of the Outstanding
Amount of the Notes to sell or liquidate the Collateral shall be of no
force and effect; and
(d) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this
Section, subject to Section 6.01, the Indenture Trustee need not take any action
that it determines might involve it in liability or might materially adversely
affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of
the acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes may waive any past Default or Event of Default and its consequences
except a Default (a) in the payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of the Holder of each Note. In the case
of any such waiver, the Issuer, the Indenture Trustee and the Holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
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Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding more than 10% in aggregate of the Outstanding
Amount of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right to
seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the
Collateral or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.04(b).
Section 5.16. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Transferor and the Servicer, as applicable, of each of their obligations
to the Issuer under or in connection with the Sale and Servicing Agreement, and
to exercise any and all rights, remedies, powers and privileges
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lawfully available to the Issuer under or in connection with the Sale and
Servicing Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Transferor or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Transferor or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in writing
or by telephone, confirmed in writing promptly thereafter) of the Holders of
66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Transferor or
the Servicer under or in connection with the Sale and Servicing Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Transferor or the Servicer, as the case may be, of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension, or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read
into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
5.11.
(d) Every provision of this Indenture that in any way relates to
the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(f) Money held in trust by the Indenture Trustee shall be
segregated from other funds except to the extent permitted by law or the terms
of this Indenture or the Sale and Servicing Agreement.
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(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it; provided, however, that the Indenture Trustee shall
not refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its normal fees and expenses and further provided that nothing in
this Section 6.01(g) shall be construed to limit the exercise by the Indenture
Trustee of any right or remedy permitted under this Indenture or otherwise in
the event of the Issuer's failure to pay the Indenture Trustee's fees and
expenses pursuant to Section 6.07. In determining that such repayment or
indemnity is not reasonably assured to it, the Indenture Trustee must consider
not only the likelihood of repayment or indemnity by or on behalf of the Issuer,
but also the likelihood of repayment or indemnity from amounts payable to it
from the Collateral pursuant to Section 6.07.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for (i) any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that such action or omission by
the Indenture Trustee does not constitute willful misconduct, negligence or bad
faith; or (ii) any willful misconduct or negligence on the part of the
Custodian.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture
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Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may
do the same with like rights. However, the Indenture Trustee must comply with
Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement of
the Issuer in the Indenture or in the Notes (other than the Indenture Trustee's
certificate of authentication) or in any document issued in connection with the
sale of the Notes.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within
ninety (90) days after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such Holder to prepare its federal and State income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for its
services hereunder, the Indenture Trustee shall be entitled to receive, on each
Distribution Date, the Indenture Trustee's Fee pursuant to Section 8.02(c)
hereof (which compensation shall not be limited by any law on compensation of a
trustee of an express trust) and shall be entitled to reimbursement for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer agrees to cause the Transferor to indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder, except for the Indenture Trustee's gross
negligence or bad faith. The Indenture Trustee shall notify the Issuer and the
Transferor promptly of any action or claim for which the Indenture Trustee (the
"Indemnified Party") may seek indemnity. In case any such action is brought
against the Indemnified Party and it notifies the Transferor (the "Indemnifying
Party") of the commencement thereof, the Indemnifying Party shall be entitled to
participate therein and, to the extent that, by written notice delivered to the
Indemnified Party promptly after receiving the aforesaid notice from such
Indemnified Party, the Indemnifying Party elects to assume the defense thereof,
it may participate with counsel satisfactory to such Indemnified Party;
provided, however, that if the defendants in any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party or
parties shall have reasonably concluded that there may be legal defenses
available to it or them and/or other Indemnified Parties that are different from
or additional to those available to the Indemnifying Party, the Indemnified
Party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party or parties.
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Upon receipt of notice from the Indemnifying Party to such Indemnified Party of
its election so to assume the defense of such action and approval by the
Indemnified Party of such counsel, the Indemnifying Party shall not be liable to
such Indemnified Party under this paragraph for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, unless (i) the Indemnified Party shall have employed separate counsel
(including any local counsel) in connection with the assertion of legal defenses
in accordance with the proviso to the immediately preceding sentence, (ii) the
Indemnifying Party shall not have employed counsel satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (iii) the Indemnifying Party has
authorized the employment of counsel for the Indemnified Party at the expense of
the Indemnifying Party. No party shall be liable for contribution with respect
to any action or claim settled without its consent, which shall not be
unreasonably withheld. Failure by the Indenture Trustee to so notify the Issuer
and the Servicer shall not relieve the Issuer of its obligations hereunder. The
Issuer shall or shall cause the Servicer to defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall or shall cause
the Servicer to pay the fees and expenses of such counsel. Neither the Issuer
nor the Servicer need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Indenture Trustee through the Indenture
Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant
to this Section shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of a Default specified in
Section 5.01(e) or (f) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(a) the Indenture Trustee fails to comply with Section 6.11;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee.
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A successor Indenture Trustee shall deliver a written acceptance
of its appointment to the retiring Indenture Trustee and to the Issuer.
Thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within sixty
(60) days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Issuer or the Holders of a majority in
Outstanding Amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant
to this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation, without any further act, shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall provide
the Rating Agencies written notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Collateral may at the time be located, the
Indenture Trustee shall have the power and may execute and deliver all
instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part
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thereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility specified under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture 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 Collateral or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. 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, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Indenture
Trustee shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
Section 6.13. No Conflict with Administrator. In performing its duties
as Administrator pursuant to the Administration Agreement, the Indenture Trustee
shall not be liable for any potential conflict of interest related to its
performance as Indenture Trustee hereunder.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five (5) days after the earlier of (i) each
Record Date and (ii) three (3) months after the last Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within thirty (30) days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than ten (10) days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) that the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission, in
accordance with the rules and regulations prescribed from time to time
by the Commission, such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section
313(c)) such summaries of any information, documents and reports
required to be filed by the
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Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by
rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA Section
313(a), within sixty (60) days after each _______________ __, beginning with
_______________ __, 199_, the Indenture Trustee shall mail to each Noteholder,
as required by TIA Section 313(c), a brief report dated as of such date that
complies with TIA Section 313(a). The Indenture Trustee also shall comply with
TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each securities
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any securities exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money. General. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of, and shall receive and collect, directly and without the intervention or
assistance of any fiscal agent or other intermediary, all money and other
property payable to or receivable by the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall apply all such money received by it as
provided in this Indenture. Except as otherwise expressly provided in this
Indenture, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Collateral, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
Section 8.02. Trust Accounts; Distributions. (a) On or prior to the
Closing Date, the Issuer shall cause the Servicer to establish and maintain, in
the name of the Indenture Trustee for the benefit of the Noteholders, or the
Co-Owner Trustee for the benefit of the Residual Interestholders, the Trust
Accounts as provided in Article V of the Sale and Servicing Agreement. The
Indenture Trustee or Co-Owner Trustee shall deposit amounts into each of the
Trust Accounts in accordance with the terms hereof, the Sale and Servicing
Agreement and the Servicer's Monthly Remittance Report.
(b) On or before the Business Day prior to each Distribution Date, the
Indenture Trustee shall withdraw from the Collection Account, the Available
Collection Amount pursuant to Section 5.01(b)(2) of the Sale and Servicing
Agreement and shall deposit such amount into the Note Distribution Account.
Prior to each Distribution Date, to the extent funds are available in the Note
Distribution Account, the Indenture Trustee shall either retain funds in the
Note Distribution Account or make the withdrawals from the Note Distribution
Account and deposits into the other Trust Accounts for distribution on such
Distribution Date as required pursuant to Section 5.01(c) of the Sale and
Servicing Agreement.
(c) On each Distribution Date and Redemption Date, to the extent funds
are available in the Note Distribution Account, the Indenture Trustee shall make
the following distributions from the amounts on deposit in the Note Distribution
Account in the following order of priority (except as otherwise provided in
Section 5.04(b)):
(i) (A) to the Servicer, an amount equal to the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to Section 5.01(b)(1) of the Sale and
Servicing Agreement) and all unpaid Servicing Compensation from prior
due periods, (B) to the Indenture Trustee, an amount equal to the
Indenture Trustee Fee and all unpaid Indenture Trustee Fees from prior
Due Periods, (C) to the Owner Trustee, an amount equal to the Owner
Trustee Fee and all unpaid Owner Trustee Fees from prior Due
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Periods, and (D) to the Custodian, an amount equal to the Custodian Fee
and all unpaid Custodian Fees from prior Due Periods; and
(ii) to the Noteholders, the amounts set forth in Sections 5.01(d)
and (e) of the Sale and Servicing Agreement.
(d) On each Distribution Date and each Redemption Date, to the extent
of the interest of the Indenture Trustee in the Certificate Distribution Account
(as described in Section 5.03(a) of the Sale and Servicing Agreement), the
Indenture Trustee hereby authorizes the Owner Trustee, the Co-Owner Trustee or
the Paying Agent, as applicable, to make the distributions from the Certificate
Distribution Account as required pursuant to Sections 5.01(d) and (e) of the
Sale and Servicing Agreement.
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Permitted
Investments and reinvested by the Indenture Trustee at the direction of the
Servicer in accordance with the provisions of Article V of the Sale and
Servicing Agreement. All income or other gain from investments of moneys
deposited in the Trust Accounts shall be paid by the Indenture Trustee to the
Servicer, and any loss resulting from such investments shall be deposited by the
Servicer into the Trust Account experiencing such loss. The Servicer will not
direct the Indenture Trustee to make any investment of any funds or to sell any
investment held in any of the Trust Accounts unless the security interest
Granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable pursuant to Section 5.02 or
(iii) such Notes shall have been declared due and payable following an Event of
Default and amounts collected or receivable from the Collateral are being
applied in accordance with Section 5.05 as if there had not been such a
declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
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Section 8.04. Servicer's Monthly Remittance Report. On each
Distribution Date, the Indenture Trustee shall deliver the Servicer's Monthly
Remittance Report with respect to such Distribution Date to the Clearing
Agencies and the Rating Agencies.
Section 8.05. Release of Collateral. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when
required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to the Residual Interestholder, the Servicer
pursuant to Section 8.02(c)(i)(A) hereof, the Indenture Trustee pursuant to
Section 8.02(c)(i)(B) hereof, the Owner Trustee pursuant to Section
8.02(c)(i)(C) hereof and the Custodian pursuant to Section 8.02(c)(i)(D) hereof
have been paid, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this subsection (b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1).
Section 8.06. Opinion of Counsel. The Indenture Trustee shall receive
at least seven (7) days notice (or such shorter period of time as may be agreed
upon by the parties hereto) when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
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ARTICLE IX
INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
or in the Notes;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to provide for the issuance of Notes in bearer or
registered form or for the conversion of any outstanding Notes to or
from bearer form;
(vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(viii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
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The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior consent of the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by (i) an
Opinion of Counsel or (ii) satisfaction of the Rating Agency Condition,
adversely affect in any material respect the interests of any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, with
prior consent of the Rating Agencies and with the consent of the Holders of not
less than 51% of the Outstanding Amount of the Notes, by Act of such Holders
delivered to the Issuer and the Indenture Trustee, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Note affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest rate
thereon or the Termination Price with respect thereto, change the earliest date
on which any of the Notes may be redeemed at the option of the Majority Residual
Interest Holders, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the Collateral to
payment of principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(b) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental indenture,
or the consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(c) modify or alter the provisions of the definition of the term
"Outstanding";
(d) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Collateral pursuant to Section 5.04;
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(e) modify any provision of this Section or Section 5.11 except to
increase any percentage specified therein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or waived
without the consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or principal
due on any Note on any Distribution Date (including the calculation of any of
the individual components of such calculation) [If Noteholders given right of
redemption, add: or to affect the rights of the Holders of Notes to the benefit
of any provisions contained herein for the redemption of the Notes at the
request of the Noteholders]; or
(g) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Collateral or,
except as otherwise permitted or contemplated herein, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant
to this Section, the Indenture Trustee shall mail to the Holders of the Notes to
which such amendment or supplemental indenture relates a notice setting forth in
general terms the substance of such supplemental indenture. It shall not be
necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental
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indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Trust Agreement. Subject to Section 11.1 of
the Trust Agreement, the Indenture Trustee shall, upon Issuer Order, consent to
any proposed amendment to the Trust Agreement or an amendment to or waiver of
any provision of any other document relating to the Trust Agreement, such
consent to be given without the necessity of obtaining the consent of the
Holders of any Notes upon satisfaction of the requirements under Section 11.1 of
the Trust Agreement.
Nothing in this Section shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
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ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. The Majority Residual Interest Holders (as
defined in the Trust Agreement) may, at their option, effect an early redemption
of the Notes on or after any Distribution Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount. The Majority
Residual Interest Holders shall effect such early redemption by purchasing all
of the Mortgage Loans at a price not less than the Termination Price. In
connection with any such optional termination, to the extent that sufficient
proceeds are not available from the sale of the Mortgage Loans or the
termination of the Trust, the Majority Residual Interest Holders will pay the
outstanding fees and expenses, if any, of the Indenture Trustee, the Owner
Trustee, the Co-Owner Trustee, the Issuer, the Custodian and the Servicer.
Any such early redemption by the Majority Residual Interestholders
shall be accomplished by depositing into the Collection Account on the
Determination Date immediately preceding the Distribution Date on which the
purchase is to occur the amount of the Termination Price to be paid. The
Termination Price and any amounts then on deposit in the Collection Account
(other than any amounts not required to have been deposited therein pursuant to
Section 5.01(b)(1) of the Sale and Servicing Agreement and any amounts
withdrawable therefrom by the Indenture Trustee pursuant to Section 5.01(b)(3)
of the Sale and Servicing Agreement) shall be transferred to the Note
Distribution Account pursuant to Section 5.01(b)(2) of the Sale and Servicing
Agreement for distribution to Noteholders on the succeeding Distribution Date;
and any amounts received with respect to the Mortgage Loans and Foreclosure
Properties subsequent to the Due Period immediately preceding such final
Distribution Date shall belong to the purchaser thereof. For purposes of
calculating the Available Distribution Amount for such final Distribution Date,
amounts transferred to the Note Distribution Account immediately preceding such
final Distribution Date shall in all cases be deemed to have been received
during the related Due Period, and amounts so transferred shall be applied
pursuant to Section 5.01(c) and 5.01(d) of the Sale and Servicing Agreement.
The Servicer or the Issuer shall furnish the Rating Agencies notice of
any such redemption in accordance with Section 10.02.
Section 10.02. Form of Redemption Notice. (a) Notice of redemption
under Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted not later than 10 days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Termination Price; and
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(iii) the place where such Notes are to be surrendered for payment
of the Termination Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
(b) Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer. Failure to
give notice of redemption, or any defect therein, to any Holder of any Note
shall not impair or affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for Payment
of Indenture Trustee. The Notes or portions thereof to be redeemed shall,
following notice of redemption as required by Section 10.02 (in the case of
redemption pursuant to Section 10.01), on the Redemption Date become due and
payable at a price equal to the outstanding Class Principal Amount of each Class
of Notes plus accrued and unpaid interest thereon provided that no interest
shall accrue on such price for any period after the date to which accrued
interest is calculated for purposes of calculating such price. The Issuer may
not redeem the Notes unless, (i) all outstanding obligations under the Notes
have been paid in full and (ii) the Indenture Trustee has been paid all amounts
to which it is entitled hereunder.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture (except with respect to the Servicer's
servicing activity in the ordinary course of its business), the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within ninety (90) days of such deposit) to
the Issuer of the Collateral or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (b) above, the Issuer shall also
deliver to the Indenture Trustee an
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Independent Certificate as to the same matters, if the fair value to the Issuer
of the securities to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to clause (b) above and this clause (c), is 10% or more of
the Outstanding Amount of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited if the fair value thereof
to the Issuer, as set forth in the related Officer's Certificate, is less than
$25,000 or less than one percent of the Outstanding Amount of the Notes.
(d) Whenever any property or securities are to be released from the
lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within ninety (90) days of such
release) of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
(e) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (d) above, the Issuer shall also
furnish to the Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property, other than securities released from the lien of this Indenture since
the commencement of the then-current calendar year, as set forth in the
certificates required by clause (d) above and this clause (e), equals 10% or
more of the Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is less than $25,000
or less than 1% of the then Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or any Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Transferor, the Issuer or the
Administrator, stating that the information with respect to such factual matters
is in the possession of the Servicer, the Transferor, the Issuer or the
Administrator, unless such
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Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document, as provided
in Article VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee and, where
it is hereby expressly required, to the Issuer. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders, or other documents provided or permitted by this
Indenture, shall be in writing and, if such request,
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demand, authorization, direction, notice, consent, waiver or act of Noteholders
is to be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer,
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder,
shall be sufficient for every purpose hereunder if in writing and
mailed first-class, postage prepaid to the Issuer addressed to:
Cityscape Loan Trust 199_-_, in care of _____________________________,
_________________________________________, or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in the
case of DCR, at the following address: Duff & Phelps Credit Rating, 17 State
Street (12th Floor), New York, New York 10004, (ii) in the case of Standard &
Poor's, at the following address: Standard & Poor's Ratings Group, 26 Broadway
(15th Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department [Add or substitute other rating agencies as appropriate]; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed first-class, postage prepaid to each Noteholder affected by such
event, at its address as it appears on the Note Register, not later than the
latest date, nor earlier than the earliest date, prescribed for the giving of
such notice. In any case where notice to Noteholders is given by mail, neither
the failure to mail such notice nor any defect in any notice so mailed to any
particular Noteholder shall affect the sufficiency of such notice with respect
to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
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Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
Section 11.06. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein,
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
Section 11.07. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and
agreements of the Issuer in this Indenture and the Notes shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors, co-trustees and
agents.
Section 11.09. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or
in the Notes, either express or implied, shall give to any Person, other than
the parties hereto, and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership interest
in any part of the Collateral, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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Section 11.13. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.14. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or, except as expressly provided
for in Article VI hereof, under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Indenture Trustee or the
Owner Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee, or of any successor or
assign of the Indenture Trustee or the Owner Trustee in its individual capacity,
except as any such Person may have expressly agreed (it being understood that
the Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture, in
the performance of any duties or obligations of the Issuer hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Article VI, VII and VIII of the Trust Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Transferor, the
Servicer, or the Issuer, or join in any institution against the Transferor, the
Servicer, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or any other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Basic Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable
prior notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its
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representatives to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
CITYSCAPE LOAN TRUST 199_-_
By: _____________________________, not in its
individual capacity, but solely as Owner Trustee
By:____________________________________________________
Name:
Title:
_______________________________________________________,
as Indenture Trustee
By:____________________________________________________
Name:
Title:
<PAGE> 73
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and
for said county and state, on this day personally appeared
___________________________, known to me to be the person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [Name of Owner Trustee], not in its individual capacity,
but solely as Owner Trustee on behalf of CITYSCAPE LOAN TRUST 199_-_, a Delaware
business trust, and that such person executed the same as the act of said
business trust for the purpose and consideration therein expressed, and in the
capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_______________, 199_.
______________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
_______________________________
<PAGE> 74
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for
said county and state, on this day personally appeared
__________________________, known to me to be the person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of [Insert name of the Administrator], a national banking
association, and that such person executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_______________, 199_.
______________________________________________
Notary Public in and for the State of New York
(Seal)
My commission expires:
_______________________________
<PAGE> 75
SCHEDULE A
(To Be Provided at the Closing)
A-1
<PAGE> 1
EXHIBIT 4.3
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of _______ ___, 199__
among
CITYSCAPE LOAN TRUST 199__-__
(Issuer)
-------------------------------------------
(Depositor)
CITYSCAPE CORP.
(Servicer)
___________________________________________(Transferor)
and
-------------------------------------------
(Indenture Trustee and Co-Owner Trustee)
Cityscape Loan Trust 199___-___
Mortgage Loan Asset Backed Notes
Series 199___-___
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS......................................................1
Section 1.01 Definitions...............................................1
Section 1.02 Other Definitional Provisions............................25
ARTICLE II. CONVEYANCE OF THE MORTGAGE LOANS...............................27
Section 2.01 Conveyance of the Mortgage Loans.........................27
Section 2.02 [RESERVED]...............................................27
Section 2.03 Ownership and Possession of Mortgage Loan Files..........27
Section 2.04 Books and Records........................................27
Section 2.05 Delivery of Mortgage Loan Documents......................28
Section 2.06 Acceptance by Indenture Trustee of the Mortgage
Loans; Certain Substitutions; Initial Certification by
Custodian....................................................31
Section 2.07 Subsequent Transfers.....................................33
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................36
Section 3.01 Representations and Warranties of the Depositor..........36
Section 3.02 Representations and Warranties of the Transferor.........37
Section 3.03 Representations, Warranties and Covenants of the
Servicer..................................................40
Section 3.04 Representations and Warranties regarding Individual
Mortgage Loans............................................42
Section 3.05 [RESERVED]...............................................48
Section 3.06 Purchase and Substitution................................48
ARTICLE IV. ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS.............52
Section 4.01 Duties of the Servicer...................................52
Section 4.02 Liquidation of Mortgage Loans; Defaulted Mortgage
Loans.....................................................53
Section 4.03 Fidelity Bond; Errors and Omission Insurance.............54
Section 4.04 Title, Management and Disposition of Foreclosure
Property..................................................55
Section 4.05 Access to Certain Documentation and Information
Regarding the Mortgage Loans.................................57
Section 4.06 [RESERVED]...............................................57
Section 4.07 Subservicing.............................................57
Section 4.08 Successor Servicers......................................59
Section 4.09 Maintenance of Hazard Insurance; Property Protection
Expenses..................................................59
Section 4.10 Maintenance of Mortgage Impairment Insurance Policy......60
Section 4.11 Reports to the Securities and Exchange Commission........60
Section 4.12 Payment of Taxes, Insurance and Other Charges............61
Section 4.13 Filing of Continuation Statements........................61
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<PAGE> 3
Page
----
ARTICLE V. ESTABLISHMENT OF TRUST ACCOUNTS.................................62
Section 5.01 Collection Account and Note Distribution Account.........62
Section 5.02 Certificate Distribution Account and Distributions
on the Notes..............................................65
Section 5.03 Trust Accounts; Trust Account Property...................66
Section 5.04 Allocation of Losses.....................................69
Section 5.05 Pre-Funding Account......................................69
Section 5.06 Capitalized Interest Account.............................70
ARTICLE VI. STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS...........71
Section 6.01 Statements...............................................71
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
Property..................................................74
Section 6.03 Specification of Certain Tax Matters.....................74
ARTICLE VII. GENERAL SERVICING PROCEDURE...................................75
Section 7.01 Assumption Agreements....................................75
Section 7.02 Satisfaction of Mortgages and Release of Mortgage
Loan Files................................................75
Section 7.03 Servicing Compensation...................................77
Section 7.04 Statement as to Compliance and Financial Statements......77
Section 7.05 Independent Public Accountants' Servicing Report.........78
Section 7.06 Right to Examine Servicer Records........................78
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements................................................79
ARTICLE VIII. REPORTS TO BE PROVIDED BY SERVICER...........................80
Section 8.01 Financial Statements.....................................80
ARTICLE IX. THE SERVICER...................................................81
Section 9.01 Indemnification; Third Party Claims......................81
Section 9.02 Merger or Consolidation of the Servicer..................82
Section 9.03 Limitation on Liability of the Servicer and Others.......83
Section 9.04 Servicer Not to Resign; Assignment.......................83
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee...................................................83
Section 9.06 Servicer May Own Notes...................................83
ARTICLE X. DEFAULT.........................................................85
Section 10.01 Events of Default.......................................85
Section 10.02 Indenture Trustee to Act; Appointment of Successor......86
Section 10.03 Waiver of Defaults......................................88
Section 10.04 Accounting Upon Termination of Servicer.................88
ii
<PAGE> 4
Page
----
ARTICLE XI. TERMINATION....................................................89
Section 11.01 Termination.............................................89
Section 11.02 Optional Termination....................................89
Section 11.03 Notice of Termination...................................89
ARTICLE XII. MISCELLANEOUS PROVISIONS......................................90
Section 12.01 Acts of Securityholders.................................90
Section 12.02 Amendment...............................................90
Section 12.03 Recordation of Agreement................................91
Section 12.04 Duration of Agreement...................................91
Section 12.05 Governing Law...........................................91
Section 12.06 Notices.................................................91
Section 12.07 Severability of Provisions..............................92
Section 12.08 No Partnership..........................................92
Section 12.09 Counterparts............................................92
Section 12.10 Successors and Assigns..................................92
Section 12.11 Headings................................................92
Section 12.12 Actions of Securityholders..............................92
Section 12.13 Reports to Rating Agencies..............................93
Section 12.14 Holders of the Residual Interest........................93
EXHIBITS
EXHIBIT A Mortgage Loan Schedule
EXHIBIT B Form of Servicer Remittance Report to Trustee
EXHIBIT C Form of Release
EXHIBIT D Form of Request for Release
EXHIBIT E Form of Subsequent Transfer Agreement
EXHIBIT F Reports of Trustee Pursuant to Section 2.06.
iii
<PAGE> 5
THIS SALE AND SERVICING AGREEMENT is entered into effective as of _______
___, 199___, among CITYSCAPE LOAN TRUST 199__-__, a ________________ (the
"Issuer" or the "Trust"), _________________________________, a
___________________, as Depositor (the "Depositor"), CITYSCAPE CORP., a New York
corporation ("Cityscape"), as Servicer (the "Servicer"),
____________________________, a _________________, as Transferor (the
"Transferor"), and ___________________________________, a
______________________, as Indenture Trustee on behalf of the Noteholders (in
such capacity, the "Indenture Trustee") and as Co-Owner Trustee on behalf of the
Certificateholders (in such capacity, the "Co-Owner Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Mortgage Loans which
were originated or purchased by the Servicer in its ordinary course of business
and subsequently conveyed by the Servicer to the Transferor and by the
Transferor to the Depositor;
WHEREAS, the Depositor is willing to sell such Mortgage Loans to the
Issuer; and
WHEREAS, the Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing first, second and third
lien residential mortgage loans such as the Mortgage Loans held for its own
account, giving due consideration to standards of practice of prudent mortgage
lenders and loan servicers that originate and service mortgage loans comparable
to the Mortgage Loans and to the reliance placed by the Securityholders on the
Servicer for the servicing of the Mortgage Loans but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
affiliate of the Servicer or any Subservicer may have with the related
Obligor;
<PAGE> 6
(ii) the ownership of any Securities by the Servicer or any
affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Accrual Period: With respect to the first Distribution Date and the Class
A-[ ] Notes, the period commencing on the Closing Date and ending on the day
immediately preceding such distribution Date. With respect to any subsequent
Distribution Date and the Class A-[ ] Notes, the period commencing on the
immediately preceding Distribution Date and ending on the day immediately
preceding such subsequent Distribution Date. With respect to the Classes of
Notes other than the Class A-[ ] Notes for a given Distribution Date, the
calendar month preceding the month of such Distribution Date based on a 360-day
year consisting of twelve 30-day months (or, in the case of the first
Distribution Date, a 360-day year and 28 days' accrued interest).
Addition Notice: For any date during the Funding Period, a notice (which
may be verbal or written) given to the Rating Agencies and the Trustee pursuant
to Section 2.07.
Aggregate Note Principal Balance: With respect to any Distribution Date,
the aggregate of the Class Principal Balances of the Notes.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the excess,
if any, of (a) the aggregate of the Class Principal Balances of all Classes of
Securities (after giving effect to all distributions on such Distribution Date)
over (b) the Pool Principal Balance as of the end of the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
sequentially, to the [INSERT CLASSES OF NOTES TO WHICH LOSSES ARE TO BE
ALLOCABLE], in that order, until the respective Class Principal Balances thereof
are reduced to zero.
Assignment of Mortgage: With respect to each Mortgage Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Mortgage Loan, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering Mortgages secured by Mortgaged
Properties located in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
amount equal to the sum of: (i) all amounts received on the Mortgage Loans or
required to be paid by the Servicer or the Transferor during the related Due
Period (exclusive of amounts not required to be deposited by the Servicer in the
Collection Account pursuant to Section 5.01(b)(1) and amounts permitted to
2
<PAGE> 7
be withdrawn by the Indenture Trustee from the Collection Account pursuant to
Section 5.01(b)(3) of this Agreement) as reduced by any portion thereof that may
not be withdrawn therefrom pursuant to an order of a United States bankruptcy
court of competent jurisdiction imposing a stay pursuant to Section 362 of the
United States Bankruptcy Code; (ii) with respect to the final Distribution Date
or an early redemption or termination of the Securities pursuant to Section
11.02, the Termination Price; (iii) the Purchase Price paid for any Mortgage
Loans required to be purchased pursuant to Section 3.06 prior to the related
Determination Date and (iv) the Capitalized Interest Requirement, if any, with
respect to such Distribution Date.
Available Distribution Amount: With respect to any Distribution Date, the
Available Collection Amount, minus the amount required to be paid from the Note
Distribution Account pursuant to Section 5.01(c)(i), plus, if applicable, the
amount of any Pre-Funding Earnings for the related Due Period and, on the
Distribution Date relating to the Due Period in which the termination of the
Funding Period occurred, the amount on deposit in the Pre-Funding Account at
such time.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
Call Option Date: The first Distribution Date on which the Majority
Residual Interest Holders are able to cause an optional termination of the Trust
pursuant to Section 11.02 of this Agreement.
Capitalized Interest Account: The account designated as such, established
and maintained pursuant to Section 5.06.
Capitalized Interest Requirement: With respect to the Distribution Date in
________, 199_ [SPECIFY THE MONTH IMMEDIATELY SUCCEEDING THE MONTH IN WHICH THE
CLOSING DATE OCCURS], (A) the product of (a) a fraction, the numerator of which
is the Pre-Funding Amount on the Closing Date and the denominator of which is
the sum of the Pre-Funding Amount on the Closing Date and the Original Pool
Principal Balance and (b) the aggregate amount of interest accrued on each Class
of Notes for the respective Accrual Periods minus (B) in the case of any
Subsequent Loan transferred to the Trust during the related Due Period, the
amount of any interest collected after the Cut-Off Date applicable to such
Subsequent Loan and during such related Due Period and minus (C) any Pre-Funding
Earnings for the related Due Period.
With respect to the Distribution Date in ________, 199_ [SPECIFY THE
SECOND MONTH SUCCEEDING THE MONTH IN WHICH THE CLOSING DATE OCCURS], (A) the
product of (a) a fraction, the numerator of which is the Pre-Funding Amount on
the first day of the related Due Period and the denominator of which is the sum
of the Pre-Funding Amount on the first day of the related Due Period and the
Pool Principal Balance on the first day of the related Due Period and (b) the
percentage equivalent of fraction the numerator of which is the aggregate amount
of interest accrued on each Class of Notes for the respective Accrual Periods
minus (B) any Pre-Funding Earnings for the related Due Period and minus (C) in
the case of any Subsequent Loan transferred to the Trust during the related Due
Period, the amount of any interest collected after the Cut-Off Date applicable
to such Subsequent Loan and during such related Due Period.
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<PAGE> 8
With respect to the Distribution Date in ____________, 199_ [SPECIFY THE
THIRD MONTH SUCCEEDING THE MONTH IN WHICH THE CLOSING DATE OCCURS], (A) the
product of (a) the Pre-Funding Amount on the first day of the related Due Period
the denominator of which is the sum of the Pre-Funding Amount on the first day
of the related Due Period and the Pool Principal Balance on the first day of the
related Due Period and (b) the aggregate amount of interest accrued on each
Class of Notes for the respective Accrual Periods minus (B) any Pre-Funding
Earnings for the related Due Period and minus (C) in the case of any Subsequent
Loan transferred to the Trust during the related Due Period, the amount of any
interest collected after the Cut-Off Date applicable to such Subsequent Loan and
during such related Due Period.
Certificate: Any Residual Interest Instrument issued pursuant to the Trust
Agreement.
Certificate Distribution Account: The Account established and maintained
pursuant to Section 5.02.
Certificate Register: The register established pursuant to Section 3.4 of
the Trust Agreement.
Certificateholder: A holder of any Certificate.
Cityscape: Cityscape Corp.
Class: With respect to the Notes, all Notes bearing the same Class
designation.
Class A Excess Spread Distribution Amount: With respect to any
Distribution Date, the least of (i) the excess of (x) the Class Principal
Balance of all Senior Notes (after giving effect to all distributions pursuant
to Section 5.01(d)) over (y) the Senior Optimal Principal Balance for such
Distribution Date, (ii) the Overcollateralization Deficiency Amount for such
Distribution Date, and (iii) the Excess Spread for such Distribution Date.
Class A Principal Distribution Amount: With respect to any Distribution
Date, the lesser of (i) the Regular Principal Distribution Amount and (ii) the
excess of (x) the aggregate Class Principal Balance of all Senior Notes (prior
to giving effect to distributions on such Distribution Date, other than any
distributions in respect of the Pre-Funded Amount on the Distribution Date on
which a Pre-Funding Pro Rata Distribution Trigger has occurred) over (y) the
Senior Optimal Principal Balance for such Distribution Date.
Class A-[ ] Note and Class [ ] Note [ADD ADDITIONAL CLASSES OF NOTES WHERE
APPLICABLE]: The respective meanings assigned thereto in the Indenture.
Class [ ] Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of (A) the Class [ ] Noteholders' Monthly Interest
Distribution Amount for the preceding Distribution Date and any outstanding
Class [ ] Noteholders' Interest Carry-Forward Amount on such preceding
Distribution Date, over (B) the amount in respect of interest that is actually
distributed with respect to the Class [ ] Notes on such preceding Distribution
Date.
4
<PAGE> 9
Class [ ] Noteholders' Interest Distribution Amount: With respect to any
Distribution Date and the Class [ ] Notes, the sum of the Class [ ] Noteholders'
Monthly Interest Distribution Amount for such Distribution Date and the Class [
] Noteholders' Interest Carry-Forward Amount for such Distribution Date.
Class [ ] Noteholders' Monthly Interest Distribution Amount: With respect
to any Distribution Date (other than the first Distribution Date) and the Class
[ ] Notes, the aggregate amount of thirty (30) days' accrued interest at the
Class [ ] Note Interest Rate on the Class Principal Balance of the Class [ ]
Notes immediately preceding such Distribution Date. With respect to the first
Distribution Date, _______________ (___) days' [INSERT NUMBER OF DAYS FROM
CLOSING DATE TO THE END OF THE MONTH IN WHICH THE CLOSING DATE OCCURS] accrued
interest at the Class [ ] Note Interest Rate on the Original Class Principal
Balance of the Class [ ] Notes.]
Class Factor: With respect to each Class and any date of determination,
the then applicable Class Principal Balance of such Class divided by the
Original Class Principal Balance thereof.
Class Principal Balance: With respect to each Class and as of any date of
determination, the Original Class Principal Balance of such Class reduced by the
sum of all amounts previously distributed in respect of principal of such Class
on all previous Distribution Dates and, with respect to the Class [ ] Notes, all
Allocable Loss Amounts applied in reduction of principal of such Class on all
previous Distribution Dates.
Closing Date: ______ ___, 199___.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
Collection Account: The account established and maintained by the Servicer
in accordance with Section 5.01.
Combination Loan: A loan, the proceeds of which were used by the Obligor
in combination to finance property improvements and for debt consolidation or
other purposes.
Co-Owner Trustee: _______________________, a ________________________, in
its capacity as the Co-Owner Trustee under the Trust Agreement, acting on behalf
of the Certificateholders, or any successor co-owner trustee under the Trust
Agreement.
Cram Down Losses: With respect to any Loan, the reduction to the related
Loan Balance and/or the amount by which the installment of interest due on the
related Due Date under the terms of such Loan has been reduced as a result of a
reduction in the related Loan Interest Rate, in each case resulting from an
order issued by a court of appropriate jurisdiction in an insolvency proceeding.
A Cram Down Loss shall be deemed to have occurred on the date of issuance of
such order.
Custodial Agreement: The custodial agreement dated as of ________ ___,
199___ by and among the Depositor, the Servicer, the Transferor, the Indenture
Trustee and the Custodian,
5
<PAGE> 10
providing for the retention of the Mortgage Loan Files by the Custodian on
behalf of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to
the Custodial Agreement, which shall not be affiliated with the Servicer, the
Transferor, any Subservicer or the Depositor. ____________________ shall be the
initial Custodian pursuant to the terms of the Custodial Agreement.
Cut-Off Date: With respect to the Initial Loans, the close of business on
______ ___, 199__. With respect to any Subsequent Loan, the date designated as
such in the related Subsequent Transfer Agreement.
DCR: Duff & Phelps Credit Rating Co. [ADD OR SUBSTITUTE DEFINITIONS FOR
OTHER RATING AGENCIES WHERE APPROPRIATE.]
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Obligor for debt consolidation purposes or purposes other than to
finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Mortgage Loan.
Defaulted Mortgage Loan: With respect to any date of determination, any
Mortgage Loan, including without limitation any Liquidated Mortgage Loan,
incident to foreclosure, default or imminent default.
Defective Mortgage Loan: As defined in Section 3.06 hereof.
Deleted Mortgage Loan: As defined in Section 3.06 hereof.
Delinquent: A Mortgage Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the close of business on the day such Monthly Payment is
scheduled to be paid. A Mortgage Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due, or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such
month), then on the last day of such immediately succeeding month. The
determination of whether a Mortgage Loan is "60 days Delinquent," "90 days
Delinquent", etc., shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Indenture
Trustee or its nominee or custodian by physical delivery to the Indenture
Trustee or its nominee or custodian endorsed to, or registered in the name
of, the Indenture Trustee or its nominee or custodian or endorsed in
blank, and, with respect to a certificated
6
<PAGE> 11
security (as defined in Section 8-102 of the UCC), transfer thereof (i) by
delivery of such certificated security endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in
blank to a financial intermediary (as defined in Section 8-313 of the UCC)
and the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the
Indenture Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such
certificated security by the Indenture Trustee or its nominee or custodian
or (ii) by delivery thereof to a "clearing corporation" (as defined in
Section 8-102(3) of the UCC) and the making by such clearing corporation
of appropriate entries on its books reducing the appropriate securities
account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated
security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated securities by
such clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate
to effect the complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, FNMA
or FHLMC that are book-entry securities held through the Federal Reserve
System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial intermediary
that is also a "depository" pursuant to applicable federal regulations and
issuance by such financial intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Indenture
Trustee or its nominee or custodian of the purchase by the Indenture
Trustee or its nominee or custodian of such book-entry securities; the
making by such financial intermediary of entries in its books and records
identifying such book-entry securities held through the Federal Reserve
System pursuant to federal book-entry regulations as belonging to the
Indenture Trustee or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
7
<PAGE> 12
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of the
issuer thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the
Indenture Trustee or its nominee or custodian of such uncertificated
security, the making by such financial intermediary of entries on its
books and records identifying such uncertificated security as belonging to
the Indenture Trustee or its nominee or custodian.
Depositor: _______________________, a ____________________, and any
successor thereto.
Determination Date: With respect to any Distribution Date, the fourteenth
calendar day of the month in which such Distribution Date occurs or if such day
is not a Business Day, the immediately preceding Business Day.
Distribution Date: The 25th day of any month or, if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in ________ 199_ [SPECIFY THE MONTH IMMEDIATELY SUCCEEDING THE MONTH IN WHICH
THE CLOSING DATE OCCURS].
Distribution Statement: As defined in Section 6.01.
DTC: The Depository Trust Company.
Due Date: The day of the month on which the Monthly Payment is due from
the Obligor on a Mortgage Loan.
Due Period: With respect to any Determination Date or Distribution Date
(other than the first such date), the calendar month immediately preceding the
month in which such Determination Date or Distribution Date occurs, as the case
may be. With respect to the first Determination Date or the first Distribution
Date, the period from _______ __, 199_ through _______ ___, 199_. [SPECIFY
PERIOD RUNNING FROM THE DAY AFTER THE CLOSING DATE TO THE END OF THE MONTH IN
WHICH THE CLOSING DATE OCCURS.]
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee and
the Issuer, which depository institution or trust company shall have capital and
surplus of not less than $50,000,000; or (iv) an account that will not cause any
Rating Agency to downgrade or withdraw its then-current rating(s) assigned to
the Notes, as evidenced in writing by such Rating Agency. (Each reference in
this
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definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Standard & Poor's and DCR [ADD OR SUBSTITUTE RATING AGENCIES AS
APPROPRIATE].)
Eligible Servicer: A Person who is qualified to act as Servicer of the
Mortgage Loans under applicable federal and state laws and regulations.
Event of Default: As described in Section 10.01 hereof.
Excess Spread: With respect to any Distribution Date, the excess of (a)
the Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FICO Score: The credit evaluation scoring methodology developed by Fair,
Isaac and Company.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosure Property: Any real property securing a Mortgage Loan that has
been acquired by the Servicer through foreclosure, deed in lieu of foreclosure
or similar proceedings in respect of the related Mortgage Loan.
Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$100,000, and (ii) the close of business on ________ ___, 199___ [SPECIFY THE
DATE FOR THE LAST DAY OF THE THIRD MONTH SUCCEEDING THE MONTH IN WHICH THE
CLOSING DATE OCCURS].
Mortgage Loan: Any Debt Consolidation Loan or Combination Loan that is
included in the Mortgage Loan Pool. As applicable, a Mortgage Loan shall be
deemed to refer to the related Debt Instrument, Mortgage and any related
Foreclosure Property. The term "Mortgage Loan" includes any Subsequent Loan.
Mortgage Loan File: As defined in Section 2.05(a).
Mortgage Loan Interest Rate: The fixed annual rate of interest borne by a
Debt Instrument, as shown on the related Mortgage Loan Schedule as the same may
be modified by the Servicer in accordance with Section 4.01(c) hereof.
Mortgage Loan Pool: The pool of Mortgage Loans.
Mortgage Loan Purchase Agreement: The loan purchase agreement between the
Transferor, as seller, the Servicer and the Depositor, as purchaser, dated as of
_______ ___, 199__.
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Mortgage Loan Schedule: The schedule of Mortgage Loans attached hereto as
Exhibit A, as amended or supplemented from time to time, such schedule
identifying each Mortgage Loan by address (including the related state and zip
code) of the related Mortgaged Property, if any, and the name(s) of each Obligor
and setting forth as to each Mortgage Loan the following information: (i) the
Principal Balance as of the Cut-Off Date, (ii) the account number, (iii) the
original principal amount, (iv) the Due Date, (v) the Mortgage Loan Interest
Rate, (vi) the first date on which a Monthly Payment is due under the related
Debt Instrument, (vii) the Monthly Payment, (viii) the maturity date of the
related Debt Instrument, and (ix) the remaining number of months to maturity as
of the Cut-Off Date.
HUD: The United States Department of Housing and Urban Development and any
successor thereto.
Indenture: The Indenture, dated as of _____ ___, 199___, between the
Issuer and the Indenture Trustee.
Indenture Trustee: _________________________, a ______________________, as
Indenture Trustee under the Indenture and this Agreement, acting on behalf of
the Noteholders, or any successor indenture trustee under the Indenture or this
Agreement.
Indenture Trustee Fee: The annual fee payable to the Indenture Trustee,
calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i), equal to __% per annum percentage of the Pool Principal Balance as
of the first day of the immediately preceding Due Period.
Independent: When used with respect to any specified Person, such Person
that (i) is in fact independent of Cityscape Corp., the Servicer, the Depositor
or any of their respective affiliates, (ii) does not have any direct financial
interest in or any material indirect financial interest in any of Cityscape
Corp., the Servicer, the Depositor or any of their respective affiliates and
(iii) is not connected with any of Cityscape Corp., the Servicer, the Depositor
or any of their respective affiliates, as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of Cityscape
Corp., the Servicer, the Depositor or any of their respective affiliates merely
because such Person is the beneficial owner of 1% or less of any class of
securities issued by Cityscape Corp., the Servicer, the Depositor or any of
their respective affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Insurance Proceeds: With respect to any Mortgage Loan, the proceeds paid
to the Servicer by any insurer pursuant to any insurance policy covering a
Mortgage Loan, Mortgaged Property or Foreclosure Property or any other insurance
policy that relates to a Mortgage Loan, net of any expenses which are incurred
by the Servicer in connection with the collection of such proceeds and not
otherwise reimbursed to the Servicer, other than proceeds of any insurance
policy that are to be applied to the restoration or repair of the Mortgaged
Property or released to the Obligor in
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accordance with customary mortgage loan servicing procedures applicable to the
respective loan type, including Debt Consolidation Loans and Combination Loans.
Interest Determination Date: With respect to any Accrual Period, the
second London Business Day preceding the commencement of such Accrual Period.
Issuer: Cityscape Loan Trust 199_-_.
Liquidated Mortgage Loan: With respect to any date of determination, any
Mortgage Loan or Foreclosure Property in respect of a Mortgage Loan as to which
the Servicer has determined that all amounts which it reasonably and in good
faith expects to collect have been recovered from or on account of such Mortgage
Loan or the related Foreclosure Property; provided that, in any event, such
Mortgage Loan or the related Foreclosure Property shall be deemed uncollectible
and therefore deemed a Liquidated Mortgage Loan upon the earlier of: (a) the
liquidation of the related Foreclosure Property, (b) the determination by the
Servicer in accordance with customary servicing practices that no further
amounts are collectible from the Mortgage Loan and any related Mortgaged
Property, or (c) the date on which any portion of a Monthly Payment on any
Mortgage Loan is in excess of 180 consecutive days past due.
Liquidation Proceeds: With respect to a Liquidated Mortgage Loan, any cash
amounts received in connection with the liquidation of such Liquidated Mortgage
Loan, whether through trustee's sale, foreclosure sale or other disposition, and
any other amounts required to be deposited in the Collection Account pursuant to
Section 4.02 or 4.04, in each case, other than Insurance Proceeds and Released
Mortgaged Property Proceeds.
Loan-to-Value Ratio: With respect to any Mortgage Loan as of a given date,
the fraction, expressed as a percentage, the numerator of which is the Principal
Balance of the related Mortgage Loan as of such date and the denominator of
which is the value of the related Mortgaged Property, as established by the
latest appraisal.
London Business Day: Any day on which banks in the City of London or New
York are open and conducting transactions in United States dollars.
Loss Reimbursement Deficiency: With respect to any Distribution Date and
the Class [ ] Notes [INSERT ADDITIONAL CLASSES OF NOTES AS APPLICABLE], the
amount of Allocable Loss Amounts applied to the reduction of the Class Principal
Balance of such Class and not reimbursed pursuant to Section 5.01 hereof as of
such Distribution Date plus interest accrued thereon during the related Accrual
Period at the related Note Interest Rate.
Mandatory Redemption Date: The Distribution Date immediately following the
end of the Funding Period.
Majority Residual Interestholders: The holder, or holders in aggregate, of
a Residual Interest representing a Percentage Interest in excess of 50% in
amount.
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<PAGE> 16
Majority Securityholders: The holder or holders of in excess of 50% of the
Class Principal Balance of all Classes of Notes.
Maximum Collateral Amount: The sum of the Cut-Off Date Pool Principal
Balance and the Principal Balances of all Subsequent Loans as of the applicable
Cut-Off Dates.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Mortgage Loan, as set
forth in the related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a secured Mortgage Loan.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Mortgage Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Mortgage Loan is located as set forth in the Mortgage Loan Schedule.
Net Delinquency Calculation Amount: With respect to any Distribution Date,
beginning with the sixth Distribution Date, the excess, if any, of (x) the
product of 2.5 and the Six-Month Rolling Delinquency Average over (y) the
aggregate of the amount of Excess Spread for each of the three preceding
Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date, any cash
amounts received from Liquidated Mortgage Loans during the related Due Period,
whether through trustee's sale, foreclosure sale, disposition of Mortgaged
Properties or otherwise (other than Insurance Proceeds and Released Mortgaged
Property Proceeds), and any other cash amounts received in connection with the
management of the Mortgaged Properties relating to Defaulted Loans, in each
case, net of any reimbursements to the Servicer made from such amounts for any
unreimbursed Servicing Compensation and Servicing Advances (including
Nonrecoverable Servicing Advances) made and any other fees and expenses paid in
connection with the foreclosure, conservation and liquidation of the related
Liquidated Mortgage Loans or Foreclosure Property pursuant to Sections 4.02 and
4.04 hereof.
Net Loan Losses: On each Distribution Date, the sum of
(A) with respect to the Mortgage Loans that become Liquidated Mortgage
Loans during the immediately preceding Due Period, an amount (but not less than
zero) determined as of the related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such Liquidated
Mortgage Loans as of the last day of such Due Period prior to the
application of any amounts included in clause (ii) below, minus
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<PAGE> 17
(ii) the aggregate amount, with respect to such Liquidated Mortgage
Loans, of any recoveries attributable to principal from whatever source
received during any Due Period, including any Due Period subsequent to the
Due Period wherein such Mortgage Loan became a Liquidated Mortgage Loan
and including, without limitation, any Net Liquidation Proceeds, any
Insurance Proceeds, any Released Mortgaged Property Proceeds, any payments
from the related Obligor and any payments made pursuant to Section 3.06,
less the amount of any expenses incurred in connection with such
recoveries; and
(B) the aggregate Cram Down Losses during the related Due Period.
Net Loan Rate: With respect to each Mortgage Loan, the related Mortgage
Loan Interest Rate, less the rate at which the Servicing Fee is calculated.
Nonrecoverable Servicing Advance: (A) Any Servicing Advance previously
made and not reimbursed from late collections, Liquidation Proceeds, Insurance
Proceeds, Post Liquidation Proceeds or the Released Mortgaged Property Proceeds,
or (B) a Servicing Advance proposed to be made in respect of a Mortgage Loan or
Foreclosure Property, either of which, in the good faith business judgment of
the Servicer, as evidenced by an Officer's Certificate delivered to the
Indenture Trustee, would not be ultimately recoverable.
Note: Any of the Senior Notes and the Class [ ] Notes. [ADD ANY ADDITIONAL
CLASSES OF NOTES WHERE APPROPRIATE.]
Note Distribution Account: The account established and maintained pursuant
to Section 5.01(a)(2).
Noteholder: A holder of a Note.
Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Senior Noteholders' Interest Distribution
Amount and the Class [ ] Noteholders' Interest Distribution Amount for such
Distribution Date. [ADD ANY ADDITIONAL CLASSES OF NOTES WHERE APPROPRIATE.]
Note Interest Rate: With respect to each Class of Notes and any
Distribution Date, the per annum rate of interest payable to the holders of such
Class of Notes. The Note Interest Rates with respect to the Classes of Notes are
as follows:
Class A-[ ] Notes: [SPECIFY INTEREST RATE OR FORMULA
USED TO CALCULATED INTEREST RATE.]
Class [ ] Notes: [SPECIFY INTEREST RATE OR FORMULA
USED TO CALCULATED INTEREST RATE.]
[ADD ANY OTHER CLASSES OF NOTES AND THEIR CORRESPONDING INTEREST RATES AS
APPLICABLE.]
Obligor: Each obligor on a Debt Instrument.
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<PAGE> 18
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Depositor, the Servicer or the Transferor, in each case, as
required by this Agreement.
[IF FLOATING-RATE NOTES ARE CONTEMPLATED, ADD: ONE-MONTH LIBOR: WITH
RESPECT TO ANY ACCRUAL PERIOD AND THE CLASS [ ] NOTES, THE RATE DETERMINED BY
THE INDENTURE TRUSTEE ON THE RELATED INTEREST DETERMINATION DATE ON THE BASIS OF
THE OFFERED RATES OF THE REFERENCE BANKS FOR ONE-MONTH UNITED STATES DOLLAR
DEPOSITS, AS SUCH RATES APPEAR ON TELERATE SCREEN 3750, AS OF 11:00 A.M. (LONDON
TIME) ON SUCH INTEREST DETERMINATION DATE. ON EACH INTEREST DETERMINATION DATE,
ONE-MONTH LIBOR FOR THE RELATED ACCRUAL PERIOD WILL BE ESTABLISHED BY THE
INDENTURE TRUSTEE AS FOLLOWS:
(i) IF ON SUCH INTEREST DETERMINATION DATE TWO OR MORE REFERENCE
BANKS PROVIDE SUCH OFFERED QUOTATIONS, ONE-MONTH LIBOR FOR THE RELATED
ACCRUAL PERIOD SHALL BE THE ARITHMETIC MEAN OF SUCH OFFERED QUOTATIONS
(ROUNDED UPWARDS IF NECESSARY TO THE NEAREST WHOLE MULTIPLE OF 1/16%).
(ii) IF ON SUCH INTEREST DETERMINATION DATE FEWER THAN TWO REFERENCE
BANKS PROVIDE SUCH OFFERED QUOTATIONS, ONE-MONTH LIBOR FOR THE RELATED
ACCRUAL PERIOD SHALL BE THE HIGHER OF (i) ONE-MONTH LIBOR AS DETERMINED ON
THE PREVIOUS INTEREST DETERMINATION DATE AND (ii) THE RESERVE INTEREST
RATE.]
Optimal Principal Balance: With respect to the Senior Notes [INSERT
ADDITIONAL CLASSES OF NOTES AS APPLICABLE], the Senior Optimal Principal Balance
[WITH RESPECT TO EACH ADDITIONAL CLASS OF NOTE TO WHICH OPTIMAL PRINCIPAL
BALANCE IS RELEVANT, INSERT THE DEFINED TERM FOR OPTIMAL PRINCIPAL BALANCE WITH
RESPECT TO SUCH CLASS OF NOTE].
Original Class Principal Balance: With respect to the Classes of
Securities, as follows: Class A-[ ]: $_____ and Class [ ]: $_____ [ADD
ADDITIONAL CLASSES OF NOTES AS APPROPRIATE].
Original Pool Principal Balance: $ _____________, which is the Pool
Principal Balance as of the Cut-Off Date.
Original Pre-Funded Amount: $ ______________.
Overcollateralization Amount: With respect to any Distribution Date, the
amount equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funded Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
all distributions on the Classes of Securities and to the Residual Interest on
such Distribution Date).
Overcollateralization Deficiency Amount: With respect to any Distribution
Date, the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount (such Overcollateralization Amount to be calculated
after giving effect to all prior distributions on the Classes of Securities and
to the Residual Interest on such Distribution Date pursuant to Section 5.01(d)
hereof).
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Overcollateralization Target Amount: (A) With respect to any Distribution
Date occurring prior to the Stepdown Date, an amount equal to the greater of (x)
8% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; (B) with respect to any other Distribution Date, an amount equal to the
greater of (x) 16% of the Pool Principal Balance as of the end of the related
Due Period and (y) the Net Delinquency Calculation Amount; provided, however,
that the Overcollateralization Target Amount shall in no event be less than
0.50% of the Maximum Collateral Amount.
Ownership Interest: As to any Security, any ownership or security interest
in such Security, including any interest in such Security as the holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
Owner Trustee: ______________________, as owner trustee under the Trust
Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $2,500, payable in equal monthly
installments to the Servicer, who shall in turn pay such $2,500 to the Owner
Trustee on the Distribution Date occurring in _______ each year during the term
of this Agreement, commencing in _____ 199___; provided, however, that the
initial Owner Trustee Fee shall be paid by the Transferor on the Closing Date.
Percentage Interest: As defined in the Trust Agreement.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(2) a repurchase agreement that satisfies the following criteria:
(1) the agreement must be between the Indenture Trustee and either (a)
primary dealers on the Federal Reserve reporting dealer list which are
rated in one of the two highest categories for long-term unsecured debt
obligations by at least one Rating Agency, or (b) banks rated in one of
the two highest categories for long-term unsecured debt obligations by at
least one Rating Agency; and (2) the written agreement must include the
following: (a) securities which are acceptable for transfer and are either
(I) direct U.S. government obligations, or (II) obligations of a federal
agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for any
repurchase transaction; (c) the collateral must be delivered to the
Indenture Trustee or a third party custodian acting as agent for the
Indenture Trustee by appropriate book entries and confirmation statements
and must have been delivered before or simultaneous with payment (i.e.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at the
current market price plus accrued interest, and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement, and
if the value of the securities held as collateral declines to an amount
below 104% of the cash
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<PAGE> 20
transferred by the Indenture Trustee plus accrued interest (i.e., a margin
call), then additional cash and/or acceptable securities must be
transferred to the Indenture Trustee to satisfy such margin call;
provided, however, that if the securities used as collateral are
obligations of FNMA or FHLMC, then the value of the securities held as
collateral must equal at least 105% of the cash transferred by the
Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company incorporated
under the laws of the United States or any state, including the Indenture
Trustee; provided that the debt obligations of such depository institution
or trust company at the date of the acquisition thereof have been rated by
at least one Rating Agency in one of its two highest long-term rating
categories;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof, including corporate affiliates
of the Indenture Trustee, which at the date of acquisition is rated by at
least one Rating Agency in its highest short-term rating category and
which has an original maturity of not more than 365 days;
(6) debt obligations rated by at least one Rating Agency at the time
at which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository institutions
which have debt obligations rated by at least one Rating Agency in one of
its two highest long-term rating categories);
(7) money market funds which are rated by at least one Rating
Agency at the time at which the investment is made in its highest
long-term rating category, any such money market funds which provide for
demand withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; provided, further, that no instrument described in the
foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Any loans repurchased after the end of a Due Period
and prior to the following Determination Date shall be deemed to have been
repurchased during such Due Period.
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Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of Standard & Poor's and DCR [ADD OR
SUBSTITUTE OTHER RATING AGENCIES WHERE APPROPRIATE].
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Mortgage Loans as of the end of the
preceding Due Period, provided, however, that the Pool Principal Balance as of
the end of the Due Period relating to the Distribution Date on which the
Termination Price is to be paid will be deemed to have been equal to zero as of
such date.
Post Liquidation Proceeds: As defined in Section 4.02(b).
Pre-Funded Percentage: With respect to any Class of Notes and a
Distribution Date, the percentage obtained from the fraction, the numerator of
which is the Class Principal Balance of such Class of Notes on the Closing Date
and the denominator of which is the Maximum Collateral Amount.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee pursuant to Section 5.05.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Distribution Date in _____ 199__
[INSERT THE NAME OF THE MONTH IMMEDIATELY SUCCEEDING THE MONTH IN WHICH THE
CLOSING DATE OCCURS], the actual investment earnings earned on amounts on
deposit in the Pre-Funding Account during the period from _______ ___, 199___
through and including ______ ____, 199___ [SPECIFY END DATE OF THE MONTH IN
WHICH THE CLOSING DATE OCCURS]. With respect to the Distribution Date in
________ 199___ [SPECIFY THE SECOND MONTH SUCCEEDING THE MONTH IN WHICH THE
CLOSING DATE OCCURS], the actual investment earnings earned on amounts on
deposit in the Pre-Funding Account during the period from _______ ____, 199___
through and including ______ ___, 199__ [SPECIFY THE DATES FOR FIRST AND LAST
DAYS OF THE MONTH IMMEDIATELY SUCCEEDING THE MONTH IN WHICH THE CLOSING DATE
OCCURS] (which amount shall be available on ______ ___, 199__). With respect to
the Distribution Date in ________ 199__ [SPECIFY THE THIRD MONTH SUCCEEDING THE
MONTH IN WHICH THE CLOSING DATE OCCURS], the actual investment earnings earned
on amounts on deposit in the Pre-Funding Account during the period from ________
___, 199__ through and including _______ __, 199__ [SPECIFY THE DATES FOR FIRST
AND LAST DAYS OF THE MONTH IN WHICH THE CLOSING DATE OCCURS] (which amount shall
be available on _________ ___, 199__).
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<PAGE> 22
Pre-Funding Pro Rata Distribution Trigger: With respect to the
Distribution Date following the Due Period in which the termination of the
Funding Period occurs, a Pre-Funding Pro Rata Distribution Trigger will be
deemed to have occurred if, at such time, the Pre-Funded Amount was greater than
or equal to $100,000.
Principal Balance: With respect to any Mortgage Loan or related
Foreclosure Property, (i) at the Cut-Off Date, the outstanding unpaid principal
balance of the Mortgage Loan as of the Cut-Off Date and (ii) with respect to any
date of determination, the outstanding unpaid principal balance of the Mortgage
Loan as of the last day of the preceding Due Period (after giving effect to all
payments received thereon and the allocation of any Net Loan Losses [PURSUANT TO
CLAUSE (B) THEREOF] with respect thereto for any Defaulted Mortgage Loan which
relates to such Due Period), without giving effect to amounts received in
respect of such Mortgage Loan or related Foreclosure Property after such Due
Period; provided, however, that any Mortgage Loan that became a Liquidated
Mortgage Loan during the preceding Due Period shall have a Principal Balance of
zero. With respect to any Distribution Date, any Mortgage Loans repurchased in
the month following the end of the related Due Period but prior to the
Determination Date in such month shall be deemed to have been repurchased during
such related Due Period. [QUERY: WHY LIMIT TO CRAM DOWN LOSSES?]
Principal Prepayment: With respect to any Mortgage Loan and any Due
Period, any principal amount received on a Mortgage Loan in excess of the
principal portion of the Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the
Mortgage which secures the Debt Instrument evidencing a secured Mortgage Loan.
Purchase Price: As defined in Section 3.06 herein.
Qualified Substitute Mortgage Loan: A mortgage loan or mortgage loans
substituted for a Defective Mortgage Loan pursuant to Section 2.06 or 3.06,
which (i) has or have an interest rate or rates of not less than two percentage
points fewer and not more than two percentage points greater than the Mortgage
Loan Interest Rate for the Defective Mortgage Loan, (ii) matures or mature not
more than two years later than, and not more than two years earlier than, the
Defective Mortgage Loan (provided, however, that no such Qualified Substitute
Mortgage Loan shall mature later than the latest maturing Mortgage Loan in the
Trust as of the Closing Date), (iii) has or have a principal balance or
principal balances (after application of all payments received on or prior to
the date of substitution) equal to or less than the Principal Balance of the
Defective Mortgage Loan as of such date, (iv) has or have a lien priority equal
or superior to that of the Defective Mortgage Loan, (v) has or have a borrower
with a comparable credit grade classification to the credit grade classification
of the borrower with respect to the Deleted Mortgage Loans, including a FICO
Score that is no more than 10 points below that of such Deleted Mortgage Loan;
and (vi) complies or comply as of the date of substitution with each
representation and warranty set forth in Section 3.04 and is or are not more
than 29 days delinquent as of the date of substitution for such Deleted Mortgage
Loan. For purposes of determining whether multiple mortgage loans proposed to be
substituted for one or more Deleted Mortgage Loans pursuant to Section 2.06 or
3.06 are in fact
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<PAGE> 23
"Qualified Substitute Mortgage Loans" as provided above, the criteria specified
in clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (e.g., so long as the
weighted average Mortgage Loan Interest Rate of any loans proposed to be
substituted is not less than two percentage points fewer than and not more than
two percentage points greater than the Mortgage Loan Interest Rate for the
designated Deleted Mortgage Loan or Mortgage Loans, the requirements of clause
(i) above would be deemed satisfied).
Rating Agencies: Standard & Poor's and DCR [ADD OR SUBSTITUTE OTHER RATING
AGENCIES AS APPROPRIATE]. If, with respect to either such organization, neither
such organization nor a successor is any longer in existence, "Rating Agency"
shall mean a nationally recognized statistical rating organization or other
comparable person designated by the Issuer, notice of which designation shall
have been given to the Indenture Trustee, the Issuer and the Servicer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date, the close of business
on the last Business Day of the month immediately preceding the month in which
such Distribution Date occurs.
[IF FLOATING RATE NOTES ARE CONTEMPLATED, ADD: REFERENCE BANKS: BANKERS
TRUST COMPANY, BARCLAY'S BANK PLC, THE BANK OF TOKYO AND NATIONAL WESTMINSTER
BANK PLC; PROVIDED THAT IF ANY OF THE FOREGOING BANKS ARE NOT SUITABLE TO SERVE
AS A REFERENCE BANK, THEN ANY LEADING BANKS SELECTED BY THE INDENTURE TRUSTEE
WHICH ARE ENGAGED IN TRANSACTIONS IN EURODOLLAR DEPOSITS IN THE INTERNATIONAL
EUROCURRENCY MARKET (i) WITH AN ESTABLISHED PLACE OF BUSINESS IN LONDON,
ENGLAND, (ii) WHO ARE NOT CONTROLLING, UNDER THE CONTROL OF OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR ANY AFFILIATE THEREOF, (iii) WHOSE QUOTATIONS
APPEAR ON TELERATE SCREEN 3750 ON THE RELEVANT INTEREST DETERMINATION DATE AND
(iv) WHO HAVE BEEN DESIGNATED AS SUCH BY THE TRUSTEE.]
Regular Distribution Amount: With respect to any Distribution Date, the
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Noteholders' Interest Distribution Amount, (ii) the Regular Principal
Distribution Amount and (iii) if such Distribution Date relates to the Due
Period in which the Funding Period ended and at the termination of such Funding
Period a Pre-Funding Pro Rata Distribution Trigger occurred, the amount on
deposit in the Pre-Funding Account on such date.
Regular Principal Distribution Amount: On each Distribution Date, an
amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Securities immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal actually
collected by the Servicer in the related Due Period, (ii) all partial and
full principal prepayments applied by
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the Servicer during such related Due Period, (iii) the principal portion
of all Net Liquidation Proceeds, Insurance Proceeds and Released Mortgaged
Property Proceeds received during the related Due Period, (iv) that
portion of the Purchase Price, received prior to the related Determination
Date, that represents principal of the related Repurchased Mortgage Loan,
(v) the principal portion of any Substitution Adjustments required to be
deposited in the Collection Account as of the related Determination Date,
(vi) if such Distribution Date relates to the Due Period in which the
Funding Period ended and at the termination of such Funding Period a
Pre-Funding Pro Rata Distribution Trigger did not occur, the amount on
deposit in the Pre-Funding Account on such date and (vii) on the
Distribution Date on which the Trust is to be terminated pursuant to
Section 11.02 hereof, that portion of the Termination Price to be applied
to the payment of principal of the Securities.
Released Mortgaged Property Proceeds: With respect to any secured Mortgage
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which in either case are not released to the Obligor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
Reserve Interest Rate: With respect to any Interest Determination Date,
the rate per annum that the Indenture Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
1/16%) of the one-month United States dollar lending rates which New York City
banks selected by the Indenture Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month United States dollar
lending rate which New York City banks selected by the Indenture Trustee are
quoting on such Interest Determination Date to leading European banks.
Residual Interest: The interest which represents (i) the right to the
amount remaining, if any, after all prior distributions have been made under
this Agreement, the Indenture and the Trust Agreement on each Distribution Date
and (ii) certain other rights to receive amounts hereunder and under the Trust
Agreement.
Residual Interest Instrument: As defined in the Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee 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 to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Depositor, the
Transferor, the Servicer, or the Custodian,
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then the President or any Vice President, Assistant Vice President, or any
Secretary or Assistant Secretary.
Securities: The Notes.
Securityholder: A holder of a Note.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of (A) the Senior Noteholders' Monthly Interest
Distribution Amount for the preceding Distribution Date and any outstanding
Senior Noteholders' Interest Carry-Forward Amount for preceding Distribution
Dates, over (B) the amount in respect of interest that was actually distributed
to such Notes on such preceding Distribution Date.
Senior Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Senior Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Senior Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Senior Noteholders' Monthly Interest Distribution Amount: With respect to
each Distribution Date (other than the first Distribution Date) and the Classes
of Senior Notes, the aggregate amount of interest accrued during the related
Accrual Period at the respective Note Interest Rates on the respective Class
Principal Balances of such Classes immediately preceding such Distribution Date.
Senior Notes: The Class A-[ ] Notes [ADD ADDITIONAL CLASSES OF NOTES WHERE
APPROPRIATE].
Senior Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
an amount equal to the Pool Principal Balance as of the preceding Determination
Date minus the greater of (a) the sum of (1) 47.0% of the Pool Principal Balance
as of the preceding Determination Date and (2) the Overcollateralization Target
Amount for such Distribution Date (without giving effect to the proviso in the
definition thereof) and (b) 0.50% of the Maximum Collateral Amount; provided,
however, that the Senior Optimal Principal Balance shall never be less than zero
or greater than the aggregate Note Principal Balance of the Senior Notes as of
the Closing Date.
Series or Series 199 - : Cityscape Mortgage Loan Asset Backed Notes,
Series 199_-_.
Servicer: Cityscape, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer Mortgage Loan File: In respect of each Mortgage Loan, all
documents customarily included in the servicer's loan file for the related type
of Mortgage Loan in accordance with the servicing standard set forth in Section
4.01.
Servicer Remittance Report: The monthly report described in Section
6.01(a).
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Servicing Advances: Subject to Section 4.01(b), all reasonable, customary
and necessary "out of pocket" costs and expenses advanced or paid by the
Servicer with respect to the Mortgage Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of the Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.02, (iii) the conservation, management
and sale or other disposition of a Foreclosure Property pursuant to Section
4.04, (iv) the preservation of the security for a Mortgage Loan if any
lienholder under a Superior Lien has accelerated or intends to accelerate the
obligations secured by such Superior Lien pursuant to Section 4.06; provided,
however, that such Servicing Advances are reimbursable to the Servicer on
account of late collections as set forth in Section 5.01(b)(3)(iii) or, to the
extent that such Servicing Advances constitute Nonrecoverable Servicing
Advances, from any amounts on deposit in the Collection Account.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Sections 7.01 and 7.03.
Servicing Fee: As to each Mortgage Loan (including any Mortgage Loan that
has been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Mortgage Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the (i) product of 0.50% (fifty (50) basis
points) and the Principal Balance of such Mortgage Loan as of the beginning of
the immediately preceding Due Period (ii) divided by twelve (12). The Servicing
Fee is inclusive of any servicing fees owed or payable to any Subservicer, which
fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Issuer and the Indenture Trustee, as such list may from
time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Distribution
Date, the average of the applicable 60-Day Delinquency Amounts for each of the
six immediately preceding Due Periods, where the 60-Day Delinquency Amount for
any Due Period is the aggregate of the Principal Balances of (i) all Loans that
are sixty (60) or more days delinquent, (ii) all Loans that are in foreclosure
and (iii) all Foreclosure Property, each as of the end of such Due Period.
Standard & Poor's: Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., or any successor thereto. [ADD OR SUBSTITUTE
DEFINITION FOR OTHER RATING AGENCIES WHERE APPROPRIATE]
Stepdown Date: The first Distribution Date occurring after ____________
___ as to which all of the following conditions exist:
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(1) the Pool Principal Balance has been reduced to an amount less
than or equal to 50% of the Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 8% of the
Original Pool Principal Balance; and
(3) the aggregate Class Principal Balance of the Senior Notes (after
giving effect to distributions of principal on such Distribution Date)
will be reduced on such Distribution Date (such determination to be made
by the Indenture Trustee prior to making actual distributions on such
Distribution Date) to the excess of (i) the Pool Principal Balance as of
the preceding Determination Date over (ii) the greater of (a) the sum of
(1) 47.0% of the Pool Principal Balance as of the preceding Determination
Date and (2) the Overcollateralization Target Amount for such Distribution
Date (such Overcollateralization Target Amount to be calculated for this
purpose solely pursuant to clause (B) in the definition thereof and
without giving effect to clause (A) or the proviso in the definition
thereof) and (b) 0.50% of the Maximum Collateral Amount.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan which is transferred to the Trust during any month
and which does not have a Monthly Payment due until the second Due Period
following such month, an amount equal to the product of (a) the Loan Balance of
such Subsequent Loan on the related Cut-Off Date and (b) one-twelfth of the Net
Loan Rate on such Subsequent Loan.
Subsequent Loans: The Mortgage Loans sold to the Trust for inclusion
pursuant to Section 2.07 of this Agreement and the applicable Subsequent
Transfer Agreement, which shall be listed on the loan schedule attached to such
Subsequent Transfer Agreement.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Owner Trustee, Indenture Trustee and Transferor, substantially in the
form in Exhibit E hereto, by which Subsequent Loans are sold and assigned to the
Trust.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement; provided, however, that in no event shall there be more than three
(3) such Subsequent Transfer Agreements.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of a
Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to
a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all
Mortgage Loans, as provided in Section 4.07(a), copies of which shall be made
available, along with any modifications thereto, to the Issuer and the Indenture
Trustee.
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Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.06 or 3.06, the amount, if any, by which (a) the sum of
the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Mortgage Loans as of the date of substitution and any accrued and unpaid
interest thereon to the date of substitution, is less than (b) the aggregate of
the Principal Balances, together with accrued and unpaid interest thereon to the
date of substitution, of the related Defective Mortgage Loans.
Superior Lien: With respect to any Mortgage Loan which is secured by a
lien other than a first priority lien, the mortgage loan(s) relating to the
corresponding Mortgaged Property having a superior priority lien.
Termination Price: As of any date of determination, an amount equal to the
sum of the following items, without duplication: (i) the then outstanding
Principal Balances of the Mortgage Loans plus all accrued and unpaid interest
thereon, (ii) any Trust Fees and Expenses due and unpaid on such date and (iii)
any unreimbursed Servicing Advances or any Nonrecoverable Servicing Advances.
Transferor: ______________________, in its capacity as the transferor
hereunder.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Certificate
Distribution Account, the Collection Account, the Pre-Funding Account and the
Capitalized Interest Account.
Trust Agreement: The Trust Agreement dated as of __________, 199_, among
the Depositor, the Company, the Co-Owner Trustee and the Owner Trustee.
Trust Estate: The assets subject to this Agreement, the Trust Agreement
and the Indenture and assigned to the Trust, which assets consist of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, as listed in
the Mortgage Loan Schedule as the same may be amended or supplemented from time
to time, including the addition of Subsequent Loans, the removal of Deleted
Mortgage Loans and the addition of Qualified Substitute Mortgage Loans, together
with the Servicer Mortgage Loan Files and the Trustee Mortgage Loan Files
relating thereto and all proceeds thereof, (ii) all payments in respect of
interest received with respect to the Mortgage Loans on or after the Cut-Off
Date and all payments received with respect to principal on or after the Cut-Off
Date, (iii) such assets as from time to time are identified as Foreclosure
Property, (iv) such assets and funds as are from time to time deposited in the
Collection Account, the Note Distribution Account and the Certificate
Distribution Account, including amounts on deposit in such accounts which are
invested in Permitted Investments, (v) the Issuer's rights under all insurance
policies with respect to the Mortgage Loans, (vi) any Insurance Proceeds, (vii)
Net Liquidation Proceeds, Post Liquidation Proceeds and Released Mortgaged
Property Proceeds, (viii) all right, title and interest of the Servicer and the
Transferor in and to the rights and obligations of
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any Subservicer, pursuant to any Subservicing Agreement and (ix) all rights,
title and interest of the Depositor in and to the obligations of the Transferor
under the Mortgage Loan Purchase Agreement in which the Depositor acquired the
Mortgage Loans from the Transferor.
Trust Fees and Expenses: As of each Distribution Date, an amount equal to
the Servicing Compensation, the Indenture Trustee Fee and the Owner Trustee Fee.
Trustee Mortgage Loan File: As defined in Section 2.05(d).
Underwriters: Greenwich Capital Markets, Inc. and ____________________.
Uninsured Cause: Any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to this Agreement.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of
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agreements or instruments) references to all attachments thereto and instruments
incorporated therein.
(g) References to a "Person" are also to its permitted successors and
assigns.
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ARTICLE II.
CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01 Conveyance of the Mortgage Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery of
the Notes and Residual Interest Instruments to the Depositor, or its designee
upon the order of the Depositor, the Depositor, as of the Closing Date and
concurrently with the execution and delivery hereof, does hereby sell, transfer,
assign, set over and otherwise convey to the Trust, without recourse, but
subject to the other terms and provisions of this Agreement, all of the right,
title and interest of the Depositor in and to the Trust Estate. The foregoing
sale, transfer, assignment, set over and conveyance does not and is not intended
to result in a creation or an assumption by the Trust of any obligation of the
Depositor, the Transferor or any other person in connection with the Trust
Estate or under any agreement or instrument relating thereto, except as
specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it
of the Trust Estate, including all right, title and interest of the Depositor in
and to the Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery and in exchange therefor, the Issuer has pledged
the Trust Estate to the Indenture Trustee, and the Indenture Trustee, pursuant
to the written instructions of the Issuer, has executed and caused to be
authenticated and delivered the Notes to the Depositor, or its designee upon the
order of the Issuer. In addition, concurrently with such delivery and in
exchange therefor, the Owner Trustee, pursuant to the instructions of the
Depositor, has executed (not in its individual capacity, but solely as Owner
Trustee on behalf of the Issuer) and caused to be authenticated and delivered
the Residual Interest Instruments to the Depositor or its designee, upon the
order of the Depositor.
Section 2.02 [RESERVED].
Section 2.03 Ownership and Possession of Mortgage Loan Files.
Upon the issuance of the Securities, with respect to each of the Mortgage
Loans, the ownership of the related Debt Instrument and Mortgage and the
contents of the related Servicer Mortgage Loan File and the Trustee Mortgage
Loan File shall be vested in the Owner Trustee and the Co-Owner Trustee and
pledged to the Indenture Trustee for the benefit of the Securityholders,
although possession of the Servicer Mortgage Loan Files (other than items
required to be maintained in the Trustee Mortgage Loan Files) on behalf of and
for the benefit of the Securityholders shall remain with the Servicer as
contemplated in Section 2.06, and the Custodian shall take possession of the
Trustee Mortgage Loan Files as contemplated in Section 2.05.
Section 2.04 Books and Records.
The sale of each Mortgage Loan shall be reflected on the Depositor's or
the Transferor's, as the case may be, balance sheets and other financial
statements as a sale of assets by the Depositor or the Transferor, as the case
may be, under generally accepted accounting principles. Each of the Servicer and
the Custodian shall be responsible for maintaining, and shall maintain, a
complete set
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of books and records for each Mortgage Loan, which shall be clearly marked to
reflect the ownership of each Mortgage Loan by the Owner Trustee and the
Co-Owner Trustee and pledged to the Indenture Trustee for the benefit of the
Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Mortgage Loans and the other property specified in Section 2.01(a) from the
Depositor to the Trust, and such property shall not be property of the
Depositor. If the assignment and transfer of the Mortgage Loans and the other
property specified in this Section 2.01(a) to the Owner Trustee and Co-Owner
Trustee pursuant to this Agreement or the conveyance of the Mortgage Loans or
any of such other property to the Owner Trustee and Co-Owner Trustee is held or
deemed not to be a sale or is held or deemed to be a pledge of security for a
loan, the Depositor intends that the rights and obligations of the parties shall
be established pursuant to the terms of this Agreement and that, in such event,
(i) the Depositor shall be deemed to have granted and does hereby grant to the
Owner Trustee and Co-Owner Trustee a first priority security interest in the
entire right, title and interest of the Depositor in and to the Mortgage Loans
and all other property conveyed to the Owner Trustee and Co-Owner Trustee
pursuant to Section 2.01(a) and all proceeds thereof, and (ii) this Agreement
shall constitute a security agreement under applicable law. Within five (5) days
after the Closing Date, the Depositor shall cause to be filed UCC-1 financing
statements naming the Owner Trustee and Co-Owner Trustee as "secured parties"
and describing the Mortgage Loans and such other assets being sold by the
Depositor to the Trust with the office of the Secretary of State of the state in
which the Depositor is located.
Section 2.05 Delivery of Mortgage Loan Documents.
(a) With respect to each Mortgage Loan, on the Closing Date the Transferor
has delivered or caused to be delivered to the Custodian, as the designated
agent of the Indenture Trustee, each of the following documents (collectively,
the "Mortgage Loan Files"):
(i) The original Debt Instrument, endorsed by Cityscape in blank or
in the following form: "Pay to the order of ____________________, as
Indenture Trustee and Co-Owner Trustee under the Sale and Servicing
Agreement, dated as of ____________ ___, 199_, Cityscape Loan Trust
199_-_, without recourse", with all prior and intervening endorsements
showing a complete chain of endorsement from origination of the Mortgage
Loan to Cityscape;
(ii) The original Mortgage with evidence of recording thereon (or,
if the original Mortgage has not been returned from the applicable public
recording office or is not otherwise available, a copy of the Mortgage
certified by a Responsible Officer of the Transferor or by the closing
attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy or commitment
therefor to be a true and complete copy of the original Mortgage submitted
for recording) and, if the Mortgage was executed pursuant to a power of
attorney, the original power of attorney with evidence of recording
thereon (or, if the original power of attorney has not been returned from
the applicable public recording office or is not otherwise available, a
copy of the power of attorney certified by a Responsible Officer of the
Transferor or by the closing attorney or by
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an officer of the title insurer or agent of the title insurer which issued
the related title insurance policy or commitment therefor, to be a true
and complete copy of the original power of attorney submitted for
recording);
(iii) The original executed Assignment of Mortgage, acceptable for
recording except with respect to any currently unavailable recording
information, from the Transferor to the Indenture Trustee in blank or in
the following form: "____________________, as Indenture Trustee and
Co-Owner Trustee under the Sale and Servicing Agreement, dated as of
____________ ___, 199_, of Cityscape Loan Trust 199_-_";
(iv) The original Assignment of Mortgage and any original
intervening Assignments of Mortgage, with evidence of recording thereon,
showing a complete chain of assignment from origination of the Mortgage
Loan to the Transferor (or, if any such Assignment of Mortgage has not
been returned from the applicable public recording office or is not
otherwise available, a copy of such Assignment of Mortgage certified by a
Responsible Officer of the Transferor or by the closing attorney or by an
officer of the title insurer or agent of the title insurer which issued
the related title insurance policy or commitment therefor to be a true and
complete copy of the original Assignment submitted for recording); and
(v) the original, or a copy certified by the Transferor to be a true
and correct copy of the original, of each assumption, modification,
written assurance or substitution agreement, if any.
(b) [RESERVED].
(c) With respect to any Mortgage referred to in Section 2.05(a)(ii) above
as to which the original Mortgage is not available as of the Closing Date or the
Subsequent Transfer Date, as the case may be, and with respect to any Assignment
of Mortgage referred to in Section 2.05(a)(iii) or 2.05(a)(iv) as to which the
original Assignment of Mortgage is not available as of the Closing Date or the
Subsequent Transfer Date, as the case may be, the Transferor shall deliver to
the Indenture Trustee, prior to the Closing Date or the Subsequent Transfer
Date, as the case may be, a copy of such Mortgage or such Assignment of
Mortgage, as the case may be, certified by the Transferor to be a true and
correct copy, and shall also deliver the original Mortgage, or where the
original Mortgage is unavailable, a copy thereof certified by the applicable
public recording office, and the original Assignment of Mortgage, or where the
original Assignment of Mortgage is unavailable, a copy thereof certified by the
applicable public recording office, to the Indenture Trustee within five (5)
Business Days of receipt thereof by the Transferor, but in no event later than
360 days following the date of origination of the related Mortgage Loan or the
date of such Assignment of Mortgage to the Transferor. The failure of the
Transferor to deliver to the Indenture Trustee (x) any original Mortgage under
Section 2.05(a)(ii) (or where the original is unavailable a copy thereof
certified by the applicable public recording office), or (y) any original
Assignment of Mortgage under Section 2.05(a)(iii) and (iv) (or where the
original is unavailable a copy thereof certified by the applicable public
recording office), shall not be deemed a breach of this Agreement for any
purpose whatsoever until the expiration of such 360-day period.
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The Indenture Trustee shall promptly (and in no event later than five (5)
Business Days following the Closing Date and each Subsequent Transfer Date)
submit for recording, at the Transferor's own expense, in the appropriate public
office for real property records, each original Assignment of Mortgage referred
to in Section 2.05(a)(iii) above, as well as each original Assignment of
Mortgage referred to in Section 2.05(a)(iv) above that was not previously
submitted for recording. With respect to any original Assignment of Mortgage
referred to in Section 2.05(a)(iii) above as to which the related recording
information is unavailable within five (5) Business Days following the Closing
Date or Subsequent Transfer Date, as the case may be, such original Assignment
of Mortgage shall be submitted for recording within five (5) Business Days after
receipt of such information (or any longer period as approved by the Indenture
Trustee in writing with respect to specific Mortgage Loans upon the request of
the Transferor pursuant to an Officer's Certificate in accordance with Accepted
Servicing Procedures stating the amount of time generally required by the
applicable recording office to record and return such documents submitted for
recordation) after the Closing Date or Subsequent Transfer Date. The Transferor
shall deliver each recorded Assignment of Mortgage referred to in Section
2.05(a)(iii) or, where the original is unavailable, a copy thereof certified by
the applicable public recording office to be a true and correct copy of the
original, to the Indenture Trustee no later than the earlier of (i) five (5)
Business Days after receipt thereof and (ii) within 360 days of the Closing Date
or Subsequent Transfer Date. Any failure of the Transferor to deliver to the
Indenture Trustee, prior to the expiration of such 360-day period, any such
recorded Assignment of Mortgage, or such certified copy if such recorded
Assignment of Mortgage has not been received by it, shall not be deemed a breach
of this Agreement for any purpose. In the event that any such Assignment of
Mortgage is lost or returned unrecorded because of a defect therein, the
Transferor shall promptly prepare a substitute Assignment of Mortgage or cure
such defect, as the case may be, and thereafter cause each such Assignment of
Mortgage to be duly recorded.
The Indenture Trustee shall promptly upon receipt thereof (and in any
event no longer than thirty (30) days following the Closing Date or Subsequent
Transfer Date, as the case may be), with respect to each Debt Instrument and
Assignment of Mortgage delivered in blank in accordance with Section 2.05(a)(i)
and (iii), respectively, endorse each such Debt Instrument and Assignment of
Mortgage in the form described therein.
The Servicer shall promptly upon receipt thereof (and in no event later
than the earlier of (i) five (5) Business Days following such receipt and (ii)
360 days after the Closing Date or Subsequent Transfer Date, as the case may be)
deliver to the Indenture Trustee (a) the original recorded Mortgage in those
instances where a certified copy thereof was delivered to the Indenture Trustee;
(b) the original recorded Assignment of Mortgage or Assignment of Mortgages
showing a complete chain of assignment from origination of a Mortgage Loan to
the Transferor in those instances where certified copies thereof were delivered
to the Indenture Trustee; (c) the original policy of title insurance or title
report, as applicable, or a copy certified by the Transferor to be a true and
correct copy in those instances where a commitment (binder) (including any
marked additions thereto or deletions therefrom) to issue such policy was
delivered to the Indenture Trustee; and (d) any other original documents
constituting a part of the Mortgage Loan File received with respect to any
Mortgage Loan, including, but not limited to, any original documents evidencing
an assumption or modification of any Mortgage Loan.
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All original documents relating to the Mortgage Loans that are not
delivered to the Indenture Trustee are and shall be held by the Transferor or
the Servicer, as the case may be, in trust for the benefit of the Indenture
Trustee on behalf of the Securityholders. In the event that any such original
document is required pursuant to the terms of this Section to be a part of a
Mortgage Loan File, such document shall be delivered promptly to the Indenture
Trustee. Any original document that is not required pursuant to the terms of
this Section to be a part of a Mortgage Loan File delivered to or held by the
Indenture Trustee shall be delivered promptly to the Servicer.
In connection with the delivery of documentation provided by this Section
2.05, the Transferor hereby appoints the Indenture Trustee its attorney with
full power and authority to act in its stead for the purpose of executing and
certifying assignments and endorsing and certifying promissory notes which make
a part of each Mortgage Loan File in order to cure any deficiencies in such
documentation.
If the Transferor has not delivered all required documentation with
respect to any Mortgage Loan within the time periods, if any, specified in this
Agreement, the Transferor shall be required to take action with respect to such
Mortgage Loan as and to the extent provided in Section 2.06 hereof.
(d) All Mortgage Loan documents held by the Custodian on behalf of the
Indenture Trustee are referred to herein as the "Trustee Mortgage Loan Files."
All recordings required pursuant to this Section 2.05 shall be accomplished by
and at the expense of the Transferor.
Section 2.06 Acceptance by Indenture Trustee of the Mortgage Loans;
Certain Substitutions; Initial Certification by Custodian.
(a) The Indenture Trustee acknowledges receipt by it on the Closing Date,
in good faith without notice of adverse claims, subject to the provisions of
Sections 2.05(a)(ii) and 2.05(c) and to any exceptions noted on the Indenture
Trustee's receipt, in the form annexed hereto as Exhibit C, delivered to the
Transferor, the Depositor and the Servicer on the Closing Date, of the documents
referred to in Section 2.05(a)(i), (ii), (iii), (iv) and (v) above (except that
any such applicable document may be endorsed in blank upon receipt) with respect
to the Mortgage Loans listed on the Mortgage Loan Schedule delivered to the
Indenture Trustee on the Closing Date; in addition, the Indenture Trustee
acknowledges the assignment to it of (x) all other assets included in clauses
(i) through (v) of the definition of "Trust Estate" and (y) the Trust Accounts
and declares that it holds and will hold such documents and the other documents
delivered to it constituting the Mortgage Loan Files, and that it holds or will
hold all such assets and such other assets included in the definition of "Trust
Estate" that are delivered to it, in trust for the exclusive use and benefit of
all present and future Securityholders.
Within ten (10) Business Days of the Closing Date or Subsequent Transfer
Date, as applicable, the Indenture Trustee shall deliver to the Transferor, the
Depositor and the Servicer a certification in the form annexed hereto as Exhibit
D, with any applicable exceptions noted thereon.
After the delivery of the certification, the Indenture Trustee shall
provide to the Servicer, the Transferor and the Depositor, and the Transferor
shall in turn provide to the Indenture Trustee, no
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less frequently than quarterly, updated certifications, a form of which is
attached hereto as Exhibit F, indicating the then current status of exceptions
until all such exceptions have been eliminated.
If in the process of reviewing the Mortgage Loan Files and making or
preparing the certifications referred to above the Indenture Trustee finds any
document or documents constituting a part of a Mortgage Loan File to be missing
or defective in any material respect or, at the end of any 360-day period
referenced above, finds that all recorded Assignments of Mortgage and all
original Mortgages or certified copies thereof have not been delivered to it,
the Indenture Trustee shall promptly so notify the Transferor, the Depositor and
the Servicer. In performing any such review, the Indenture Trustee may
conclusively rely on the Transferor as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Indenture Trustee's review of the items delivered to the Indenture Trustee
pursuant to this Section 2.06, unless otherwise expressly stated, shall be
limited solely to confirming that the documents listed in this Section 2.06 have
been executed and received, relate to the Mortgage Loans in the Mortgage Loan
Schedule and conform as to the loan number and address and description thereof
in the Mortgage Loan Schedule. In addition, upon the discovery by the
Transferor, the Depositor, the Servicer or the Indenture Trustee of a breach of
any of the representations and warranties made by the Transferor herein in
respect of any Mortgage Loan which materially and adversely affects the value of
such Mortgage Loan or the interests of the Securityholders in such Mortgage
Loan, the Person discovering such breach shall give prompt written notice to the
other Persons set forth in this sentence.
At such time as any Mortgage Loan becomes ninety (90) days Delinquent, the
Servicer shall make, or cause to be made, a reasonable investigation to
determine whether such Mortgage Loan satisfied the representations and
warranties of the Transferor set forth in Section 3.04 as of the Closing Date;
provided, however, that only one such investigation shall be required for any
Mortgage Loan.
If the Transferor has not delivered all required documentation with
respect to any Mortgage Loan within the time periods specified in this Agreement
(as such may have been extended pursuant to Section 2.05(c) hereof), the
Transferor shall be required to take action with respect to such Mortgage Loan
as and to the extent provided in Section 3.06 hereof.
(b) The Servicer Mortgage Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Securityholders and the
Indenture Trustee as the owner thereof. It is intended that, by the Servicer's
agreement pursuant to this Section 2.06(b), the Indenture Trustee shall be
deemed to have possession of the Servicer Mortgage Loan Files for purposes of
Section 9-305 of the Uniform Commercial Code of the state in which such
documents or instruments are located. The Servicer shall promptly report to the
Indenture Trustee any failure by it to hold the Servicer Mortgage Loan File as
herein provided and shall promptly take appropriate action to remedy any such
failure. In acting as custodian of such documents and instruments, the Servicer
agrees not to assert any legal or beneficial ownership interest in the Mortgage
Loans or such documents or instruments. The Servicer agrees to indemnify the
Securityholders and the Indenture Trustee for any and all liabilities,
obligations, losses, damages, payments, costs or expenses of any
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kind whatsoever which may be imposed on, incurred by or asserted against the
Securityholders or the Indenture Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of such documents or
instruments which have been delivered to the Servicer; provided, however, that
the Servicer will not be liable for any portion of any such amount resulting
from the negligence or misconduct of any Securityholder or the Indenture
Trustee; provided, further, that the Servicer will not be liable for any portion
of any such amount resulting from the Servicer's compliance with any
instructions or directions consistent with this Agreement issued to the Servicer
by the Indenture Trustee. The Indenture Trustee shall have no duty to monitor or
otherwise oversee the Servicer's performance as custodian hereunder.
(c) If the Custodian, during the process of reviewing the Trustee Mortgage
Loan Files, finds any document constituting a part of a Trustee Mortgage Loan
File which is not executed, has not been received, is unrelated to any Mortgage
Loan identified in the Mortgage Loan Schedule, does not conform to the
requirements of Section 2.05 or does not conform, in all material respects, to
the description thereof as set forth in the Mortgage Loan Schedule, then the
Custodian shall promptly so notify the Transferor, the Servicer, the Indenture
Trustee, the Issuer and the Depositor. In performing any such review, the
Custodian may conclusively rely on the Transferor as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Custodian's review of the Trustee Mortgage Loan Files is
limited solely to confirming that the documents listed in Section 2.05 have been
received and further confirming that any and all documents delivered pursuant to
Section 2.05 have been executed and relate to the Mortgage Loans identified in
the Mortgage Loan Schedule. Neither the Issuer nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Trustee Mortgage Loan File is discovered, then the Transferor and
Cityscape shall comply with the cure, substitution and repurchase provisions of
Section 3.06 hereof.
Section 2.07 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this
Article and in paragraph (b) below and pursuant to the terms of the related
Subsequent Transfer Agreement, in consideration of the Indenture Trustee's
delivery on each Subsequent Transfer Date to or upon the order of the Transferor
of all or a portion of the balance of funds in the Pre-Funding Account, the
Transferor shall on such Subsequent Transfer Date sell, transfer, assign, set
over and otherwise convey without recourse to the Indenture Trustee and Co-Owner
Trustee, all of its right, title and interest in and to each Subsequent Loan
listed on the related Loan Schedule delivered by the Transferor on such
Subsequent Transfer Date, including (i) the related Loan Balance, all interest
payments received after the related Cut-Off Date and all collections in respect
of principal received after the related Subsequent Cut-Off Date; (ii) any real
property that secured such Subsequent Loan and that has been acquired by
foreclosure or deed in lieu of foreclosure; (iii) all of its interest in any
insurance policies in respect of such Subsequent Loan; and (iv) all proceeds of
the foregoing. The transfer by the Transferor to the Indenture Trustee and
Co-Owner Trustee of the Subsequent Loans set forth in the related Subsequent
Transfer Agreement shall be absolute and shall be intended by
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all parties hereto to be treated as a sale by the Transferor to the Trust. If
the assignment and transfer of the Subsequent Loans and the other property
specified in this Section 2.07(a) from the Transferor to the Trust pursuant to
this Agreement is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Transferor intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (A) the Transferor shall be deemed to have
granted and does hereby grant to the Indenture Trustee and Co-Owner Trustee as
of each Subsequent Transfer Date a perfected, first priority security interest
in the entire right, title and interest of the Transferor in and to the related
Subsequent Loans and all other property conveyed to the Owner Trustee and
Co-Owner Trustee pursuant to this Section 2.07(a) and all proceeds thereof and
(B) this Agreement shall constitute a security agreement under applicable law.
The amount released to the Transferor from the Pre-Funding Account shall be 100%
of the aggregate Cut-Off Date Loan Balances of the Subsequent Loans so
transferred.
(b) The Indenture Trustee shall contribute from the Pre-Funding Account
funds in an amount equal to 100% of the aggregate Cut-Off Date Loan Balances of
the Subsequent Loans so transferred to the Trust and use such cash to purchase
the Subsequent Loans on behalf of the Trust, along with the other property and
rights related thereto described in paragraph (a) above, only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Dates:
(i) the Transferor shall have provided the Indenture Trustee, Owner
Trustee, Co-Owner Trustee and Rating Agencies with an Addition Notice,
which notice shall be given not less than two (2) Business Days prior to
the related Subsequent Transfer Date and shall designate the Subsequent
Loans to be sold to the Trust and the aggregate Cut-Off Date Loan Balances
of such Mortgage Loans;
(ii) the Transferor shall have deposited in the Collection Account
(A) all principal collected after the related Cut-Off Date and interest
payments collected after the related Cut-Off Date in respect of each
Subsequent Loan and (B) the related Subsequent Cut-Off Date Deposit;
(iii) the Transferor shall have delivered an Officer's Certificate
to the Indenture Trustee and the Co-Owner Trustee confirming that, as of
the related Subsequent Transfer Date, the Transferor was not insolvent,
nor will it be made insolvent by such transfer, nor is it aware of any
pending insolvency;
(iv) the Funding Period shall not have ended;
(v) the Transferor shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b) and in the related Subsequent Transfer
Agreement;
(vi) the Transferor shall have delivered an Officer's Certificate to
the Indenture Trustee and the Co-Owner Trustee confirming that the
representations and warranties of the Transferor pursuant to Section 3.04
(other than to the extent representations and warranties relate to
statistical information as to the characteristics of the Initial Loans in
the aggregate)
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and pursuant to Section 3.02 are true and correct with respect to the
Transferor and the Subsequent Loans, as applicable, as of the Subsequent
Transfer Date;
(vii) the Transferor shall have provided the Indenture Trustee and
the Co-Owner Trustee with an Opinion of Counsel relating to the sale of
the Subsequent Loans to the Trustee;
(viii) the Trust shall not purchase a Subsequent Loan unless (a) the
Rating Agencies shall have consented (which consent shall not have been
unreasonably withheld) to the purchase by the Trust of such Subsequent
Loan and (b) such Subsequent Loan shall mature no later than six months
after the latest maturing Initial Loan; and
(ix) in connection with the transfer and assignment of the
Subsequent Loans, the Transferor shall satisfy the document delivery
requirements set forth in Section 2.05.
(c) In connection with each Subsequent Transfer Date and on the related
Distribution Date, the Indenture Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-Funding
Earnings for such Distribution Date in accordance with the provisions of this
Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and of the Capitalized Interest
Account. In the event that any amounts are released as a result of calculation
error by the Indenture Trustee from the Pre-Funding Account or from the
Capitalized Interest Account, the Indenture Trustee shall not be liable
therefor, and the Transferor shall immediately repay such amounts to the
Indenture Trustee.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Indenture Trustee, the Owner Trustee, the Co-Owner Trustee and the
Securityholders that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has, and had at all
relevant times, full power to own its property, to carry on its business as
presently conducted, to enter into and perform its obligations under this
Agreement and to create the Trust pursuant to the Trust Agreement;
(b) The execution and delivery of this Agreement by the Depositor and its
performance of and compliance with the terms of this Agreement will not violate
the Depositor's certificate of incorporation or by-laws or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Depositor is a party or
which may be applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into and
consummate the transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement, and has duly executed
and delivered this Agreement. This Agreement, assuming due authorization,
execution and delivery by the Indenture Trustee, the Transferor and the
Servicer, constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and delivery
of this Agreement by the Depositor and its performance and compliance with the
terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would
materially and adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations of, the
Depositor pending with regard to which the Depositor has received service of
process, or, to the knowledge of the Depositor, threatened, before any court,
administrative agency or other tribunal (A) that, if determined adversely, would
prohibit its entering into this Agreement or render the Securities invalid, (B)
seeking to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or
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materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement or the
Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the Certificates, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(g) The Depositor is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Agreement or its obligations hereunder; no petition of bankruptcy (or
similar insolvency proceeding) has been filed by or against the Depositor prior
to the date hereof;
(h) The Depositor did not sell the Mortgage Loans to the Trust with any
intent to hinder, delay or defraud any of its creditors; the Depositor will not
be rendered insolvent as a result of the sale of the Mortgage Loans to the
Trust;
(i) As of the Closing Date, the Depositor had good title to, and was the
sole owner of, each Mortgage Loan free and clear of any Lien other than any such
Lien released simultaneously with the sale contemplated herein, and, immediately
upon each transfer and assignment herein contemplated, the Depositor will have
taken all steps necessary so that the Trust will have good title to, and will be
the sole owner of, each Mortgage Loan free and clear of any lien;
(j) The Depositor acquired title to each of the Mortgage Loans in good
faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document prepared
by the Depositor and furnished or to be furnished by it pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended; and
(m) The transfer, assignment and conveyance of the Debt Instruments and
the Mortgages by the Depositor pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Indenture Trustee,
the Owner Trustee, the Securityholders and the Depositor that as of the Closing
Date or the Subsequent Transfer Date, as the case may be (except as otherwise
specifically provided herein):
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(a) The Transferor is a corporation licensed as a mortgage banker, is duly
organized, validly existing and in good standing under the laws of the State of
New York and has, and had at all relevant times, full corporate power to
originate or purchase the Mortgage Loans, to own its property, to carry on its
business as presently conducted and to enter into and perform its obligations
under this Agreement;
(b) The execution and delivery of this Agreement by the Transferor and its
performance of and compliance with the terms of this Agreement will not violate
the Transferor's articles of incorporation or by-laws or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Transferor is a party or
which may be applicable to the Transferor or any of its assets;
(c) The Transferor has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement to be consummated by
it, has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Indenture Trustee and
the Depositor, constitutes a valid, legal and binding obligation of the
Transferor, enforceable against it in accordance with the terms hereof, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(d) The Transferor is not in violation of, and the execution and delivery
of this Agreement by the Transferor and its performance and compliance with the
terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would
materially and adversely affect the condition (financial or otherwise) or
operations of the Transferor or its properties or materially and adversely
affect the performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations of, the
Transferor pending with regard to which the Transferor has received service of
process or, to the knowledge of the Transferor, threatened, before any court,
administrative agency or other tribunal (A) that, if determined adversely, would
prohibit its entering into this Agreement or render the Securities invalid, (B)
seeking to prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the sale of the
Mortgage Loans to the Depositor, the performance by the Transferor of its
obligations under, or the validity or enforceability of, this Agreement or the
Securities;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Transferor of, or compliance by the Transferor with, this
Agreement or the Securities, or for the consummation of the transactions
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contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(g) The Transferor acquired title to the Mortgage Loans in good faith,
without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect to the
Mortgage Loans have been, in all material respects, legal, proper, prudent and
customary in the non-conforming mortgage servicing business;
(i) No Officers' Certificate, statement, report or other document prepared
by the Transferor and furnished or to be furnished by it pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading;
(j) The Transferor is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Transferor to conduct its business or perform its
obligations hereunder;
(k) The Transferor is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Agreement or by the performance of its obligations hereunder; no petition
of bankruptcy (or similar insolvency proceeding) has been filed by or against
the Transferor prior to the date hereof;
(l) As of the date of the Prospectus Supplement, the information under the
captions "Summary of Terms -- The Mortgage Loans" and "The Mortgage Pool" in the
Prospectus Supplement contains no untrue statement of a material fact and does
not omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they will be made, not misleading; and
(m) The Transferor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Mortgage
Loan Files to the Custodian (as the agent of the Indenture Trustee) and shall
inure to the benefit of the Securityholders, the Depositor, the Servicer, the
Indenture Trustee, the Owner Trustee and the Trust. Upon discovery by any of the
Transferor, the Depositor, the Servicer or the Indenture Trustee of a breach of
any of the foregoing representations and warranties that materially and
adversely affects the value of any Mortgage Loan or the interests of the
Securityholders therein, the party discovering such breach shall give prompt
written notice (but in no event later than two Business Days following such
discovery) to the other parties. The obligations of the Transferor and Cityscape
set forth in Section 3.06 to cure any breach or to substitute for or repurchase
an affected Mortgage Loan shall constitute the sole remedies
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available to the Securityholders, the Depositor, the Servicer, the Indenture
Trustee and the Owner Trustee respecting a breach of the representations and
warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the
Owner Trustee, the Securityholders, the Depositor and the Transferor that as of
the Closing Date or as of such date specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and is or will be in
compliance with the laws of each state in which any Mortgaged Property is
located to the extent necessary to ensure the enforceability of each Mortgage
Loan in accordance with the terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer and its
performance of and compliance with the terms of this Agreement will not violate
the Servicer's articles of incorporation or by-laws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Servicer is a party or
which may be applicable to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement, and has duly executed
and delivered this Agreement. This Agreement, assuming due authorization,
execution and delivery by the Indenture Trustee and the Owner Trustee,
constitutes a valid, legal and binding obligation of the Servicer, enforceable
against it in accordance with the terms hereof, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and delivery of
this Agreement by the Servicer and its performance and compliance with the terms
of this Agreement will not constitute a violation with respect to, any order or
decree of any court or any order or regulation of any federal, state, municipal
or governmental agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer or materially and adversely affect the performance of its duties
hereunder;
(e) There are no actions or proceedings against, or investigations of, the
Servicer pending or, to the knowledge of the Servicer, threatened before any
court, administrative agency or other tribunal (A) that, if determined
adversely, would prohibit its entering into this Agreement or render the
Securities invalid, (B) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement or (C)
that, if determined adversely, would prohibit or materially and adversely affect
the performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Securities;
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(f) The Servicer will examine each Subservicing Agreement and will be
familiar with the terms thereof. Each designated Subservicer and the terms of
each Subservicing Agreement will be required to comply with the provisions of
Section 4.07. The terms of any Subservicing Agreement will not be inconsistent
with any of the provisions of this Agreement;
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Securities, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(h) The collection practices used by the Servicer with respect to the
Mortgage Loans have been, in all material respects, legal, proper, prudent and
customary in the non-conforming mortgage servicing business;
(i) The transactions contemplated by this Agreement are in the ordinary
course of business of the Servicer;
(j) The Servicer is duly licensed where required as a "licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Servicer to conduct its business or perform its
obligations hereunder;
(k) The Servicer is an Eligible Servicer and services mortgage loans in
accordance with Accepted Servicing Procedures;
(l) [RESERVED]
(m) No Officers' Certificate, statement, report or other document prepared
by the Servicer and furnished or to be furnished by it pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading;
(n) The Servicer is solvent and will not be rendered insolvent as a result
of the performance of its obligations pursuant to this Agreement;
(o) The Servicer has not waived any default, breach, violation or event of
acceleration under any Debt Instrument or the related Mortgage; and
(p) The Servicer is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Mortgage Loan Files to the Indenture Trustee and shall inure to the
benefit of the Depositor, the Securityholders and the Indenture
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Trustee. Upon discovery by any of the Transferor, the Depositor, the Servicer or
the Indenture Trustee of a breach of any of the foregoing representations,
warranties and covenants that materially and adversely affects the value of any
Mortgage Loan or the interests of the Securityholders therein, the party
discovering such breach shall give prompt written notice (but in no event later
than two (2) Business Days following such discovery) to the other parties. The
obligations of the Servicer set forth in (x) Section 3.06 to cure any breach or
to purchase an affected Mortgage Loan and (y) Section 9.01(a) to indemnify and
hold harmless the Trust, the Depositor, the Transferor, the Trustee and the
Securityholders, shall constitute the sole remedies available to the Transferor,
the Securityholders, the Trust, the Depositor or the Indenture Trustee
respecting a breach of the representations, warranties and covenants contained
in this Section 3.03.
Section 3.04 Representations and Warranties regarding Individual Mortgage
Loans.
Each of Cityscape and the Transferor hereby represents and warrants to the
Depositor, the Issuer, the Indenture Trustee and the Securityholders, with
respect to each Mortgage Loan, as of the Closing Date and, with respect to each
Subsequent Loan, as of the related Subsequent Transfer Date (except as otherwise
expressly stated):
(a) Mortgage Loan Information. The information with respect to each
Initial Loan set forth in the Mortgage Loan Schedule is complete, true and
correct as of the Cut-Off Date.
(b) Delivery of Mortgage Loan Documents. All of the original or certified
documentation required to be delivered to the Indenture Trustee or to the
Custodian on or prior to the Closing Date or as otherwise provided in this
Agreement has been so delivered.
(c) Payments Current. As of the Cut-Off Date, approximately 0.45% (by
aggregate Cut-Off Date Principal Balance) of the Initial Loans are more than 30
days but not more than 59 days delinquent, based on the terms under which the
related Mortgages, if applicable, and Debt Instruments have been made and none
of the Mortgage Loans is 60 or more days delinquent. The Transferor has not
advanced funds, or induced, solicited or knowingly received any advance of funds
from a party other than the related Obligor, directly or indirectly, for the
payment of any amount required by any Mortgage Loan.
(d) No Waiver or Modification. The terms of each Debt Instrument and
Mortgage have not been impaired, waived, altered or modified in any respect that
would have any adverse effect upon any of the Securityholders, except by written
instruments reflected in the Trustee Mortgage Loan File. No instrument of
waiver, alteration, modification or assumption has been executed except for the
instruments that are part of the Trustee Mortgage Loan File and the terms of
which are reflected in the Trustee Mortgage Loan File.
(e) No Defenses. No Debt Instrument or Mortgage, if applicable, is subject
to any set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Debt Instrument or Mortgage, if
applicable, or the exercise of any right thereunder, render such Debt Instrument
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
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rescission, set-off, counterclaim or defense has been asserted in any proceeding
or was asserted in any state or federal bankruptcy or insolvency proceeding at
the time the related Mortgage Loan was originated.
(f) Compliance with Laws. Any and all requirements of any federal, state
or local law applicable to each Mortgage Loan have been complied with,
including, without limitation, all consumer, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to each Mortgage Loan; each Mortgage
Loan was originated in compliance with all applicable laws, and no fraud or
misrepresentation was committed by any Person in connection therewith.
(g) No Satisfaction or Release of Lien. No Mortgage, if applicable, has
been satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage, if
applicable, in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission, other than
the subordination of the lien of such Mortgage securing a Mortgage Loan with
respect to which a related Superior Lien was released in connection with the
refinancing of the mortgage loan relating to such Superior Lien.
(h) Valid Lien. With respect to each Debt Instrument that is secured by a
Mortgage, such Mortgage is or creates a valid, subsisting and enforceable lien
on the related Mortgaged Property, including the land and all buildings on the
related Mortgaged Property.
(i) Validity of Mortgage Loan Documents. Each Debt Instrument and each
Mortgage is genuine and each is the legal, valid and binding obligation of the
Obligor thereof, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting creditors' rights in general and by general
principles of equity. All parties to each Debt Instrument and each Mortgage, if
applicable, had legal capacity at the time to enter into the related Mortgage
Loan and to execute and deliver such Debt Instrument and Mortgage, and such Debt
Instrument and Mortgage have been duly and properly executed by such parties.
(j) Full Disbursement of Proceeds. As of the Cut-Off Date, the proceeds of
each Mortgage Loan have been fully disbursed and there is no requirement for
future advances thereunder, all costs, fees and expenses incurred in making or
closing each Mortgage Loan and the recording of the Mortgage, if applicable,
have been fully disbursed, the Obligor is not entitled to any refund of any
amounts paid or due under the Debt Instrument or any related Mortgage and any
and all requirements set forth in the related Mortgage Loan documents have been
complied with.
(k) Ownership. Immediately prior to the conveyance thereof to the
Depositor, the Transferor had good and marketable title to each Mortgage Loan,
Debt Instrument and Mortgage, was the sole owner thereof and had full right to
sell each Mortgage Loan, Debt Instrument and Mortgage to the Depositor and upon
the conveyance thereof by the Transferor to the Depositor, the Depositor became
the sole owner of each Mortgage Loan, Debt Instrument and Mortgage free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest.
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(l) Ownership of Mortgaged Property. With respect to each Mortgage Loan,
to the best of the Servicer's knowledge, the related Mortgaged Property is
occupied by the Obligor(s) under such Mortgage Loan.
(m) Marketability of Title. Immediately prior to the transactions hereby
contemplated, the Depositor had good and marketable title thereto, and was the
sole owner and holder of each Mortgage Loan free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, other than any such lien related
simultaneously with the sale contemplated herein, and had full right and
authority, subject to no interest or participation of, or agreement with, any
other party, to sell and assign the same pursuant to this Agreement, and
immediately upon the transfer and assignment of each Mortgage Loan as herein
contemplated, the Issuer shall have good title to, and will be the sole legal
owner of, each Mortgage Loan free and clear of any Lien;
(n) [RESERVED].
(o) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Mortgage Loans, the Debt Instruments and the Mortgages by the Transferor to the
Depositor pursuant to this Agreement are not subject to the bulk transfer laws
or any similar statutory provisions in effect in any applicable jurisdiction.
(p) No Defaults. Except with respect to any delinquent scheduled payment
set forth in subsection (c) above, there is no default, breach, violation or
event of acceleration existing under any Mortgage, if applicable, or any Debt
Instrument and, to the best of the Transferor's knowledge, there is no event
which, with the passage of time or with notice and/or the expiration of any
grace or cure period, would constitute such a default, breach, violation or
event of acceleration, and the Transferor has not waived any such default,
breach, violation or event of acceleration, except as set forth in an instrument
of waiver, alteration, modification or assumption that is included in the
Trustee Mortgage Loan File.
(q) No Condemnation or Damage. To the best of the Transferor's knowledge,
the physical condition of each Mortgaged Property has not deteriorated since the
date of origination of the related Mortgage Loan (normal wear and tear
excepted), and there is no proceeding pending for the total or partial
condemnation of any Mortgaged Property.
(r) Mortgage Remedies Adequate. Each Mortgage, if applicable, contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale and (ii)
otherwise, by judicial foreclosure.
(s) Underwriting of Mortgage Loans. Each Mortgage Loan has been
underwritten by the originator thereof in accordance with the Transferor's then
current "Sav*-A-Loan" underwriting guidelines.
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(t) Terms of Mortgage Loans. Each Mortgage Loan is a fixed rate loan; each
Debt Instrument has an original term to maturity of not less than 120 months nor
more than 240 months from the date of origination; each Debt Instrument is
payable in monthly installments of principal and interest, with interest payable
in arrears, and requires a monthly payment which is sufficient to amortize the
original principal balance over the original term and to pay interest at the
related Mortgage Loan Interest Rate; and no Debt Instrument provides for any
extension of the original term.
(u) Security. No Debt Instrument is, or has been, secured by any
collateral except the lien of the related Mortgage, if applicable.
(v) Deed of Trust. If a Mortgage for a Mortgage Loan constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves as such and is named in such
Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable by
the Transferor to the trustee under the deed of trust, except in connection with
default proceedings and a trustee's sale after default by the related Obligor.
(w) Types of Mortgage Loans. Each Mortgage Loan is either (i) a Debt
Consolidation Loan, or (ii) a Combination Loan. No Mortgage Loan was originated
for the express purpose of purchasing a home.
(x) Origination Practices. The origination practices used by each
originator of the Mortgage Loans and the servicing and collection practices used
by Cityscape with respect to each Mortgage Loan have been in all material
respects legal, proper, prudent and customary with respect to the loan
origination and servicing business as applicable to the respective loan type.
(y) Servicing Practices. Each Mortgage Loan has been serviced in
accordance with all applicable laws and, to the best of the Transferor's
knowledge, no fraud or misrepresentation was committed by any Person in
connection therewith.
(z) [RESERVED].
(aa) [RESERVED].
(bb) Relief Act Matters. No Obligor has notified the Transferor, and no
relief has been requested or allowed to an Obligor, under the Soldiers' and
Sailors' Civil Relief Act of 1940.
(cc) Selection Criteria. The Mortgage Loans were not selected by the
Transferor for sale to the Depositor or the Issuer on any basis intended to
adversely affect the Depositor or the Issuer.
(dd) Superior Lien Delinquencies. No Superior Lien was more than 30 days
past due at the time of origination of the related Mortgage Loan.
(ee) Treasury Regulation Section 301.7701. On the Closing Date, 55% or
more (by aggregate Principal Balance) of the Mortgage Loans do not constitute
"real estate mortgages" for the purpose
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of Treasury Regulation Section 301.7701 under the Code. For this purpose a
Mortgage Loan does not constitute a "real estate mortgage" if:
(i) The Mortgage Loan is not secured by an interest in real
property, or
(ii) The Mortgage Loan is not an "obligation principally secured by
an interest in real property." For this purpose an "obligation is
principally secured by an interest in real property" if it satisfies
either the test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured
by an interest in real property if the fair market value of the
interest in real property securing the obligation
(A) was at least equal to 80 percent of the adjusted
issue price of the obligation at the time the obligation was
originated (or, if later, the time the obligation was
significantly modified); or
(B) is at least equal to 80 percent of the adjusted
issue price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of the
real property interest must be first reduced by the amount of any
lien on the real property interest that is senior to the obligation
being tested and must be further reduced by a proportionate amount
of any lien that is in parity with the obligation being tested, in
each case before the percentages set forth in (1)(A) and (1)(B) are
determined. The adjusted issue price of an obligation is its issue
price plus the amount of accrued original issue discount, if any, as
of the date of determination.
(2) Alternative test. An obligation is principally secured by
an interest in real property if substantially all of the proceeds of
the obligation were used to acquire or to improve or protect an
interest in real property that, at the origination date, is the only
security for the obligation. For purposes of this test, loan
guarantees made by the United States or any state (or any political
subdivision, agency or instrumentality of the United States or of
any state), or other third party credit enhancement, are not viewed
as additional security for a loan. An obligation is not considered
to be secured by property other than real property solely because
the obligor is personally liable on the obligation. For this purpose
only, substantially all of the proceeds of the obligations means
66K% or more of the gross proceeds.
(ff) Good Repair. To the best of the Transferor's knowledge, the related
Mortgaged Property is free of damage and in good repair or will be free of
damage and in good repair following the completion of any improvements or
repairs to be financed by the related Mortgage Loan.
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(gg) Mortgage Loan Interest Method. Interest for each Mortgage Loan is
calculated at a rate of interest computed by the actuarial method.
(hh) [RESERVED].
(ii) No Encroachment. To the best of the Transferor's knowledge, all
required inspections, licenses and certificates with respect to the use and
occupancy of all occupied portions of all property securing the Mortgages, if
applicable, have been made, obtained or issued as applicable. To the best of the
Transferor's knowledge, all improvements which were considered in determining
the appraised value of the property securing each Mortgage, if applicable, lay
wholly within the boundaries and building restrictions lines of the related
property and no improvements on adjoining properties encroach upon such property
and no improvement located on or being a part of such property is in violation
of any applicable zoning laws or regulation.
(jj) Consent of Superior Lien. With respect to each Mortgage Loan that is
not a first mortgage loan, either (i) no consent for the Mortgage Loan is
required by the holder of the related Superior Lien or (ii) such consent has
been obtained and has been delivered to the Indenture Trustee.
(kk) Insurance. If the Mortgaged Property was, at the time of origination
of the related Mortgage Loan, in an area identified on a Flood Hazard Boundary
Map or Flood Hazard Rate Map issued by the Federal Emergency Management Agency
as having special flood hazards (and if the flood insurance policy referenced
herein has been made available), a flood insurance policy is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount that is not less than the value of such Mortgaged Property. All
individual insurance policies (collectively, the "hazard insurance policy") are
the valid and binding obligation of the insurer and contain a standard mortgagee
clause naming the Transferor, its successors and assigns, as mortgagee. All
premiums thereon have been paid. The Mortgage obligates the Obligor thereunder
to maintain all such insurance at the Obligor's cost and expense, and upon the
Obligor's failure to do so, authorizes the holder of the Mortgage to obtain and
maintain such insurance at the Obligor's cost and expense and to seek
reimbursement therefor from the Obligor. All acts required to be performed to
preserve the rights and remedies of the Indenture Trustee in any such insurance
policies have been performed including, without limitation, any necessary
notifications of insurers and assignments of policies or interests therein.
(ll) No Fraudulent Conveyance. The Mortgage Loans are not being
transferred with any intent to hinder, delay or defraud any creditors.
(mm) [RESERVED].
(nn) Environmental Compliance. To the best of Cityscape's and the
Transferor's knowledge, the Mortgaged Property is free from any and all toxic or
hazardous substances and there exists no violation of any local, state or
federal environmental law, rule or regulation.
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(oo) Description Conforms to Prospectus Supplement. Each Mortgage Loan
will conform, and all Mortgage Loans in the aggregate will conform, in all
material respects to the description thereof set forth in the Prospectus
Supplement.
(pp) No Buydown, GPM or Shared Appreciation Loans. No Mortgage Loan
contains any provisions pursuant to which principal and interest payments are
paid or partially paid with funds deposited in any separate account established
by the Transferor, the Obligor or anyone else on behalf of the Obligor, or paid
by any source other than the Obligor. No Mortgage Loan contains any other
similar provision which may constitute a "buydown" provision. No Mortgage Loan
is a graduated payment mortgage loan. No Mortgage Loan has a shared appreciation
or other contingent interest feature.
(qq) No Chattel Paper. Each Debt Instrument is comprised of one original
promissory note and each such promissory note constitutes an "instrument" for
purposes of Section 9-105(1)(i) of the UCC. No Debt Instrument constitutes or is
comprised of "chattel paper" as such term is defined in Section 9-105(1)(b) of
the UCC. Each Debt Instrument has been delivered to the Indenture Trustee or the
Custodian.
(rr) Entire Agreement. The Debt Instrument and the Mortgage, if
applicable, contain the entire agreement between the related Obligor and the
lender and all obligations of the lender under the related Mortgage Loan, and no
other agreement defines, modifies, or expands the obligations of the lender
under the Mortgage Loan, except for any assumptions or modifications included in
the Trustee Mortgage Loan File pursuant to Section 2.05(a)(v). In light of the
Transferor's underwriting guidelines, the Transferor has reviewed all of the
documents constituting each Servicer Mortgage Loan File and each Trustee
Mortgage Loan File and has made such inquiries as it deems reasonable under the
circumstances to make and confirm the accuracy of the representations set forth
herein.
Section 3.05 [RESERVED].
Section 3.06 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties
set forth in this Article III shall survive the conveyance of the Mortgage Loans
to the Issuer, the grant of the Mortgage Loans to the Indenture Trustee and the
delivery of the Securities to the Securityholders. Upon discovery by the
Depositor, the Servicer, the Transferor, the Custodian, the Issuer, the
Indenture Trustee or any Securityholder of a breach of any of such
representations and warranties which materially and adversely affects the value
of the Mortgage Loans or the interest of the Securityholders, or which
materially and adversely affects the interests of the Securityholders in the
related Mortgage Loan in the case of a representation and warranty relating to a
particular Mortgage Loan (notwithstanding that such representation and warranty
was made to the Transferor's or the Servicer's best knowledge), the party
discovering such breach shall give prompt written notice to the others. The
Transferor or Cityscape shall within sixty (60) days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, promptly cure such breach in all material respects. If, however,
within sixty (60) days after the earlier of the Transferor's or Cityscape's
discovery of such breach or the Transferor's or Cityscape's receiving notice
thereof,
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such breach has not been remedied by either the Transferor or Cityscape and such
breach materially and adversely affects the interests of the Securityholders in
the related Mortgage Loan (the "Defective Mortgage Loan"), the Transferor or
Cityscape shall, on or before the Determination Date next succeeding the end of
such 60-day period, either (i) remove such Defective Mortgage Loan from the
Trust (in which case it shall become a "Deleted Mortgage Loan") and substitute
one or more Qualified Substitute Mortgage Loans in the manner and subject to the
conditions set forth in this Section 3.06 or (ii) purchase such Defective
Mortgage Loan at a purchase price equal to the Purchase Price (as defined below)
by depositing such Purchase Price in the Collection Account. The Transferor or
Cityscape shall provide the Servicer (if the certificate is to come from the
Transferor), the Indenture Trustee and the Issuer with a certification executed
by a Responsible Officer on the Determination Date next succeeding the end of
such 60-day period indicating whether the Transferor or Cityscape is purchasing
the Defective Mortgage Loan or substituting, in lieu of such Defective Mortgage
Loan, a Qualified Substitute Mortgage Loan. With respect to the purchase of a
Defective Mortgage Loan pursuant to this Section, the "Purchase Price" shall be
equal to the Principal Balance of such Defective Mortgage Loan as of the date of
purchase, plus all accrued and unpaid interest on such Defective Mortgage Loan
to, but not including, the Due Date in the Due Period most recently ended prior
to such Determination Date computed at the applicable Mortgage Loan Interest
Rate, plus the amount of any unreimbursed Servicing Advances and Nonrecoverable
Servicing Advances made by the Servicer with respect to such Defective Mortgage
Loan, which Purchase Price shall be deposited in the Collection Account (after
deducting therefrom any amounts received in respect of such repurchased
Defective Mortgage Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the Due Date in the Due Period most
recently ended prior to such Determination Date).
Any substitution of Mortgage Loans pursuant to this Section 3.06(a) and
Section 2.06(c) shall be accompanied by payment by the Transferor or Cityscape
of the Substitution Adjustment, if any, to be deposited in the Collection
Account. For purposes of calculating the Available Collection Amount for any
Distribution Date, amounts paid by the Transferor or Cityscape pursuant to this
Section 3.06 in connection with the repurchase or substitution of any Defective
Mortgage Loan that are on deposit in the Collection Account as of the
Determination Date for such Distribution Date shall be deemed to have been paid
during the related Due Period and shall be transferred to the Note Distribution
Account as part of the Available Collection Amount to be retained therein or
transferred to the Certificate Distribution Account, if applicable, pursuant to
Section 5.01(c).
As to any Deleted Mortgage Loan for which the Transferor or Cityscape
substitutes a Qualified Substitute Mortgage Loan or Loans, the Transferor or
Cityscape shall effect such substitution by delivering to the Issuer (i) a
certification executed by a Responsible Officer of the Transferor or Cityscape
to the effect that the Substitution Adjustment has been credited to the
Collection Account and (ii) the documents constituting the Trustee Mortgage Loan
File for such Qualified Substitute Mortgage Loan or Loans.
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(b) The Transferor or Cityscape, as the case may be, shall deposit in
the Collection Account all payments received in connection with such Qualified
Substitute Mortgage Loan or Loans after the date of such substitution. Monthly
Payments received with respect to Qualified Substitute Mortgage Loans on or
before the date of substitution will be retained by the Transferor (or
Cityscape, if substituted by Cityscape). The Issuer will be entitled to all
payments received on the Defective Mortgage Loan on or before the date of
substitution, and the Transferor or Cityscape, as the case may be, shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Transferor or Cityscape shall give written
notice to the Issuer, the Servicer and the Indenture Trustee that such
substitution has taken place, and the Servicer shall amend the Mortgage Loan
Schedule to reflect (i) the removal of such Defective Mortgage Loan from the
terms of this Agreement and (ii) the substitution of the Qualified Substitute
Mortgage Loan. The Transferor or Cityscape shall promptly deliver to the Issuer,
the Servicer and the Indenture Trustee a copy of the amended Mortgage Loan
Schedule. Upon such substitution, such Qualified Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects, and the
Transferor and Cityscape shall be deemed to have made with respect to such
Qualified Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.04. On the date
of such substitution, the Transferor or Cityscape, as the case may be, will
deposit into the Collection Account an amount equal to the related Substitution
Adjustment, if any. In addition, on the date of such substitution, the Issuer
shall cause the Indenture Trustee to release the Deleted Mortgage Loan from the
lien of the Indenture and the Issuer will cause such Qualified Substitute
Mortgage Loan to be pledged to the Indenture Trustee under the Indenture as part
of the Trust Estate.
(c) It is understood and agreed that the obligations of the Transferor
and Cityscape set forth in this Section 3.06 to cure, purchase or substitute for
a Defective Mortgage Loan constitute the sole remedies of the Depositor, the
Issuer, the Indenture Trustee and the Securityholders hereunder respecting a
breach of the representations and warranties contained in Section 3.04. Any
cause of action against the Transferor or Cityscape relating to or arising out
of a defect in a Trustee Mortgage Loan File as contemplated by Section 2.06 or
against the Transferor and Cityscape relating to or arising out of a breach of
any representations and warranties made in Section 3.04 shall accrue as to any
Mortgage Loan upon (i) discovery of such defect or breach by any party and
notice thereof to the Transferor or Cityscape or notice thereof by the
Transferor or Cityscape to the Issuer, (ii) failure by the Transferor or
Cityscape to cure such defect or breach or purchase or substitute such Mortgage
Loan as specified above, and (iii) demand upon the Transferor or Cityscape, as
applicable, by the Issuer or the Majority Securityholders for all amounts
payable in respect of such Mortgage Loan.
(d) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Mortgage Loan pursuant to this Section or the eligibility of
any Mortgage Loan for purposes of this Agreement.
(e) With respect to all Defective Mortgage Loans or other Mortgage
Loans repurchased by the Transferor or Cityscape pursuant to this Agreement,
upon the deposit of the Purchase Price therefor in the Note Distribution
Account, the Indenture Trustee shall assign to the Transferor or
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Cityscape, as the case may be, without recourse, representation or warranty, all
the Indenture Trustee's right, title and interest in and to such Defective
Mortgage Loans or Mortgage Loans, which right, title and interest were conveyed
to the Indenture Trustee pursuant to Section 2.01.
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ARTICLE IV.
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor,
shall service and administer the Mortgage Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or desirable
and consistent with the terms of this Agreement. Notwithstanding anything to the
contrary contained herein, the Servicer, in servicing and administering the
Mortgage Loans, shall employ or cause to be employed procedures (including
collection, foreclosure, liquidation and Foreclosure Property management and
liquidation procedures) and exercise the same care that it customarily employs
and exercises in servicing and administering loans of the same type as the
Mortgage Loans for its own account, all in accordance with Accepted Servicing
Procedures of prudent lending institutions and servicers of loans of the same
type as the Mortgage Loans and giving due consideration to the Securityholders'
reliance on the Servicer. The Servicer has and shall maintain the facilities,
procedures and experienced personnel necessary to comply with the servicing
standard set forth in this subsection (a) and the duties of the Servicer set
forth in this Agreement relating to the servicing and administration of the
Mortgage Loans.
(b) Servicing Advances. In accordance with the preceding general
servicing standard, the Servicer, or any Subservicer on behalf of the Servicer,
shall make all Servicing Advances in connection with the servicing of each
Mortgage Loan hereunder. Notwithstanding any provision to the contrary herein,
neither the Servicer, nor any Subservicer on behalf of the Servicer, shall have
any obligation to advance its own funds for any delinquent scheduled payments of
principal and interest on any Mortgage Loan or to satisfy or keep current the
indebtedness secured by any Superior Liens on the related Mortgaged Property. No
costs incurred by the Servicer or any Subservicer in respect of Servicing
Advances shall, for the purposes of distributions to Securityholders, be added
to the amount owing under the related Mortgage Loan. Notwithstanding any
obligation by the Servicer to make a Servicing Advance hereunder with respect to
a Mortgage Loan, before making any Servicing Advance that is material in
relation to the outstanding principal balance thereof, the Servicer shall assess
the reasonable likelihood of (i) recovering such Servicing Advance and any prior
Servicing Advances for such Mortgage Loan, and (ii) recovering any amounts
attributable to outstanding interest and principal owing on such Mortgage Loan
for the benefit of the Securityholders in excess of the costs, expenses and
other deductions to obtain such recovery, including without limitation any
Servicing Advances therefor and, if applicable, the outstanding indebtedness of
all Superior Liens. The Servicer shall only make a Servicing Advance with
respect to a Mortgage Loan to the extent that the Servicer determines in its
reasonable, good faith judgment that such Servicing Advance would likely be
recovered as aforesaid; provided, however, that the Servicer will be entitled to
be reimbursed for any Nonrecoverable Servicing Advance pursuant to this
Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
reasonably diligent efforts to collect all payments called for under the terms
and provisions of the Mortgage
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Loans, and shall, to the extent such procedures shall be consistent with this
Agreement, follow Accepted Servicing Procedures. The Servicer may in its
discretion waive or permit to be waived any penalty interest or any other fee or
charge which the Servicer would be entitled to retain hereunder as servicing
compensation and extend the Due Date on a Debt Instrument for a period (with
respect to each payment as to which the Due Date is extended) not greater than
ninety (90) days after the initially scheduled due date for such payment.
Notwithstanding anything in this Agreement to the contrary, the Servicer shall
not permit any additional extension or modification with respect to any Mortgage
Loan other than that permitted by the immediately preceding sentence unless the
Mortgage Loan is a Defaulted Mortgage Loan.
(d) Instruments of Satisfaction or Release. Without limiting the
generality of Section 4.01(c), the Servicer, in its own name or in the name of a
Subservicer, is hereby authorized and empowered, when the Servicer believes it
appropriate in its best judgment and subject to the requirements of this
Agreement or Acceptable Servicing Procedures, to execute and deliver, on behalf
of the Securityholders and the Trust, or any of them, and upon notice to the
Indenture Trustee, 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 the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold, or cause to be held, title to
such properties, on behalf of the Trust and Securityholders, or any of them. The
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Obligors any reports
required to be provided to them thereby. The Indenture Trustee shall execute, at
the written direction of the Servicer, any limited or special powers of attorney
and other documents reasonably acceptable to the Indenture Trustee to enable the
Servicer or any Subservicer to carry out their servicing and administrative
duties hereunder, including, without limitation, limited or special powers of
attorney with respect to any Foreclosure Property, and the Indenture Trustee
shall not be accountable for the actions of the Servicer or any Subservicers
under such powers of attorney and shall be indemnified by such parties with
respect to such actions.
Section 4.02 Liquidation of Mortgage Loans; Defaulted Mortgage Loans.
(a) In the event that any payment due under any Mortgage Loan and not
postponed pursuant to Section 4.01(c) is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Mortgage Loan and such failure continues beyond any
applicable grace period, the Servicer shall, in accordance with the standard of
care specified in Section 4.01(a), take such action as it shall deem to be in
the best interest of the Securityholders to collect or liquidate such Defaulted
Mortgage Loan in a manner that in the reasonable judgment of the Servicer will
be likely to maximize the net proceeds realizable therefrom under the
circumstances (including, but without limitation, causing the resale or
substitution of such Mortgage Loan pursuant to Section 3.06 or, if no Superior
Liens exist on the related Mortgaged Property, foreclosing or taking other
comparable action to effect ownership in such Mortgaged Property in the name of
the Issuer for the benefit of Securityholders). The Servicer shall give the
Indenture Trustee notice of the election of remedies made pursuant to this
Section 4.02. The Servicer shall not be required to satisfy the indebtedness
secured by any Superior Liens
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on the related Mortgaged Property or to advance funds to keep the indebtedness
secured by such Superior Liens current. In connection with any collection or
liquidation activities, the Servicer shall exercise collection or liquidation
procedures with the same degree of care and skill as it would exercise or use
under the circumstances in the conduct of its own affairs.
(b) During any Due Period occurring after a Mortgage Loan becomes a
Liquidated Mortgage Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Mortgage Loan or the
related Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Mortgage Loan has become a Liquidated Mortgage Loan, the
Servicer shall promptly prepare and forward to the Issuer and the Indenture
Trustee, and upon the request of any Securityholder to such Securityholder, a
Liquidation Report detailing the following: (i) the Net Liquidation Proceeds,
Insurance Proceeds or Released Mortgaged Property Proceeds received in respect
of such Liquidated Mortgage Loan; (ii) expenses incurred with respect thereto;
(iii) any Net Loan Losses incurred in connection therewith; and (iv) any Post
Liquidation Proceeds.
(d) The Servicer may, at its option, purchase from the Trust any
Mortgage Loan which is ninety (90) days or more Delinquent and which the
Servicer determines in good faith would otherwise become subject to foreclosure
proceedings at a price equal to the Purchase Price; provided, however, that the
aggregate Principal Balance of all Mortgage Loans that may be so purchased by
the Servicer shall not exceed an amount equal to 10% of the Original Pool
Principal Balance. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited into the Collection Account, and the Indenture Trustee, upon
(i) receipt of an Officer's Certificate of the Servicer as to the making of such
deposit and (ii) confirmation that such deposit has been made, shall release or
cause to be released to the Servicer the related Mortgage Loan File and shall
execute and deliver such instruments of transfer or assignment as are furnished
by the Transferor or the Servicer, as the case may be, in each case without
recourse, as shall be necessary to vest in the Transferor or the Servicer, as
the case may be, title to any Mortgage Loan released pursuant hereto, and the
Indenture Trustee shall have no further responsibility or liability (except as
to its own acts) with regard to such Mortgage Loan.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
The Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Mortgage Loans. The Servicer shall
also maintain a fidelity bond in the form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall be deemed to have complied with this provision if an
affiliate of the Servicer has such errors and omissions and fidelity bond
coverage and, by the terms of such insurance policy or fidelity bond, the
coverage afforded thereunder extends to the Servicer. Any such errors and
omissions policy and fidelity bond shall not be canceled without thirty (30)
days' prior written notice to the Indenture Trustee. Upon the request of the
Indenture Trustee, or any Securityholder, the Servicer
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shall furnish to the requesting party copies of all binders and policies or
certificates evidencing that such fidelity bonds and insurance policies are in
full force and effect. The Servicer shall also cause each Sub-Servicer to
maintain a policy of insurance covering errors and omissions and a fidelity bond
which would meet the requirements set forth above.
Section 4.04 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Indenture Trustee
for the benefit of the Securityholders.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Indenture Trustee and the Securityholders solely
for the purpose of its prudent and prompt disposition and sale. The Servicer
shall, either itself or through an agent selected by the Servicer, manage,
conserve, protect and operate the Foreclosure Property in the same manner that
it manages, conserves, protects and operates other foreclosure property for its
own account. The Servicer shall attempt to sell the same (and may temporarily
lease the same) on such terms and conditions as the Servicer deems to be in the
best interest of the Securityholders.
The Servicer shall, consistent with the servicing standards set forth
herein, foreclose upon or otherwise comparably convert the ownership of
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. In connection with realization upon defaulted Mortgage
Loans, the Servicer shall follow such practices and procedures as it shall deem
necessary or advisable, as shall be normal and usual in accordance with Accepted
Servicing Procedures and the requirements of insurers under any insurance policy
required to be maintained hereunder with respect to the related Mortgage Loan.
The Servicer shall be responsible for all costs and expenses incurred by it in
any such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
an Uninsured Cause, unless it shall determine in its reasonable judgment, as
evidenced by a certificate of a Servicing Officer, that such foreclosure or
restoration, as the case may be, will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for Servicing Advances.
Any Servicing Advances made with respect to a Mortgage Loan shall be recoverable
by the Servicer only from recoveries on such Mortgage Loan except to the extent
such Servicing Advance is deemed a Nonrecoverable Servicing Advance.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Indenture Trustee and the
Securityholders, and as soon as practicable thereafter, the expenses of such
sale shall be paid. The Net Liquidation Proceeds or Post Liquidation Proceeds,
as applicable, from the conservation, disposition and sale of the Foreclosure
Property shall be promptly deposited by the
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Servicer in the Collection Account in accordance with Section 5.01 of this
Agreement and the Indenture.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on the
related Mortgaged Property by a company such as Equifax, Inc. or Toxicheck; the
scope of such review shall be limited to the review of public records and
documents for indications that such Mortgaged Property has on it, or is near,
hazardous or toxic material or waste. If such review reveals that the Mortgaged
Property has on it, under it or is near hazardous or toxic material or waste or
reveals any other environmental problem, the Servicer shall provide a copy to
the Indenture Trustee of the related report. If the Servicer attaches to such
report a certification executed by a Responsible Officer stating that, based on
an analysis of all available information (including potential clean-up costs and
liability claims) at the time, it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Indenture Trustee, then the Trust shall take title to such Mortgaged Property.
The Indenture Trustee shall promptly forward such report and certification to
the Securityholders.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered
to require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property and remit all related revenues (net of such costs
and expenses) to the Servicer as soon as practicable, but in no event
later than thirty (30) days following the receipt thereof by such
independent contractor;
(iii) none of the provisions of this Section 4.04 relating to
any such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its duties
and obligations hereunder with respect to the operation and management
of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such
Foreclosure Property.
The Servicer shall be entitled to enter into any agreement with any independent
contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such independent contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be liable for all fees owed by it to any
such independent contractor, and that any amounts so expended shall be deemed
Servicing Advances. Each liquidation of a Foreclosure Property shall be carried
out by the Servicer at such price and upon such terms and conditions as the
Servicer shall deem necessary or advisable, as shall be
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normal and usual in accordance with Accepted Servicing Procedures, and the
resulting Liquidation Proceeds shall be distributed in accordance with the
Section 5.01 hereof.
Section 4.05 Access to Certain Documentation and Information Regarding
the Mortgage Loans.
The Servicer shall provide to the Issuer, the Indenture Trustee and the
Securityholders, and the supervisory agents and examiners of each of the
foregoing, access to the documentation regarding the Mortgage Loans required by
applicable state and federal regulations, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer designated by it.
Section 4.06 [RESERVED].
Section 4.07 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer. The
Servicer shall give prior written notice to the Issuer and the Indenture Trustee
of the appointment of any Subservicer. The Servicer shall be entitled to
terminate any Subservicing Agreement in accordance with the terms and conditions
of such Subservicing Agreement and to either directly service the related
Mortgage Loans or enter into a Subservicing Agreement with a successor
subservicer which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall directly service the related Mortgage Loans.
Each Subservicing Agreement shall include the provision that such
agreement may be immediately terminated by the Indenture Trustee in the event
that the Servicer shall, for any reason, no longer be the Servicer. In no event
shall any Subservicing Agreement require the Indenture Trustee, as Successor
Servicer, for any reason whatsoever, to pay compensation to a Subservicer in
order to terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer, or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee and Securityholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Mortgage Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Mortgage Loans when the Subservicer has actually received such
payments and,
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unless the context otherwise requires, 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 Subservicer on behalf of the Servicer. The
Servicer shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Servicer by such Subservicer, and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Issuer, the Indenture Trustee and the Securityholders pursuant
to Section 4.08, shall thereupon assume all of the rights and obligations of the
Servicer under each Subservicing Agreement that the Servicer may have entered
into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements which accrued prior to the transfer of servicing to the
successor Servicer. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of the Subservicing Agreements to the
assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee and the Securityholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate 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, and shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Mortgage Loan or (ii) from a
specific recovery of costs, expenses or attorneys fees against the party against
whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone and none of the Issuer, the Indenture
Trustee or the Securityholders shall be deemed parties thereto or shall have any
claims, rights, obligations, duties or liabilities with respect to the
Subservicer in its capacity as such except as set forth in Section 4.07(c)
above.
(f) In those cases where a Subservicer is servicing a Mortgage Loan
pursuant to a Subservicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "Subservicing
Account"). The Subservicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Subservicing Account no later
than the first Business Day after receipt all proceeds of Mortgage Loans
received by the
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Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this clause (f) to the contrary,
the Subservicer shall only be able to withdraw funds from the Subservicing
Account for the purpose of remitting such funds to the Servicer for deposit into
the Collection Account. The Servicer shall require the Subservicer to cause any
collection agent of the Subservicer to send a copy to the Servicer of each
statement of monthly payments collected by or on behalf of the Subservicer
within five (5) Business Days after the end of every month, and the Servicer
shall compare the information provided in such reports with the deposits made by
the Subservicer into the Collection Account for the same period. The Servicer
shall be deemed to have received payments on the Mortgage Loans on the date on
which the Subservicer has received such payments.
Section 4.08 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes unable
to perform its obligations under this Agreement, the Indenture Trustee will
become the successor servicer or will appoint a successor servicer in accordance
with the provisions of Section 10.02 hereof; provided that any successor
servicer, including the Indenture Trustee, shall satisfy the requirements of an
Eligible Servicer and shall be approved by the Rating Agencies.
Section 4.09 Maintenance of Hazard Insurance; Property Protection
Expenses.
For each Mortgage Loan, the Servicer shall cause to be maintained fire
and hazard insurance naming the Servicer as loss payee thereunder and providing
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (ii) the combined principal balance owing on such Mortgage Loan
and any mortgage loan senior to such Mortgage Loan and (iii) the minimum amount
required to compensate for damage or loss on a replacement cost basis. The
Servicer shall also maintain on property acquired upon foreclosure, or by deed
in lieu of foreclosure, hazard insurance with extended coverage in an amount
which is at least equal to the lesser of (i) the maximum insurable value from
time to time of the improvements which are a part of such property, (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan and (iii) the minimum amount required to compensate
for damage or loss on a replacement cost basis at the time of such foreclosure,
fire and or deed in lieu of foreclosure.
Any amounts to be 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 amounts to be released to the Obligor in
accordance with Accepted Servicing Procedures, subject to the terms and
conditions of the related Mortgage and Debt Instrument) shall be deposited in
the Collection Account, subject to withdrawal as set forth herein.
Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Securityholders, be
added to the Principal Balance of the related Mortgage Loan, notwithstanding
that the terms of such Mortgage Loan so permit. It is understood and agreed that
no earthquake or other additional insurance is to be required of any
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Obligor other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. If the
Mortgaged Property or Foreclosure Property is located at the time of origination
of the Mortgage Loan in a federally designated special flood hazard area (and if
the flood insurance policy referenced herein has been made available), the
Servicer will cause to be maintained flood insurance in respect thereof. Such
flood insurance shall be in an amount equal to the lesser of (i) the sum of the
Principal Balance of the related Mortgage Loan and any Senior Lien, (ii) the
maximum insurable value of the related Mortgaged Property and (iii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).
Section 4.10 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a general policy rating of A:VIII or better in
Best's Key Rating Guide, insuring against fire and hazards of extended coverage
on all of the Mortgage Loans, then, to the extent such policy names the Servicer
as loss payee and provides coverage in an amount equal to the aggregate unpaid
principal balance on the Mortgage Loans without co-insurance, and otherwise
complies with the requirements of Section 4.09, the Servicer shall be deemed
conclusively to have satisfied its obligations with respect to fire and hazard
insurance coverage under Section 4.09, it being understood and agreed that such
blanket policy may contain a deductible clause that is in form and substance
consistent with standard industry practice for servicers of mortgage loans
comparable to the Mortgage Loans, in which case the Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property a
policy complying with Section 4.09 and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the
difference, if any, between the amount that would have been payable under a
policy complying with Section 4.09 and the amount paid under such blanket
policy. Upon the request of the Indenture Trustee or any Securityholder, the
Servicer shall cause to be delivered to the Indenture Trustee or such
Certificateholder, as the case may be, a certified true copy of such policy. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Indenture Trustee and Securityholders, claims under any such policy in a timely
fashion in accordance with the terms of such policy.
Section 4.11 Reports to the Securities and Exchange Commission.
The Indenture Trustee shall, on behalf of the Trust, cause to be filed
with the Securities and Exchange Commission all monthly collateral reports on
Forms 8-K and 10-K required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder. Upon the request of the Indenture
Trustee, each of the Servicer and the Transferor shall cooperate with the
Indenture Trustee in the preparation of any such report and shall provide to the
Indenture Trustee in a timely manner all such information or documentation as
the Indenture Trustee may reasonably request in connection with the performance
of its duties and obligations under this Section.
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Section 4.12 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers
shall, establish and maintain one or more accounts (the "Servicing Accounts"),
into which any collections from the Obligors (or related advances from
Subservicers) for the payment of taxes, assessments, hazard insurance premiums,
and comparable items for the account of the Obligors shall be deposited and
retained. Servicing Accounts shall be Eligible Accounts. Withdrawals of amounts
so collected from a Servicing Account may be made only to (i) effect timely
payment of taxes, assessments, hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer (or a Subservicer to the extent provided in the
related Subservicing Agreement) out of related collections for any advances with
respect to taxes, assessments and insurance premiums and with respect to hazard
insurance; (iii) refund to Obligors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Obligors on
balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of this Agreement in accordance with Section 11.01.
As part of its servicing duties, the Servicer or Subservicers shall pay to the
Obligors interest on funds in Servicing Accounts, to the extent required by law,
and to the extent that interest earned on funds in the Servicing Accounts is
insufficient, shall pay such interest from its or their own funds, without any
reimbursement from the Trust, the Indenture Trustee, the Depositor or any
Securityholder therefor. Upon request of the Indenture Trustee, the Transferor
or the Servicer shall cause the bank, savings association or other depository
for each Servicing Account to forward to the Indenture Trustee copies of such
statements or reports as the Indenture Trustee, the Depositor, or any
Securityholder shall reasonably request.
Section 4.13 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by Cityscape and the Depositor, respectively, with respect to the
assets conveyed to the Trust, Cityscape and the Depositor shall prepare, have
executed by the necessary parties and file in the proper jurisdictions all
financing and continuation statements necessary to maintain the liens, security
interests, and priorities of such liens and security interests that have been
granted by Cityscape and the Depositor, respectively, and Cityscape and the
Depositor shall continue to file on or before each fifth anniversary of the
filing of any financing and continuation statements such additional financing
and continuation statements until the Trust has terminated pursuant to Section
9.1 of the Trust Agreement. The Indenture Trustee agrees to cooperate with
Cityscape and the Depositor in preparing, executing and filing such statements.
The Indenture Trustee agrees to notify Cityscape and the Depositor on the third
Distribution Date prior to each such fifth anniversary of the requirement to
file such financing and continuation statements. The filing of any such
statement with respect to Cityscape and the Depositor shall not be construed as
any indication of an intent of any party contrary to the expressed intent set
forth in Section 2.04 hereof. If Cityscape or the Depositor has ceased to do
business whenever any such financing and continuation statements must be filed
or Cityscape or the Depositor fails to file any such financing statements or
continuation statements at least one month prior to the expiration thereof, the
Indenture Trustee shall perform the services required under this Section 4.13.
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ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Securityholders, shall cause to be established and maintained one
or more Collection Accounts, which shall be separate Eligible Accounts, which
may be interest-bearing, entitled "Collection Account,
______________________________, as Indenture Trustee, in trust for the Cityscape
Mortgage Loan Asset Backed Securities, Series 199_-_". The Collection Account
may be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of any Collection Account other than one maintained with
the Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Indenture Trustee. A
copy of such letter agreement shall be furnished to the Indenture Trustee and,
upon request of any Securityholder, to such Securityholder. Funds in the
Collection Account shall be invested in accordance with Section 5.03.
The Collection Account shall be established, as of the Closing Date,
with the Indenture Trustee as an Eligible Account pursuant to the definition
thereof. The Collection Account may, upon written notice to the Issuer and the
Indenture Trustee, be transferred to a different depository institution so long
as such transfer is to an Eligible Account reasonably acceptable to the
Indenture Trustee.
(2) Establishment of Note Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Securityholders, shall cause
to be established and maintained with the Indenture Trustee one or more Note
Distribution Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "Note Distribution Account,
______________________________, as Indenture Trustee, in trust for the Cityscape
Mortgage Loan Asset Backed Securities, Series 199_-_". Funds in the Note
Distribution Account shall be invested in accordance with Section 5.03.
(b) (1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication) within two (2)
Business Days of receipt thereof in the Collection Account and retain therein in
trust for the benefit of the Securityholders:
(i) all payments on account of principal on the Mortgage Loans
collected after the Cut-Off Date;
(ii) all payments on account of interest on the Mortgage Loans
received after the Cut-Off Date;
(iii) all Net Liquidation Proceeds and Post Liquidation
Proceeds pursuant to Sections 4.02 or 4.04;
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(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of
any Mortgage Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.06 and 3.06;
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any insurance policies
under Section 4.03 or the deposit of the Termination Price under
Section 11.02; and
(viii) any amounts to be deposited from the Capitalized
Interest Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Mortgage Loan that
constitute additional servicing compensation pursuant to Section 7.03, and such
amounts retained by the Servicer during a Due Period shall be excluded from the
calculation of the Servicing Compensation that is distributable to the Servicer
from the Note Distribution Account on the next Distribution Date following such
Due Period.
(2) Deposits to Note Distribution Account. On the Business Day
prior to the Distribution Date, the Indenture Trustee (based on information
provided by the Servicer for such Distribution Date) shall withdraw from the
Collection Account the Available Collection Amount and deposit such into the
Note Distribution Account for such Distribution Date. In addition, on each of
the first three Distribution Dates, the Servicer shall deposit to the Note
Distribution Account the amounts of any Pre-Funding Earnings for the related Due
Period or any amounts to be deposited thereto pursuant to Section 5.05(b) or
5.05(c), as applicable.
(3) Withdrawals from Collection Account. The Indenture
Trustee, at the direction of the Servicer, shall also make the following
withdrawals from the Collection Account, in no particular order of priority, but
in the cases of clauses (ii), (iii) and (iv), after giving effect to any
withdrawal therefrom pursuant to 5.01(b)(2):
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) on each Distribution Date, to pay to the Servicer any
accrued and unpaid Servicing Fees and any additional Servicing
Compensation pursuant to Section 7.03 not withheld pursuant to Section
5.01(b)(1);
(iii) on each Distribution Date, to pay to the Servicer any
unreimbursed Servicing Advances; provided, however, that the Servicer's
right to reimbursement for unreimbursed Servicing Advances shall be
limited to late collections (excluding the scheduled monthly payments)
on the related Mortgage Loans, including, without limitation, late
collections constituting Liquidation Proceeds, Released Mortgaged
Property Proceeds, Insurance Proceeds, Post Liquidation Proceeds and
such other amounts as may be collected
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by the Servicer from the related Obligor or otherwise relating to the
Mortgage Loan in respect of which such unreimbursed amounts are owed;
(iv) on each Distribution Date, to reimburse the Servicer for
any Servicing Advances determined by the Servicer in good faith to have
become Nonrecoverable Servicing Advances; and
(v) to make payments set forth in Section 9.01(e).
(c) Withdrawals from Note Distribution Account. To the extent funds are
available in the Note Distribution Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer Remittance Report
for such Distribution Date) shall make withdrawals therefrom by 11:00 a.m. (New
York City time) on each Distribution Date, for application in the following
order of priority:
(i) to distribute on such Distribution Date the following
amounts pursuant to the Indenture in the following order: (a) to the
Indenture Trustee, an amount equal to the Indenture Trustee Fee and all
unpaid Indenture Trustee Fees from prior Distribution Dates, and (b) to
the Servicer, in trust for the Owner Trustee, an amount equal to the
Owner Trustee Fee and all unpaid Owner Trustee Fees from prior
Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Residual Interest calculated pursuant to 5.01(d) and
(e) below on such Distribution Date;
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Distribution Account hereunder until the Class Principal Balance of
each Class of Securities has been reduced to zero.
(d) On each Distribution Date, the Indenture Trustee shall distribute
the Regular Distribution Amount from the Note Distribution Account (in the case
of all amounts distributable to Noteholders), in the following order of
priority:
(i) to the holders of the Senior Notes, the Senior
Noteholders' Interest Distribution Amount for such Distribution Date
allocated to each Class of Senior Notes, pro rata, based on the amount
of interest distributable in respect of each such Class based on the
related Note Interest Rate;
(ii) [INSERT ADDITIONAL CLASSES OF NOTES TO RECEIVE PAYMENTS
WITH RESPECT TO INTEREST, AS APPLICABLE];
(iii) if with respect to such Distribution Date the
Pre-Funding Pro Rata Distribution Trigger has occurred, the amount on
deposit in the Pre-Funding Account at the end of the Funding Period
will be distributed as principal to all Classes of Notes and the
Residual Interest pro rata, based on the Original Class Principal
Balances thereof (which, with respect to the Residual Interest, for
purposes of this clause, shall be represented by the
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Overcollateralization Amount on the Closing Date) in relation to the
sum of the Original Pool Principal Balance and the Original Pre-Funded
Amount;
(iv) [INSERT ADDITIONAL CLASSES OF NOTES TO RECEIVE PAYMENTS
WITH RESPECT TO PRINCIPAL, AS APPLICABLE];
(v) any remaining amount to the holders of the Residual
Interest.
(e) On each Distribution Date, the Indenture Trustee shall distribute
the Excess Spread, if any, in the following order of priority (in each case,
after giving effect to the distributions in Section 5.01(d)):
(i) in an amount equal to the Overcollateralization Deficiency
Amount, if any, as follows:
(A) [INSERT DISTRIBUTION SCHEME AMONG NOTEHOLDERS];
and
(ii) sequentially, to the Class [ ] Notes and [INSERT OTHER
APPROPRIATE CLASSES OF NOTES], in that order, until their respective
Loss Reimbursement Deficiencies, if any, have been paid in full; and
(iii) any remaining amount to the holders of the Residual
Interest.
(f) Notwithstanding the priorities specified above, on any Distribution
Date as to which the Class Principal Balances of each of the Class [ ] Notes and
[INSERT APPROPRIATE CLASSES OF NOTES] and the Overcollateralization Amount have
been reduced to zero, distributions of principal on the Classes of Senior Notes
will be applied to such Classes pro rata based on their respective Class
Principal Balances.
Section 5.02 Certificate Distribution Account and Distributions on the
Notes.
(a) Establishment. No later than the Closing Date, the Servicer, for
the benefit of the Securityholders, shall cause to be established and maintained
with the Indenture Trustee for the benefit of the Owner Trustee on behalf of the
Certificateholders one or more separate Eligible Accounts, which Trust
Account(s) shall be entitled "Certificate Distribution Account, _____________
_________________, as Indenture Trustee, in trust for the Cityscape Loan Trust
Series 199_-_". Funds in the Certificate Distribution Account shall be invested
in accordance with Section 5.03.
(b) [RESERVED].
(c) Distributions. On each Distribution Date, the Indenture Trustee
shall withdraw from the Note Distribution Account all amounts required to be
deposited in the Certificate Distribution Account with respect to such
Distribution Date pursuant to Section 5.01(c)(ii) and will remit such amount to
the Owner Trustee or the Co-Owner Trustee for deposit into the Certificate
Distribution Account. The Indenture Trustee shall distribute all remaining
amounts on deposit in the Note Distribution Account to the holders of the Notes
to the extent of amounts due and unpaid
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on the Notes for principal thereof and interest thereon as set forth in Section
5.01(d). The Owner Trustee or the Co-Owner Trustee shall distribute all amounts
on deposit in the Certificate Distribution Account to the holders of the
Residual Interest.
(d) All distributions made on the Notes on each Distribution Date will
be made on a pro rata basis among the Noteholders of record of such Class on the
next preceding Record Date based on the Percentage Interest represented by their
respective Notes, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to the
account of such Noteholder, if such Noteholder shall own of record Notes which
have original denominations aggregating at least $250,000 and shall have so
notified the Indenture Trustee, and otherwise by check mailed to the address of
such Noteholder appearing in the Notes Register. The final distribution on each
Note will be made in like manner, but only upon presentment and surrender of
such Note at the location specified in the notice to Noteholders of such final
distribution.
(e) [RESERVED].
(f) All distributions made on the Residual Interest on each
Distribution Date will be made on a pro rata basis among the holders of the
Residual Interest of record on the next preceding Record Date based on the
Percentage Interest represented by their respective Residual Interest, and
except as otherwise provided in the next succeeding sentence, shall be made by
wire transfer of immediately available funds to the account of each such holder,
if such holder shall own of record a Residual Interest which represents a
Percentage Interest equal to at least 10% in amount and shall have so notified
the Owner Trustee or Co-Owner Trustee, and otherwise by check mailed to the
address of such Residual Interest holder appearing in the Certificate Register.
The final distribution on each Residual Interest Instrument will be made in like
manner, but only upon presentment and surrender of such Residual Interest
Instrument at the location specified in the notice to holders of the Residual
Interest of such final distribution.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Trust Accounts (other than the Certificate
Distribution Account) and in all proceeds thereof (excluding all income
thereon), and all such funds, investments, proceeds and income shall be part of
the Trust Account Property and the Trust Estate. If, at any time, any Trust
Account ceases to be an Eligible Account, the Indenture Trustee (or the Servicer
on its behalf) shall within ten (10) Business Days (or such longer period, not
to exceed thirty (30) calendar days, as to which each Rating Agency may consent)
(i) establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account
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and (iii) transfer any cash and investments from such ineligible Trust Account
to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate
Distribution Account), the Indenture Trustee agrees, by its acceptance hereof,
that each such Trust Account shall be subject to the sole and exclusive custody
and control of the Indenture Trustee for the benefit of the Securityholders and
the Issuer, as the case may be, and the Indenture Trustee shall have sole
signature and withdrawal authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder also shall be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee or Co-Owner Trustee shall possess all right, title and interest for the
benefit of the Certificateholders in all funds on deposit from time to time in
the Certificate Distribution Account and in all proceeds thereof (excluding all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. Subject to the rights
of the Indenture Trustee, the Owner Trustee and Co-Owner Trustee each agrees, by
its acceptance hereof, that such Certificate Distribution Account shall be
subject to the sole and exclusive custody and control of the Owner Trustee and
Co-Owner Trustee for the benefit of the Issuer and the parties entitled to
distributions therefrom, including without limitation, the Certificateholders,
and the Owner Trustee and the Co-Owner Trustee shall have sole signature and
withdrawal authority with respect to the Certificate Distribution Account.
Notwithstanding the preceding, the distribution of amounts from the Certificate
Distribution Account in accordance with Section 5.02(c) also shall be made for
the benefit of the Indenture Trustee (including, without limitation, with
respect to its duties under the Indenture and this Agreement relating to the
Trust Estate), and the Indenture Trustee (in its capacity as Indenture Trustee)
shall have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with Section 5.02(f).
The Servicer shall have the power, revocable by the Indenture Trustee
or by the Owner Trustee or Co-Owner Trustee with the consent of the Indenture
Trustee, to instruct the Indenture Trustee or Owner Trustee to make withdrawals
and payments from the Trust Accounts for the purpose of permitting the Servicer
to carry out its respective duties hereunder or permitting the Indenture Trustee
or Owner Trustee to carry out its duties herein or under the Indenture or the
Trust Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default shall have
occurred and be continuing, the funds held in any Trust Account may be invested
(to the extent practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed by the Servicer in writing or by telephone or
facsimile transmission confirmed in writing by the Servicer. In any case, funds
in any Trust Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, not
later than the Business Day immediately preceding the Distribution Date next
following the date of such investment and shall not be sold or disposed of prior
to its maturity, subject to Section 5.03(b)(2)
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below. All interest and any other investment earnings on amounts or investments
held in any Trust Account shall be deposited into the Collection Account
immediately upon receipt by the Indenture Trustee, or in the case of the
Certificate Distribution Account, the Owner Trustee or Co-Owner Trustee, as
applicable, but shall be payable to the Servicer as additional Servicing
Compensation and may be withdrawn from the Collection Account pursuant to
Section 5.01(b)(3)(ii). All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must be
held by or registered in the name of "______________________________, as
Indenture Trustee, in trust for the Cityscape Mortgage Loan Asset Backed
Securities, Series 199_-_". While the Co-Owner Trustee holds the Certificate
Distribution Account, all Permitted Investments in which funds in the
Certificate Distribution Account are invested shall be held by or registered in
the name of "______________________________, as Co-Owner Trustee, in trust for
the Cityscape Mortgage Loan Asset Backed Securities, Series 199_-_".
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from any Trust Account held by or on behalf of the
Indenture Trustee and sufficient uninvested funds are not available to make such
disbursement, the Indenture Trustee, or Owner Trustee or Co-Owner Trustee in the
case of the Certificate Distribution Account, shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such Trust
Account. The Indenture Trustee, or Owner Trustee or Co-Owner Trustee in the case
of the Certificate Distribution Account, shall not be liable for any investment
loss or other charge resulting therefrom, unless such loss or charge is caused
by the failure of the Indenture Trustee or Owner Trustee or Co-Owner Trustee,
respectively, to perform in accordance with this Section 5.03.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the Servicer
shall deposit the amount of such losses (to the extent not offset by income from
other investments in such Trust Account) in such Trust Account immediately upon
the realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the Issuer and, for federal
and state income tax purposes, the Issuer shall be deemed to be the owner of
each Trust Account.
(c) Subject to Section 6.01 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property (other than the
Certificate Distribution Account and amounts held from time to time therein),
the Indenture Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in Eligible Accounts, subject to the last
sentence of Section 5.03(a); and each such Eligible Account shall be
subject to the exclusive custody and control of the Indenture Trustee,
and the Indenture Trustee shall have sole signature authority with
respect thereto;
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(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property, as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and is not governed by clause
(3) above shall be delivered to the Indenture Trustee in accordance
with paragraph (c) of the definition of "Delivery" and shall be
maintained by the Indenture Trustee, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Issuer with the consent of the Indenture Trustee, to instruct
the Indenture Trustee to make withdrawals and payments from the Trust Accounts
for the purpose of permitting the Servicer or the Issuer to carry out their
respective duties hereunder or permitting the Indenture Trustee to carry out its
duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Mortgage Loan are less than
the related Principal Balance plus accrued interest thereon, or any Obligor
makes a partial payment of any Monthly Payment due on a Mortgage Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds
or partial payment shall be applied to payment of the related Debt Instrument,
first to interest accrued at the Mortgage Loan Interest Rate and then to
principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Class [] Notes
and [INSERT CLASSES OF NOTES TO WHICH LOSSES ARE TO BE ALLOCABLE] in accordance
with the Allocable Loss Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Noteholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Account (the
"Pre-Funding Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders.
On the Closing Date, the Owner Trustee will deposit in the Pre-Funding
Account the Pre-Funded Amount from the net proceeds of the sale of the Notes. On
each Subsequent Transfer Date,
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upon satisfaction of the conditions set forth in Section 2.07 with respect to
such transfer, the Indenture Trustee shall withdraw from the Pre-Funding Account
an amount equal to the Principal Balances of the Subsequent Loans transferred to
the Issuer on such Subsequent Transfer Date, and shall distribute such amount to
or upon the order of the Transferor.
(b) If the Pre-Funded Amount has not been reduced to zero on the last
day of the Funding Period after giving effect to any reductions in the
Pre-Funded Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee shall withdraw the Pre-Funded Amount from the Pre-Funding Account on the
Mandatory Redemption Date and (i) if the Pre-Funded Amount is less than
$100,000, deposit such amount in the Note Distribution Account to be applied to
reduce the Outstanding Amount of the Class of Notes then entitled to
distributions of principal and (ii) if the Pre-Funded Amount is greater than or
equal to $100,000, deposit such amounts to the Note Distribution Account for
distribution pursuant to Section 5.01(d)(iii).
(c) On the Business Day preceding each of the second and third
Distribution Dates, if applicable, the Indenture Trustee shall withdraw the
related Pre-Funding Earnings for the related Due Period and deposit such amounts
into the Note Distribution Account.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Noteholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Account (the
"Capitalized Interest Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Noteholders.
(b) On each Determination Date during the Funding Period (including the
Determination Date in the month following the Due Period during which the
Funding Period ends), the Indenture Trustee will withdraw from the Capitalized
Interest Account an amount equal to the Capitalized Interest Requirement and
deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Transferor.
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ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee (i) computer-readable magnetic tape setting forth the
payments and collections received with respect to the Mortgage Loans during the
Due Period for the month immediately preceding the month in which such
Determination Date occurs (each such tape, a "Servicer Remittance Report") and
(ii) if not included in the Servicer Remittance Report, a report and an
electromagnetic tape in computer readable format setting forth the information
described in clauses (A)-(I) of Section 6.01(b) for the month immediately
preceding the month in which such Determination Date occurs (such report, a
"Delinquency Report"). Furthermore, no later than each Determination Date, the
Servicer shall deliver to the Indenture Trustee a magnetic tape or computer disk
providing such information regarding the Servicer's activities in servicing the
Mortgage Loans during the related Due Period as the Indenture Trustee may
reasonably require.
(b) On each Distribution Date, Indenture Trustee shall distribute,
based on information provided by the Servicer, a monthly statement (the
"Distribution Statement"), to the Depositor, the Securityholders and the Rating
Agencies, stating the date of original issuance of the Securities (day, month
and year), the name of the Issuer (i.e., "Cityscape Loan Trust 199_-_"), the
series designation of the Notes (i.e., "Series 199 - "), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available Distribution
Amount for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes before
and after giving effect to distributions made to the holders of such
Securities on such Distribution Date and the Pool Principal Balance as
of the first and last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the
Securities then outstanding;
(iv) the amount of principal and interest received on the
Mortgage Loans during the related Due Period;
(v) with respect to each applicable Class of Securities, the
Optimal Principal Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and any
amount to be distributed to the Securityholders or the holders of the
Residual Interest on such Distribution Date;
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(vii) the Servicing Compensation, the Indenture Trustee Fee
and the Owner Trustee Fee for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution
Date, the Overcollateralization Target Amount as of such Distribution
Date and the Allocable Loss Amount for such Distribution Date;
(ix) the weighted average maturity of the Mortgage Loans and
the weighted average Mortgage Loan Interest Rate of the Mortgage Loans;
(x) certain performance information, including delinquency and
foreclosure information with respect to the Mortgage Loans, as set
forth in the Servicer Remittance Report; and
(xi) the Pre-Funding Amount at the end of the related Due
Period.
In addition, on each Distribution Date, the Indenture Trustee shall
distribute to each Securityholder, together with the information described
above, the following information, based solely upon information provided to the
Indenture Trustee pursuant to Section 6.01(a) hereof, upon which the Indenture
Trustee may conclusively rely without independent verification:
(A) the number and aggregate Principal Balance (including the
percentage equivalent relative to the aggregate Principal Balance of
all Mortgage Loans) of Mortgage Loans (i) 30-59 days delinquent, (ii)
60-89 days delinquent and (iii) 90 days or more delinquent (which
statistics shall include Mortgage Loans in foreclosure and bankruptcy
but which shall exclude Foreclosure Properties), as of the close of
business on the last day of the calendar month next preceding such
Distribution Date as well as the aggregate Principal Balances of all
Mortgage Loans as of such date;
(B) the number of, and aggregate Principal Balance of, all
Mortgage Loans in foreclosure proceedings (other than any Mortgage
Loans described in clause (C)) and the percentage of the aggregate
Principal Balances of such Mortgage Loans relative to the aggregate
Principal Balances of all Mortgage Loans, all as of the close of
business on the last day of the calendar month next preceding such
Distribution Date;
(C) the number of, and the aggregate Principal Balance of, all
Mortgage Loans in bankruptcy proceedings (other than any Mortgage Loans
described in clause (B)) and the percentage of the aggregate Principal
Balances of such Mortgage Loans relative to the aggregate Principal
Balances of all Mortgage Loans, all as of the close of business on the
last day of the calendar month next preceding such Distribution Date;
(D) the number of Foreclosure Properties, the aggregate
Principal Balances of the related Mortgage Loans, the book value of
such Foreclosure Properties and the percent of the aggregate Principal
Balances of such Mortgage Loans to the aggregate Principal Balances of
all Mortgage Loans, all as of the close of business on the last day of
the calendar month next preceding such Distribution Date;
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(E) for each Foreclosure Property, the Principal Balance of
the related Mortgage Loan, the loan number of such Mortgage Loans, the
value of the Mortgaged Property, the value established by any new
appraisal, the estimated cost of disposing of the Mortgage Loan and the
amount of any unreimbursed Servicing Advances;
(F) for each Mortgage Loan which is in foreclosure, the
Principal Balance of such Mortgage Loan, the book value of the
Mortgaged Property, the Loan-to-Value Ratio as of the date of
origination, the Loan-to-Value Ratio as of the close of business on the
last day of the calendar month next preceding such Distribution Date
and the last paid to date;
(G) the principal balance of each Mortgage Loan that was
modified or extended pursuant to the terms hereof;
(H) during the related Due Period, the number of and aggregate
Principal Balance and the loan numbers of all Mortgage Loans that,
respectively, (A) became Liquidated Mortgage Loans and (B) became
Defective Mortgage Loans pursuant to Section 3.06, including the
foregoing amounts by loan type (i.e., Combination Loans or Debt
Consolidation Loans);
(I) from the Closing Date through the most current Due Period,
the number of and cumulative aggregate Principal Balance of all
Mortgage Loans that, respectively, (A) became Liquidated Mortgage Loans
and (B) became Defective Mortgage Loans pursuant to Section 3.06,
including the foregoing amounts by loan type (i.e., Combination Loans
or Debt Consolidation Loans); and
(J) the Net Delinquency Calculation Amount for such
Distribution Date.
All reports prepared by the Indenture Trustee of the withdrawals from
and deposits in the Collection Account will be based in whole or in part upon
the information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a Securityholder, such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclauses (b)(iv) and (vii) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Securityholder.
(d) On each Distribution Date, the Indenture Trustee shall forward to
each holder of a Residual Interest a copy of the Distribution Statement in
respect of such Distribution Date and a statement setting forth the amounts
actually distributed to such holders of a Residual Interest on such Distribution
Date, together with such other information as the Indenture Trustee deems
necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a
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holder of a Residual Interest, if requested in writing by such Person, such
information as is reasonably necessary to provide to such Person a statement
containing the information provided pursuant to the previous paragraph,
aggregated for such calendar year or applicable portion thereof during which
such Person was a holder of Residual Interest.
(f) Upon reasonable advance notice in writing, the Servicer will
provide to each Securityholder which is a savings and loan association, bank or
insurance company access to information and documentation regarding the Mortgage
Loans sufficient to permit such Securityholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to
investment in such Securities.
(g) The Indenture Trustee shall forward to each Securityholder and the
holder of a Residual Interest, during the term of this Agreement, such periodic,
special, or other reports, including information tax returns or reports required
with respect to the Securities and the Residual Interest, including Internal
Revenue Service Forms 1099 and (if instructed in writing by the Depositor on the
basis of the advice of legal counsel) Form 1066, Schedule Q and other similar
reports that are required to be filed by the Indenture Trustee or its agent and
the holder of a Residual Interest, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Securityholders or
the holder of a Residual Interest, or otherwise with respect to the purposes of
this Agreement, all such reports or information to be provided by and in
accordance with such applicable instructions and directions as the
Securityholders or the holder of a Residual Interest may reasonably require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and of
a proprietary nature and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
Property.
Each year beginning in 199_ [SPECIFY THE YEAR IMMEDIATELY SUCCEEDING
THE YEAR IN WHICH THE CLOSING DATE OCCURS], the Servicer, at its expense, shall
make the reports of foreclosures and abandonments of any Mortgaged Property
required by Section 6050J of the Code. The reports from the Servicer shall be in
form and substance sufficient to meet the reporting requirements imposed by such
Section 6050J of the Code.
Section 6.03 Specification of Certain Tax Matters.
Each Securityholder in whose name a Security is registered shall
provide the Indenture Trustee with a completed and executed Form W-9 or Form
W-8, as applicable, prior to purchasing a Security. The Indenture Trustee shall
comply with all requirements of the Code, and applicable state and local law,
with respect to the withholding from any distributions made to any
Securityholder of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
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ARTICLE VII.
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements.
Except as otherwise provided in the next sentence, the Servicer will,
to the extent it has knowledge of any conveyance or prospective conveyance of
any Mortgaged Property by any Obligor (whether by absolute conveyance or by
contract of sale and whether or not the Obligor remains or is to remain liable
under the Debt Instrument and/or the Mortgage), exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause, if
any, applicable thereto. If the Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause or enforcement would
materially increase the risk of default or delinquency on, or impair the
security for, the Mortgage Loan, the Servicer will enter into an assumption and
modification agreement from or with the person to whom such property has been
conveyed or is proposed to be conveyed, pursuant to which such person becomes
liable under the Debt Instrument and, to the extent permitted by applicable
state law, the Obligor remains liable thereon. The Servicer is also authorized
to enter into a substitution of liability agreement with such person, pursuant
to which the original Obligor is released from liability and such person is
substituted as the Obligor and becomes liable under the Debt Instrument. In
connection with any assumption or substitution, the Servicer shall apply
Accepted Servicing Procedures. Any fee collected by the Servicer in respect of
an assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation. In connection with any such
assumption, no material term of the Debt Instrument (including, but not limited
to, the related Mortgage Loan Interest Rate and the amount of the Monthly
Payment) may be amended or modified, except as otherwise required pursuant to
the terms thereof. The Servicer shall notify the Indenture Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Indenture Trustee the original copy of such substitution or assumption
agreement, which copy shall be added to the related Trustee Mortgage Loan File
and shall, for all purposes, be considered a part of such Mortgage Loan File to
the same extent as all other documents and instruments constituting a part
thereof.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Debt Instrument or any
assumption which the Servicer believes in good faith that it may be restricted
by law from preventing, for any reason whatever. For purposes of this Section
7.01, the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
Section 7.02 Satisfaction of Mortgages and Release of Mortgage Loan
Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full shall be escrowed in a manner
customary for such purposes, the Servicer will notify the Indenture Trustee by
an appropriate certification of a Servicing Officer and
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shall request delivery to it of the Trustee Mortgage Loan File. Upon receipt of
such certification and request, the Indenture Trustee shall promptly release the
related Mortgage Loan File to the Servicer. The Servicer shall provide for
preparation of the appropriate instrument of satisfaction covering any Mortgage
Loan which pays in full, and the Indenture Trustee shall cooperate in the
execution and return of such instrument to provide for its delivery or recording
as may be required. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to any Trust Account or
shall be otherwise chargeable to the Trust, the Indenture Trustee or the
Securityholders.
From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Indenture Trustee shall, upon request of the Servicer
and delivery to the Indenture Trustee of a Request for Release in the form of
Exhibit D, release the related Mortgage Loan File to the Servicer, and the
Indenture Trustee shall, at the direction of the Servicer, execute such
documents as shall be necessary to the prosecution of any such proceedings. Such
Request for Release shall obligate the Servicer to return each and every
document previously requested from the Mortgage Loan File to the Indenture
Trustee when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Net Liquidation Proceeds relating to
the Mortgage Loan File have been deposited in the Collection Account or the
Mortgage Loan File or such document has been delivered to an attorney, or to a
public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially, and the Servicer has
delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage Loan
File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation which are required to be deposited into the
Collection Account have been so deposited, a copy of the Request for Release
shall be released by the Indenture Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Indenture
Trustee shall execute and deliver to the Servicer any court pleadings, requests
for trustee's sale or other documents 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 Obligor on the Debt Instrument or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Debt Instrument or Mortgage or otherwise available at law or in equity. Each
such certification shall include a request that such pleadings or documents be
executed by the Indenture Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture Trustee will not 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.
The Indenture Trustee shall, upon receipt of a written request from a
Servicing Officer, execute any document provided to the Indenture Trustee by the
Servicer or take any other action requested in such request that is, in the
opinion of the Servicer as evidenced by such request, required by any state or
other jurisdiction to discharge the lien of a Mortgage upon the satisfaction
thereof and the Indenture Trustee will sign and post, but will not guarantee
receipt of, any such
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documents to the Servicer, or such other party as the Servicer may direct,
within five (5) Business Days, or more promptly if needed, of the Indenture
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Indenture Trustee's satisfaction that the
related Mortgage Loan has been paid in full by or on behalf of the Obligor and
that such payment has been deposited in the Collection Account.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to receive from the Collection Account, the Servicing Fee out of which
the Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of assumption fees, modification
fees, and other administrative fees, insufficient funds charges, prepayment
penalties, amounts remitted pursuant to Section 7.01, late payment charges and
investment income on earnings on the Trust Accounts shall be part of the
Servicing Compensation payable to the Servicer hereunder and shall be paid
either by the Servicer retaining such additional servicing compensation prior to
deposit in the Collection Account pursuant to Section 5.01(b)(1) or, if
deposited into the Collection Account, as part of the Servicing Compensation
withdrawn from the Note Distribution Account pursuant to Section 5.01(b)(3)
hereof.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The Servicer
also agrees to pay all annual Rating Agency monitoring fees.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee, the Depositor and
the Transferor not later than ninety (90) days following the end of each
Servicer's Fiscal Year (beginning with the end of the Servicer's Fiscal Year in
_____ [SPECIFY THE YEAR IN WHICH THE CLOSING DATE OCCURS]), an Officers'
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Servicer during the preceding year and of performance under
this Agreement has been made under such officer's supervision and (ii) to the
best of such officer's knowledge, based on such review, the Servicer has
fulfilled all of 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 officers and the nature and status
thereof.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the Trustee a
copy of its annual audited financial statements prepared in the ordinary course
of business. The Servicer shall, upon the request of the Depositor, deliver to
such party any unaudited quarterly financial statements of the Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor or the
Underwriters on reasonable notice to inspect the Servicer's servicing facilities
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during normal business hours for the purpose of satisfying the Depositor that
the Servicer has the ability to service the Mortgage Loans in accordance with
this Agreement.
The Servicer shall also furnish and certify to the requesting party
such other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder, (ii)
its financial condition, (iii) the Mortgage Loans and (iv) the performance of
the obligations of any Subservicer under the related Subservicing Agreement, in
each case as the Trustee or the Depositor may reasonably request from time to
time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than ninety (90) days following the end of each Servicer's
Fiscal Year (beginning with the end of the Servicer's Fiscal Year in _____
[SPECIFY THE YEAR IN WHICH THE CLOSING DATE OCCURRED]), the Servicer, at its
expense, shall cause any of Arthur Andersen & Co., Coopers & Lybrand, Deloitte &
Touche, Ernst & Young, KPMG Peat Marwick and Price Waterhouse & Co., or such
other nationally recognized firm of Independent Certified Public Accountants,
(which may also render other services to the Servicer) to furnish a statement to
the Trustee, the Transferor and the Depositor to the effect that such firm has
examined certain documents and records relating to the servicing of the Mortgage
Loans under this Agreement or of mortgage loans under pooling and servicing
agreements (which shall include the Mortgage Loans and this Agreement)
substantially similar to one another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements covered thereby) and
that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC, such firm confirms that such servicing
has been conducted in compliance with this Agreement or such pooling and
servicing agreements, as applicable, except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers or the Attestation Program for
Mortgages serviced for FHLMC requires it to report, each of which errors and
omissions shall be specified in such statement. In rendering such statement,
such firm may rely, as to matters relating to direct servicing of mortgage loans
by Subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of independent public accountants with
respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Issuer and each of
their respective agents shall have the right, upon reasonable prior notice,
during normal business hours and as often as reasonably required, to examine,
audit and copy, at the expense of the Person making such examination, any and
all of the books, records or other information of the Servicer (including,
without limitation, any Subservicer to the extent provided in the related
Subservicing Agreement) whether held by the Servicer or by another on behalf of
the Servicer, which may be relevant to the performance or observance by the
Servicer of the terms, covenants or conditions of this Agreement.
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Each Securityholder, the Indenture Trustee and the Issuer agree that any
information obtained pursuant to the terms of this Agreement shall be held
confidential.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than twenty-five (25) days after each Record Date, the Servicer
shall forward to the Indenture Trustee a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account as of the close of
business on the preceding Record Date and showing, for the period covered by
such statement, the aggregate of deposits into the Collection Account for each
category of deposit specified in Section 5.01(b)(1), the aggregate of
withdrawals from the Collection Account for each category of withdrawal
specified in Section 5.01(b)(2) and (3) for the related Due Period.
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ARTICLE VIII.
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to the
Securityholders and to prospective Securityholders annual audited financial
statements of the Servicer for one or more of the most recently completed five
(5) fiscal years for which such statements are available, which request shall
not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Mortgage Loans in accordance
with this Agreement.
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ARTICLE IX.
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the Trust, the Owner
Trustee, the Co-Owner Trustee, the Depositor and the Indenture Trustee (each an
"Indemnified Party") and hold harmless each of them against any and all claims,
losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of any of the Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the
Servicer to perform its duties and service the Mortgage Loans in compliance with
the terms of this Agreement; provided, however, that if the Servicer is not
liable, pursuant to the provisions of Section 9.01(d) hereof, for its failure to
perform its duties and service the Mortgage Loans in compliance with the terms
of this Agreement, then the provisions of this Section 9.01 shall have no force
and effect with respect to such failure.
(b) The Transferor, the Owner Trustee, the Co-Owner Trustee, the
Depositor or the Indenture Trustee, as the case may be, shall promptly notify
the Servicer if a claim is made by a third party with respect to a breach of any
of the Servicer's representations and warranties and covenants contained in this
Agreement or in any way relating to the failure of the Servicer to perform its
duties and service the Mortgage Loans in compliance with the terms of this
Agreement. The Servicer shall promptly notify the Indenture Trustee and the
Depositor of any claim of which it has been notified pursuant to this Section
9.01 by a Person other than the Depositor and, in any event, shall promptly
notify the Depositor of its intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice
to the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party unless (a) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (b) the Servicer has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both the Servicer and one or more Indemnified Parties, and the
Indemnified Parties shall have been advised by counsel that there may be one or
more legal defenses available to them which are different from or additional to
those available to the Servicer. The Servicer shall not be liable for any
settlement of any such claim or action unless the Servicer shall have consented
thereto or be in default on its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Servicer of liability only if such failure is materially prejudicial to the
position of the Servicer, and then only to the extent of such prejudice.
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(d) Neither the Transferor, the Depositor or the Servicer nor any of
the directors, officers, employees or agents of the Transferor, the Depositor or
the Servicer, or members or affiliates of the Depositor shall be under any
liability to the Trust or the Securityholders 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 Transferor, the Depositor, the Servicer or any such person
against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any specific liability
imposed on the Transferor, the Depositor or the Servicer herein, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the duties of the Servicer, the
Depositor or the Transferor, as the case may be, or by reason of reckless
disregard of the obligations and duties of the Servicer, the Depositor or the
Transferor, as the case may be, hereunder. The Transferor, the Depositor, the
Servicer and any director, officer, employee or agent of the Transferor, the
Depositor or the Servicer, or any member or affiliate of the Depositor may rely
in good faith on any document of any kind which, prima facie, is properly
executed and submitted by any Person respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Securities, other than any loss, liability or
expense related to any specific Mortgage Loan or Mortgage Loans (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Except as
otherwise provided herein, neither of the Transferor, the Depositor nor the
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action that is not related to its respective duties under this Agreement;
provided, however, that, except as otherwise provided herein, any of the
Transferor, the Depositor, or the Servicer may, with the prior consent of the
Indenture Trustee, in its discretion, 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 and the interests of the Securityholders hereunder.
In such event, the legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Trust, and
the Transferor, the Depositor and the Servicer shall be entitled to be
reimbursed therefor out of the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall 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 and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or
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any Person succeeding to the business of the Servicer, shall be an Eligible
Servicer and shall be the successor of the Servicer, as applicable 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. The
Servicer shall send notice of any such merger, conversion, consolidation or
succession to the Indenture Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. Subject to the terms of
Section 9.01 herein, the Servicer shall have no obligation to appear with
respect to or prosecute or defend any legal action which is not incidental to
the Servicer's duty to service the Mortgage Loans in accordance with this
Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) by the consent of the Indenture Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee. No resignation of the Servicer shall become
effective until the Indenture Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 and satisfying the requirements of
Sections 4.08 hereof with respect to the qualifications of a successor Servicer,
shall have assumed the Servicer's responsibilities, duties, liabilities (other
than those liabilities arising prior to the appointment of such successor) and
obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder, without the prior written consent of the Indenture
Trustee, and absent such written consent, any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
Section 9.06 Servicer May Own Notes.
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Notes with the
same rights as it would have if it were not
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the Servicer or an affiliate thereof, except as otherwise specifically provided
herein. Notes so owned by or pledged to the Servicer or such affiliate shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority, or distinction as among all of the Notes;
provided, however, that any Notes owned by the Servicer or any affiliate
thereof, during the time such Notes are owned by any of them, shall be without
voting rights for any purpose set forth in this Agreement. The Servicer shall
notify the Indenture Trustee promptly after it or any of its affiliates becomes
the owner or pledgee of a Note.
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ARTICLE X.
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
the Mortgage Loans received by the Servicer no later than the second
Business Day following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in
any material respect, any other covenants, obligations or agreements of
the Servicer as set forth in this Agreement, which failure continues
unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have
been given (a) to the Servicer by the Indenture Trustee or the Issuer
or (b) to the Servicer, the Indenture Trustee or the Issuer by any
Majority Securityholder; or
(iii) 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,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of sixty (60) days; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings of
or relating to the Servicer or of or relating to all or substantially
all of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Securityholders, the
Indenture Trustee or the Issuer by notice in writing to the Servicer may, in
addition to whatever rights such Person may have at law or equity to damages,
including injunctive relief and specific performance, may terminate all the
rights and obligations of the Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, as servicer under this Agreement. Upon
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the
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Mortgage Loans or otherwise, shall, subject to Section 10.02, pass to and be
vested in a successor servicer, or the Indenture Trustee if a successor servicer
cannot be retained in a timely manner, and the successor servicer, or Indenture
Trustee, as applicable, is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the successor servicer for administration by it of all amounts
which shall at the time be credited by the Servicer to each Collection Account
or thereafter received with respect to the Mortgage Loans.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as servicer pursuant to
this Article X, then, subject to Section 4.08, the Indenture Trustee shall
appoint a successor servicer to be the successor in all respects to the Servicer
in its capacity as Servicer under this Agreement and the transactions set forth
or provided for herein and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof; provided, however, that the successor servicer shall not be
liable for any actions of any servicer prior to it; provided further, however,
that if a successor servicer cannot be retained in a timely manner, the
Indenture Trustee shall act as successor Servicer. In the event the Indenture
Trustee assumes the responsibilities of the Servicer pursuant to this Section
10.02, the Indenture Trustee will make reasonable efforts consistent with
applicable law to become licensed, qualified and in good standing in each
Mortgaged Property State in which the laws require licensing or qualification
for it to perform its obligations as Servicer hereunder or, alternatively, shall
retain an agent who is so licensed, qualified and in good standing in any such
Mortgaged Property State.
In the case that the Indenture Trustee serves as successor servicer,
the Indenture Trustee in such capacity shall not be liable for any servicing of
the Mortgage Loans prior to its date of appointment and shall not be subject to
any obligations to repurchase any Mortgage Loans. The successor servicer shall
be obligated to make Servicing Advances hereunder. As compensation therefor, the
successor servicer appointed pursuant to the following paragraph shall be
entitled to all funds relating to the Mortgage Loans which the Servicer would
have been entitled to receive from the Note Distribution Account pursuant to
Section 5.01(c) as if the Servicer had continued to act as servicer hereunder,
together with other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in Sections 7.01 and 7.03.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fees, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee
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is required to solicit bids to appoint a successor servicer, the Indenture
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions that: (i) have a
net worth of not less than $25,000,000, (ii) have a blanket fidelity bond and
errors and omissions insurance coverage satisfying the requirements set forth in
Section 4.03 and (iii) would not cause any rating of any Class of the Securities
in effect immediately prior to such assignment to be qualified, downgraded or
withdrawn, as evidenced by a letter from each Rating Agency to such effect. Such
public announcement shall specify that the successor servicer shall be entitled
to the full amount of the Servicing Fee and Servicing Compensation provided for
herein. Within thirty (30) days after any such public announcement, the
Indenture Trustee shall negotiate and effect the sale, transfer and assignment
of the servicing rights and responsibilities hereunder to the qualified party
submitting the highest qualifying bid. The Indenture Trustee shall deduct from
any sum received by the Indenture Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unpaid Servicing
Fees and unreimbursed Servicing Advances made by the Indenture Trustee. After
such deductions, the remainder of such sum shall be paid by the Indenture
Trustee to the Servicer at the time of such sale, transfer and assignment to the
Servicer's successor. The Indenture Trustee, the Issuer, any Custodian, the
Servicer and any such successor servicer shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. The
Servicer agrees to cooperate with the Indenture Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Trust Account maintained by the Servicer or which are
thereafter received with respect to the Mortgage Loans. Neither the Indenture
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay by the Servicer in delivering, cash, documents or records to it or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer hereunder. No appointment of a successor to the Servicer hereunder
shall be effective until written notice of such proposed appointment shall have
been provided by the Indenture Trustee to each Securityholder, the Issuer and
the Depositor and, except in the case of the appointment of the Indenture
Trustee as successor to the Servicer (when no consent shall be required).
Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act as servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor servicer out of
payments on the Mortgage Loans as it and such successor servicer shall agree
(provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 7.03) together with other Servicing
Compensation in the form of assumption fees, late payment charges or otherwise
as provided in this Agreement.
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In connection with any transfer of servicing responsibilities pursuant
to this Section 10.02, the successor Servicer shall be responsible for all costs
and expenses in connection with such transfer, other than the costs and expenses
of transferring the files and records relating to the Loans which shall be at
the expense of the Servicer being replaced.
Section 10.03 Waiver of Defaults.
The Majority Securityholders may waive any events permitting removal of
the Servicer as servicer pursuant to this Article X, provided, however, that the
Majority Securityholders may not waive a default in making a required
distribution on a Security or Residual Interest without the consent of the
related Securityholder or holders of the Residual Interest. Upon any waiver of a
past default, such default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the funds in any Trust Account maintained by the
Servicer;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee all Mortgage Loan Files and related documents, and
statements held by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Issuer and the Securityholders, a full accounting
of all funds, including a statement showing the Monthly Payments collected by it
and a statement of monies held in trust by it for payments or charges with
respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
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ARTICLE XI.
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to the provisions thereof or (ii) the disposition of all funds with
respect to the last Mortgage Loan and the remittance of all funds due hereunder
and the payment of all amounts due and payable to the Indenture Trustee, the
Owner Trustee, the Co-Owner Trustee, the Issuer and the Custodian; or (b) the
mutual consent of the Servicer, the Depositor, the Transferor and all
Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an
early termination of the Trust on or after any Distribution Date on which the
Pool Principal Balance declines to 10% or less of the Maximum Collateral Amount.
The Majority Residual Interestholders shall effect such early termination by
providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Mortgage Loans at a price not less than the Termination
Price.
Any such early termination by the Majority Residual Interestholders
shall be accomplished by depositing into the Collection Account on the
Determination Date immediately preceding the Distribution Date on which the
purchase is to occur the amount of the Termination Price to be paid. The
Termination Price and any amounts then on deposit in the Collection Account
(other than any amounts not required to have been deposited therein pursuant to
Section 5.01(b)(1) and any amounts withdrawable therefrom by the Indenture
Trustee pursuant to Section 5.01(b)(3)) shall be transferred to the Note
Distribution Account pursuant to Section 5.01(b)(2) for distribution to
Securityholders on the succeeding Distribution Date; and any amounts received
with respect to the Mortgage Loans and Foreclosure Properties subsequent to the
Due Period immediately preceding such final Distribution Date shall belong to
the purchaser thereof. For purposes of calculating the Available Distribution
Amount for such final Distribution Date, amounts transferred to the Note
Distribution Account immediately preceding such final Distribution Date shall in
all cases be deemed to have been received during the related Due Period, and
amounts so transferred shall be applied pursuant to Section 5.01(c) and 5.01(d).
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Trust shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section 2.06(b) of the Indenture and (ii) by the
Owner Trustee to the holders of Residual Interests in accordance with Section
9.1(d) of the Trust Agreement.
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ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders.
Except as otherwise specifically provided herein, whenever
Securityholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor,
the Servicer, the Transferor and the Issuer, by written agreement with notice
thereof to the Securityholders, without the consent of any of the
Securityholders, to cure any error or ambiguity, to correct or supplement any
provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of the Securityholders if either
(i) an opinion of counsel is obtained to such effect and (ii) the party
requesting the amendment obtains a letter from each of the Rating Agencies
confirming that the amendment, if made, would not result in the downgrading or
withdrawal of the rating then assigned by the respective Rating Agency to any
Class of Securities then outstanding.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Transferor and the Issuer by written agreement,
with the prior written consent of the Majority Securityholders, 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
Securityholders; provided, however, that no such amendment shall (i) without the
consent of the holders of 100% of each Class of Notes affected thereby, reduce
in any manner the amount of, or delay the timing of, collections of payments on
Mortgage Loans or distributions which are required to be made on any Security,
(ii) without the consent of the holders of 100% of such Class of Notes,
adversely affect in any material respect the interests of the holders of any
Class of Notes in any manner other than as described in (i), or (iii) without
the consent of the holders of 100% of such Class of Notes, reduce the percentage
of any Class of Notes, the holders of which are required to consent to any such
amendment.
(c) It shall not be necessary for the consent of Securityholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Issuer may, but shall not be obligated to, enter into
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any such amendment which affects the Issuer's own rights, duties or immunities
under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Securityholders' expense on direction of the Majority Securityholders, but only
when accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Securityholders or is
necessary for the administration or servicing of the Mortgage Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05 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, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 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 overnight mail, certified mail or registered mail, postage prepaid, to: (i)
in the case of the Depositor, ____________________ [INSERT FULL NAME OF THE
DEPOSITOR], ____________________________________________________________, or
such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor, (ii) in the case of the
Issuer, Cityscape Loan Trust 199_-_, c/o ____________________ [INSERT FULL NAME
OF THE OWNER TRUSTEE] or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto, (iii) in the case of the Servicer,
Cityscape Corp., 565 Taxter Road, Elmsford, New York Attention: Cheryl P. Carl,
or such other address as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Servicer, (iv) in the case of the
Transferor, ____________________ [INSERT FULL NAME OF THE TRANSFEROR],
___________ (v) in the case of the Indenture Trustee or Co-Owner Trustee,
____________________ [INSERT FULL NAME OF THE INDENTURE TRUSTEE], __________ and
(vi) in the case of the Securityholders, as set forth in the applicable Note
Register and Certificate Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Securityholders shall be effective upon
mailing or personal delivery.
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Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Issuer and the Securityholders and
their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by an
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Depositor, the Servicer or the Issuer. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
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(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done or omitted to be done
by the Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional
proof of any matter referred to in this Section 12.12 as it shall deem
necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Servicer shall provide, or cause the Indenture Trustee to
provide or cause to be provided to, each Rating Agency copies of statements,
reports and notices, to the extent received or prepared in connection herewith,
as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Mortgage
Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer, any Custodian or the
Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's report
delivered pursuant to Section 7.05, and copies of any compliance
reports delivered by the Servicer hereunder including Section 7.04; and
(vii) copies of any Distribution Statement pursuant to Section
6.01.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's, then to Standard & Poor's Ratings Group,
26 Broadway, 15th Floor, New York, New York 10004-1064, Attention: Asset-Backed
Monitoring Department, (ii) if to DCR, then to Duff & Phelps Credit Rating Co.,
55 East Monroe Street, 35th Floor, Chicago, Illinois 60603, Attention: MBS
Monitoring [ADD OR SUBSTITUTE OTHER RATING AGENCIES WHERE APPROPRIATE].
Section 12.14 Holders of the Residual Interest.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interest shall be paid to such
holders pro rata based on their Percentage Interest;
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(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest, such consent or
approval shall be capable of being given by the holder, or holders in aggregate,
of a Residual Interest representing a Percentage Interest of not less than 51%.
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<PAGE> 99
IN WITNESS WHEREOF, the Servicer, the Transferor, the Issuer, the
Indenture Trustee, the Co-Owner Trustee and the Depositor have caused their
names to be signed by their respective officers, thereunto duly authorized, as
of the day and year first above written.
CITYSCAPE LOAN TRUST 199_-_,
By: ____________________ [INSERT NAME OF OWNER
TRUSTEE], not in its individual capacity but
solely as Owner Trustee
By: _______________________________
Name: _________________________
Title: ________________________
____________________ [INSERT NAME OF DEPOSITOR],
as Depositor
By: _______________________________
Name: _________________________
Title: ________________________
CITYSCAPE CORP., as Servicer
By: _______________________________
Name: _________________________
Title: ________________________
____________________ [INSERT NAME OF INDENTURE
TRUSTEE], as Indenture Trustee and Co-Owner Trustee
By: _______________________________
Name: _________________________
Title: ________________________
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<PAGE> 100
____________________ [INSERT NAME OF
TRANSFEROR], as Transferor
By: _______________________________
Name: _________________________
Title: ________________________
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<PAGE> 101
THE STATE OF ________ }
} ss.:
COUNTY OF ________ }
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared __________________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ____________________, not in its
individual capacity but in its capacity as Owner Trustee of CITYSCAPE LOAN TRUST
199_-_ as Issuer, and that he executed the same as the act of such corporation
for the purpose and consideration therein expressed, and in the capacity therein
stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this the __th day of __________, 199_.
_______________________________________
Notary Public, State of ________
THE STATE OF ________ }
} ss.:
COUNTY OF ________ }
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ______________________________, as the
Depositor, and that he executed the same as the act of such corporation for the
purpose and consideration therein expressed, and in the capacity therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, this the __th day of __________, 199_.
_______________________________________
Notary Public, State of ________
<PAGE> 102
THE STATE OF ________ }
} ss.:
COUNTY OF ________ }
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared __________________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said CITYSCAPE CORP., as the Servicer, and
that he executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, this the __th day of __________, 199_.
_______________________________________
Notary Public, State of ________
THE STATE OF ________ }
} ss.:
COUNTY OF ________ }
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ____________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ____________________, a national
banking association, as the Indenture Trustee, and that he executed the same as
the act of such entity for the purposes and consideration therein expressed, and
in the capacity therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, this the __th day of __________, 199_.
_______________________________________
Notary Public, State of ________
<PAGE> 103
THE STATE OF ________ }
} ss.:
COUNTY OF ________ }
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared __________________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ____________________, as the
Transferor, and that he executed the same as the act of such corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, this the __th day of __________, 199_.
_______________________________________
Notary Public, State of ________
<PAGE> 1
Exhibit 5.1
August 25, 1997
(212) 351-4000 15565-00003
Cityscape Corp.
565 Taxter Road
Elmsford, New York 10523-5200
Re: Cityscape Corp. Registration Statement on Form S-3
Gentlemen:
We have acted as special counsel for Cityscape Corp., a New York
corporation (the "Company"), in connection with (1) the preparation of
registration statement on Form S-3 (such registration statement, as amended by
Amendment No. 5 thereto, the "Registration Statement") relating to one or more
series ("Series") of asset backed securities and (2) the authorization and
proposed issuance from time to time of one or more Series of asset backed
certificates (the "Certificates"). The Registration Statement has been filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"). As set forth in the Registration Statement, each
Series of Certificates will be issued by a separate trust (each, a "Trust")
established by the Company or a separate entity formed by the Company solely for
the purpose of forming such trust (the Company or such entity, the "Depositor")
pursuant to a separate pooling and servicing agreement (each, a "Pooling and
Servicing Agreement") for such Series among the Depositor, the Company, as
Originator and Servicer, and an independent trustee identified therein (each, a
"Trustee").
We have examined original or reproduced or certified copies of the
Certificate of Incorporation and By-laws of the Company, records of actions
taken by the Company's Board of Directors, a form of Pooling and Servicing
Agreement filed as an exhibit to the Registration Statement, a form of
Certificate included in the form of Pooling and Servicing Agreement, the
prospectus (the "Prospectus") forming a part of the Registration Statement, the
prospectus
<PAGE> 2
Cityscape Corp.
August 25, 1997
Page 2
supplement filed as an exhibit to the Registration Statement and the other
agreements and documents filed as exhibits thereto.
We have assumed the genuineness of all signatures and the conformity to
original documents of all copies submitted to us as certified or reproduced
copies. As to various matters material to such opinions, we have relied upon the
representations and warranties in the form of Pooling and Servicing Agreement
and statements and certificates of officers and representatives of the Company
and others.
Based upon the foregoing and subject to the qualifications,
limitations and assumptions set forth below, we are of the opinion that
when a Series of Certificates has been duly and validly authorized
by all necessary action on the part of the related Depositor (subject to the
terms thereof being otherwise in compliance with applicable law at such time),
duly executed and authenticated by the Trustee for such Series in accordance
with the terms of the related Pooling and Servicing Agreement, and issued and
delivered against payment therefor as contemplated in the Registration
Statement, the Certificates of such Series will be validly issued,
fully paid and nonassessable.
The foregoing opinion is subject to the following qualifications,
limitations and assumptions:
A. We render no opinion herein as to matters involving the laws of any
jurisdiction other than the State of New York and the United States of America.
This opinion is limited to the effect of the present state of the laws of the
State of New York and of the United States of America and the facts as they
presently exist. We assume no obligation to revise or supplement this opinion in
the event of future changes in such laws or the interpretations thereof or such
facts.
B. Our opinions are subject to (i) the effect of bankruptcy, insolvency
reorganization, moratorium, arrangement or other similar laws affecting
enforcement of creditors' rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent transfers or conveyances
or preferential transfers) and (ii) the application of general principles of
equity, whether considered in a case or proceeding at law or in equity,
including, without
2
<PAGE> 3
Cityscape Corp.
August 25, 1997
Page 3
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or other equitable
relief (whether sought in a proceeding at law or in equity).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus. In giving such permission, we do not admit
we are within the category of person whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
3
<PAGE> 1
Exhibit 5.2
August 25, 1997
(212) 351-4000 15565-00003
Cityscape Corp.
565 Taxter Road
Elmsford, New York 10523-5200
Re: Cityscape Corp. Registration Statement on Form S-3
Gentlemen:
We have acted as special counsel for Cityscape Corp., a New York
corporation (the "Company"), in connection with (1) the preparation of
registration statement on Form S-3 (such registration statement, as amended by
Amendment No. 5 thereto, the "Registration Statement") relating to one or more
series ("Series") of asset backed securities and (2) the authorization and
proposed issuance from time to time of one or more Series of asset backed notes
(the "Notes"). The Registration Statement has been filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "1933
Act"). As set forth in the Registration Statement, each Series of Notes will be
issued under and pursuant to the conditions of an indenture (an "Indenture")
between the Company or a separate entity formed by the Company solely for the
purpose of issuing such Notes (the Company or such entity, the "Depositor") and
an independent trustee identified therein (each, a "Trustee").
We have examined original or reproduced or certified copies of the
Certificate of Incorporation and By-laws of the Company, records of actions
taken by the Company's Board of Directors, a form of Indenture filed as an
exhibit to the Registration Statement, a form of Note included in the form of
Indenture, the prospectus (the "Prospectus") forming a part of the Registration
Statement, the prospectus supplement filed as an exhibit to the Registration
Statement and the other agreements and documents filed as exhibits thereto.
<PAGE> 2
Cityscape Corp.
August 25, 1997
Page 2
We have assumed the genuineness of all signatures and the conformity to
original documents of all copies submitted to us as certified or reproduced
copies. As to various matters material to such opinions, we have relied upon the
representations and warranties in the form of Indenture and statements and
certificates of officers and representatives of the Company and others.
Based upon the foregoing and subject to the qualifications,
limitations and assumptions set forth below, we are of the opinion that
when a Series of Notes has been duly and validly authorized by all
necessary action on the part of the related Depositor (subject to the terms
thereof being otherwise in compliance with applicable law at such time), duly
executed and authenticated by the Trustee for such Series in accordance with the
terms of the related Indenture, and issued and delivered against payment
therefor as contemplated in the Registration Statement, the Notes of such Series
will be valid and binding non-recourse obligations of such Depositor,
enforceable against such Depositor in accordance with their terms.
The foregoing opinion is subject to the following qualifications,
limitations and assumptions:
A. We render no opinion herein as to matters involving the laws of any
jurisdiction other than the State of New York and the United States of America.
This opinion is limited to the effect of the present state of the laws of the
State of New York and of the United States of America and the facts as they
presently exist. We assume no obligation to revise or supplement this opinion in
the event of future changes in such laws or the interpretations thereof or such
facts.
B. Our opinions are subject to (i) the effect of bankruptcy,
insolvency reorganization, moratorium, arrangement or other similar laws
affecting enforcement of creditors' rights generally (including, without
limitation, the effect of statutory or other laws regarding fraudulent transfers
or conveyances or preferential transfers) and (ii) the application of general
principles of equity, whether considered in a case or proceeding at law or in
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or other equitable relief (whether sought in a proceeding at law or
in equity).
2
<PAGE> 3
Cityscape Corp.
August 25, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus. In giving such permission, we do not admit
we are within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
3
<PAGE> 1
Exhibit 8.1
-----------
[ON GD&C LETTERHEAD]
August 25, 1997
(212) 351-4000 C 15565-00003
Cityscape Corp.
565 Taxter Road
Elmsford, New York 10523
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income
tax consequences of the ownership and disposition (i) of asset-backed
certificates (the "Certificates") to be issued by one or more trusts to be
created pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") by and among Cityscape Corp. (the "Company") as
Servicer and Claims Administrator, the Company or a separate entity formed
by the Company solely for the purpose of forming such trust, and a trustee
and (ii) of asset-backed notes (the "Notes") to be issued by the Company
or a separate entity (a "Depositor") formed by the Company solely for
the purpose of issuing such Notes pursuant to an Indenture (the
"Indenture") between the Depositor and a trustee.
In formulating our opinion as to the matters certified, we have
reviewed the originals or copies of: (i) Amendment No. 5 to the
Registration Statement on Form S-3 (Registration No. 333-4387) dated
August 25, 1997, filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933 (the "Registration Statement"), (ii) the form
of the Pooling and Servicing Agreement, (iii) the form of the Certificates,
(iv) the form of Indenture and (v) the form of the Notes. Furthermore, we
have reviewed such other documents relating to the transaction and have
made such other factual and legal inquiries as we have considered necessary
or appropriate for purposes of the opinions given below.
Based on the foregoing and the assumptions and qualifications
stated herein and therein, we are of the opinion that the statements and
legal conclusions contained in the Registration Statement under the caption
"Material Federal Income Tax Consequences" are correct in all material
respects, and that the discussion thereunder does not omit any material
provision with respect to the matters covered.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, Treasury Department regulations
(including proposed regulations), pertinent judicial authority, rulings,
pronouncements, and internal memoranda of the Internal Revenue Service, and
such other materials as we have considered relevant, any of which may be
changed at any time with retroactive effect. Any change in applicable laws
may affect the continuing validity of the opinion set forth herein. We
assume no responsibility to inform you of any such change that may occur or
come to our attention.
No opinion has been sought and none has been given concerning the
tax consequences of the transaction or of the ownership or disposition of
the Certificates or the Notes under the laws of any state or locality, or
under the laws of any foreign country. No opinion is expressed on any
matters other than those specifically referred to herein.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm therein.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
