SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
DECEMBER 30, 1997
Bear Stearns Mortgage Securities Inc. (as Seller under a
Pooling and Servicing Agreement dated as of December 1,
1997 providing for the issuance of the Mortgage Pass-Through
Certificates, Series 1997-7)
BEAR STEARNS MORTGAGE SECURITIES INC.
(Exact name of registrant as specified in charter)
DELAWARE 333-13617 13-3633241
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
245 PARK AVENUE, NEW YORK, NEW YORK 10167
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 272-2000
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(c) Exhibits
EXHIBIT NO.
*1.1 Terms Agreement dated as of December 26, 1997 among the
Registrant and Bear, Stearns & Co.
Inc.
4.1 Pooling and Servicing Agreement dated as of
December 1, 1997 among the Registrant, North
American Mortgage Company, PHH Mortgage Services
Corporation and The First National Bank of
Chicago.
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* Previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEAR STEARNS MORTGAGE SECURITIES INC.
(Registrant)
Date: January 30, 1998 By: /S/ JOSEPH T. JURKOWSKI, JR.
Name: Joseph T. Jurkowski, Jr.
Title: Vice President
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
*1.1 Terms Agreement dated as of December 26, 1997 between the
Registrant and Bear, Stearns & Co. Inc.
4.1 Pooling and Servicing Agreement dated as of December 1, 1997
among the Registrant, North American Mortgage Company,
PHH Mortgage Corporation and The First National Bank of
Chicago
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* Previously filed.
EXECUTION COPY
BEAR STEARNS MORTGAGE SECURITIES INC.,
SELLER,
NORTH AMERICAN MORTGAGE COMPANY,
A MASTER SERVICER,
PHH MORTGAGE SERVICES CORPORATION,
A MASTER SERVICER,
and
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
---------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1997
--------------------------------
Bear Stearns Mortgage Securities Inc.
Mortgage Pass-Through Certificates
Series 1997-7
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions.............................................................I-1
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates
2.01. Conveyance of Mortgage Loans to Trustee........................II-1
2.02. Acceptance of Mortgage Loans by Trustee........................II-2
2.03. Representations, Warranties and Covenants of NAMC and PHH......II-4
2.03A. Assignment of Interest in the Mortgage Loan Purchase
Agreement....................................................II-5
2.04. Substitution of Mortgage Loans.................................II-6
2.05. Representations and Warranties of the Trustee..................II-7
2.06. Issuance of Certificates.......................................II-8
2.07. Representations and Warranties Concerning the Seller...........II-8
ARTICLE III
Administration and Servicing of Mortgage Loans
3.01. Master Servicers to Assure Servicing...........................III-1
3.02. Sub-Servicing Agreements Between a Master Servicer and
Sub-Servicers.................................................III-2
3.03. Successor Sub-Servicers........................................III-2
3.04. Liability of Each Master Servicer..............................III-3
3.05. Assumption or Termination of Sub-Servicing Agreements
by Trustee....................................................III-3
3.06. Collection of Mortgage Loan Payments...........................III-4
3.07. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts............................................III-5
3.08. Access to Certain Documentation and Information Regarding
the Mortgage Loans............................................III-5
3.09. Maintenance of Primary Mortgage Insurance Policies;
Collection Thereunder.........................................III-6
3.10. Maintenance of Hazard Insurance and Fidelity Coverage..........III-6
3.11. Due-on-Sale Clauses; Assumption Agreements.....................III-8
3.12. Realization Upon Defaulted Mortgage Loans......................III-9
3.13. Trustee to Cooperate; Release of Mortgage Files................III-10
3.14. Servicing and Master Servicing Compensation....................III-11
3.15. Annual Statement of Compliance.................................III-11
3.16. Annual Independent Public Accountants' Servicing Report........III-12
3.17. REMIC-Related Covenants........................................III-12
3.18. Additional Information.........................................III-13
ARTICLE IV
Accounts
4.01. Protected Accounts.............................................IV-1
4.02. Certificate Account............................................IV-2
4.03. Permitted Withdrawals and Transfers from the
Certificate Account...........................................IV-4
4.04. Custody Account................................................IV-7
ARTICLE V
Certificates
5.01. Certificates...................................................V-1
5.02. Registration of Transfer and Exchange of Certificates..........V-9
5.03. Mutilated, Destroyed, Lost or Stolen Certificates..............V-13
5.04. Persons Deemed Owners..........................................V-14
5.05. Transfer Restrictions on Residual Certificates.................V-14
5.06. Restrictions on Transferability of Private Certificates........V-15
5.07. ERISA Restrictions.............................................V-16
5.08. Rule 144A Information..........................................V-16
ARTICLE VI
Payments to Certificateholders
6.01. Distributions on the Certificates..............................V1-1
6.02. [Reserved].....................................................V1-11
6.03. Allocation of Losses...........................................V1-11
6.04. [Reserved].....................................................V1-16
6.05. Payments.......................................................V1-16
6.06. Statements to Certificateholders...............................V1-16
6.07. Reports to the Trustee and each Master Servicer................V1-19
6.08. Monthly Advances...............................................V1-21
6.09. Compensating Interest Payments.................................V1-21
6.10. Reports of Foreclosures and Abandonment of Mortgaged
Property......................................................V1-21
ARTICLE VII
The Master Servicers
7.01. Liabilities of the Master Servicers............................VII-1
7.02. Merger or Consolidation of the Master Servicers................VII-1
7.03. Indemnification of the Trustee.................................VII-1
7.04. Limitation on Liability of the Master Servicers and Others.....VII-2
7.05. Master Servicers Not to Resign.................................VII-3
7.06. [Reserved].....................................................VII-3
7.07. Sale and Assignment of Master Servicing........................VII-3
ARTICLE VIII
Default
8.01. Events of Default..............................................VIII-1
8.02. Trustee to Act; Appointment of Successor.......................VIII-2
8.03. Notification to Certificateholders.............................VIII-3
8.04. Waiver of Defaults.............................................VIII-3
8.05. List of Certificateholders.....................................VIII-4
ARTICLE IX
Concerning the Trustee
9.01. Duties of Trustee...............................................IX-1
9.02. Certain Matters Affecting the Trustee...........................IX-2
9.03. Trustee Not Liable for Certificates or Mortgage Loans...........IX-4
9.04. Trustee May Own Certificates....................................IX-4
9.05. Trustee's Fees and Expenses.....................................IX-4
9.06. Eligibility Requirements for Trustee............................IX-5
9.07. Insurance.......................................................IX-5
9.08. Resignation and Removal of the Trustee..........................IX-5
9.09. Successor Trustee...............................................IX-6
9.10. Merger or Consolidation of Trustee..............................IX-6
9.11. Appointment of Co-Trustee or Separate Trustee...................IX-7
9.12. Master Servicers Shall Provide Information as
Reasonably Required............................................IX-8
9.13. Federal Information Returns and Reports to Certificateholders...IX-8
ARTICLE X
Termination
10.01. Termination Upon Repurchase by the Seller or its Designee or
Liquidation of All Mortgage Loans..............................X-1
10.02. Additional Termination Requirements.............................X-3
ARTICLE XI
Miscellaneous Provisions
11.01. Intent of Parties..............................................XI-1
11.02. Amendment......................................................XI-1
11.03. Recordation of Agreement.......................................XI-2
11.04. Limitation on Rights of Certificateholders.....................XI-2
11.05. Acts of Certificateholders.....................................XI-3
11.06. [Reserved].....................................................XI-4
11.07. Governing Law..................................................XI-4
11.08. Notices........................................................XI-4
11.09. Severability of Provisions.....................................XI-4
11.10. Successors and Assigns.........................................XI-4
11.11. Article and Section Headings...................................XI-4
11.12. Counterparts...................................................XI-4
11.13. Notice to Rating Agencies......................................XI-5
EXHIBITS
Exhibit A-1 - Form of Face of Certificates
Exhibit A-2 - Form of Reverse of Certificates
Exhibit B-1 - Mortgage Loan Schedule
Exhibit B-2 - NAMC Mortgage Loans
Exhibit B-3 - PHH Mortgage Loans
Exhibit C-1 - Representations and Warranties of the Seller
Concerning the Mortgage Loans
Exhibit C-2 - Representations and Warranties of NAMC Concerning
the NAMC Mortgage Loans
Exhibit C-3 - Representations and Warranties of PHH Concerning
the PHH Mortgage Loans
Exhibit D - Form of Request for Release
Exhibit E - Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1 - Form of Investment Letter
Exhibit F-2 - Form of Rule 144A and Related Matters Certificate
Exhibit G - Form of Trustee's Initial Certification
Exhibit H - Form of Trustee's Final Certification
Exhibit I - Planned Balances for the PAC Certificates
Exhibit J - List of PHH Mortgage Loans for which Mortgage
Notes are Lost
Exhibit K-1 - List of NAMC Mortgage Loans with Buydown Features
Exhibit K-2 - List of PHH Mortgage Loans with Buydown Features
<PAGE>
POOLING AND SERVICING AGREEMENT
Pooling and Servicing Agreement dated as of December 1, 1997, among Bear
Stearns Mortgage Securities Inc., a Delaware corporation, as the seller (the
"Seller"), North American Mortgage Company, a Delaware corporation ("NAMC"), as
a master servicer (the "NAMC Master Servicer"), PHH Mortgage Servicing
Corporation, a Delaware corporation ("PHH"), as a master servicer (the "PHH
Master Servicer"), and The First National Bank of Chicago, a national bank, as
trustee (the "Trustee").
PRELIMINARY STATEMENT
On or prior to the Closing Date, the Seller has acquired the Mortgage Loans
from Bear Stearns Mortgage Capital Corporation ("BSMCC"). On the Closing Date,
the Seller will sell the Mortgage Loans and certain other property to the Trust
Fund and receive in consideration therefor Certificates evidencing the entire
beneficial ownership interest in the Trust Fund. NAMC will be the NAMC Master
Servicer for the NAMC Mortgage Loans and PHH will be the PHH Master Servicer for
the PHH Mortgage Loans.
The Trustee shall make an election for the assets constituting REMIC II to
be treated for federal income tax purposes as a REMIC. On the Startup Day, all
the Classes of REMIC II Regular Certificates will be designated "regular
interests" in such REMIC and the Class R-2 Certificate will be designated the
"residual interest" in such REMIC.
The Trustee shall make an election for the assets constituting REMIC I to
be treated for federal income tax purposes as a REMIC. On the Startup Day, all
the Classes of Certificates except for the Class R-1 and Class R-2 Certificates
will be designated "regular interests" in such REMIC and the Class R-1
Certificates will be designated the "residual interests" in such REMIC.
The Mortgage Loans will have an Outstanding Principal Balance as of the
Cut-off Date, after deducting all Scheduled Principal due on or before the
Cut-off Date, of $789,958,210.60. The initial principal amount of the
Certificates will not exceed such Outstanding Principal Balance.
In consideration of the mutual agreements herein contained, the Seller,
NAMC, PHH and the Trustee agree as follows:
<PAGE>
ARTICLE I
Definitions
Whenever used in this Agreement, the following words and phrases, unless
otherwise expressly provided or unless the context otherwise requires, shall
have the meanings specified in this Article.
ACCOUNT: The Custody Account, the Certificate Account (including each
subaccount thereof), the Protected Accounts or the Servicing Accounts as the
context may require.
ACCRUAL AMOUNT: With respect to any Distribution Date through the Group 1
and 2 Cross-Over Date, an amount equal to the interest accrued but unpaid on the
Class 2-A-3 Certificates and added to the principal amount thereof on such
Distribution Date.
ACCRUED CERTIFICATE INTEREST: For any Certificate (other than a Class P
Certificate) for any Distribution Date, the interest accrued during the related
Interest Accrual Period at the applicable Pass-Through Rate on the Current
Principal Amount (or in the case of the Class 1-A-X1, Class 1-A-X2, Class X,
Class 3-X and Class 4-X Certificates, the Notional Amount) of such Certificate
immediately prior to such Distribution Date, calculated on the basis of a
360-day year consisting of twelve 30-day months, less (i) in the case of an
interest bearing Senior Certificate of a Certificate Group, such Certificate's
share of any Net Interest Shortfall and, after the applicable Cross-Over Date,
the interest portion of any Realized Losses applicable to its related Mortgage
Loan Group (or Groups in the case of the Group 1 and Group 2 Certificates) and
(ii) in the case of a Subordinate Certificate, such Certificate's share of any
Net Interest Shortfall and the interest portion of any Realized Losses
applicable to its related Mortgage Loan Group (or Groups in the case of the
Class B Subordinate Certificates).
ADVANCING DATE: The Business Day preceding the related Distribution Date.
AFFILIATE: As to any Person, any other Person controlling, controlled by or
under common control with such Person. "Control" means the power to direct the
management and policies of a Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise. "Controlled" and
"Controlling" have meanings correlative to the foregoing. The Trustee may
conclusively presume that a Person is not an Affiliate of another Person unless
a Responsible Officer of the Trustee has actual knowledge to the contrary.
AGREEMENT: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
ALLOCABLE SHARE: With respect to each Class of Subordinate Certificates in
each Certificate Group:
(a) as to any Distribution Date and amounts distributable pursuant to
clauses (i) and (iii) of the applicable Subordinate Optimal Principal
Amount for such Certificate Group, the fraction, expressed as a percentage,
the numerator of which is the Current Principal Amount of such Class and
the denominator of which is the aggregate Current Principal Amount of all
Classes of the Subordinate Certificates of such Certificate Group; and
(b) as to any Distribution Date and amounts distributable pursuant to
clauses (ii), (iv) and (v) of the applicable Subordinate Optimal Principal
Amount for such Certificate Group, and as to each Class of Subordinate
Certificates of such Certificate Group (other than the Class of Subordinate
Certificates of such Certificate Group having the lowest numerical
designation as to which the Class Prepayment Distribution Trigger shall not
be applicable) for which (x) the related Class Prepayment Distribution
Trigger has been satisfied on such Distribution Date, the fraction,
expressed as a percentage, the numerator of which is the Current Principal
Amount of such Class and the denominator of which is the aggregate Current
Principal Amount of all Classes of Subordinate Certificates of such
Certificate Group and (y) the related Class Prepayment Distribution Trigger
has not been satisfied on such Distribution Date, 0%; provided that if on a
Distribution Date, the Current Principal Amount of any Class of Subordinate
Certificates of such Certificate Group for which the related Class
Prepayment Distribution Trigger was satisfied on such Distribution Date is
reduced to zero, any amounts distributed pursuant to this clause (b), to
the extent of such Class's remaining Allocable Share, shall be distributed
to the remaining Classes of Subordinate Certificates of such Certificate
Group which satisfy the related Class Prepayment Distribution Trigger and
to the Subordinate Class having the lowest numerical designation in
reduction of their respective Current Principal Amounts in the order of
their numerical Class designations.
APPLICABLE CREDIT RATING: A credit rating of Aaa, in the case of Moody's or
a rating of AAA, in the case of DCR, for any long-term deposit or security or a
rating of Prime-1, in the case of Moody's, or D-1+ in the case of DCR, for any
short-term deposit or security.
APPLICABLE PERCENTAGE: With respect to the NAMC Master Servicer or the PHH
Master Servicer, a fraction expressed as a percentage, the numerator of which is
the aggregate Scheduled Principal Balance of the NAMC Mortgage Loans or PHH
Mortgage Loans, respectively, as of the Cut-off Date, and the denominator is the
aggregate Scheduled Principal Balance of all of the Mortgage Loans as of the
Cut-off Date.
APPLICABLE STATE LAW: For purposes of Section 9.13(d), the Applicable State
Law shall be (a) the law of the State of New York; and (b) the law of the State
of Illinois, and (c) such other state law whose applicability shall have been
brought to the attention of the Trustee by either (i) an Opinion of Counsel
delivered to it, or (ii) written notice from the appropriate taxing authority as
to the applicability of such state law.
APPRAISED VALUE: For any Mortgaged Property, the amount set forth as the
appraised value of such Mortgaged Property in an appraisal made for the mortgage
originator in connection with its origination of the related Mortgage Loan.
ASSUMED FINAL DISTRIBUTION DATE: With respect to each Class of Group 1
Certificates, February 25, 2028, with respect to each Class of Group 2
Certificates, January 25, 2028 (except that the Assumed Final Distribution Date
of the Class 2-A-2 Certificates is calculated to be November 25, 2010), with
respect to each Class of Group B Certificates, February 25, 2028, with respect
to each Class of Group 3 Certificates, January 25, 2028, with respect to each
Class of Group 4 Certificates, January 25, 2013 and with respect to each Class
of Group 5 Certificate, January 25, 2028.
AVAILABLE FUNDS: With respect to any Distribution Date, the sum of the
Group 1 Available Funds, the Group 2 Available Funds, the Group 3 Available
Funds, the Group 4 Available Funds and the Group 5 Available Funds for such
Distribution Date.
BANKRUPTCY CODE: The United States Bankruptcy Code, as amended as codified
in 11 U.S.C. ss.ss. 101-1330.
BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Deficient Valuation
or Debt Service Reduction.
BOOK-ENTRY CERTIFICATES: Initially, all Classes of Certificates other than
the Class R-1, Class R-2, Class B-4, Class B-5, Class B-6, Class 3-B-4, Class
3-B-5, Class 3-B-6, Class 4-B-4, Class 4-B-5, Class 4-B-6, Class 5-B-4, Class
5-B-5 and Class 5-B-6 Certificates.
BSMCC: Bear Stearns Mortgage Capital Corporation.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which the New York Stock Exchange is closed or on which banking institutions
in New York City or in Chicago, Illinois are authorized or obligated by law or
executive order to be closed.
CERTIFICATE: Any mortgage pass-through certificate evidencing a beneficial
ownership interest in the Trust Fund signed and countersigned by the Trustee in
substantially the forms annexed hereto as Exhibit A-1 and A-2, with the blanks
therein appropriately completed.
CERTIFICATE ACCOUNT: The trust account or accounts created and maintained
pursuant to Section 4.02, which shall be denominated "The First National Bank of
Chicago, as Trustee f/b/o holders of Bear Stearns Mortgage Securities Inc.
Mortgage Pass-Through Certificates, Series 1997-7 - Certificate Account" which
shall have five subaccounts as provided in Section 4.02.
CERTIFICATE ACCOUNT ADVANCE: As of any Determination Date, the amount on
deposit in a Protected Account or Custody Account which is not required to be
transferred to the Certificate Account for distribution during the calendar
month in which such Determination Date occurs but which is deposited in a
subaccount of the Certificate Account and used to make a distribution to
Certificateholders during such calendar month on account of Scheduled Payments
on the Mortgage Loans due on the Due Date for such month not being paid on or
before such Determination Date except insofar as such unpaid amounts are the
result of application of the Relief Act.
CERTIFICATE GROUP: Certificate Group 1, Certificate Group 2, Certificate
Group B, Certificate Group 3, Certificate Group 4 and Certificate Group 5.
CERTIFICATE GROUP 1: The Group of Certificates which is composed of the
Group 1 Certificates.
CERTIFICATE GROUP 2: The Group of Certificates which is composed of the
Group 2 Certificates.
CERTIFICATE GROUP B: The Group of Certificates which is composed of the
Group B Certificates.
CERTIFICATE GROUP 3: The Group of Certificates which is composed of the
Group 3 Certificates.
CERTIFICATE GROUP 4: The Group of Certificates which is composed of the
Group 4 Certificates.
CERTIFICATE GROUP 5: The Group of Certificates which is composed of the
Group 5 Certificates.
CERTIFICATE OWNER: Any Person who is the beneficial owner of a Certificate
registered in the name of the Depository or its nominee.
CERTIFICATE REGISTER: The register maintained pursuant to Section 5.02.
CERTIFICATEHOLDER: A Holder of a Certificate.
CLASS: With respect to the Certificates, P, 1-A-1, 1-A-X1, 1-A-2, 1-A-X2,
1-A-3, 1-A-4, 1-A-5, 1-A-6, 1-A-7, 1-A-8, 1-A-9, 2-A-1, 2-A-2, 2-A-3, 2-A-4, X,
B-1, B-2, B-3, B-4, B-5, B-6, 3-A, 3-X, 3-B-1, 3-B-2, 3-B-3, 3-B-4, 3-B-5,
3-B-6, 4-A, 4-X, 4-B-1, 4-B-2, 4-B-3, 4-B-4, 4-B-5, 4-B-6, 5-A, 5-B-1, 5-B-2,
5-B-3, 5-B-4, 5-B-5, 5-B-6, R-1 and R-2.
CLASS 1-A-9 OPTIMAL PRINCIPAL AMOUNT: As defined in section 6.01(a)(i)(D).
CLASS 1-A-9 PRO RATA OPTIMAL PRINCIPAL AMOUNT: As defined in Section
6.01(a)(i)(E).
CLASS 2-A-4 OPTIMAL PRINCIPAL AMOUNT: As defined in Section 6.01
(a)(ii)(D).
CLASS 2-A-4 PRO RATA OPTIMAL PRINCIPAL AMOUNT: As defined in Section
6.01(a)(ii)(E).
CLASS PREPAYMENT DISTRIBUTION TRIGGER: For a Class of Subordinate
Certificates in any Certificate Group for any Distribution Date, the Class
Prepayment Distribution Trigger is satisfied if the fraction (expressed as a
percentage), the numerator of which is the aggregate Current Principal Amount of
such Class and each Class of Subordinate Certificates in the same Certificate
Group subordinate thereto, if any, and the denominator of which is the Scheduled
Principal Balance of all of the Mortgage Loans in the related Mortgage Loan
Group (or Mortgage Loan Group 1 and Mortgage Loan Group 2 in the case of the
Class B Subordinate Certificates) as of the related Due Date, equals or exceeds
such percentage calculated as of the Closing Date.
CLOSING DATE: December 30, 1997.
CODE: The Internal Revenue Code of 1986, as amended.
COMPENSATING INTEREST PAYMENTS: As defined in Section 6.09.
COMPONENT: The Component X-1, the Component X-2, the Component P-1, the
Component P-2, the Component P-3, the Component P-4 or the Component P-5.
COMPONENT P CASH SHORTFALL: The Component P-1 Cash Shortfall, Component P-2
Cash Shortfall, Component P-3 Cash Shortfall and/or Component P-4 Cash
Shortfall.
COMPONENT P-1 CASH SHORTFALL: As defined in Section 6.01(a)(i)(C)
COMPONENT P-2 CASH SHORTFALL: As defined in Section 6.01(a)(ii)(C)
COMPONENT P-3 CASH SHORTFALL: As defined in Section 6.01(a)(v)(B)
COMPONENT P-4 CASH SHORTFALL: As defined in Section 6.01(a)(vi)(B)
COMPONENT P DEFERRED AMOUNT: With respect to each Distribution Date through
the applicable Cross-Over Date, the aggregate of all amounts allocable on such
Distribution Date to Component P-1, Component P-2, Component P-3 and Component
P-4, in respect of the principal portion of applicable Realized Losses on
Discount Mortgage Loans in the Mortgage Loan Groups 1, 2, 3 and 4, respectively,
and the applicable Component P Cash Shortfall for Component P-1, Component P-2,
Component P-3 and Component P-4, respectively, and all amounts previously
allocated in respect of such losses and such shortfalls to the Component P-1,
Component P-2, Component P-3 and Component P-4, respectively, and not
distributed on prior Distribution Dates. No interest shall accrue on any
Component P Deferred Amount.
COMPONENT P DEFERRED PAYMENT WRITEDOWN AMOUNT: With respect to any
Distribution Date, the amount if any, distributed on such date in respect of the
Component P-1, Component P-2, Component P-3 and Component P-4 Deferred Amounts,
respectively, pursuant to Sections 6.01 (a)(i) FOURTH, (ii) FOURTH, (iv) FOURTH
and (v) FOURTH, respectively.
COMPONENT P PRINCIPAL DISTRIBUTION AMOUNT: With respect to Component P-1,
Component P-2, Component P-3 and Component P-4 on each Distribution Date, an
amount, without duplication, equal to the sum of:
(i) The applicable PO Percentage of all scheduled payments of
principal due on each Discount Mortgage Loan in the related Mortgage Loan
Group on the related Due Date as specified in the amortization schedule at
the time applicable thereto (after adjustments for previous principal
prepayments, but before any adjustment to such amortization schedule by
reason of any other bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period);
(ii) the applicable PO Percentage of the Scheduled Principal Balance
of each Discount Mortgage Loan in the related Mortgage Loan Group which was
the subject of a Voluntary Principal Prepayment in full received by the
related Master Servicer during the applicable Prepayment Period;
(iii) the applicable PO Percentage of all Voluntary Principal
Prepayments in part for each Discount Mortgage Loan in the related Mortgage
Loan Group received during the applicable Prepayment Period;
(iv) the lesser of (a) the applicable PO Percentage of the sum of (A)
all Net Liquidation Proceeds allocable to principal on each Discount
Mortgage Loan in the related Mortgage Loan Group which became a Liquidated
Mortgage Loan during the related Prepayment Period (other than a Discount
Mortgage Loan described in clause (B)) and (B) the Scheduled Principal
Balance of each such Discount Mortgage Loan purchased by an Insurer from
the Trustee during the related Prepayment Period pursuant to the related
Primary Mortgage Insurance Policy, if any, or otherwise; and (b) the
applicable PO Percentage of the Scheduled Principal Balance of each
Discount Mortgage Loan in the related Mortgage Loan Group which became a
Liquidated Mortgage Loan during the related Prepayment Period (other than a
Discount Mortgage Loan described in clause (B)) and (B) the Scheduled
Principal Balance of each such Mortgage Loan that was purchased by an
Insurer from the Trustee during the related Prepayment Period pursuant to
the related Primary mortgage Insurance Policy, if any, or otherwise; and
(v) the applicable PO Percentage of the sum of (a) the Scheduled
Principal Balance of each Discount Mortgage Loan in the related Mortgage
Loan Group which was repurchased by BSMCC on such Distribution Date
pursuant to Section 2.02 or 2.03(A)(b) and (b) the excess, if any, of the
Scheduled Principal Balance of a Discount Mortgage Loan in the related
Mortgage Loan Group that has been replaced by BSMCC with a Substitute
Mortgage Loan pursuant to Section 2.04 on such Distribution Date over the
Scheduled Principal Balance of such Substitute Mortgage Loan.
COMPONENT X-1 AND COMPONENT X-2: As defined in Section 5.01(d)
CORPORATE TRUST OFFICE: The office of the Trustee at which at any
particular time its corporate trust business is administered, which office, at
the date of the execution of this Agreement, is located at One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust
Services Division, ref: Bear Stearns/NAMC - PHH 1997-7.
CORRESPONDING CLASS: As indicated in Section 5.01(c).
CROSS-OVER DATE: The Group 1 and 2 Cross-Over Date, the Group 3 Cross-Over
Date, the Group 4 Cross-Over Date and the Group 5 Cross-Over Date.
CURRENT PRINCIPAL AMOUNT: With respect to any Certificate (other than a
Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X or Class 4-X Certificate) or a P
Component as of any Distribution Date, the initial principal amount of such
Component or Certificate, plus in the case of the Class 2-A-3 Certificates all
amounts added to the principal balance thereof with respect to the Accrual
Amount, as reduced by (A) the sum of (i) all amounts distributed on previous
Distribution Dates on such Certificate or Component with respect to principal,
(ii) the principal portion of all Realized Losses allocated prior to such
Distribution Date to such Certificate or Component, taking account of the Loss
Allocation Limitation applicable to the Certificate Group of such Component or
Certificate and (iii) in the case of a Subordinate Certificate of a Certificate
Group, such Certificate's pro rata share, if any, of the applicable Subordinate
Certificate Writedown Amount for such Group and the applicable Component P
Deferred Payment Writedown Amount, in each case for previous Distribution Dates.
With respect to any Class of Certificates (other than the Class 1-A-X1, Class
1-A-X2, Class X, Class 3-X and Class 4-X Certificates) or Components, the
Current Principal Amount thereof will equal the sum of the Current Principal
Amounts of all Certificates in such Class. Notwithstanding the foregoing, solely
for purposes of giving consents, directions, waivers, approvals, requests and
notices, the Class R-1 and Class R-2 Certificates after the Distribution Date on
which they receive the distribution of the last dollar of their original
principal amount shall be deemed to have a Current Principal Amount equal to
their Current Principal Amount on the day immediately preceding such
Distribution Date.
CUSTODY ACCOUNT: A trust account created and maintained pursuant to Section
4.04.
CUT-OFF DATE: December 1, 1997.
CUT-OFF DATE BALANCE: $789,958,210.60
DCR: Duff & Phelps Credit Rating Co., or its successors in interest.
DEBT SERVICE REDUCTION: Any reduction of the Scheduled Payments which a
Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of any
proceeding under the Bankruptcy Code or any other similar state law or other
proceeding.
DEBTOR RELIEF LAWS: Any applicable liquidation, conservatorship,
receivership, bankruptcy, insolvency, rearrangement, moratorium, reorganization,
or similar debtor relief laws affecting the rights of creditors generally from
time to time in effect.
DEFAULTED MORTGAGE LOAN: Any Mortgage Loan as to which the Mortgagor has
failed to make unexcused payment in full of three or more consecutive Scheduled
Payments.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of the
Mortgaged Property by a court of competent jurisdiction in an amount less than
the then outstanding indebtedness under the Mortgage Loan, which valuation
results from a proceeding initiated under the Bankruptcy Code or any other
similar state law or other proceeding.
DEPOSITORY: The Depository Trust Company, the nominee of which is Cede &
Co., or any successor thereto.
DEPOSITORY AGREEMENT: The meaning specified in Subsection 5.01(a) hereof.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DESIGNATED DEPOSITORY INSTITUTION: A depository institution (commercial
bank, federal savings bank mutual savings bank or savings and loan association)
or trust company (which may include the Trustee), the deposits of which are
fully insured by the FDIC to the extent provided by law.
DETERMINATION DATE: The 18th day of the month of the Distribution Date, or
if such day is not a Business Day, the preceding Business Day.
DISCOUNT MORTGAGE LOAN: Any Group 1, Group 2, Group 3 or Group 4 Mortgage
Loan with a Net Rate less then 7.00%, 7.00%, 7.25% or 7.00% per annum,
respectively.
DISTRIBUTION DATE: The 25th day of any month, beginning in the month
immediately following the month of the Closing Date, or, if such 25th day is not
a Business Day, the Business Day immediately following.
DTC CUSTODIAN: The First National Bank of Chicago, or its successors in
interest as custodian for the Depository.
DUE DATE: With respect to each Mortgage Loan, the date in each month on
which its Scheduled Payment is due if such due date is the first day of a month
and otherwise is deemed to be the first day of the following month.
DUE PERIOD: With respect to any Distribution Date, the period commencing on
the second day of the month preceding the month in which the Distribution Date
occurs and ending at the close of business on the first day of the month in
which the Distribution Date occurs.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: An event described in Section 8.01.
EXCESS LIQUIDATION PROCEEDS: To the extent that such amount is not required
by law to be paid to the related Mortgagor, the amount, if any, by which
Liquidation Proceeds with respect to a Liquidated Mortgage Loan exceed the sum
of (i) the Outstanding Principal Balance of such Mortgage Loan and accrued but
unpaid interest at the related Mortgage Interest Rate through the last day of
the month in which the related Liquidation Date occurs, plus (ii) related
Liquidation Expenses.
FDIC: Federal Deposit Insurance Corporation or any successor thereto.
FHLMC: Freddie Mac, formerly the Federal Home Loan Mortgage Corporation, or
any successor thereto.
FNMA: Federal National Mortgage Association or any successor thereto.
FRACTIONAL UNDIVIDED INTEREST: With respect to any Class of Certificates
(other than the Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X and Class 4-X
Certificates) or any Component, the fractional undivided interest evidenced by
any Certificate of such Class or any Component, the numerator of which is the
Current Principal Amount of such Certificate or such Component and the
denominator of which is the Current Principal Amount of such Class or such
Component. With respect to the Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X
and Class 4-X Certificates, the fractional undivided interest evidenced by such
Certificate, the numerator of which is the Notional Amount of such Certificate
and the denominator of which is the Notional Amount of such Class. With respect
to the Certificates in the aggregate, the fractional undivided interest
evidenced by (i) each Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X or Class
4-X Certificate will be deemed to equal 1% multiplied by a fraction, the
numerator of which is the Notional Amount of such Certificate and the
denominator of which is the Notional Amount of all of the Class 1-A-X1, Class
1-A-X2, Class X, Class 3-X and Class 4-X Certificates, respectively, (ii) a
Class R-1 or Class R-2 Certificate will be deemed to equal 1% multiplied by a
fraction the numerator of which is the Current Principal Amount of such
Certificate and the denominator of which is the aggregate Current Principal
Amount of such respective Class and (iii) a Certificate of any other Class will
be deemed to equal 93% (plus an additional 1% if and when each of the Class
1-A-X1, Class 1-A-X2, Class X, Class 3-X and Class 4-X Certificates have been
paid in full prior to the date of determination) multiplied by a fraction, the
numerator of which is the Current Principal Amount of such Certificate and the
denominator of which is the Current Principal Amount of all the Certificates.
FUNDS TRANSFER DATE: The Business Day prior to the related Distribution
Date in any month or if such day is not a Business Day, the preceding Business
Day.
GLOBAL CERTIFICATE: Any Private Certificate registered in the name of the
Depository or its nominee, beneficial interests in which are reflected on the
books of the Depository or on the books of a Person maintaining an account with
such Depository (directly or as an indirect participant in accordance with the
rules of such depository). As of the Closing Date, there will be no Global
Certificates.
GROUP AVAILABLE FUNDS: Reference to any one of the Group 1 Available Funds,
Group 2 Available Funds, Group 3 Available Funds, Group 4 Available Funds or
Group 5 Available Funds.
GROUP 1 AVAILABLE FUNDS, GROUP 2 AVAILABLE FUNDS, GROUP 3 AVAILABLE FUNDS,
GROUP 4 AVAILABLE FUNDS, or GROUP 5 AVAILABLE FUNDS: Except as otherwise
provided in Sections 6.01(a)(iv) and 6.01(c), with respect to any Distribution
Date, an amount equal to the aggregate of the following amounts with respect to
the Mortgage Loans in Mortgage Loan Groups 1, 2, 3, 4 and 5, respectively: (a)
all previously undistributed payments on account of principal (including the
principal portion of Scheduled Payments, Principal Prepayments and the principal
portion of Net Liquidation Proceeds) and all previously undistributed payments
on account of interest received after the Cut-off Date and on or prior to the
related Determination Date, (b) any Monthly Advances (including Certificate
Account Advances) and Compensating Interest Payments by the related Master
Servicer with respect to such Distribution Date and (c) any amount reimbursed by
the related Master Servicer pursuant to 4.04(d) in connection with losses on
Permitted Investments, except:
(i) all payments that were due on or before the Cut-off Date;
(ii) all Principal Prepayments and Liquidation Proceeds received after
the applicable Prepayment Period;
(iii) all payments, other than Principal Prepayments, that represent
early receipt of Scheduled Payments due on a date or dates subsequent to
the related Due Date;
(iv) amounts received on particular Mortgage Loans as late payments of
principal or interest and respecting which, and to the extent that, there
are any unreimbursed Monthly Advances (including Certificate Account
Advances);
(v) amounts of Monthly Advances (including Certificate Account
Advances) determined to be Nonrecoverable Advances;
(vi) amounts permitted to be withdrawn from the Certificate Account
pursuant to Subsection 4.03(a); and
(vii) amounts withdrawn by the Trustee pursuant to Subsection 4.03(b)
to pay the Trustee's Fee.
GROUP B CERTIFICATES: The Group B Subordinate Certificates.
GROUP 1 CERTIFICATES: The Group 1 Senior Certificates.
GROUP 2 CERTIFICATES: The Group 2 Senior Certificates.
GROUP 3 CERTIFICATES: The Group 3 Senior Certificates and the Group 3
Subordinate Certificates.
GROUP 4 CERTIFICATES: The Group 4 Senior Certificates and the Group 4
Subordinate Certificates.
GROUP 5 CERTIFICATES: The Group 5 Senior Certificates and the Group 5
Subordinate Certificates.
GROUP 1 AND 2 CROSS-OVER DATE: The first Distribution Date on which the
aggregate Current Principal Amount of the Group B Subordinate Certificates has
been reduced to zero (giving effect to all distributions on such Distribution
Date).
GROUP 3 CROSS-OVER DATE: The first Distribution Date on which the aggregate
Current Principal Amount of the Group 3 Subordinate Certificates has been
reduced to zero (giving effect to all distributions on such Distribution Date).
GROUP 4 CROSS-OVER DATE: The first Distribution Date on which the aggregate
Current Principal Amount of the Group 4 Subordinate Certificates has been
reduced to zero (giving effect to all distributions on such Distribution Date).
GROUP 5 CROSS-OVER DATE: The first Distribution Date on which the aggregate
Current Principal Amount of the Group 5 Subordinate Certificates has been
reduced to zero (giving effect to all distributions on such Distribution Date).
GROUP 1 AND 2 LOSS ALLOCATION LIMITATION: The meaning specified in Section
6.03(b)(F) hereof.
GROUP 3 LOSS ALLOCATION LIMITATION: The meaning specified in Section
6.03(b)(F) hereof.
GROUP 4 LOSS ALLOCATION LIMITATION: The meaning specified in Section
6.03(b)(F) hereof.
GROUP 5 LOSS ALLOCATION LIMITATION: The meaning specified in Section
6.03(b)(F) hereof.
GROUP 1 MORTGAGE LOANS: The Mortgage Loans identified as such on the
Mortgage Loan Schedule.
GROUP 2 MORTGAGE LOANS: The Mortgage Loans identified as such on the
Mortgage Loan Schedule.
GROUP 3 MORTGAGE LOANS: The Mortgage Loans identified as such on the
Mortgage Loan Schedule.
GROUP 4 MORTGAGE LOANS: The Mortgage Loans identified as such on the
Mortgage Loan Schedule.
GROUP 5 MORTGAGE LOANS: The Mortgage Loans identified as such on the
Mortgage Loan Schedule.
GROUP 1 ORIGINAL SUBORDINATE PRINCIPAL BALANCE: The aggregate Scheduled
Principal Balance of the Group 1 Mortgage Loans as of the Cut-off Date minus the
aggregate Current Principal Amounts of the Group 1 Senior Certificates as of the
Closing Date.
GROUP 2 ORIGINAL SUBORDINATE PRINCIPAL BALANCE: The aggregate Scheduled
Principal Balance of the Group 2 Mortgage Loans as of the Cut-off Date minus the
aggregate Current Principal Amounts of the Group 2 Senior Certificates as of the
Closing Date.
GROUP 3 ORIGINAL SUBORDINATE PRINCIPAL BALANCE: The sum of the aggregate
Current Principal Amounts of each Class of Group 3 Subordinate Certificates as
of the Cut-off Date.
GROUP 4 ORIGINAL SUBORDINATE PRINCIPAL BALANCE: The sum of the aggregate
Current Principal Amounts of each Class of Group 4 Subordinate Certificates as
of the Cut-off Date.
GROUP 5 ORIGINAL SUBORDINATE PRINCIPAL BALANCE: The sum of the aggregate
Current Principal Amounts of each Class of Group 5 Subordinate Certificates as
of the Cut-off Date.
GROUP 1 SENIOR CERTIFICATES: The Class 1-A-1, Class 1-A-X1, Class 1-A-2,
Class 1-A-X2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 1-A-6, Class 1-A-7,
Class 1-A-8 and Class 1-A-9 Certificates and Component X-1 and Component P-1.
GROUP 2 SENIOR CERTIFICATES: The Class 2-A-1, Class 2-A-2, Class 2-A-3,
Class 2-A-4, Class R-1 and Class R-2 Certificates and Component X-2 and
Component P-2.
GROUP 3 SENIOR CERTIFICATES: The Class 3-A and Class 3-X Certificates and
Component P-3.
GROUP 4 SENIOR CERTIFICATES: The Class 4-A and class 4-X Certificates and
Component P-4.
GROUP 5 SENIOR CERTIFICATES: The Class 5-A Certificates and Component P-5.
GROUP 1 SENIOR P&I CERTIFICATES: The Group 1 Senior Certificates (other
than the Component P-1).
GROUP 2 SENIOR P&I CERTIFICATES: The Group 2 Senior Certificates (other
than the Component P-2).
GROUP 3 SENIOR P&I CERTIFICATES: The Group 3 Senior Certificates (other
than the Component P-3).
GROUP 4 SENIOR P&I CERTIFICATES: The Group 4 Senior Certificates (other
than the Component P-4).
GROUP 5 SENIOR P&I CERTIFICATES: The Group 5 Senior Certificates.
GROUP 1 SENIOR P&I OPTIMAL PRINCIPAL AMOUNT, GROUP 2 SENIOR P&I OPTIMAL
PRINCIPAL AMOUNT, GROUP 3 SENIOR P&I OPTIMAL PRINCIPAL AMOUNT, GROUP 4 SENIOR
P&I OPTIMAL PRINCIPAL AMOUNT OR GROUP 5 SENIOR P&I OPTIMAL PRINCIPAL AMOUNT: As
to any Distribution Date, an amount equal to the sum, without duplication, of:
(i) the applicable Senior Percentage of the applicable Non-PO
Percentage of all scheduled payments of principal allocated to the
Scheduled Principal Balance due on each Outstanding Mortgage Loan in the
related Mortgage Loan Group on the related Due Date as specified in the
amortization schedule at the time applicable thereto (after adjustments for
previous Principal Prepayments but before any adjustment to such
amortization schedule by reason of any bankruptcy or similar proceeding or
any moratorium or similar waiver or grace period);
(ii) the applicable Senior Prepayment Percentage of the applicable
Non-PO Percentage of all Voluntary Principal Prepayments in part received
during the related Prepayment Period with respect to each Mortgage Loan in
the related Mortgage Loan Group, together with the applicable Senior
Prepayment Percentage of the applicable Non-PO Percentage of the Scheduled
Principal Balance of each Mortgage Loan in the related Mortgage Loan Group
which was the subject of a Voluntary Principal Prepayment in full during
the related Prepayment Period;
(iii) the lesser of (a) the applicable Senior Prepayment Percentage
for the relevant Certificate Group of the sum of (A) all Net Liquidation
Proceeds for such Certificate Group, allocable to principal received in
respect of each Mortgage Loan of the related Mortgage Loan Group which
became a Liquidated Mortgage Loan during the related Prepayment Period
(other than Mortgage Loans described in clause (B)) and (B) the Scheduled
Principal Balance of each such Mortgage Loan purchased by an Insurer from
the Trustee during the related Prepayment Period, pursuant to the related
Primary Mortgage Insurance Policy, if any, or otherwise; and (b) the
applicable Senior Percentage of the applicable Non-PO Percentage for such
Certificate Group of the sum of (A) the Scheduled Principal Balance of each
Mortgage Loan of the related Mortgage Loan Group which became a Liquidated
Mortgage Loan during the related Prepayment Period (other than the Mortgage
Loans described in clause (B)) and (B) the Scheduled Principal Balance of
each such Mortgage Loan that was purchased by an Insurer from the Trustee
during the related Prepayment Period pursuant to the related Primary
Mortgage Insurance Policy, if any, or otherwise; and
(iv) the applicable Senior Prepayment Percentage of the applicable
Non-PO Percentage of the Scheduled Principal Balance of each Mortgage Loan
of the related Mortgage Loan Group which was purchased by BSMCC on such
Distribution Date pursuant to Section 2.02 or 2.03A(b);
(v) the applicable Senior Prepayment Percentage of the applicable
Non-PO Percentage of the excess, if any, of the Scheduled Principal Balance
of a Mortgage Loan in the related Mortgage Loan Group that has been
replaced by BSMCC with a Substitute Mortgage Loan pursuant to Section 2.04
on such Distribution Date over the Scheduled Principal Balance of such
Substitute Mortgage Loan; and
(vi) plus or minus, in the case of the Group 1 Senior Certificates
and/or the Group 2 Senior Certificates, any Principal Prepayments and/or
other amounts allocable to the Group 1 Senior Certificates and/or the Group
2 Senior Certificates from the Mortgage Loan Group related to the other
Certificate Group pursuant to Section 6.01(a)(iv) and/or Section 6.01(c).
GROUP 1 SENIOR PERCENTAGE: Initially 95.246619%. On any Distribution Date,
the lesser of (i) 100% and (ii) the percentage (carried to six places rounded
up) obtained by dividing the aggregate Current Principal Amounts of all the
Group 1 Senior P&I Certificates immediately preceding such Distribution Date by
the aggregate Scheduled Principal Balance of the Mortgage Loans (other than the
PO Percentage) in the related Mortgage Loan Group immediately preceding such
Distribution Date.
GROUP 2 SENIOR PERCENTAGE: Initially 95.245145%. On any Distribution Date,
the lesser of (i) 100% and (ii) the percentage obtained by dividing the
aggregate Current Principal Amounts of all Group 2 Senior P&I Certificates
immediately preceding such Distribution Date by the aggregate Scheduled
Principal Balance of the Mortgage Loans (other than the PO Percentage) in the
related Mortgage Loan Group immediately preceding such Distribution Date.
GROUP 3 SENIOR PERCENTAGE: Initially 91.495132%. On any Distribution Date,
the lesser of (i) 100% and (ii) the percentage obtained by dividing the
aggregate Current Principal Amounts of all the Group 3 Senior P&I Certificates
immediately preceding such Distribution Date by the aggregate Scheduled
Principal Balance of the Mortgage Loans (other than the PO Percentage) in the
related Mortgage Loan Group immediately preceding such Distribution Date.
GROUP 4 SENIOR PERCENTAGE: Initially 96.715687%. On any Distribution Date,
the lesser of (i) 100% and (ii) the percentage obtained by dividing the
aggregate Current Principal Amounts of all the Group 4 Senior P&I Certificates
immediately preceding such Distribution Date by the aggregate Scheduled
Principal Balance of the Mortgage Loans (other than the PO Percentage) in the
related Mortgage Loan Group immediately preceding such Distribution Date.
GROUP 5 SENIOR PERCENTAGE: Initially 96.250000%. On any Distribution Date,
the lesser of (i) 100% and (ii) the percentage obtained by dividing the
aggregate Current Principal Amounts of all the Group 5 Senior P&I Certificates
immediately preceding such Distribution Date by the aggregate Scheduled
Principal Balance of the Mortgage Loans (other than the PO Percentage) in the
related Mortgage Loan Group immediately preceding such Distribution Date.
GROUP 1 SENIOR PREPAYMENT PERCENTAGE, GROUP 2 SENIOR PREPAYMENT PERCENTAGE,
GROUP 3 SENIOR PREPAYMENT PERCENTAGE, GROUP 4 SENIOR PREPAYMENT PERCENTAGE OR
GROUP 5 SENIOR PREPAYMENT PERCENTAGE: On any Distribution Date occurring during
the periods set forth below, as follows (provided that in the case of the Group
1 and Group 2 Senior Certificates, Subordinate Percentage as used below means
the applicable Group B Subordinate Percentage for the relevant Mortgage Loan
Group):
Period (dates inclusive) Senior Prepayment Percentage
- -------------------------------------------------------------------------------
January 25, 1998 - December 25, 2002 100%
January 25, 2003 - December 25, 2003 Applicable Senior Percentage for
the related Certificate Group plus
70% of the applicable Subordinate
Percentage for such Certificate
Group
January 25, 2004 - December 25, 2004 Applicable Senior Percentage for
the related Certificate Group plus
60% of the applicable Subordinate
Percentage for such Certificate
Group
January 25, 2005 - December 25, 2005 Applicable Senior Percentage for
the related Certificate Group plus
40% of the applicable Subordinate
Percentage for such Certificate
Group
January 25, 2006 - December 25, 2006 Applicable Senior Percentage for
the related Certificate Group plus
20% of the applicable Subordinate
Percentage for such Certificate
Group
January 25, 2007 and thereafter Applicable Senior Percentage
Notwithstanding the foregoing, if on any Distribution Date the applicable Senior
Percentage for a Certificate Group exceeds the applicable Senior Percentage for
such Certificate Group as of the Cut-Off Date, the Senior Prepayment Percentage
for such Certificate Group for such Distribution Date will equal 100%. On the
Distribution Date on which the Current Principal Amounts of the Senior
Certificates of a Certificate Group are reduced to zero, the Senior Prepayment
Percentage for such Certificate Group shall be the minimum percentage sufficient
to effect such reduction and thereafter shall be zero, provided that in the
circumstances described in Section 6.01(a)(iv), prepayments resulting from
Mortgage Loans in Mortgage Loan Group 1 or 2 and otherwise distributable to the
Group B Subordinate Certificates shall be distributed to the Senior Certificates
related to the other such Mortgage Loan Group.
In addition, no reduction of the applicable Senior Prepayment Percentage for a
Certificate Group shall occur on any Distribution Date unless, as of the last
day of the month preceding such Distribution Date, (i) the aggregate Scheduled
Principal Balance of Mortgage Loans in the related Mortgage Loan Group
delinquent 60 days or more (including for this purpose any such Mortgage Loans
in foreclosure and such Mortgage Loans with respect to which the related
Mortgaged Property has been acquired by the Trust), averaged over the last six
months, as a percentage of the sum of the aggregate Current Principal Amount of
the Subordinate Certificates of such Certificate Group (using in the case of the
Group 1 Certificates and Group 2 Certificates the aggregate Scheduled Principal
Balance of the Mortgage Loans of the respective Mortgage Loan Group after
subtracting the Current Principal Amount of the Group 1 or Group 2 Senior
Certificates, as applicable) does not exceed 50% and (ii) cumulative Realized
Losses on such Mortgage Loans do not exceed (a) 30% of the applicable Original
Subordinate Principal Balance of such Certificate Group if such Distribution
Date occurs between and including January 2003 and December 2003, (b) 35% of the
Original Subordinate Principal Balance of such Certificate Group if such
Distribution Date occurs between and including January 2004 and December 2004,
(c) 40% of the applicable Original Subordinate Principal Balance if such
Distribution Date occurs between and including January 2005 and December 2005,
(d) 45% of the applicable Original Subordinate Principal Balance for such
Certificate Group if such Distribution Date occurs between and including January
2006 and December 2006, and (e) 50% of the applicable Original Subordinate
Principal Balance for such Certificate Group if such Distribution Date occurs
during or after January 2007. No reduction of the Senior Prepayment Percentage
for Certificate Groups 1 or 2 will occur unless the foregoing tests have been
met with respect to both Groups.
GROUP B SUBORDINATE CERTIFICATES: The Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6 Certificates.
GROUP 3 SUBORDINATE CERTIFICATES: The Class 3-B-1, Class 3-B-2, Class
3-B-3, Class 3-B-4, Class 3-B-5 and Class 3-B-6 Certificates.
GROUP 4 SUBORDINATE CERTIFICATES: The Class 4-B-1, Class 4-B-2, Class
4-B-3, Class 4-B-4, Class 4-B-5 and Class 4-B-6 Certificates.
GROUP 5 SUBORDINATE CERTIFICATES: The Class 5-B-1, Class 5-B-2, Class
5-B-3, Class 5-B-4, Class 5-B-5 and Class 5-B-6 Certificates.
GROUP B SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution
Date, the amount by which (a) the sum of the Current Principal Amounts of all
the Group 1 and 2 Certificates (after giving effect to the distribution of
principal and the allocation of applicable Realized Losses and any applicable
Component P Deferred Payment Writedown Amount with respect to the Component P-1
and Component P-2 in reduction of the Current Principal Amounts of such
Certificates on such Distribution Date) exceeds (b) the aggregate Scheduled
Principal Balances of the Group 1 and 2 Mortgage Loans on the Due Date related
to such Distribution Date.
GROUP 3 SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution
Date, the amount by which (a) the sum of the Current Principal Amounts of all
the Group 3 Certificates (after giving effect to the distribution of principal
and the allocation of applicable Realized Losses and any applicable Component P
Deferred Payment Writedown Amount with respect to the Component P-3 in reduction
of the Current Principal Amounts of such Certificates on such Distribution Date)
exceeds (b) the aggregate Scheduled Principal Balances of the Group 3 Mortgage
Loans on the Due Date related to such Distribution Date.
GROUP 4 SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution
Date, the amount by which (a) the sum of the Current Principal Amounts of all
the Group 4 Certificates (after giving effect to the distribution of principal
and the allocation of applicable Realized Losses and any applicable Component P
Deferred Payment Writedown Amount with respect to the Component P-4 in reduction
of the Current Principal Amounts of such Certificates on such Distribution Date)
exceeds (b) the aggregate Scheduled Principal Balances of the Group 4 Mortgage
Loans on the Due Date related to such Distribution Date.
GROUP 5 SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution
Date, the amount by which (a) the sum of the Current Principal Amounts of all of
the Group 5 Certificates (after giving effect to the distribution of principal
and the allocation of applicable Realized Losses in reduction of the Current
Principal amounts of such Certificates on such Distribution Date) exceeds (b)
the aggregate Scheduled Principal Balances of the Group 5 Mortgage Loans on the
Due Date related to such Distribution Date.
GROUP 1 SUBORDINATE OPTIMAL PRINCIPAL AMOUNT, GROUP 2 SUBORDINATE OPTIMAL
PRINCIPAL AMOUNT, GROUP 3 SUBORDINATE OPTIMAL PRINCIPAL AMOUNT, GROUP 4
SUBORDINATE OPTIMAL PRINCIPAL AMOUNT OR GROUP 5 SUBORDINATE OPTIMAL PRINCIPAL
AMOUNT: As to any Distribution Date, an amount equal to the sum, without
duplication, of the following (but in no event greater than the aggregate
Current Principal Amounts of the Subordinate Certificates of the relevant
Certificate Group immediately prior to such Distribution Date): (i) the
applicable Subordinate Percentage of the applicable Non-PO Percentage of the
principal portion of all Monthly Payments due on each Outstanding Mortgage Loan
in the related Mortgage Loan Group (or Groups in the case of the Class B
Subordinate Certificates), on the related Due Date as specified in the
amortization schedule at the time applicable thereto (after adjustment for
previous Principal Prepayments but before any adjustment to such amortization
schedule by reason of any bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period);
(ii) the applicable Subordinate Prepayment Percentage of the
applicable Non-PO Percentage of each Voluntary Principal Payment in part
during the related Prepayment Period with respect to each Mortgage Loan in
the related Mortgage Loan Group (or Groups in the case of the Class B
Subordinate Certificates) and the applicable Subordinate Prepayment
Percentage of the applicable Non-PO Percentage of the Scheduled Principal
Balance of each Mortgage Loan in the related Mortgage Loan Group (or Groups
in the case of the Class B Subordinate Certificates) that was the subject
of a Voluntary Principal Prepayment in full during the related Prepayment
Period;
(iii) the excess, if any, of the applicable Non-PO Percentage of (A)
all Net Liquidation Proceeds allocable to principal received during the
related Prepayment Period over (B) the sum of the amounts distributable
pursuant to clause (iii) of the definition of Senior P&I Optimal Principal
Amount for the applicable Certificate Group and in the case of Certificate
Groups 1, 2, 3 and 4, clause (iv) of the definition of the applicable
Component P Principal Distribution Amount, on such Distribution Date;
(iv) the applicable Subordinate Prepayment Percentage of the
applicable Non-PO Percentage of the sum of (a) the Scheduled Principal
Balance of each Mortgage Loan in the related Mortgage Loan Group (or Groups
in the case of the Group B Subordinate Certificates) which was purchased by
BSMCC on such Distribution Date pursuant to Section 2.02 or 2.03(A)(b) and
(b) the difference, if any, between the Scheduled Principal Balance of a
Mortgage Loan in the related Mortgage Loan Group that has been replaced by
BSMCC with a substitute Mortgage Loan pursuant to Section 2.04 on such
Distribution Date over the Scheduled Principal Balance of such substitute
Mortgage Loan;
(v) on the Distribution Date on which the Current Principal Amounts of
the Senior P&I Certificates of the relevant Certificate Group have all been
reduced to zero, 100% of any applicable Senior P&I Optimal Principal
Amount; and
(vi) minus, in the case of the Group B Subordinate Certificates, any
Principal Prepayments and/or other amounts allocable to the Group 1 Senior
Certificates or Group 2 Senior Certificates from Mortgage Loan Group 1 or 2
pursuant to Section 6.01(a)(iv) and/or Section 6.01(c).
After the aggregate current Principal Amounts of the relevant Subordinate
Certificates of the relevant Certificate Group have been reduced to zero, the
Subordinate Optimal Principal Amount for such Certificate Group shall be zero.
GROUP 1 SUBORDINATE PERCENTAGE, GROUP 2 SUBORDINATE PERCENTAGE, GROUP 3
SUBORDINATE PERCENTAGE, GROUP 4 SUBORDINATE PERCENTAGE OR GROUP 5 SUBORDINATE
PERCENTAGE: On any Distribution Date, 100% minus the applicable Senior
Percentage of the relevant Certificate Group; provided that the Group B
Subordinate Certificates will have two Subordinate Percentages, one applicable
to the Group 1 Mortgage Loans and one applicable to the Group 2 Mortgage Loans.
GROUP 1 SUBORDINATE PREPAYMENT PERCENTAGE, GROUP 2 SUBORDINATE PREPAYMENT
PERCENTAGE, GROUP 3 SUBORDINATE PREPAYMENT PERCENTAGE, GROUP 4 SUBORDINATE
PREPAYMENT PERCENTAGE OR GROUP 5 SUBORDINATE PREPAYMENT PERCENTAGE: On any
Distribution Date, 100% minus the applicable Senior Prepayment Percentage for
the relevant Certificate Group; provided that the Group B Subordinate
Certificates will have two Subordinate Prepayment Percentages, one applicable to
the Group 1 Mortgage Loans and one applicable to the Group 2 Mortgage Loans,
except that on any Distribution Date after the Current Principal Amounts of the
Senior Certificates of the relevant Certificate Group have each been reduced to
zero, the Subordinate Prepayment Percentage for such Certificate Group will
equal 100%.
HOLDER: The Person in whose name a Certificate is registered in the
Certificate Register, except that, subject to Subsections 11.02(b) and 11.05(e),
solely for the purpose of giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Seller, a Master Servicer, a
Sub-Servicer or the Trustee or any Affiliate thereof shall be deemed not to be
outstanding and the Fractional Undivided Interest evidenced thereby shall not be
taken into account in determining whether the requisite percentage of Fractional
Undivided Interests necessary to effect any such consent has been obtained.
INDEMNIFIED PERSONS: The Trustee, its officers, directors, agents and
employees and any separate Co-trustee and its officers, directors, agents and
employees.
INDEPENDENT: When used with respect to any specified Person, this term
means that such Person (a) is in fact independent of the Seller or a Master
Servicer and of any Affiliate of the Seller or a Master Servicer, (b) does not
have any direct financial interest or any material indirect financial interest
in the Seller or a Master Servicer, or any Affiliate of the Seller or a Master
Servicer, and (c) is not connected with the Seller or a Master Servicer, or any
Affiliate as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
INDIVIDUAL CERTIFICATE: Any Private Certificate registered in the name of
the Holder other than the Depository or its nominee.
INSTITUTIONAL ACCREDITED INVESTOR: Any Person meeting the requirements of
Rule 501 (a)(1), (2), (3) or (7) of Regulation D under the Securities Act or any
entity all of the equity holders in which come within such paragraphs.
INSURANCE POLICY: With respect to any Mortgage Loan, any Primary Mortgage
Insurance Policy, standard hazard insurance policy, flood insurance policy or
title insurance policy.
INSURANCE PROCEEDS: Amounts paid by the insurer under any Insurance policy
covering any Mortgage Loan or Mortgaged Property other than amounts required to
be paid over to the Mortgagor pursuant to law or the related Mortgage Note or
Security Instrument and other than amounts used to repair or restore the
Mortgaged Property or to reimburse Insured Expenses.
INSURED EXPENSES: Expenses covered by any Insurance Policy.
INSURER: Any issuer of an Insurance Policy.
INTEREST ACCRUAL PERIOD: With respect to each Distribution Date, for each
Class of Certificates, the calendar month preceding the month in which the
Distribution Date occurs, except for the Class 1-A-5 and Class 1-A-6
Certificates, which will be the period beginning on the 25th day of the month
preceding the month in which the Distribution Date occurs, and ending on the
24th day of the month in which the Distribution Date occurs, in each case
commencing in December, 1997.
INTEREST SHORTFALL: With respect to any Distribution Date and each Mortgage
Loan that during the related Prepayment Period was the subject of a Voluntary
Principal Prepayment, or constitutes a Relief Act Mortgage Loan, an amount
determined as follows:
(a) partial principal prepayments: The difference between (i) one
month's interest at the applicable Net Rate on the amount of such
prepayment and (ii) the amount of interest for the calendar month of such
prepayment (adjusted to the applicable Net Rate) received at the time of
such prepayment;
(b) principal prepayments in full received during the relevant
Prepayment Period: The difference between (i) one month's interest at the
applicable Net Rate on the Scheduled Principal Balance of such Mortgage
Loan immediately prior to such prepayment and (ii) the amount of interest
for the calendar month of such prepayment (adjusted to the applicable Net
Rate) received at the time of such prepayment;
(c) Relief Act Mortgage Loans: As to any Relief Act Mortgage Loan, the
excess of (i) 30 days' interest (or, in the case of a principal prepayment
in full, interest to the date of prepayment) on the Scheduled Principal
Balance thereof (or, in the case of a principal prepayment in part, on the
amount so prepaid) at the related Net Rate over (ii) 30 days' interest (or,
in the case of a principal prepayment in full, interest to the date of
prepayment) on such Scheduled Principal Balance (or, in the case of a
Principal Prepayment in part, on the amount so prepaid) at the Net Rate
required to be paid by the Mortgagor as limited by application of the
Relief Act.
INVESTMENT LETTER: The letter to be furnished by each Institutional
Accredited Investor which purchases any Class of Certificates in connection with
such purchase, substantially in the form set forth as Exhibit F-1 hereto.
LIBOR: Will be established as provided in Section 5.01(f).
LIQUIDATED MORTGAGE LOAN: Any defaulted Mortgage Loan as to which the
related Master Servicer has determined that all amounts it expects to recover
from or on account of such Mortgage Loan have been recovered.
LIQUIDATION DATE: With respect to any Liquidated Mortgage Loan, the date on
which the related Master Servicer has certified that such Mortgage Loan has
become a Liquidated Mortgage Loan. LIQUIDATION EXPENSES: With respect to a
Mortgage Loan in liquidation, unreimbursed expenses paid or incurred by or for
the account of the related Master Servicer and not recovered by such Master
Servicer under any Primary Mortgage Insurance Policy for reasons other than such
Master Servicer's failure to ensure the maintenance of or compliance with a
Primary Mortgage Insurance Policy, such expenses including (a) property
protection expenses, (b) property sales expenses, (c) foreclosure and sale
costs, including court costs and reasonable attorneys' fees, and (d) similar
expenses reasonably paid or incurred in connection with liquidation.
LIQUIDATION PROCEEDS: Cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through trustee's sale, foreclosure sale,
Insurance Proceeds, condemnation proceeds or otherwise.
LOAN SUMMARY AND REMITTANCE REPORT: The report to be submitted by each
Master Servicer to the Trustee pursuant to Subsection 6.07(b).
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the numerator
of which is the original principal balance of the related Mortgage Loan and the
denominator of which is the Original Value of the related Mortgaged Property.
LOSS ALLOCATION LIMITATION: The meaning specified in Section 6.03(c)
hereof.
LOST NOTES: The original Mortgage Notes that have been lost, as indicated
on Exhibit J hereto.
MASTER SERVICER: Each of the NAMC Master Servicer and the PHH Master
Servicer.
MASTER SERVICING FEE: As to any NAMC Mortgage Loan and Distribution Date,
an amount equal to the product of (i) the Scheduled Principal Balance of such
Mortgage Loan as of the Due Date in the preceding calendar month and (ii) the
NAMC Master Servicing Fee Rate and as to any PHH Mortgage Loan and Distribution
Date, an amount equal to the product of (i) the Scheduled Principal Balance of
such Mortgage Loan as of the Due Date in the preceding calendar month and (ii)
the PHH Master Servicing Fee Rate.
MASTER SERVICING FEE RATE: Each of the NAMC Master Servicing Fee Rate and
the PHH Master Servicing Fee Rate.
MONTHLY ADVANCE: The advance (including a Certificate Account Advance)
required to be made by the related Master Servicer on the related Advancing Date
pursuant to Section 6.08.
MOODY'S: Moody's Investors Service, Inc., and its successors in interest.
MORTGAGE FILE: The mortgage documents listed in Section 2.01(b) pertaining
to a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to this Agreement.
MORTGAGE INTEREST RATE: The annual rate at which interest accrues from time
to time on any Mortgage Loan pursuant to the related Mortgage Note, which rate
is equal to the "Mortgage Interest Rate" set forth with respect thereto on the
Mortgage Loan Schedule.
MORTGAGE LOAN: A mortgage loan transferred and assigned to the Trustee
pursuant to Section 2.01 or Section 2.04 and held as a part of the Trust Fund,
as identified in the Mortgage Loan Schedule, including a mortgage loan the
property securing which has become an REO Property.
MORTGAGE LOAN GROUP: Any one of Mortgage Loan Group 1, Mortgage Loan Group
2, Mortgage Loan Group 3, Mortgage Loan Group 4 or Mortgage Loan Group 5, each
of which constitutes a separate sub-trust.
MORTGAGE LOAN GROUP 1: The group of Mortgage Loans which is composed of the
Group 1 Mortgage Loans.
MORTGAGE LOAN GROUP 2: The group of Mortgage Loans which is composed of the
Group 2 Mortgage Loans.
MORTGAGE LOAN GROUP 3: The group of Mortgage Loans which is composed of the
Group 3 Mortgage Loans.
MORTGAGE LOAN GROUP 4: The group of Mortgage Loans which is composed of the
Group 4 Mortgage Loans.
MORTGAGE LOAN GROUP 5: The Group of Mortgage Loan which is composed of the
Group 5 Mortgage Loans.
MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement
dated as of December 26, 1997, between BSMCC, as seller, and Bear Stearns
Mortgage Securities Inc., as purchaser, and all amendments thereof and
supplements thereto.
MORTGAGE LOAN SCHEDULE: The schedule, attached hereto as Exhibit B-1 with
respect to the Mortgage Loans and as amended from time to time to reflect the
repurchase or substitution of Mortgage Loans pursuant to this Agreement, which
shall separately identify the Group 1 Mortgage Loans, the Group 2 Mortgage
Loans, the Group 3 Mortgage Loans, the Group 4 Mortgage Loans and the Group 5
Mortgage Loans.
MORTGAGE NOTE: The originally executed note or other evidence of the
indebtedness of a Mortgagor under the related Mortgage Loan.
MORTGAGED PROPERTY: Land and improvements securing the indebtedness of a
Mortgagor under the related Mortgage Loan or, in the case of REO Property, such
REO Property.
MORTGAGOR: The obligor on a Mortgage Note.
NAMC: North American Mortgage Company, a Delaware corporation, or its
successors in interest.
NAMC CUSTODY ACCOUNT: A trust account created and maintained pursuant to
Section 4.04.
NAMC MASTER SERVICER: With respect to the NAMC Mortgage Loans, NAMC, or its
successor in interest, or any successor master servicer with respect to the NAMC
Mortgage Loans appointed as herein provided.
NAMC MASTER SERVICING FEE RATE: With respect to each NAMC Mortgage Loan,
the per annum rate of 0.25%.
NAMC MORTGAGE LOANS: The Mortgage Loans listed in Exhibit B-2.
NAMC PURCHASE AGREEMENTS: The two Mortgage Loan Purchase Agreement, each
dated as of December 1, 1997, between NAMC, as seller, and BSMCC, as purchaser,
and all amendments thereof and supplements thereto.
NET INTEREST SHORTFALL: With respect to any Distribution Date, the Interest
Shortfall, if any, for such Distribution Date net of Compensating Interest
Payments made with respect to such Distribution Date.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan, Liquidation
Proceeds net of (i) Liquidation Expenses which are payable therefrom to the
related Master Servicer in accordance with this Agreement and (ii) unreimbursed
advances by the related Sub-Servicer and Monthly Advances including Certificate
Account Advances.
NET RATE: With respect to each NAMC Mortgage Loan, the Mortgage Interest
Rate in effect from time to time less the sum of the NAMC Master Servicing Fee
and the Trustee's Fees (expressed as a per annum rate) and with respect to each
PHH Mortgage Loan, the Mortgage Interest Rate in effect from time to time less
the sum of the PHH Master Servicing Fee and the Trustee's Fees expressed as a
per annum rate).
NON-DISCOUNT MORTGAGE LOAN: Any Group 1 Mortgage Loan, Group 2 Mortgage
Loan, Group 3 Mortgage Loan or Group 4 Mortgage Loan with a Net Rate equal to or
greater than 7.00%, 7.00%, 7.25% or 7.00%, respectively, and any Group 5
Mortgage Loan.
NON-PO PERCENTAGE: (i) with respect to any Discount Mortgage Loan in
Mortgage Loan Group 1, Mortgage Loan Group 2, Mortgage Loan Group 3 or Mortgage
Loan Group 4, the Net Rate thereof divided by 7.00%, 7.00%, 7.25% or 7.00%,
respectively, (ii) with respect to any Non-Discount Mortgage Loan in Mortgage
Loan Groups 1, 2, 3 and 4, 100% and (iii) with respect to any Mortgage Loan in
Mortgage Loan Group 5, 100%.
NONRECOVERABLE ADVANCE: Any advance (i) which was previously made or is
proposed to be made by a Master Servicer and (ii) which, in the good faith
judgment of such Master Servicer, as evidenced by an Officer's Certificate, will
not or, in the case of a proposed advance, would not, be ultimately recoverable
by such Master Servicer from Liquidation Proceeds, Insurance Proceeds or future
payments on the Mortgage Loan for which such advance was made.
NOTIONAL AMOUNT: On any Distribution Date, with respect to (i) the Class
1-A-X1 Certificates and the Class 1-A-X2 Certificates, an amount equal to the
Current Principal Amount of the Class 1-A-1 Certificates and the Class 1-A-2
Certificates, respectively, as of such date and (ii) the Class X Certificates,
the Class 3-X Certificates and the Class 4-X Certificates, the aggregate
Scheduled Principal Balances of the Group 1 Mortgage Loans and the Group 2
Mortgage Loans, the Group 3 Mortgage Loans and the Group 4 Mortgage Loans,
respectively, immediately following the Due Date in the month prior to the month
of the Distribution Date.
OFFERED CERTIFICATE: Any Class P, Class 1-A-1, Class 1-A-X1, Class 1-A-2,
Class 1-A-X2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 1-A-6, Class 1-A-7,
Class 1-A-8, Class 1-A-9, Class 2-A-1, Class 2-A-2, Class 2-A-3, Class 2-A-4,
Class X, , Class B-1, Class B-2, Class B-3, Class 3-A, Class 3-X, Class 3-B-1,
Class 3-B-2, Class 3-B-3, Class 4-A, Class 4-X, Class 4-B-1, Class 4-B-2, Class
4-B-3, Class 5-A, Class 5-B-1, Class 5-B-2, Class 5-B-3, Class R-1 and Class R-2
Certificate.
OFFICER'S CERTIFICATE: A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board, the President or a Vice President or Assistant
Vice President of the Master Servicer and delivered to the Trustee, as required
by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel who is or are acceptable
to the Trustee and who, unless required to be Independent (an "Opinion of
Independent Counsel"), may be internal counsel for a Master Servicer.
ORIGINAL SUBORDINATE PRINCIPAL BALANCE: Each of the Group B Original
Subordinate Principal Balance, Group 3 Original Subordinate Principal Balance,
Group 4 Original Subordinate Principal Balance and Group 5 Original Subordinate
Principal Balance.
ORIGINAL VALUE: The lesser of (i) the Appraised Value or (ii) sales price
of a Mortgaged Property at the time of origination of a Mortgage Loan, except
that in instances where either (i) or (ii) is unavailable, the other may be used
to determine Original Value, or if both (i) and (ii) are unavailable, Original
Value may be determined from other sources reasonably acceptable to the Trustee.
OUTSTANDING MORTGAGE LOAN: With respect to any Due Date, a Mortgage Loan
which, prior to such Due Date, was not the subject of a Principal Prepayment in
full, did not become a Liquidated Mortgage Loan and was not purchased pursuant
to Sections 2.02 or 2.03A or replaced pursuant to Section 2.04.
OUTSTANDING PRINCIPAL BALANCE: As of the time of any determination, the
principal balance of a Mortgage Loan remaining to be paid by the Mortgagor, or,
in the case of an REO Property, the principal balance of the related Mortgage
Loan remaining to be paid by the Mortgagor at the time such property was
acquired by the Trust Fund less any Net Insurance Proceeds with respect thereto
to the extent applied to principal.
P COMPONENT: The Component P-1, Component P-2, Component P-3, Component P-4
or Component P-5.
PAC CERTIFICATES: The Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class 1-A-4
Certificates.
PASS-THROUGH RATE: As to each Class of Certificates, the rate of interest
set forth, or determined as provided with respect thereto, in Section 5.01(d).
Any monthly calculation of interest at a stated rate shall be based upon annual
interest at such rate divided by twelve.
PERMITTED INVESTMENTS: Any one or more of the following obligations or
securities held in the name of the Trustee for the benefit of the
Certificateholders:
(i) direct obligations of, and obligations the timely payment of which
are fully guaranteed by the United States of America or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(ii) (a) demand or time deposits, federal funds or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof (including the Trustee acting in its commercial banking capacity)
and subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or the short-term debt
rating and/or the long-term unsecured debt obligations of such depository
institution or trust company at the time of such investment or contractual
commitment providing for such investment have the Applicable Credit Rating
or better from each Rating Agency and (b) any other demand or time deposit
or certificate of deposit that is fully insured by the Federal Deposit
Insurance Corporation;
(iii) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or
guaranteed by an agency or instrumentality of the United States of America,
the obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(ii)(a) above where the Trustee holds the security therefor;
(iv) securities bearing interest or sold at a discount issued by any
corporation (including the Trustee) incorporated under the laws of the
United States of America or any state thereof that have the Applicable
Credit Rating or better from each Rating Agency at the time of such
investment or contractual commitment providing for such investment;
PROVIDED, HOWEVER, that securities issued by any particular corporation
will not be Permitted Investments to the extent that investments therein
will cause the then outstanding principal amount of securities issued by
such corporation and held as part of the Trust to exceed 10% of the
aggregate Outstanding Principal Balances and amounts of all the Mortgage
Loans and Permitted Investments held as part of the Trust;
(v) commercial paper (including both noninterest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
having the Applicable Credit Rating or better from each Rating Agency at
the time of such investment;
(vi) a Reinvestment Agreement issued by any bank, insurance company or
other corporation or entity;
(vii) any other demand, money market or time deposit, obligation,
security or investment as may be acceptable to each Rating Agency as
evidenced in writing by each Rating Agency to the Trustee; and
(viii) any money market or common trust fund having a rating of Aaa
from Moody's and the Applicable Credit Rating or better from DCR;
PROVIDED, HOWEVER, that no instrument or security shall be a Permitted
Investment if such instrument or security evidences a right to receive only
interest payments with respect to the obligations underlying such instrument or
if such security provides for payment of both principal and interest with a
yield to maturity in excess of 120% of the yield to maturity at par or if such
instrument or security is purchased at a price greater than par.
PERSON: Any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
PHH: PHH Mortgage Services corporation, a Delaware corporation, or its
successors in interest.
PHH CUSTODY ACCOUNT: A trust account created and maintained pursuant to
Section 4.01.
PHH MASTER SERVICER: With respect to the PHH Mortgage Loans, PHH, or its
successor in interest, or any successor master servicer with respect to the PHH
Mortgage Loans appointed as herein provided.
PHH MORTGAGE LOANS: The Mortgage Loans listed in Exhibit B-3.
PHH MASTER SERVICING FEE RATE: With respect to each PHH Mortgage Loan, the
per annum rate of between 0.20% and 1.075%, as indicated on Exhibit B-3 hereto.
PHH PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement dated as of
December 1, 1997, between PHH, as seller, and BSMCC, as purchaser, and all
amendments thereof and supplements thereto.
PHYSICAL CERTIFICATES: The Class R-1, Class R-2, Class B-4, Class B-5,
Class B-6, Class 3-B-4, Class 3-B-5, Class 3-B-6, Class 4-B-4, Class 4-B-5,
Class 4-B-6, Class 5-B-4, Class 5-B-5 and Class 5-B-6 Certificates; provided
that as set forth in Section 5.01(a), if one or more Classes of the Class B-4,
Class B-5, Class B-6, Class 3-B-4, Class 3-B-5, Class 3-B-6, Class 4-B-4, Class
4-B-5, Class 4-B-6, Class 5-B-4, Class 5-B-5 or Class 5-B-6 Certificates have
become Global Certificates, then with respect to such Class or Classes, only to
the extent provided in Section 5.02.
PLANNED BALANCE: With respect to the Class 1-A-1, Class 1-A-2, Class 1-A-3
and Class 1-A-4 Certificates and each Distribution Date, the amount set forth
for such Class in Exhibit I hereto for such Distribution Date.
PO PERCENTAGE: (i) With respect to any Discount Mortgage Loan (a) in
Mortgage Loan Group 1, the fraction, expressed as a percentage, equal to 7.00%
minus the Net Rate thereof divided by 7.00%, (b) in Mortgage Loan Group 2, the
fraction expressed as a percentage, equal to 7.00% minus the Net Rate thereof
divided by 7.00%, (c) in Mortgage Loan Group 3, the fraction expressed as a
percentage, equal to 7.25% minus the Net Rate thereof divided by 7.25%, and (d)
in Mortgage Loan Group 4, the fraction, expressed as a percentage, equal to
7.00% minus the Net Rate thereof divided by 7.00%, (ii) with respect to any
Non-Discount Mortgage Loan in Mortgage Loan Groups 1, 2, 3 and 4, 0%, and (iii)
with respect to any Mortgage Loan in Mortgage Loan Group 5, 0%.
PREPAYMENT PERIOD: With respect to any Mortgage Loan and any Distribution
Date, the calendar month preceding the month of such Distribution Date.
PRIMARY MORTGAGE INSURANCE POLICY: Any primary mortgage guaranty insurance
policy issued in connection with a Mortgage Loan which provides compensation to
a Mortgage Note holder in the event of default by the obligor under such
Mortgage Note or the related Security Instrument, or any replacement policy
therefor.
PRINCIPAL PREPAYMENT: Any payment (whether partial or full) or other
recovery of principal on a Mortgage Loan which is received in advance of its
scheduled Due Date to the extent that it is not accompanied by an amount as to
interest representing scheduled interest due on any date or dates in any month
or months subsequent to the month of prepayment, including Insurance Proceeds
and the purchase price in connection with any purchase of a Mortgage Loan, any
cash deposit in connection with the substitution of a Mortgage Loan, and the
principal portion of Net Liquidation Proceeds.
PRIVATE CERTIFICATES: Any Class B-4, Class B-5, Class B-6, Class 3-B-4,
Class 3-B-5, Class 3-B-6, Class 4-B-4, Class 4-B-5, Class 4-B-6, Class 5-B-4,
Class 5-B-5 or Class 5-B-6 Certificate.
PROTECTED ACCOUNT: A segregated account established and maintained in the
name of the Trustee for the benefit of Certificateholders by a Master Servicer
or any Sub-Servicer with respect to the Mortgage Loans and with respect to REO
Property in a Designated Depository Institution for receipt of principal and
interest and other amounts as described in Section 4.01 provided that no
Protected Account may be established or maintained at a Designated Depository
Institution which is affiliated with NAMC, PHH or any other master servicer
other than the Trustee unless such Designated Depository Institution's unsecured
and uncollateralized long-term debt obligations are rated "Baa3" or better by
Moody's.
QIB: A Qualified Institutional Buyer as defined in Rule 144A promulgated
under the Securities Act.
QUALIFIED INSURER: Any insurance company duly qualified as such under the
laws of the state or states in which the related Mortgaged Property or Mortgaged
Properties is or are located, duly authorized and licensed in such state or
states to transact the type of insurance business in which it is engaged and
approved as an insurer by the Master Servicer, so long as the claims paying
ability of which is acceptable to the Rating Agencies for pass-through
certificates having the same rating as the Certificates rated by the Rating
Agencies as of the Closing Date.
RATING AGENCIES: Moody's and DCR.
RATING AGENCY ELIGIBLE ACCOUNT: An account, including one maintained with
the Trustee, which either (i) is a trust account maintained with the corporate
trust department of a depository institution or trust company (including,
without limitation, the Trustee) organized under the laws of the United States
of America or any one of the states thereof or the District of Columbia which is
not affiliated with NAMC, PHH or any other master servicer other than the
Trustee or (ii) is maintained with an entity which is an institution whose
deposits are insured by the FDIC, the unsecured and uncollateralized long-term
debt obligations of which shall be rated "A2" or higher by Moody's and "A" or
higher by DCR, or one of the two highest short-term ratings by Moody's and DCR,
and which is either (a) a federal savings association duly organized, validly
existing and in good standing under the federal banking laws, (b) an institution
duly organized, validly existing and in good standing under the applicable
banking laws of any state, (c) a national banking association under the federal
banking laws, or (d) a principal subsidiary of a bank holding company.
REALIZED LOSS: Any (i) Deficient Valuation or (ii) as to any Liquidated
Mortgage Loan, (x) the Outstanding Principal Balance of such Liquidated Mortgage
Loan plus accrued and unpaid interest thereon at the Mortgage Interest Rate
through the last day of the month of such liquidation LESS (y) the related Net
Liquidation Proceeds with respect to such Mortgage Loan.
RECORD DATE: With respect to any Distribution Date, the close of business
on the last Business Day of the month immediately preceding the month of such
Distribution Date.
REINVESTMENT AGREEMENTS: One or more reinvestment agreements, acceptable to
the Rating Agencies, from a bank, insurance company or other corporation or
entity (including the Trustee).
RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
RELIEF ACT MORTGAGE LOAN: Any Mortgage Loan as to which the Scheduled
Payment thereof has been reduced due to the application of the Relief Act.
REMIC: A real estate mortgage investment conduit, as defined in the Code.
REMIC I: That group of assets contained in the Trust Fund designated as a
REMIC consisting of the REMIC II Regular Certificates.
REMIC II: That group of assets contained in the Trust Fund designated as a
REMIC consisting of (i) the Mortgage Loans, (ii) the Certificate Account, (iii)
any REO Property and (iv) any proceeds of the foregoing. Expenses and fees of
the Trust shall be paid by REMIC II.
REMIC II CERTIFICATES: The REMIC II Regular Certificates and the Class R-2
Certificates.
REMIC II REGULAR CERTIFICATES: As defined in Section 5.01.
REMIC OPINION: An Opinion of Independent Counsel, to the effect that the
proposed action described therein would not, under the REMIC Provisions, (i)
cause either REMIC I or REMIC II to fail to qualify as a REMIC while any regular
interest in either REMIC I or REMIC II is outstanding, (ii) result in a tax on
prohibited transactions with respect to either REMIC I or REMIC II or (iii)
constitute a taxable contribution to either REMIC I or REMIC II after the
Startup Day.
REMIC PROVISIONS: The provisions of the federal income tax law relating to
REMICs, which appear at Sections 860A through 860G of the Code, and related
provisions and regulations promulgated thereunder, as the foregoing may be in
effect from time to time.
REO PROPERTY: A Mortgaged Property acquired in the name of the Trustee, for
the benefit of Certificateholders, by foreclosure or deed-in-lieu of foreclosure
in connection with a defaulted Mortgage Loan.
REPURCHASE PRICE: With respect to any Mortgage Loan (or any property
acquired with respect thereto) required to be repurchased pursuant to Section
2.02 or 2.03A an amount equal to the sum of (i) 100% of the Outstanding
Principal Balance of such Mortgage Loan as of the date of repurchase (or if the
related Mortgaged Property was acquired with respect thereto, 100% of the
Outstanding Principal Balance at the date of the acquisition) plus (ii) accrued
but unpaid interest on the Outstanding Principal Balance at the related Mortgage
Interest Rate, through and including the last day of the month of repurchase
reduced by (ii) any portion of the Master Servicing Fee or advances payable to
the purchaser of the Mortgage Loan.
REQUEST FOR RELEASE: A request for release in the form attached hereto as
Exhibit D.
REQUIRED INSURANCE POLICY: With respect to any Mortgage Loan, any insurance
policy which is required to be maintained from time to time under this Agreement
with respect to such Mortgage Loan.
RESIDUAL CERTIFICATES: The Class R-1 and Class R-2 Certificates.
RESPONSIBLE OFFICER: Any officer assigned to the Corporate Trust Office or
similar department of the Trustee (or any successor division or department
thereto), 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.
RULE 144A CERTIFICATE: The certificate to be furnished by each purchaser of
a Private Certificate (which is also a Physical Certificate) which is a
Qualified Institutional Buyer as defined under Rule 144A promulgated under the
Securities Act, substantially in the form set forth as Exhibit F-2 hereto.
SCHEDULED PAYMENT: With respect to any Mortgage Loan and any month, the
scheduled payment or payments of principal and interest due during such month on
such Mortgage Loan which either is payable by a Mortgagor in such month under
the related Mortgage Note or, in the case of REO Property, would otherwise have
been payable under the related Mortgage Note.
SCHEDULED PRINCIPAL: The principal portion of any Scheduled Payment.
SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan on any
Distribution Date, (i) the unpaid principal balance of such Mortgage Loan as of
the close of business on the related Due Date (i.e., taking account of the
principal payment to be made on such Due Date and irrespective of any
delinquency in its payment), as specified in the amortization schedule at the
time relating thereto (before any adjustment to such amortization schedule by
reason of any bankruptcy or similar proceeding occurring after the Cut-off Date
(other than a Deficient Valuation) or any moratorium or similar waiver or grace
period) less (ii) any Principal Prepayments (including the principal portion of
Net Liquidation Proceeds) received during or prior to the related Prepayment
Period; provided that the Scheduled Principal Balance of a Liquidated Mortgage
Loan is zero.
SECURITIES ACT: The Securities Act of 1933, as amended.
SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3)
IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE
MEANING THEREOF IN RULE 501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE ACT
OR ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS
PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO
(A) THE RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN
THE AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE
ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY
OTHER APPLICABLE JURISDICTION. THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR
INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, UNLESS THE PROPOSED TRANSFEREE PROVIDES A
REPRESENTATION OR CERTIFICATION TO THE EFFECT THAT THE PROPOSED TRANSFER AND/OR
HOLDING OF A CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE
TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS
NOT COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION,
INCLUDING, BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14,
PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF EITHER MASTER SERVICER OR THE
TRUSTEE."
SECURITY INSTRUMENT: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage, deed of trust, deed to secure debt or security deed, including any
riders or addenda thereto.
SELLER: Bear Stearns Mortgage Securities Inc., a Delaware corporation, or
its successors in interest.
SENIOR CERTIFICATES: The Group 1 Senior Certificates, Group 2 Senior
Certificates, Group 3 Senior Certificates, Group 4 Senior Certificates and/or
Group 5 Senior Certificates, as the context requires.
SENIOR P&I CERTIFICATES: The Group 1 Senior P&I Certificates, Group 2
Senior P&I Certificates, Group 3 Senior P&I Certificates, Group 4 Senior P&I
Certificates and/or Group 5 Senior P&I Certificates, as the context requires.
SERVICING ACCOUNT: The separate trust account(s) created and maintained by
each Master Servicer or each Sub-Servicer with respect to the Mortgage Loans or
with respect to REO Property in a Designated Depository Institution for
collection of taxes, assessments, insurance premiums and comparable items as
described in Section 3.07.
SERVICING ADVANCES: All reasonable and customary "out of pocket" costs and
expenses incurred in the performance by each Master Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (iv) compliance with the
obligations under Section 3.07 or 3.10, and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the first lien on the Mortgaged Property pursuant to Section
3.12, all of which reasonable and customary out-of-pocket costs and expenses are
reimbursable to such Master Servicer to the extent provided in Sections 4.02(b)
and 4.03(b).
SERVICING OFFICER: Any officer of each Master Servicer or of an agent or
independent contractor through which all or part of such Master Servicer's
master servicing responsibilities are carried out, involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee by such Master Servicer as such list may from time to time be amended in
accordance with the foregoing.
STARTUP DAY: December 30, 1997.
SUBORDINATE CERTIFICATES: The Group B Subordinate Certificates, Group 3
Subordinate Certificates, Group 4 Subordinate Certificates and/or Group 5
Subordinate Certificates, as the context requires.
SUBORDINATE OPTIMAL PRINCIPAL AMOUNT: Any of the Group 1 Subordinate
Optimal Principal Amount, the Group 2 Subordinate Optimal Principal Amount, the
Group 3 Subordinate Optimal Principal Amount, the Group 4 Subordinate Optimal
Principal Amount or the Group 5 Subordinate Optimal Principal Amount.
SUB-SERVICER: Any Person with which either Master Servicer has entered into
a Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.
SUB-SERVICING AGREEMENT: The written contract between a Master 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.
SUBSTITUTE MORTGAGE LOAN: A mortgage loan tendered to the Trustee pursuant
to Section 2.04, in each case, in the opinion of the related Master Servicer,
(i) which has an Outstanding Principal Balance not materially greater nor
materially less than the Mortgage Loan for which it is to be substituted; (ii)
which has a Mortgage Interest Rate and Net Rate not less than, and not
materially greater than, such Mortgage Loan; (iii) which has a maturity date not
materially earlier or later than such Mortgage Loan and not later than the
latest maturity date of any Mortgage Loan; (iv) which is of the same property
type and occupancy type as such Mortgage Loan; (v) which has a Loan-to-Value
Ratio not greater than the Loan-to-Value Ratio of such Mortgage Loan; (vi) which
is current in payment of principal and interest as of the date of substitution;
(vii) as to which the payment terms do not vary in any material respect from the
payment terms of the Mortgage Loan for which it is to be substituted; and (viii)
which has a fixed interest rate no less than that of such Mortgage Loan. The
opinion of the related Master Servicer shall be evidenced by an Officer's
Certificate delivered to the Trustee.
TAX ADMINISTRATION AND TAX MATTERS PERSON: The Trustee or any successor
thereto or assignee thereof shall serve as tax administrator hereunder and as
agent for the Tax Matters Person. The Holder of the Class of Residual
Certificates shall be the Tax Matters Person for the related REMIC, as more
particularly set forth in Section 9.13 hereof.
TRUST FUND or TRUST: The corpus of the trust created by this Agreement,
consisting of the Mortgage Loans and the other assets described in Section
2.01(a).
TRUSTEE: The First National Bank of Chicago, or its successor in interest,
or any successor trustee appointed as herein provided.
TRUSTEE'S FEES: With respect to each Distribution Date, the amount to be
paid to the Trustee calculated monthly on a Mortgage Loan by Mortgage Loan
basis, equal to the sum of (i) with respect to each Mortgage Loan which has been
prepaid in full during the related Prepayment Period, the product of (a) the
amount of the Principal Prepayment, (b) 0.01% per annum and (c) a fraction, the
numerator of which is the number of days elapsed from the Due Date in the month
prior to the month of such Distribution Date to the date of Principal Prepayment
and the denominator of which is 365, and (ii) with respect to all other Mortgage
Loans, the product of (x) the Scheduled Principal Balance of such Mortgage Loan
on the Due Date in the month prior to the month of such Distribution Date and
(y) one-twelfth of 0.01%.
UNINSURED CAUSE: Any cause of damage to a Mortgaged Property or REO
Property such that the complete restoration of such Mortgaged Property or REO
Property is not fully reimbursable by the hazard insurance policies required to
be maintained pursuant to Section 3.10, without regard to whether or not such
policy is maintained.
VOLUNTARY PRINCIPAL PREPAYMENT: With respect to any Distribution Date, any
Principal Prepayment received from the related Mortgagor on a Mortgage Loan.
<PAGE>
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates
Section 2.01. CONVEYANCE OF MORTGAGE LOANS TO TRUSTEE. (a) The Seller
concurrently with the execution and delivery of this Agreement, sells, transfers
and assigns to the Trustee without recourse all its right, title and interest in
and to (i) the Mortgage Loans identified in the Mortgage Loan Schedule,
including all interest and principal due with respect to the Mortgage Loans
after the Cut-off Date, but excluding any payments of principal and interest due
on or prior to the Cut-off Date; (ii) such assets as shall from time to time be
credited or are required by the terms of this Agreement to be credited to the
Certificate Account, (iii) such assets relating to the Mortgage Loans as from
time to time may be held by the Master Servicer or a Sub-Servicer in Protected
Accounts (excluding any income to the Master Servicer or any Sub-Servicer from
Permitted Investments under Subsection 4.01(a)), (iv) such assets relating to
the Mortgage Loans as from time to time may be held by the Trustee in the
Custody Account (excluding any income to the Master Servicer from Permitted
Investments under Section 4.04(d)), (v) any Servicing Accounts (to the extent
the mortgagee has a claim thereto and excluding any income to the Master
Servicer or Sub-Servicer or interest payable to Mortgagors pursuant to
applicable law), (vi) any REO Property, (vii) the Required Insurance Policies
and any amounts paid or payable by the insurer under any Insurance Policy (to
the extent the mortgagee has a claim thereto), (viii) the Mortgage Loan Purchase
Agreement to the extent provided in Subsection 2.03A(a), and (ix) any proceeds
of the foregoing. The Mortgage Loans that constitute part of the Trust shall be
divided into five separate sub-trusts, one for each of the Mortgage Loan Groups.
Although it is the intent of the parties to this Agreement that the conveyance
of the Seller's right, title and interest in and to the Mortgage Loans and other
assets in the Trust Fund pursuant to this Agreement shall constitute a purchase
and sale and not a loan, in the event that such conveyance is deemed to be a
loan, it is the intent of the parties to this Agreement that the Seller shall be
deemed to have granted to the Trustee a first priority perfected security
interest in all of the Seller's right, title and interest in, to and under the
Mortgage Loans and other assets in the Trust Fund, and that this Agreement shall
constitute a security agreement under applicable law.
(b) In connection with the above transfer and assignment, the Seller hereby
deposits with the Trustee, with respect to each Mortgage Loan, (i) the original
Mortgage Note, endorsed without recourse to the order of the Trustee and showing
an unbroken chain of endorsements from the original payee thereof to the Person
endorsing it to the Trustee, (ii) the original Security Instrument, which shall
have been recorded, with evidence of such recording indicated thereon, (iii) the
assignment (which may be in the form of a blanket assignment if permitted in the
jurisdiction in which the Mortgaged Property is located) to the Trustee of the
Security Instrument, with evidence of recording with respect to each Mortgage
Loan in the name of the Trustee thereon, (iv) all intervening assignments of the
Security Instrument, if applicable and only to the extent available to the
Seller with evidence of recording thereon, (v) the original or a copy of the
policy or certificate of primary mortgage guaranty insurance, to the extent
available, if any, and (vi) originals of all modification agreements, if
applicable and available; PROVIDED, HOWEVER, that in lieu of the foregoing, the
Seller may deliver the following documents, under the circumstances set forth
below: (x) in lieu of the original Security Instrument or intervening
assignments thereof which have been delivered or are being delivered to
recording offices for recording and have not been returned to the Seller in time
to permit their delivery as specified above, the Seller may deliver a true copy
thereof with a certification by BSMCC, NAMC or PHH, on the face of such copy,
substantially as follows: "Certified to be a true and correct copy of the
original, which has been transmitted for recording"; (y) in lieu of the Security
Instrument, assignment to the Trustee or intervening assignments thereof, if the
applicable jurisdiction retains the originals of such documents (as evidenced by
a certification from BSMCC, NAMC or PHH to such effect) the Seller may deliver
photocopies of such documents containing an original certification by the
judicial or other governmental authority of the jurisdiction where such
documents were recorded; and (z) in lieu of the Mortgage Notes relating to 6 PHH
Mortgage Loans, with an aggregate Scheduled Principal Balance as of the Cut-off
Date of approximately $1,757,769, each as identified in the list delivered by
the Seller to the Trustee on the Closing Date and set forth in Exhibit J hereto,
the Seller may deliver a lost note affidavit and, if available, a copy of the
original Mortgage Note; and PROVIDED, FURTHER, HOWEVER, that in the case of
Mortgage Loans which have been prepaid in full after the Cut-off Date and prior
to the Closing Date, the Seller, in lieu of delivering the above documents, may
deliver to the Trustee a certification of a Servicing Officer to such effect and
shall deposit all amounts paid in respect of such Mortgage Loans in the
Certificate Account on the Closing Date. The Seller shall deliver such original
documents (including any original documents as to which certified copies had
previously been delivered) to the Trustee promptly after they are received. The
Master Servicer shall cause, at its expense, the Security Instrument and
intervening assignments, if any, and the assignment of the Security Instrument
to the Trustee to be recorded not later than 180 days after the Closing Date.
Section 2.02. ACCEPTANCE OF MORTGAGE LOANS BY TRUSTEE. (a) The Trustee
acknowledges receipt of, subject to its further review and the exceptions it
notes pursuant to the procedures described below, the documents (or certified
copies thereof) delivered to it pursuant to Section 2.01 and declares that it
holds and will continue to hold those documents and any amendments, replacements
or supplements thereto and all other assets of the Trust Fund delivered to it as
Trustee in trust for the use and benefit of all present and future Holders of
the Certificates. No later than 45 days after the Closing Date (or, with respect
to any Substitute Mortgage Loan, within 5 Business Days after the receipt by the
Trustee thereof), the Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File delivered to it and to execute and deliver, or
cause to be executed and delivered, to the Seller and the Master Servicer an
Initial Certification substantially in the form annexed hereto as Exhibit G. In
conducting such review, the Trustee will ascertain whether all required
documents have been executed and received and whether those documents relate,
determined on the basis of the Mortgagor name, original principal balance and
loan number, to the Mortgage Loans it has received, as identified in Exhibit B-1
to this Agreement, as supplemented (PROVIDED, HOWEVER, that with respect to
those documents described in subclauses (b)(iv), (b)(v) and (b)(vi) of Section
2.01, the Trustee's obligations shall extend only to documents actually
delivered pursuant to such subsections). In performing any such review, the
Trustee may conclusively rely on the purported due execution and genuineness of
any such document and on the purported genuineness of any signature thereon. If
the Trustee finds any document constituting part of the Mortgage File not to
have been executed or received, or to be unrelated to the Mortgage Loans
identified in Exhibit B-1 or to appear to be defective on its face, the Trustee
shall promptly notify BSMCC. BSMCC shall correct or cure any such defect within
60 days from the date of notice from the Trustee of the defect and if BSMCC
fails to correct or cure the defect within such period, and such defect
materially and adversely affects the interests of the Certificateholders in the
related Mortgage Loan, BSMCC will, subject to Section 2.04, within 90 days from
the Trustee's notification purchase such Mortgage Loan at the Repurchase Price;
PROVIDED, HOWEVER, that if such defect relates solely to the inability of BSMCC
to deliver the original Security Instrument or intervening assignments thereof,
or a certified copy because the originals of such documents, or a certified copy
have not been returned by the applicable jurisdiction, BSMCC shall not be
required to purchase such Mortgage Loan if BSMCC delivers such original
documents or certified copy promptly upon receipt, but in no event later than
360 days after the Closing Date.
(b) No later than 180 days after the Closing Date, the Trustee will review,
for the benefit of the Certificateholders, the Mortgage Files delivered to it
and will execute and deliver or cause to be executed and delivered to the Seller
and the Master Servicers, a Final Certification substantially in the form
annexed hereto as Exhibit H. In conducting such review, the Trustee will
ascertain whether an original of each document required to be recorded has been
returned from the recording office with evidence of recording thereon or a
certified copy has been obtained from the recording office. If the Trustee finds
any document constituting part of the Mortgage File has not been received, or to
be unrelated, determined on the basis of the Mortgagor name, original principal
balance and loan number, to the Mortgage Loans identified in Exhibit B-1 or to
appear defective on its face, the Trustee shall promptly notify BSMCC shall
correct or cure any such defect or shall deliver to the Trustee an Opinion of
Counsel to the effect that such defect does not materially or adversely affect
the interests of Certificateholders in such Mortgage Loan within 60 days from
the date of notice from the Trustee of the defect and if BSMCC is unable to cure
such defect within such period, and if such defect materially and adversely
affects the interests of the Certificateholders in the related Mortgage Loan,
BSMCC shall, subject to Section 2.04, within 90 days from the Trustee's
notification purchase such Mortgage Loan at the Repurchase Price; PROVIDED,
HOWEVER, that if such defect relates solely to the inability of BSMCC to deliver
the original Security Instrument or intervening assignments thereof, or a
certified copy, because the originals of such documents, or a certified copy,
have not been returned by the applicable jurisdiction, BSMCC shall not be
required to purchase such Mortgage Loan, if BSMCC delivers such original
documents or certified copy promptly upon receipt, but in no event later than
360 days after the Closing Date.
(c) In the event that a Mortgage Loan is purchased by BSMCC in accordance
with Subsections 2.02(a) or (b) above, BSMCC shall provide the Repurchase Price
to the Trustee for deposit in the appropriate subaccount of the Certificate
Account and shall provide to the Trustee written notification detailing the
components of the Repurchase Price. Upon deposit of the Repurchase Price in the
appropriate subaccount of the Certificate Account, the Trustee shall release to
BSMCC the related Mortgage File and shall execute and deliver all instruments of
transfer or assignment, without recourse, furnished to it by BSMCC as are
necessary to vest in BSMCC title to and rights under the Mortgage Loan. Such
purchase shall be deemed to have occurred on the date on which the Repurchase
Price in available funds is received by the Trustee. The Trustee shall amend the
Mortgage Loan Schedule to reflect such repurchase and shall promptly notify the
Master Servicers and the Rating Agencies of such amendment. The obligation of
BSMCC to repurchase any Mortgage Loan as to which such a defect in a constituent
document exists shall be the sole remedy respecting such defect available to the
Certificateholders or to the Trustee on their behalf.
Section 2.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF NAMC AND PHH.
(a) NAMC hereby represents and warrants with respect to NAMC, and PHH hereby
represents and warrants with respect to PHH, to the Trustee and, solely for
purposes of clauses (ix) and (x) of this Section 2.03, to BSMCC as of the
Closing Date that:
(i) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is in good
standing as a foreign corporation in each jurisdiction where such
qualification is necessary or is exempt from such qualification or not
required by applicable law to effect such qualification and throughout the
term of this Agreement will remain a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, any state of reincorporation or the laws of the United
States of America and in good standing as a foreign corporation in each
jurisdiction where such qualification is necessary (except, in the case of
foreign corporation qualification both on the date hereof and in the
future, where the failure so to qualify would not reasonably be expected to
have a material adverse effect on the Master Servicer's ability to enter
into this Agreement or to perform its obligations hereunder), and has the
corporate power and authority to perform its obligations under this
Agreement;
(ii) The execution and delivery of this Agreement have been duly
authorized by all requisite corporate action;
(iii) This Agreement, assuming due authorization, execution, and
delivery by the other parties hereto, will constitute its legal, valid and
binding obligation, enforceable in accordance with its terms, except only
as such enforcement may be limited by applicable Debtor Relief Laws and
that certain equitable remedies may not be available regardless of whether
enforcement is sought in equity or at law;
(iv) Its execution and delivery of this Agreement and its performance
and compliance with the terms of this Agreement will not (A) violate its
certificate of incorporation or bylaws (B) to its knowledge, violate any
law or regulation, or any administrative or judicial decree or order to
which it is subject or (C) constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other
instrument to which it is a party or which may be applicable to it or any
of its assets;
(v) To its best knowledge, after reasonable investigation, it is not
in default with respect to any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or governmental
agency, which default would reasonably be expected to have consequences
that would materially and adversely affect its financial condition or
operations or its performance hereunder;
(vi) It does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this
Agreement to be performed by it;
(vii) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of its business; and
(viii) No litigation is pending or, to its best knowledge, threatened
against it, which could be reasonably expected to materially and adversely
affect its entering into this Agreement or performing its obligations under
this Agreement or which would have a material adverse effect on its
financial condition.
(ix) As to each NAMC Mortgage Loan, the representations and warranties
of NAMC set forth in the NAMC Purchase Agreements were true and correct in
all material respects as of the time they were made and all representations
and warranties of NAMC set forth in Exhibit C-2 are true and correct in all
material respects on and as of the date hereof; and
(x) As to each PHH Mortgage Loan, the representations and warranties
of PHH set forth in the PHH Purchase Agreement were true and correct in all
material respects as of the time they were made and all representations and
warranties of PHH set forth in Exhibit C-3, are true and correct in all
material respects on and as of the date hereof.
Section 2.03A. ASSIGNMENT OF INTEREST IN THE MORTGAGE LOAN PURCHASE
AGREEMENT. (a) The Seller hereby assigns to the Trustee all of its right, title
and interest in the Mortgage Loan Purchase Agreement (but none of its
obligations) insofar as such contract relates to the representations and
warranties set forth in Exhibit C-1 hereto regarding the Mortgage Loans
(including the substitution and repurchase obligations of BSMCC); provided that
the obligations of BSMCC to substitute or repurchase a Mortgage Loan shall be
the Trustee's and the Certificateholders' sole remedy for any breach thereof. At
the request of the Trustee, the Seller shall take such actions as may be
necessary to enforce the above right, title and interest on behalf of the
Trustee and the Certificateholders or shall execute such further documents as
the Trustee may reasonably require in order to enable the Trustee to carry out
such enforcement.
(b) If the Seller, NAMC, PHH or the Trustee discovers a breach of any of
the representations and warranties set forth in Exhibit C-1 or Section 7 of the
Mortgage Loan Purchase Agreement and such breach existed on the date the
representation and warranty was made, which breach materially and adversely
affects the value of the interests of Certificateholders or the Trustee in the
related Mortgage Loan, the party discovering the breach shall give prompt
written notice of the breach to the other parties. BSMCC within 60 days of its
discovery or receipt of notice that such breach has occurred (whichever occurs
earlier), shall cure the breach in all material respects or, subject to Section
2.04, shall purchase the Mortgage Loan or any property acquired with respect
thereto from the Trustee; PROVIDED, HOWEVER, that if there is a breach of any
representation set forth in Exhibit C-1 and the Mortgage Loan or the related
property acquired with respect thereto has been sold, then BSMCC shall pay, in
lieu of the Repurchase Price, any excess of the Repurchase Price over the Net
Liquidation Proceeds received upon such sale. (If the Net Liquidation Proceeds
exceed the Repurchase Price, any excess shall be paid to BSMCC to the extent not
required by law to be paid to the borrower.) Any such purchase by BSMCC shall be
made by providing an amount equal to the Repurchase Price to the Trustee for
deposit in the appropriate subaccount of the Certificate Account and the
Trustee, upon deposit of the Repurchase Price in the appropriate subaccount of
the Certificate Account and of written notification detailing the components of
such Repurchase Price, shall release to BSMCC the related Mortgage File and
shall execute and deliver all instruments of transfer or assignment furnished to
it by BSMCC, without recourse, as are necessary to vest in BSMCC title to and
rights under the Mortgage Loan or any property acquired with respect thereto.
Such purchase shall be deemed to have occurred on the date on which the
Repurchase Price in available funds is received by the Trustee. The Trustee
shall amend the Mortgage Loan Schedule to reflect such repurchase and shall
promptly notify the Master Servicers and the Rating Agencies of such amendment.
Enforcement of the obligation of BSMCC, to purchase (or substitute a Substitute
Mortgage Loan for) any Mortgage Loan or any property acquired with respect
thereto (or pay the Repurchase Price as set forth in the above proviso) as to
which a breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Certificateholders or the Trustee on
their behalf.
Section 2.04. SUBSTITUTION OF MORTGAGE LOANS. Notwithstanding anything to
the contrary in this Agreement, in lieu of purchasing a Mortgage Loan pursuant
to Sections 2.02 or 2.03A, BSMCC may, no later than the date by which such
purchase by BSMCC would otherwise be required, tender to the Trustee a
Substitute Mortgage Loan accompanied by an Officer's Certificate of BSMCC that
such Substitute Mortgage Loan conforms to the requirements set forth in the
definition of "Substitute Mortgage Loan"; PROVIDED, HOWEVER, that substitution
pursuant to this Section 2.04 in lieu of purchase shall not be permitted after
the termination of the two-year period beginning on the Startup Day. The Trustee
shall examine the Mortgage File for any Substitute Mortgage Loan in the manner
set forth in Section 2.02(a) and shall notify the related Master Servicer in
writing, within five Business Days after receipt, whether or not the documents
relating to the Substitute Mortgage Loan satisfy the requirements of the third
sentence of Subsection 2.02(a). Within two Business Days after such
notification, BSMCC shall provide to the Trustee for deposit in the appropriate
subaccount of the Certificate Account the amount, if any, by which the
Outstanding Principal Balance as of the next preceding Due Date of the Mortgage
Loan for which substitution is being made, after giving effect to Scheduled
Principal due on such date, exceeds the Outstanding Principal Balance as of such
date of the Substitute Mortgage Loan, after giving effect to Scheduled Principal
due on such date, which amount shall be treated for the purposes of this
Agreement as if it were the payment by BSMCC of the Repurchase Price for the
purchase of a Mortgage Loan by BSMCC. After such notification to BSMCC and, if
any such excess exists, upon receipt of such deposit, the Trustee shall accept
such Substitute Mortgage Loan, which shall thereafter be deemed to be a Group 1
Mortgage Loan, Group 2 Mortgage Loan, Group 3 Mortgage Loan, Group 4 Mortgage
Loan or Group 5 Mortgage Loan, as applicable, hereunder. In the event of such a
substitution, accrued interest on the Substitute Mortgage Loan for the month in
which the substitution occurs and any Principal Prepayments made thereon during
such month shall be the property of the Trust Fund and accrued interest for such
month on the Mortgage Loan for which the substitution is made and any Principal
Prepayments made thereon during such month shall be the property of BSMCC. The
Scheduled Principal on a Substitute Mortgage Loan due on the Due Date in the
month of substitution shall be the property of BSMCC and the Scheduled Principal
on the Mortgage Loan for which the substitution is made due on such Due Date
shall be the property of the Trust Fund. Upon acceptance of the Substitute
Mortgage Loan, the Trustee shall release to BSMCC the related Mortgage File
related to any Mortgage Loan released pursuant to this Section 2.04 and shall
execute and deliver all instruments of transfer or assignment, without recourse,
in form as provided to it as are necessary to vest in BSMCC title to and rights
under any Mortgage Loan released pursuant to this Section 2.04. BSMCC shall
deliver the documents related to the Substitute Mortgage Loan in accordance with
the provisions of Subsections 2.01(b) and 2.02(b), with the date of acceptance
of the Substitute Mortgage Loan deemed to be the Closing Date for purposes of
the time periods set forth in those Subsections. The representations and
warranties set forth in Exhibit C-1 shall be deemed to have been made by BSMCC
with respect to each Substitute Mortgage Loan as of the date of acceptance of
such Mortgage Loan by the Trustee. The Trustee shall amend the Mortgage Loan
Schedule to reflect such substitution and shall provide a copy of such amended
Mortgage Loan Schedule to the Master Servicer and the Rating Agencies.
Section 2.05. REPRESENTATIONS AND WARRANTIES OF THE Trustee. The Trustee
hereby represents and warrants to the Seller, NAMC and PHH, as of the Closing
Date (and in the case of paragraphs (iv) and (v) below throughout the term of
the Agreement), that:
(i) The Trustee is a national bank duly organized, validly existing
and in good standing under the laws of the United States with a principal
place of business in Chicago, Illinois;
(ii) Subject to the right of the Trustee to appoint a co-trustee or
separate trustee under Section 9.11 hereof in order to meet the legal
requirements of a particular jurisdiction, the Trustee has full power,
authority and legal right to execute and deliver this Agreement and to
perform its obligations under this Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement and the Certificates;
(iii) To the best of the Trustee's knowledge, after reasonable
investigation, the execution and delivery by the Trustee of this Agreement
and the Certificates and the performance by the Trustee of its obligations
under this Agreement and the Certificates will not violate any provision of
the Trustee's Articles of Incorporation or By-Laws or any law or regulation
governing the Trustee or any order, writ, judgment or decree of any court,
arbitrator or governmental authority or agency applicable to the Trustee or
any of its assets. To the best of the Trustee's knowledge, after reasonable
investigation, such execution, delivery and performance will not require
the authorization, consent or approval of, the giving of notice to, the
filing or registration with, or the taking of any other action with respect
to, any governmental authority or agency regulating the fiduciary
activities of a national bank. To the best of the Trustee's knowledge,
after reasonable investigation, such execution, delivery and performance
will not conflict with, or result in a breach or violation of, any material
indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Trustee is a party or by which it or its properties is bound;
(iv) This Agreement has been duly executed and delivered by the
Trustee. This Agreement, when executed and delivered, will constitute the
valid, legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as the enforcement thereof may
be limited by applicable Debtor Relief Laws and that certain equitable
remedies may not be available regardless of whether enforcement is sought
in equity or at law; and
(v) All funds received by the Trustee and required to be deposited in
the Certificate Account and the Custody Account pursuant to this Agreement
will be promptly so deposited.
Section 2.06. ISSUANCE OF CERTIFICATES. The Trustee acknowledges the
assignment to it of the Mortgage Loans and the other assets comprising the Trust
Fund and, concurrently therewith, has signed, and countersigned and delivered to
the Seller, in exchange therefor, Certificates in such authorized denominations
representing such Fractional Undivided Interests as the Seller has requested.
The Trustee agrees that it will hold the Mortgage Loans and such other assets as
may from time to time be delivered to it segregated on the books of the Trustee
in trust for the benefit of the Certificateholders.
Section 2.07. REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER. The
Seller hereby represents and warrants to the Trustee, NAMC and PHH as follows:
(i) the Seller (a) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and (b) is
qualified and in good standing as a foreign corporation to do business in
each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not reasonably be expected to have a material
adverse effect on the Seller's business as presently conducted or on the
Purchaser's ability to enter into this Agreement and to consummate the
transactions contemplated hereby;
(ii) the Seller has full corporate power to own its property, to carry
on its business as presently conducted and to enter into and perform its
obligations under this Agreement;
(iii) the execution and delivery by the Seller of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Seller; and neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor compliance with
the provisions hereof, will conflict with or result in a breach of, or
constitute a default under, any of the provisions of any law, governmental
rule, regulation, judgment, decree or order binding on the Seller or its
properties or the articles of incorporation or by-laws of the Seller,
except those conflicts, breaches or defaults which would not reasonably be
expected to have a material adverse effect on the Seller's ability to enter
into this Agreement and to consummate the transactions contemplated hereby;
(iv) the execution, delivery and performance by the Seller of this
Agreement and the consummation of the transactions contemplated hereby do
not require the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any
state, federal or other governmental authority or agency, except those
consents, approvals, notices, registrations or other actions as have
already been obtained, given or made;
(v) this Agreement has been duly executed and delivered by the Seller
and, assuming due authorization, execution and delivery by the other
parties hereto, constitutes a valid and binding obligation of the Seller
enforceable against it in accordance with its terms (subject to applicable
bankruptcy and insolvency laws and other similar laws affecting the
enforcement of the rights of creditors generally);
(vi) there are no actions, suits or proceedings pending or, to the
knowledge of the Seller, threatened against the Seller, before or by any
court, administrative agency, arbitrator or governmental body (i) with
respect to any of the transactions contemplated by this Agreement or (ii)
with respect to any other matter which in the judgment of the Seller will
be determined adversely to the Seller and will if determined adversely to
the Seller materially and adversely affect the Seller's ability to enter
into this Agreement or perform its obligations under this Agreement; and
the Seller is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to materially
and adversely affect the transactions contemplated by this Agreement; and
(vii) immediately prior to the transfer and assignment to the Trustee,
each Mortgage Note and each Mortgage were not subject to an assignment or
pledge, and the Seller had good and marketable title to and was the sole
owner thereof and had full right to transfer and sell such Mortgage Loan to
the Trustee free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest.
<PAGE>
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. MASTER SERVICERS TO ASSURE SERVICING. (a) The NAMC Master
Servicer and the PHH Master Servicer shall supervise, or take such actions as
are necessary to ensure, the servicing and administration of the NAMC Mortgage
Loans and the PHH Mortgage Loans, respectively, and any related REO Property in
accordance with this Agreement and its normal servicing practices (including
making any Servicing Advances), which generally conform to the standards of an
institution prudently servicing mortgage loans for its own account and shall
have full authority to do anything it reasonably deems appropriate or desirable
in connection with such servicing and administration. Each Master Servicer may
perform its responsibilities relating to servicing through other agents or
independent contractors, but shall not thereby be released from any of its
responsibilities as hereinafter set forth. The authority of each Master
Servicer, in its capacity as master servicer, shall include, without limitation,
the power to (i) consult with and advise any Sub-Servicer regarding
administration of a related Mortgage Loan, (ii) approve any recommendation by a
Sub-Servicer to foreclose on a related Mortgage Loan, (iii) supervise the filing
and collection of insurance claims and take or cause to be taken such actions on
behalf of the insured person thereunder as shall be reasonably necessary to
prevent the denial of coverage thereunder, and (iv) effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing a related
Mortgage Loan, including the employment of attorneys, the institution of legal
proceedings, the collection of deficiency judgments, the acceptance of
compromise proposals, the filing of claims under any Primary Mortgage Insurance
Policy and any other matter pertaining to a delinquent Mortgage Loan. The
authority of each Master Servicer shall include, in addition, the power on
behalf of the Certificateholders, the Trustee or any of them to (i) execute and
deliver customary consents or waivers and other instruments and documents, (ii)
consent to transfers of any related Mortgaged Property and assumptions of the
related Mortgage Notes and Security Instruments (in the manner provided in this
Agreement) and (iii) collect any Insurance Proceeds and Liquidation Proceeds.
Without limiting the generality of the foregoing, each Master Servicer may, and
is hereby authorized, and empowered by the Trustee to, execute and deliver, on
behalf of itself, the Certificateholders, the Trustee, or any of them, any
instruments of satisfaction, cancellation, partial or full release, discharge
and all other comparable instruments, with respect to the related Mortgage
Loans, the Insurance Policies and the accounts related thereto, and the
Mortgaged Properties. Each Master Servicer may exercise this power in its own
name or in the name of a Sub-Servicer.
(b) Notwithstanding the provisions of Subsection 3.01(a), neither Master
Servicer shall take any action inconsistent with generally accepted good
servicing procedures and practices and with the interest of the Trustee or the
Certificateholders in the related Mortgage Loans or with the rights and
interests of the Trustee or the Certificateholders under this Agreement.
(c) The Trustee shall furnish each Master Servicer with any powers of
attorney and other documents in form as provided to it necessary or appropriate
to enable such Master Servicer to service and administer the related Mortgage
Loans and REO Property.
Section 3.02. SUB-SERVICING AGREEMENTS BETWEEN A MASTER SERVICER AND
SUB-SERVICERS. (a) Each Master Servicer may enter into Sub-Servicing Agreements
with Sub-Servicers for the servicing and administration of the related Mortgage
Loans and for the performance of any and all other activities of such Master
Servicer hereunder. Each Sub-Servicer shall be either (i) an institution the
accounts of which are insured by the FDIC or (ii) another entity that engages in
the business of originating or servicing mortgage loans, and in either case
shall be authorized to transact business in the state or states in which 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, and in either case shall be a
FHLMC or FNMA approved mortgage servicer. Any Sub-Servicing Agreement entered
into by a Master Servicer shall include the provision that such Agreement may be
immediately terminated (x) with cause and without any termination fee by any
Master Servicer hereunder other than NAMC or PHH or (y) without cause in which
case the relevant Master Servicer shall be responsible for any termination fee
or penalty resulting therefrom. In addition, any Sub-Servicing Agreement shall
provide for servicing of the related Mortgage Loans consistent with the terms of
this Agreement. With the consent of the Trustee, which consent shall not be
unreasonably withheld, each Master Servicer and the Sub-Servicers may enter into
Sub-Servicing Agreements 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 that no such amendment or different form
shall be made or entered into which could be reasonably expected to be
materially adverse to the interests of the Certificateholders, without the
consent of the Holders of Certificates entitled to at least 51% of the
Fractional Undivided Interests of all the Certificates in the aggregate.
(b) As part of its servicing activities hereunder, each Master Servicer,
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as such Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. Each Master Servicer shall pay
the costs of such enforcement at its own expense, but shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement only
to the extent, if any, that such recovery exceeds all amounts due in respect of
the related Mortgage Loans or (ii) from a specific recovery of costs, expenses
or attorneys' fees against the party against whom such enforcement is directed.
Section 3.03. SUCCESSOR SUB-SERVICERS. Each Master Servicer shall be
entitled to terminate any Sub-Servicing Agreement that may exist in accordance
with the terms and conditions of such Sub-Servicing Agreement and without any
limitation by virtue of this Agreement; PROVIDED, HOWEVER, that upon
termination, such Master Servicer shall either act as servicer of the related
Mortgage Loan or enter into an appropriate contract with a successor
Sub-Servicer pursuant to which such successor Sub-Servicer will be bound by all
relevant terms of the related Sub-Servicing Agreement pertaining to the
servicing of such Mortgage Loan.
Section 3.04. LIABILITY OF EACH MASTER SERVICER. (a) Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between a Master Servicer and a Sub-Servicer or
reference to actions taken through a Sub-Servicer or otherwise, the NAMC Master
Servicer and the PHH Master Servicer shall under all circumstances remain
obligated and primarily liable to the Trustee and the Certificateholders for the
servicing and administering of the NAMC Mortgage Loans and the PHH Mortgage
Loans, respectively, and any related REO Property in accordance with this
Agreement. The obligations and liability of the NAMC Master Servicer and the PHH
Master Servicer shall not be diminished by virtue of Sub-Servicing Agreements or
by virtue of indemnification of NAMC or PHH by any Sub-Servicer, or any other
Person. The obligations and liability of each Master Servicer shall remain of
the same nature and under the same terms and conditions as if such Master
Servicer alone were servicing and administering the related Mortgage Loans. Each
Master Servicer shall, however, be entitled to enter into indemnification
agreements with any Sub-Servicer or other Person and nothing in this Agreement
shall be deemed to limit or modify such indemnification. For the purposes of
this Agreement, the NAMC Master Servicer and the PHH Master Servicer shall be
deemed to have received any payment on an NAMC Mortgage Loan or a PHH Mortgage
Loan, respectively, on the date the Sub-Servicer received such payment;
PROVIDED, HOWEVER, that this sentence shall not apply to the Trustee acting as a
Master Servicer; PROVIDED, FURTHER, HOWEVER, that the foregoing provision shall
not affect the obligation of a Master Servicer if it is also the Trustee to
advance amounts which are not Nonrecoverable Advances.
(b) 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 an originator shall be deemed to be between
the Sub-Servicer and the relevant Master Servicer alone, and the Trustee and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Sub-Servicer
except as set forth in Section 3.05.
Section 3.05. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENTS BY
TRUSTEE. (a) If the Trustee or its designee shall assume the master servicing
obligations of either Master Servicer in accordance with Section 8.02, the
Trustee, to the extent necessary to permit the Trustee to carry out the
provisions of Section 8.02 with respect to the Mortgage Loans, shall succeed to
all of the rights and obligations of such Master Servicer under each of the
Sub-Servicing Agreements. In such event, the Trustee or its designee as the
successor master servicer shall be deemed to have assumed all of such Master
Servicer's rights and obligations therein and to have replaced such Master
Servicer as a party to such Sub-Servicing Agreements to the same extent as if
such Sub-Servicing Agreements had been assigned to the Trustee or its designee
as a successor master servicer, except that the Trustee or its designee as a
successor master servicer shall not be deemed to have assumed any obligations or
liabilities of such Master Servicer arising prior to such assumption and such
Master Servicer shall not thereby be relieved of any liability or obligations
under such Sub-Servicing Agreements.
(b) In the event that the Trustee or its designee as successor master
servicer for the Trustee assumes the servicing obligations of either Master
Servicer under Section 8.02, upon the reasonable request of the Trustee or such
designee as successor master servicer, such Master Servicer shall at its own
expense deliver to the Trustee, or at its written request to such designee,
photocopies of all documents and records, electronic or otherwise, relating to
the Sub-Servicing Agreements and the related Mortgage Loans or REO Property then
being serviced and an accounting of amounts collected and held by it, if any,
and will otherwise cooperate and use its reasonable best efforts to effect the
orderly and efficient transfer of the Sub-Servicing Agreements, or
responsibilities hereunder to the Trustee, or at its written request to such
designee as successor master servicer.
Section 3.06. COLLECTION OF MORTGAGE LOAN PAYMENTS. (a) Each Master
Servicer will make remittances itself or will coordinate and monitor remittances
by Sub-Servicers to the Trustee with respect to the related Mortgage Loans in
accordance with this Agreement.
(b) Each Master Servicer shall make its reasonable best efforts to collect
or cause to be collected all payments required under the terms and provisions of
the related Mortgage Loans and shall follow, and use its best efforts to cause
Sub-Servicers to follow, collection procedures comparable to the collection
procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Agreement.
Consistent with the foregoing, each Master Servicer may in its discretion (i)
waive or permit to be waived any late payment charge, prepayment charge,
assumption fee, or any penalty interest in connection with the prepayment of a
related Mortgage Loan and (ii) suspend or temporarily reduce or permit to be
suspended or temporarily reduced regular monthly payments for a period of up to
six months, or arrange or permit an arrangement with a Mortgagor for a scheduled
liquidation of delinquencies. In the event either Master Servicer shall consent
to the deferment of the due dates for payments due on a related Mortgage Note,
such Master Servicer shall nonetheless make a Monthly Advance or shall cause the
related Sub-Servicer to make an advance to the same extent as if such
installment were due, owing and delinquent and had not been deferred through
liquidation of the Mortgaged Property; PROVIDED, HOWEVER, that the obligation of
such Master Servicer to make a Monthly Advance shall apply only to the extent
that such Master Servicer believes, in good faith, that such advances are not
Nonrecoverable Advances.
(c) Notwithstanding anything in this Agreement to the contrary, neither
Master Servicer may make any advances of amounts due in the future with respect
to a related Mortgage Loan and such Master Servicer shall not permit (i) any
modification with respect to any related Mortgage Loan that would change the
Mortgage Interest Rate, reduce or increase the principal balance (except for
reductions resulting from actual payments of principal) or change the final
maturity date on such Mortgage Loan or (ii) any modification, waiver or
amendment of any term of any related Mortgage Loan that would both (A) effect an
exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or
final, temporary or proposed Treasury regulations promulgated thereunder) and
(B) cause the Trust Fund to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions after the
startup date" under the REMIC Provisions.
(d) Within five Business Days after either Master Servicer has determined
that all amounts which it expects to recover from or on account of a related
Mortgage Loan have been recovered and that no further Liquidation Proceeds will
be received in connection therewith, such Master Servicer shall provide to the
Trustee a certificate of a Servicing Officer that such Mortgage Loan became a
Liquidated Mortgage Loan as of the date of such determination.
Section 3.07. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS; SERVICING
ACCOUNTS. (a) Each Master Servicer shall establish and maintain or cause the
Sub-Servicers to establish and maintain, in addition to the Protected Accounts,
one or more Servicing Accounts. Each Master Servicer or a Sub-Servicer will
deposit and retain therein all otherwise unapplied collections from the
Mortgagors, including amounts collected for the payment of taxes, assessments,
insurance premiums, or comparable items as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in a Designated
Depository Institution in an account designated as a "Mortgage Loan Servicing
Account," held in trust by each Master Servicer or a Sub-Servicer as Trustee of
Taxes and Insurance Custodial Account for borrowers and for NAMC or PHH, as the
case may be (and its successors and assigns) acting on its own behalf and for
NAMC or PHH, as the case may be, as agent for holders of various pass-through
securities and other interests in mortgage loans sold by it; and agent for
various mortgagors, as their interests may appear or under such other
designation as may be permitted by a Sub-Servicing Agreement. The amount at any
time credited to a Servicing Account must be fully insured by the FDIC, or, to
the extent that such deposits exceed the limits of such insurance, such excess
must be (i) transferred to another fully insured account in another Designated
Depository Institution or (ii) if permitted by applicable law, invested in
Permitted Investments held in trust by the relevant Master Servicer or a
Sub-Servicer as described above and maturing, or be subject to redemption or
withdrawal, no later than the date on which such funds are required to be
withdrawn, and in no event later than 45 days after the date of investment. Each
Master Servicer may, or may permit a Sub-Servicer to, establish Servicing
Accounts not conforming to the foregoing requirements to the extent that such
Servicing Accounts are Rating Agency Eligible Accounts. Withdrawals of amounts
from the Servicing Accounts may be made only to effect timely payment of taxes,
assessments, insurance premiums, or comparable items, to transfer previously
unapplied collections to a Protected Account, to reimburse the relevant Master
Servicer or a Sub-Servicer for any advances made with respect to such items, to
refund to any Mortgagors any sums as may be determined to be overages, to pay
interest, if required, to Mortgagors on balances in the Servicing Accounts or to
clear and terminate the Servicing Accounts at or any time after the termination
of this Agreement in accordance with Section 10.01.
Section 3.08. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. Each Master Servicer shall provide, and shall cause any
Sub-Servicer to provide, to the Trustee and the Seller access to the records and
documentation regarding the related Mortgage Loans and REO Property and the
servicing thereof and to the Certificateholders, the FDIC, and the supervisory
agents and examiners of the FDIC (to which the Trustee shall also provide)
access to the documentation regarding the related Mortgage Loans required by
applicable regulations, such access being afforded without charge but only upon
reasonable prior written request and during normal business hours at the offices
of the related Master Servicer, the Sub-Servicers or the Trustee that are
designated by these entities; PROVIDED, HOWEVER, that, unless otherwise required
by law, the Trustee, the related Master Servicer or the Sub-Servicer shall not
be required to provide access to such records and documentation if the provision
thereof would violate the legal right to privacy of any Mortgagor PROVIDED,
FURTHER, HOWEVER, that the Trustee and the Seller shall coordinate their
requests for such access so as not to impose an unreasonable burden on, or cause
an interruption of, the business of the related Master Servicer or any
Sub-Servicer. The related Master Servicer, the Sub-Servicers and the Trustee
shall allow representatives of the above entities to photocopy any of the
records and documentation and shall provide equipment for that purpose at a
charge that covers their own actual out-of-pocket costs.
Section 3.09. MAINTENANCE OF PRIMARY MORTGAGE INSURANCE POLICIES;
COLLECTION THEREUNDER. Each Master Servicer shall, or shall cause the related
Sub-Servicer to, exercise its best reasonable efforts to maintain and keep in
full force and effect each Primary Mortgage Insurance Policy by a Qualified
Insurer, or other insurer satisfactory to the Rating Agencies, with respect to
each related conventional Mortgage Loan as to which as of the Cut-off Date such
a Primary Mortgage Insurance Policy was in effect (or, in the case of a
Substitute Mortgage Loan, the date of substitution) and the original principal
amount of the related Mortgage Note exceeded 80% of the Original Value in an
amount at least equal to the excess of such original principal amount over 75%
of such Original Value until the principal amount of any such Mortgage Loan is
reduced below 80% of the Original Value or, based upon a new appraisal, the
principal amount of such Mortgage Loan represents less than 80% of the new
appraised value. Each Master Servicer shall, or shall cause the related
Sub-Servicer to, effect the timely payment of the premium on each Primary
Mortgage Insurance Policy. Each Master Servicer and the related Sub-Servicer
shall have the power to substitute for any Primary Mortgage Insurance Policy
another substantially equivalent policy issued by another Qualified Insurer;
PROVIDED THAT such substitution is subject to the condition, to be evidenced by
a writing from each Rating Agency, that it would not cause the ratings on the
Certificates to be downgraded or withdrawn.
Section 3.10. MAINTENANCE OF HAZARD INSURANCE AND FIDELITY COVERAGE. (a)
Each Master Servicer shall maintain and keep, or cause each Sub-Servicer to
maintain and keep, with respect to each related Mortgage Loan and each REO
Property, in full force and effect hazard insurance (fire insurance with
extended coverage) equal to at least the lesser of the Outstanding Principal
Balance of the Mortgage Loan or the current replacement cost of the Mortgaged
Property, and containing a standard mortgagee clause; PROVIDED, HOWEVER, that
the amount of hazard insurance may not be less than the amount necessary to
prevent loss due to the application of any co-insurance provision of the related
policy. Unless applicable state law requires a higher deductible, the deductible
on such hazard insurance policy may be $1000 or 1% of the applicable amount of
coverage, whichever is less. In the case of a condominium unit or a unit in a
planned unit development, the required hazard insurance shall take the form of a
multiperil policy covering the entire condominium project or planned unit
development, in an amount equal to at least 100% of the insurable value based on
replacement cost.
(b) Any amounts collected by a Master Servicer or a Sub-Servicer under any
such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with such Master Servicer's or Sub-Servicer's normal
servicing procedures, the terms of the Mortgage Note, the Security Instrument or
applicable law) shall be deposited initially in a Protected Account, for
transmittal to the appropriate subaccount of the Certificate Account or Custody
Account, subject to withdrawal pursuant to Section 4.03.
(c) Any cost incurred by a Master Servicer or a Sub-Servicer in maintaining
any such hazard insurance policy shall not be added to the amount owing under
the related Mortgage Loan for the purpose of calculating monthly distributions
to Certificateholders, notwithstanding that the terms of such Mortgage Loan so
permit. Such costs shall be recoverable by such Master Servicer or Sub-Servicer
out of related late payments by the Mortgagor or out of Insurance Proceeds or
Liquidation Proceeds or by the Master Servicer from the Repurchase Price, to the
extent permitted by Section 4.03.
(d) No earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. Each year,
in accordance with standards and procedures required by FHLMC, each Master
Servicer shall perform a review of the related Mortgage Loans to determine
which, if any, of the Mortgaged Properties are located in a federally designated
special flood hazard area and for each Mortgaged Property found to be located in
a federally designated special flood hazard area, the related Master Servicer
shall use its best reasonable efforts to cause with respect to the related
Mortgage Loans and each REO Property, flood insurance (to the extent available
and in accordance with mortgage servicing industry practice) to be maintained.
Such flood insurance shall cover the related Mortgaged Property, including all
items taken into account in arriving at the Appraised Value on which the
Mortgage Loan was based, and shall be in an amount equal to the lesser of (i)
the Outstanding Principal Balance of the related Mortgage Loan and (ii) the
minimum amount required under the terms of coverage to compensate for any damage
or loss on a replacement cost basis, but not more than the maximum amount of
such insurance available for the related Mortgaged Property under either the
regular or emergency programs of the National Flood Insurance Program (assuming
that the area in which such Mortgaged Property is located is participating in
such program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,000 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections 3.10(a)
and (d) and there shall have been a loss which would have been covered by such
insurance had it been maintained, the related Master Servicer shall pay, or
cause the related Sub-Servicer to pay, for any necessary repairs.
(f) The related Master Servicer shall present, or cause the related
Sub-Servicer to present, if it is a permitted claimant, claims under the related
hazard insurance or flood insurance policy.
(g) Each Master Servicer shall obtain and maintain at its own expense and
for the duration of this Agreement a blanket fidelity bond and shall cause each
Sub-Servicer to obtain and maintain an errors and omissions insurance policy
covering such Sub-Servicer's officers, employees and other persons acting on its
behalf in connection with its activities under this Agreement. The amount of
coverage shall be at least equal to the coverage maintained by the related
Master Servicer acceptable to FNMA or FHLMC to service loans for it or otherwise
in an amount as is commercially available at a cost that is generally not
regarded as excessive by industry standards. Each Master Servicer shall promptly
notify the Trustee of any material change in the terms of such bond or policy.
Each Master Servicer shall provide annually to the Trustee a certificate of
insurance that such bond and policy are in effect. If any such bond or policy
ceases to be in effect, each Master Servicer shall, to the extent possible, give
the Trustee ten days' notice prior to any such cessation and shall use its best
efforts to obtain a comparable replacement bond or policy, as the case may be.
Any amounts relating to the Mortgage Loans collected under such bond or policy
shall be remitted to the appropriate subaccount of the Certificate Account to
the extent that such amounts have not previously been paid to such account.
Section 3.11. DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS. (a) In any case
in which the NAMC Master Servicer is notified by any Mortgagor or Sub-Servicer
that a Mortgaged Property relating to a NAMC Mortgage Loan has been or is about
to be conveyed by the Mortgagor, or the PHH Master Servicer is notified by any
Mortgagor or Sub-Servicer that a Mortgaged Property relating to a PHH Mortgage
Loan has been or is about to be conveyed to the Mortgagor, the applicable Master
Servicer shall enforce, or shall instruct such Sub-Servicer to enforce, any
due-on-sale clause contained in the related Security Instrument to the extent
permitted under the terms of the related Mortgage Note and by applicable law
unless such Master Servicer reasonably believes such enforcement is likely to
result in legal action by the Mortgagor. If a Master Servicer reasonably
believes that such due-on-sale clause cannot be enforced under applicable law or
if the related Mortgage Loan does not contain a due-on-sale clause, such Master
Servicer is authorized, and may authorize any Sub-Servicer, to consent to a
conveyance subject to the lien of the Mortgage, and to take or enter into an
assumption agreement from or with the Person to whom such property has been or
is about to be conveyed, pursuant to which such Person becomes liable under the
related Mortgage Note and unless prohibited by applicable state law, such
Mortgagor remains liable thereon, on condition, however, that the related
Mortgage Loan shall continue to be covered (if so covered before the Master
Servicer or the related Sub-Servicer enters into such agreement) by any Primary
Mortgage Insurance Policy. Each Master Servicer shall notify the Trustee,
whenever possible, before the completion of such assumption agreement, and shall
forward to the Trustee the original copy of such assumption agreement, which
copy shall be added by the Trustee to the related Mortgage File and which shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. In
connection with any such assumption agreement, the interest rate on the related
Mortgage Loan shall not be changed and no other material alterations in the
Mortgage Loan shall be made. Any fee or additional interest collected by a
Master Servicer or Sub-Servicer for consenting to any such conveyance or
entering into any such assumption agreement may be retained by the Master
Servicer or the related Sub-Servicer as additional servicing compensation.
(b) Notwithstanding the foregoing paragraph or any other provision of this
Agreement, neither of the Master Servicers shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a related Mortgage Loan by operation of law or any conveyance by
the Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan
which such Master Servicer reasonably believes, based on prudent servicing
standards, it may be restricted by law from preventing, for any reason
whatsoever or if the exercise of such right would impair or threaten to impair
any recovery under any applicable Insurance Policy, or, in such Master
Servicer's judgment, be reasonably, likely to result in legal action by the
Mortgagor or would otherwise adversely affect the Certificateholders.
Section 3.12. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) Each Master
Servicer shall, or shall direct the related Sub-Servicer to, foreclose upon or
otherwise comparably convert the ownership of properties securing any related
Mortgage Loans that come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.06 except that such Master Servicer shall not, and shall
not direct the related Sub-Servicer, if any, to, foreclose upon or otherwise
comparably convert a Mortgaged Property if there is evidence of environmental
hazards or toxic waste thereon and such Master Servicer determines it would be
imprudent to do so or not in accordance with appropriate servicing standards.
Each Master Servicer can conclusively rely on results of third party inspections
from parties it reasonably believes are qualified to conduct such inspections.
In connection with such foreclosure or other conversion, each Master Servicer in
conjunction with the related Sub-Servicer, if any, shall use its best reasonable
efforts to preserve REO Property and to realize upon related defaulted Mortgage
Loans in such manner as to maximize the receipt of principal and interest by the
Certificateholders, taking into account, among other things, the timing of
foreclosure and the considerations set forth in Subsection 3.12(b). The
foregoing is subject to the proviso that a Master Servicer shall not be required
to expend its own funds in connection with any foreclosure or towards the
restoration of any property unless it determines in good faith (i) that such
restoration or foreclosure will increase the proceeds of liquidation of the
related Mortgage Loan to Certificateholders after reimbursement to itself for
such expenses and (ii) that such expenses will be recoverable to it either
through Liquidation Proceeds (respecting which it shall have priority for
purposes of reimbursements from the Certificate Account pursuant to Section
4.03) or through Insurance Proceeds (respecting which it shall have similar
priority). Each Master Servicer shall be responsible for all other costs and
expenses incurred by it in any such proceedings; PROVIDED, HOWEVER, that it
shall be entitled to reimbursement thereof (as well as its normal servicing
compensation), and in respect of such Master Servicer only, to receive Excess
Liquidation Proceeds as additional servicing compensation to the extent that
transfers or withdrawals from the Certificate Account with respect thereto are
permitted under Section 4.03. Any income from or other funds (net of any income
taxes) generated by REO Property shall be deemed for purposes of this Agreement
to be Insurance Proceeds.
(b) The Trust Fund shall not acquire any real property (or any personal
property incident to such real property) except in connection with a default or
imminent default of a Mortgage Loan. In the event that the Trust Fund acquires
any real property (or personal property incident to such real property) in
connection with a default or imminent default of a Mortgage Loan, such property
shall be disposed of by the Trust Fund before the close of the third taxable
year following the taxable year in which the Trust Fund acquired such property
(the "grace period") unless the Trustee shall have received a REMIC Opinion with
respect to such longer retention or a Master Servicer applies for and receives
an extension of the grace period under Section 856(e)(3) of the Code, in which
case such grace period described above will be extended by the period set forth
in such REMIC Opinion or approved application, as the case may be. The Trustee
shall have no obligation to pay for such REMIC Opinion.
Section 3.13. TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES. (a) Upon
payment in full of any Mortgage Loan or the receipt by the related Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Trustee by a certification signed by a Servicing Officer in the Form of Exhibit
D (which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Certificate Account have been or will be so deposited in the
appropriate subaccount thereof) and shall request delivery to the related Master
Servicer or a Sub-Servicer, as the case may be, of the Mortgage File. Upon
receipt of such certification and request, the Trustee shall promptly release
the related Mortgage File to the related Master Servicer or a Sub-Servicer and
execute and deliver to the related Master Servicer, without recourse, the
request for reconveyance, deed of reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Security Instrument
(furnished by the related Master Servicer), together with the Mortgage Note with
written evidence of cancellation thereon. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to the Certificate Account.
(b) From time to time as is appropriate for the servicing or foreclosure of
any Mortgage Loan or collection under a Required Insurance Policy, the related
Master Servicer shall deliver to the Trustee a Request for Release signed by a
Servicing Officer on behalf of the related Master Servicer in substantially the
form attached as Exhibit D hereto. Upon receipt of the Request for Release, the
Trustee shall deliver the Mortgage File or any document therein to the related
Master Servicer or Sub-Servicer, as the case may be.
(c) Each Master Servicer shall cause each Mortgage File or any document
therein released pursuant to Subsection 3.13(b) to be returned to the Trustee
when the need therefor no longer exists, and in any event within 21 days of the
related Master Servicer's receipt thereof, unless the related Mortgage Loan has
become a Liquidated Mortgage Loan and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the appropriate subaccount of the
Certificate Account or such Mortgage File is being used to pursue foreclosure or
other legal proceedings. Prior to return of a Mortgage File or any document to
the Trustee, the related Master Servicer, the related Insurer or Sub-Servicer to
whom such file or document was delivered shall retain such file or document in
its respective control unless 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, to initiate or pursue legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the related Master 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. If a related Mortgage Loan becomes a Liquidated Mortgage Loan,
the related Master Servicer shall deliver the Request for Release with respect
thereto to the Trustee upon deposit of the related Liquidation Proceeds in the
appropriate subaccount of the Certificate Account.
(d) The Trustee shall execute and deliver to the related Master Servicer
any court pleadings, requests for trustee's sale or other documents necessary or
desirable to (i) the foreclosure or trustee's sale with respect to a Mortgaged
Property; (ii) any legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment
against the Mortgagor; or (iv) enforce any other rights or remedies provided by
the Mortgage Note or Security Instrument or otherwise available at law or
equity. Together with such documents or pleadings the related Master Servicer
shall deliver to the Trustee a certificate of a Servicing Officer in which it
requests the Trustee to execute the pleadings or documents. The certificate
shall certify and explain the reasons for which the pleadings or documents are
required. It shall further certify that the Trustee's execution and delivery of
the pleadings or documents will not invalidate any insurance coverage under the
Required Insurance Policies or invalidate or otherwise affect the lien of the
Security Instrument, except for the termination of such a lien upon completion
of the foreclosure or trustee's sale.
Section 3.14. SERVICING AND MASTER SERVICING Compensation. (a) As
compensation for its activities hereunder, the NAMC Master Servicer shall be
entitled to receive the NAMC Master Servicing Fee from full payments of accrued
interest on each NAMC Mortgage Loan and the PHH Master Servicer shall be
entitled to receive the PHH Master Servicing Fee from full payments of accrued
interest on each PHH Mortgage Loan, in each case subject to each Master
Servicer's obligation to pay Compensating Interest Payments pursuant to Section
6.09.
(b) Each Master Servicer may retain additional servicing compensation in
the form of prepayment charges, if any, assumption fees, tax service fees, fees
for statement of account or payoff, late payment charges, interest on amounts
deposited in any Accounts or Permitted Investments of such amounts, or
otherwise. Each Master Servicer is also entitled to receive Excess Liquidation
Proceeds as additional servicing compensation. Each Master Servicer shall be
required to pay all expenses it incurs in connection with servicing activities
under this Agreement, including fees and expenses to Sub-Servicers, and shall
not be entitled to reimbursement except as provided in this Agreement. Expenses
to be paid by a Master Servicer under this Subsection 3.14(b) shall include
payment of the expenses of the accountants retained pursuant to Section 3.16.
Section 3.15. ANNUAL STATEMENT OF COMPLIANCE. Within 120 days after
December 31st of each year, commencing December 1998, each Master Servicer at
its own expense, shall deliver to the Trustee, with a copy to the Rating
Agencies, an Officer's Certificate stating, as to the signer thereof, that (i) a
review of the activities of such Master Servicer during the preceding fiscal
year or applicable portion thereof and of performance under this Agreement has
been made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review, such Master Servicer has fulfilled all its
obligations under this Agreement for such year, or, if there has been a default
in the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof including the steps being taken
by such Master Servicer to remedy such default; (iii) a review of the activities
of each Sub-Servicer, if any, during the Sub-Servicer's most recently ended
fiscal year on or prior to such December 31st and its performance under its
Sub-Servicing Agreement has been made under such Officer's supervision; and (iv)
to the best of the Servicing Officer's knowledge, based on his review and the
certification of an officer of the Sub-Servicer (unless the Servicing Officer
has reason to believe that reliance on such certification is not justified),
either each Sub-Servicer has performed and fulfilled its duties,
responsibilities and obligations under this Agreement and its Sub-Servicing
Agreement in all material respects throughout the year, or, if there has been a
default in performance or fulfillment of any such duties, responsibilities or
obligations, specifying the nature and status of each such default known to the
Servicing Officer. Copies of such statements shall be provided by each Master
Servicer to the Certificateholders upon request or by the Trustee at the expense
of such Master Servicer should such Master Servicer fail to provide such copies.
Section 3.16. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT. (a)
Within 120 days after December 31st of each year, commencing December, 1998,
each Master Servicer, at its expense, shall cause a firm of Independent public
accountants who are members of the American Institute of Certified Public
Accountants to furnish a statement to such Master Servicer, which will be
provided to the Trustee and the Rating Agencies to the effect that, in
connection with the firm's examination of such Master Servicer's financial
statements as of the end of such fiscal year, nothing came to their attention
that indicated that such Master Servicer was not in compliance with Sections
3.07, 3.15, 4.01, 4.02, 4.03 and 4.04 except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other exceptions as are set forth
in such statement. In connection with the engagement to deliver any such report
(or other accountants' report or certificate hereunder) the Trustee is
authorized and directed to enter into such agreed-upon-procedures or engagement
letter as such accountants may request and shall be indemnified hereunder in so
doing.
(b) Within 120 days after the last day of the fiscal year of each
Sub-Servicer or a Master Servicer other than NAMC, PHH or the Trustee,
commencing in 1998, each Master Servicer, at its expense, shall furnish to the
Trustee the most recently available letter or letters from one or more firms of
Independent certified public accountants who are members of the American
Institute of Certified Public Accountants reporting the results of such firm's
examination of the servicing procedures of any Sub-Servicer and any Master
Servicer (other than NAMC, PHH or the Trustee) in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, or
such other program as may be certified as being comparable by such accountant.
Section 3.17. REMIC-RELATED COVENANTS. For as long as REMIC I and REMIC II
shall exist, each Master Servicer and the Trustee shall act in accordance
herewith to assure continuing treatment of each of REMIC I and REMIC II as
REMICs, and the Trustee shall comply with any directions of such Master Servicer
to assure such continuing treatment. In particular, the Trustee shall not (a)
sell or permit the sale of all or any portion of the Mortgage Loans or of any
Permitted Investment unless such sale is as a result of a repurchase of the
Mortgage Loans pursuant to this Agreement or the Trustee has received a REMIC
Opinion prepared at the expense of the Trust Fund; and (b) other than with
respect to a substitution pursuant to Section 2.04, accept any contribution to
either REMIC I or REMIC II after the Startup Day without receipt of a REMIC
Opinion.
Section 3.18. ADDITIONAL INFORMATION. Each Master Servicer agrees to
furnish the Seller, at no expense to such Master Servicer, from time to time
upon reasonable request, such further information, reports and financial
statements as the Seller deems appropriate to prepare and file all necessary
reports with the Securities and Exchange Commission.
<PAGE>
ARTICLE IV
Accounts
Section 4.01. PROTECTED ACCOUNTS. (a) Each Master Servicer shall establish
and maintain if it is servicing the related Mortgage Loans and shall require
each Sub-Servicer to establish and maintain a Protected Account complying with
the requirements set forth in this Section 4.01, with records to be kept with
respect thereto on a Mortgage Loan by Mortgage Loan basis, into which accounts
shall be deposited within 24 hours of receipt all collections of principal and
interest on any Mortgage Loan and with respect to any REO Property received by
such Master Servicer, or a Sub-Servicer, including Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds, and advances made from the
Sub-Servicer's own funds (less servicing compensation as permitted by Subsection
3.14(a)) and all other amounts to be deposited in the Protected Accounts. Each
Master Servicer is hereby authorized to make withdrawals from and deposits to
the related Protected Accounts for purposes required or permitted by this
Agreement. All Protected Accounts shall be held in a Designated Depository
Institution and segregated on the books of such institution. The amount at any
time credited to a Protected Account shall be fully insured by the FDIC or, to
the extent that such balance exceeds the lesser of $100,000 or the limits of
such insurance, such excess must be transferred to the appropriate subaccount of
the Certificate Account or the related Custody Account or invested in Permitted
Investments or may be deposited in a Rating Agency Eligible Account in the name
of the Trustee for the benefit of Certificateholders and not commingled with any
other funds. Each Master Servicer may, and such Master Servicer may permit a
Sub-Servicer to, transfer funds to other accounts (which shall for purposes
hereof be deemed to be Protected Accounts) or to establish Protected Accounts
not conforming to the foregoing requirements, to the extent that such other
accounts or Protected Accounts are Rating Agency Eligible Accounts in the name
of the Trustee for the benefit of Certificateholders and not commingled with any
other funds.
Amounts on deposit in a Protected Account may be invested in Permitted
Investments in the name of the Trustee for the benefit of Certificateholders and
not commingled with any other funds, such Permitted Investments to mature, or to
be subject to redemption or withdrawal, no later than the date on which such
funds are required to be withdrawn for deposit in the custody Account or
Certificate Account, and shall be held until required for such deposit. The
income earned from Permitted Investments made pursuant to this Section 4.01
shall be paid to the relevant Master Servicer or the related Sub-Servicer as
additional compensation for its obligations under this Agreement, and the risk
of loss of moneys required to be distributed to the Certificateholders resulting
from such investments shall be borne by and be the risk of the relevant Master
Servicer or the related Sub-Servicer. The relevant Master Servicer shall itself,
or shall cause the related Sub-Servicer to, deposit the amount of any such loss
in the related Protected Account within two Business Days of receipt of
notification of such loss but not later than the second Business Day prior to
the Distribution Date on which the moneys so invested are required to be
distributed to the Certificateholders.
(b) On or before each Funds Transfer Date, each Master Servicer shall
withdraw or shall cause (by written direction to the Trustee if such withdrawal
is from a Custody Account) to be withdrawn from the Protected Accounts or the
Custody Account and shall immediately deposit or cause to be deposited in the
appropriate subaccount of the Certificate Account amounts representing the
following collections and payments (other than with respect to principal of or
interest on the Mortgage Loans due on or before the Cut-off Date):
(i) Scheduled Payments on the related Mortgage Loans received or any
related portion thereof advanced by such Master Servicer or Sub-Servicers
which were due on or before the related Due Date, net of the amount thereof
comprising the applicable Master Servicing Fee due such Master Servicer;
(ii) Full Principal Prepayments and any Liquidation Proceeds received
by such Master Servicer or related Sub-Servicers with respect to such
Mortgage Loans in the related Prepayment Period, with interest to the date
of prepayment or liquidation, net of the amount thereof comprising the
applicable Master Servicing Fee due such Master Servicer;
(iii) Partial prepayments of principal received by such Master
Servicer or related Sub-Servicers for such Mortgage Loans in the related
Prepayment Period; and
(iv) Any amount to be used as a Certificate Account Advance.
(c) Withdrawals may be made from a Protected Account only to make
remittances as provided in Subsections 4.01(b) or 4.03(c), or Section 4.04; to
reimburse a Master Servicer or a Sub-Servicer for advances of principal and
interest which have been recovered by subsequent collection from the related
Mortgagor; to remove amounts deposited in error; to remove fees, charges or
other such amounts deposited on a temporary basis; or to clear and terminate the
account at the termination of this Agreement in accordance with Section 10.01.
As provided in Section 4.02(b) certain amounts otherwise due to a Master
Servicer may be retained by it and need not be deposited in the Certificate
Account.
(d) Each Master Servicer shall deliver to the Trustee on or prior to the
Determination Date in each month a statement from the institution at which each
Protected Account is maintained showing deposits and withdrawals during the
prior month.
Section 4.02. CERTIFICATE ACCOUNT. (a) The Trustee shall establish and
maintain in the name of the Trustee, for the benefit of the Certificateholders,
the Certificate Account as a segregated non-interest bearing trust account or
accounts. The Certificate Account shall have five separate subaccounts, one each
for all funds with respect to each Mortgage Loan Group. The Trustee will deposit
in the appropriate subaccount as identified by each Master Servicer, of the
Certificate Account as received the following amounts:
(i) Any amounts withdrawn from a Protected Account pursuant to
Subsection 4.01(b) or the Custody Account pursuant to Section 4.04;
(ii) Any Monthly Advance and any Compensating Interest Payments;
(iii) Any Insurance Proceeds or Liquidation Proceeds received by each
Master Servicer which were not deposited in a Protected Account or the
Custody Account;
(iv) The Repurchase Price with respect to any Mortgage Loans purchased
by BSMCC pursuant to Sections 2.02 or 2.03, any amounts which are to be
treated pursuant to Section 2.04 as the payment of such a Repurchase Price,
and all proceeds of any Mortgage Loans or property acquired with respect
thereto repurchased by the Seller or its designee pursuant to Section
10.01;
(v) Any amounts required to be deposited with respect to losses on
Permitted Investments pursuant to Section 4.04(d) below; and
(vi) Any other amounts received by each Master Servicer or the Trustee
and required to be deposited in such subaccount of the Certificate Account
pursuant to this Agreement.
(b) All amounts deposited to the Certificate Account shall be held by the
Trustee in the name of the Trustee in trust for the benefit of the
Certificateholders in accordance with the terms and provisions of this
Agreement, subject to the right of the Master Servicer to require the Trustee to
make withdrawals therefrom as provided herein. The foregoing requirements for
crediting the Certificate Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, payments in the
nature of (i) prepayment or late payment charges or assumption, tax service,
statement account or payoff, substitution, satisfaction, release and other like
fees and charges and (ii) the items enumerated in Subsections 4.03(a)(ii),
(iii), (iv), (v), (vii), (viii), (x) and (xii) need not be credited by a Master
Servicer or the related Sub-Servicer to the Certificate Account and may be
retained by such Master Servicer or the related Sub-Servicer as servicing
compensation. In the event that a Master Servicer shall deposit or cause to be
deposited to the Certificate Account any amount not required to be credited
thereto, or shall deposit or cause to be deposited to a subaccount of the
Certificate Account any amount which should appropriately be credited to another
subaccount of the Certificate Account, the Trustee, upon receipt of a written
request therefor signed by a Servicing Officer of such Master Servicer, shall
promptly transfer such amount to such Master Servicer or to the appropriate
other subaccount of the Certificate Account, as applicable, any provision herein
to the contrary notwithstanding.
(c) The Certificate Account shall constitute a trust account of the Trust
Fund segregated on the books of the Trustee and held by the Trustee in trust in
its Corporate Trust Office , and the Certificate Account and the funds deposited
therein shall not be subject to, and shall be protected from, all claims, liens,
and encumbrances of any creditors or depositors of the Trustee or a Master
Servicer (whether made directly, or indirectly through a liquidator or receiver
of the Trustee or such Master Servicer). The amount at any time credited to the
Certificate Account shall be (i) fully insured by the FDIC to the maximum
coverage provided thereby, (ii) invested, in the name of the Trustee, or its
nominee, for the benefit of the Certificateholders, in Permitted Investments
described in clause (viii) of the definition of Permitted Investments to be held
by the Trustee as the Trustee may select, or (iii) from the maturity of any
Permitted Investment on the Business Day prior to a Distribution Date through
the distribution of such funds on such Distribution Date or at such other time
and in such amount as, in the judgment of the Trustee, cannot reasonably be
invested in accordance with items (i) or (ii) of this sentence, held by the
Trustee uninvested in such Certificate Account. All Permitted Investments shall
mature or be subject to redemption or withdrawal on or before, and shall be held
until, the next succeeding Distribution Date if the obligor for such Permitted
Investment is the Trustee or, if such obligor is any other Person, the Business
Day preceding such Distribution Date. With respect to the Certificate Account
and the funds deposited therein, the Trustee shall take such action as may be
necessary to ensure that the Certificateholders shall be entitled to the
priorities afforded to such a trust account (in addition to a claim against the
estate of the Trustee) as provided by 12 U.S.C. ss. 92a(e), if applicable, or
any applicable comparable state statute applicable to state chartered banking
corporations.
Section 4.03. PERMITTED WITHDRAWALS AND TRANSFERS FROM THE CERTIFICATE
ACCOUNT. (a) The Trustee will, from time to time on demand of a Master Servicer,
make or cause to be made such withdrawals or transfers from the appropriate
subaccount of the Certificate Account as such Master Servicer has designated for
such transfer or withdrawal as specified in a certificate signed by a Servicing
Officer (upon which the Trustee may conclusively rely) for the following
purposes (limited in the case of amounts due the Master Servicer to those not
withdrawn from the Protected Account in accordance with the terms of this
Agreement):
(i) [intentionally omitted];
(ii) to reimburse a Master Servicer or any Sub-Servicer for any
Monthly Advance of its own funds or any advance of such Sub-Servicer's own
funds, the right of a Master Servicer or a Sub-Servicer to reimbursement
pursuant to this subclause (ii) being limited to amounts received on a
particular related Mortgage Loan (including, for this purpose, the
Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds)
which represent late payments or recoveries of the principal of or interest
on such Mortgage Loan respecting which such Monthly Advance or advance was
made;
(iii) to reimburse a Master Servicer or any Sub-Servicer from
Insurance Proceeds or Liquidation Proceeds relating to a particular related
Mortgage Loan for amounts expended by such Master Servicer or such
Sub-Servicer pursuant to Section 3.12 in good faith in connection with the
restoration of the related Mortgaged Property which was damaged by an
Uninsured Cause or in connection with the liquidation of such Mortgage
Loan;
(iv) to reimburse a Master Servicer or any Sub-Servicer from Insurance
Proceeds relating to a particular related Mortgage Loan for Insured
Expenses incurred with respect to such Mortgage Loan and to reimburse such
Master Servicer or such Sub-Servicer from Liquidation Proceeds from a
particular related Mortgage Loan for Liquidation Expenses incurred with
respect to such Mortgage Loan; PROVIDED THAT a Master Servicer shall not be
entitled to reimbursement for Liquidation Expenses with respect to a
Mortgage Loan to the extent that (i) any amounts with respect to such
Mortgage Loan were paid as Excess Liquidation Proceeds pursuant to clause
(xii) of this Subsection 4.03(a) to such Master Servicer; and (ii) such
Liquidation Expenses were not included in the computation of such Excess
Liquidation Proceeds;
(v) to pay a Master Servicer or any Sub-Servicer (payment to any
Sub-Servicer to be subject to prior payment to such Master Servicer of an
amount equal to the applicable Master Servicing Fee), as appropriate, from
Liquidation Proceeds or Insurance Proceeds received in connection with the
liquidation of any Mortgage Loan, the amount which it or such Sub-Servicer
would have been entitled to receive under subclause (x) of this Subsection
4.03(a) as servicing compensation on account of each defaulted scheduled
payment on such Mortgage Loan if paid in a timely manner by the related
Mortgagor, but only to the extent that the aggregate of Liquidation
Proceeds and Insurance Proceeds with respect to such Mortgage Loan, after
any reimbursement to such Master Servicer or any Sub-Servicer, pursuant to
subclauses (ii), (iii), (iv) and (vii) of this Subsection 4.03(a), exceeds
the Outstanding Principal Balance of such Mortgage Loan plus accrued and
unpaid interest thereon at the related Mortgage Interest Rate less the
applicable Master Servicing Fee Rate to but not including the date of
payment;
(vi) to pay a Master Servicer or any Sub-Servicer (payment to any
Sub-Servicer to be subject to prior payment to such Master Servicer of the
portion of the applicable Master Servicing Fee which such Master Servicer
is entitled to retain as evidenced in writing to the Trustee by such Master
Servicer), as appropriate, from the Repurchase Price for any related
Mortgage Loan, the amount which it or such Sub-Servicer would have been
entitled to receive under subclause (x) of this Subsection 4.03(a) as
servicing compensation, but only to the extent that the Repurchase Price
with respect to such Mortgage Loan after any reimbursement to the related
Master Servicer and Sub-Servicer pursuant to subclauses (ii) and (vii) of
this Subsection 4.03(a) exceeds the Outstanding Principal Balance of such
Mortgage Loan plus accrued and unpaid interest thereon at the related
Mortgage Interest Rate less the applicable Master Servicing Fee Rate
through the last day of the month of repurchase;
(vii) to reimburse a Master Servicer or any Sub-Servicer for advances
of funds pursuant to Sections 3.07, 3.09 and 3.10, the right to
reimbursement pursuant to this subclause being limited to amounts received
on the related Mortgage Loan (including, for this purpose, the Repurchase
Price therefor, Insurance Proceeds and Liquidation Proceeds) which
represent late recoveries of the payments for which such advances were
made;
(viii) to pay a Master Servicer or any Sub-Servicer, as the case may
be, with respect to each related Mortgage Loan that has been purchased
pursuant to Section 2.02, 2.03A, 2.04 or 10.01, all amounts received
thereon, representing recoveries of principal that reduce the Outstanding
Principal Balance of such Mortgage Loan below the Outstanding Principal
Balance used in calculating the Repurchase Price or representing interest
included in the calculation of the Repurchase Price or accrued after the
end of the month during which such repurchase occurs;
(ix) to reimburse a Master Servicer or any Sub-Servicer for any
Monthly Advance or advance, after a Realized Loss has been allocated with
respect to the related Mortgage Loan if the Monthly Advance or advance has
not been reimbursed pursuant to clauses (ii) and (vii), such reimbursement
to come from the subaccount relating to the Mortgage Loan Group of which
the related Mortgage Loan is a part;
(x) to pay a Master Servicer and any Sub-Servicer servicing
compensation as set forth in Section 3.14;
(xi) to reimburse a Master Servicer for expenses, costs and
liabilities incurred by and reimbursable to it pursuant to Subsection
7.04(d), which, if not specifically allocable to a Mortgage Loan Group,
shall be allocated between the subaccounts, PRO RATA, based on the
Scheduled Principal Balances of the Group 1 Mortgage Loans, the Group 2
Mortgage Loans, the Group 3 Mortgage Loans, Group 4 Mortgage Loans and the
Group 5 Mortgage Loans, respectively;
(xii) to pay to a Master Servicer, as additional servicing
compensation, any Excess Liquidation Proceeds;
(xiii) to clear and terminate the Certificate Account pursuant to
Section 10.01; and
(xiv) to remove amounts deposited in error.
Each Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of accounting for any
reimbursement from the Certificate Account pursuant to subclauses (i) through
(vii), inclusive, and (ix) or with respect to any such amounts which would have
been covered by such subclauses had the amounts not been retained by such Master
Servicer without being deposited in the Certificate Account under Section
4.02(b).
(b) On each Distribution Date, the Trustee shall make the following
payments in the priority set forth from the funds in the Certificate Account:
(i) First, the Trustee's Fees shall be paid to the Trustee; and
(ii) Second, the amount distributable to the Holders of the
Certificates shall be payable in accordance with Section 6.01.
(c) Notwithstanding the provisions of this Section 4.03, each Master
Servicer may, but is not required to, allow the Sub-Servicers to deduct from
amounts received by them or from the related Protected Account, prior to deposit
in the Certificate Account or the Custody Account, any portion to which such
Sub-Servicers are entitled as servicing compensation (including income on
Permitted Investments) or reimbursement of any reimbursable advances made by
such Sub-Servicers.
Section 4.04 CUSTODY ACCOUNT. (a) The Trustee shall establish and maintain
for the benefit of the Certificateholders the NAMC Custody Account and the PHH
Custody Account as segregated non-interest bearing trust accounts in the
corporate trust department of either a Designated Depository Institution (the
unsecured and uncollateralized long-term debt obligations of which shall be
rated "A2" or better by Moody's) or the Trustee. All funds with respect to the
NAMC Mortgage Loans shall be deposited in the NAMC Custody Account, and all
funds with respect to the PHH Mortgage Loans shall be deposited in the PHH
Custody Account. The NAMC Custody Account and the PHH Custody Account shall
constitute a trust account of the Trust Fund segregated on the books of the
Designated Depository Institution or the Trustee, as applicable, and held by the
Designated Depository Institution or the Trustee, as applicable in trust, and
such Accounts and the funds deposited therein shall not be subject to, and shall
be protected from, all claims, liens, and encumbrances of any creditors or
depositors of the Designated Depository Institution, the Trustee, each Master
Servicer, any Sub-Servicer or the Seller (whether made directly, or indirectly
through a liquidator or receiver of the Designated Depository Institution, the
Trustee, any Master Servicer, any Sub-Servicer or the Seller). With respect to
each Custody Account maintained with the Trustee and the funds deposited
therein, the Trustee shall take such action as may be necessary to ensure that
the Certificateholders shall be entitled to the priorities afforded to such a
trust account (in addition to a claim against the estate of the Trustee) as
provided by 12 U.S.C. ss. 92a(e), if applicable, or any applicable comparable
state statute applicable to state chartered banking corporations. Each Custody
Account shall be an outside reserve fund of REMIC II and shall not constitute a
part of REMIC II (or REMIC I). The Trustee shall be the legal owner of the
portion of the Funds held in the Custody Account for the benefit of the
Certificateholders and for all Federal income tax purposes, NAMC shall be the
owner of the NAMC Custody Account and PHH shall be the owner of the PHH Custody
Account. For all Federal tax purposes, amounts, if any, transferred by REMIC II
to the NAMC Custody Account shall be treated as amounts distributed by REMIC II
to NAMC, and amounts, if any transferred by REMIC II to the PHH Custody Account
shall be treated as amounts distributed by REMIC II to PHH.
(b) Within one Business Day after receipt, each Master Servicer shall
withdraw or shall cause to be withdrawn from each Protected Account and shall
immediately deposit or cause to be deposited in the applicable Custody Account
all amounts in the Protected Account not otherwise invested in Permitted
Investments pursuant to Section 4.01 and exceeding the lesser of $100,000 or the
FDIC insurance limit (other than with respect to principal of or interest on the
Mortgage Loans due on or before the Cut-off Date).
(c) Withdrawals may be made from the Custody Account only to make
remittances as provided in Sections 4.01(b) or 4.04(d); to reimburse a Master
Servicer or any Sub-Servicer for advances of principal and interest which have
been recovered by subsequent collection from the related Mortgagor; to remove
amounts deposited in error; to remove fees, charges or other such amounts
deposited on a temporary basis; or to clear and terminate the account at the
termination of this Agreement in accordance with Section 10.01.
(d) Funds in a Custody Account may be invested at the written direction of
the related Master Servicer (such direction may be oral to be confirmed promptly
in writing) in Permitted Investments held in trust in the name of the Trustee
for the benefit of the Certificateholders and in the absence of such directions,
funds in a Custody Account shall be invested in Permitted Investments described
in clause (iii) or clause (viii) of the definition thereof. Such Permitted
Investments must mature, or be subject to redemption or withdrawal, no later
than the date on which such funds are required to be withdrawn for deposit in
the Certificate Account pursuant to Section 4.01(b) and shall be held in such
Account until required for such deposit. The income earned from Permitted
Investments made pursuant to this Section 4.04 shall be paid to the related
Master Servicer as additional compensation for its obligations under this
Agreement, and the risk of loss of moneys required to be distributed to the
Certificateholders resulting from such investments shall be borne by and be the
risk of the related Master Servicer. The amount of any such loss shall be
deposited by the related Master Servicer in the applicable Custody Account
within two Business Days of receipt of notification of such loss but not later
than the second Business Day prior to the Distribution Date on which the moneys
so invested are required to be distributed to the Certificateholders.
<PAGE>
ARTICLE V
Certificates
Section 5.01. CERTIFICATES. (a) The Depository, the Seller and the Trustee
have entered into a Depository Agreement dated as of December 29, 1997 (the
"Depository Agreement"). Except for the Residual Certificates and the Individual
Certificates and as provided in Subsection 5.01(b), the Certificates shall at
all times remain registered in the name of the Depository or its nominee and at
all times: (i) registration of such Certificates may not be transferred by the
Trustee except to a successor to the Depository; (ii) ownership and transfers of
registration of such Certificates on the books of the Depository shall be
governed by applicable rules established by the Depository; (iii) the Depository
may collect its usual and customary fees, charges and expenses from its
Depository Participants; (iv) the Trustee shall deal with the Depository as
representative of such Certificate Owners of the respective Class of
Certificates for purposes of exercising the rights of Certificateholders under
this Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (v) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants.
The Class B-4, Class B-5, Class B-6 Class 3-B-4, Class 3-B-5, Class 3-B-6,
Class 4-B-4, Class 4-B-5, Class 4-B-6, Class 5-B-4, Class 5-B-5 and Class 5-B-6
Certificates are initially Physical Certificates. If at any time the Holders of
all of the Certificates of one or more such Classes request that the Trustee
cause such Class to become Global Certificates, the Trustee and the Seller will
take such action as may be reasonably required to cause the Depository to accept
such Class or Classes for trading.
All transfers by Certificate Owners of such respective Classes of
Book-Entry Certificates and any Global Certificates shall be made in accordance
with the procedures established by the Depository Participant or brokerage firm
representing such Certificate Owners. Each Depository Participant shall only
transfer Book-Entry Certificates of Certificate Owners it represents or of
brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures.
(b) If (i)(A) the Seller advises the Trustee in writing that the Depository
is no longer willing or able to properly discharge its responsibilities as
Depository and (B) the Trustee or the Seller is unable to locate a qualified
successor within 30 days or (ii) the Seller at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall request that the Depository notify all Certificate
Owners of the occurrence of any such event and of the availability of
definitive, fully registered Certificates to Certificate Owners requesting the
same. Upon surrender to the Trustee of the Certificates by the Depository,
accompanied by registration instructions from the Depository for registration,
the Trustee shall issue the definitive Certificates. Neither the Seller, the
Master Servicers nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions.
(c) REMIC II will be evidenced by (x) the REMIC II Regular Certificates,
described below, which will be uncertificated and non-transferable and are
hereby designated as the "regular interests" in REMIC II and (y) the Class R-2
Certificate, which is hereby designated as the single "residual interest" in
REMIC II. Except as discussed below, principal and interest shall be payable to,
and shortfalls, losses and prepayments are allocable to, the REMIC II Regular
Certificates in the same order and priority as payments are to be made on, and
shortfalls, losses and prepayments are allocable to, the Corresponding Classes
of Certificates. To the extent principal and interest payments are to be made
on, and shortfalls, losses and prepayments are allocable to, the Class B
Certificates, such principal, interest, shortfalls, losses and prepayments shall
be payable or allocable to the Class IIB-1 and Class IIB-2 REMIC II
Certificates, in the same proportion that such principal, interest, shortfalls,
losses and prepayments are attributable to the Group 1 Mortgage Loans and Group
2 Mortgage Loans, respectively. The REMIC II Regular Certificates and the Class
R-2 Certificate will have the following designations and pass-through rates, and
distributions of principal and interest thereon shall be allocated to the
Corresponding Class of Certificates in the following manner:
<TABLE>
<CAPTION>
CORRESPONDING CLASSES OF CERTIFICATES
--------------------------------------
PASS-
REMIC II INITIAL THROUGH ALLOCATION OF ALLOCATION
CERTIFICATES BALANCE ($) RATE (1) PRINCIPAL OF INTEREST
- ------------- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C>
II-1A-1 64,234,000 W1 1-A-1 (2),(4)
II-1A-2 57,398,000 W1 1-A-2 (3),(4)
II-1AR 281,796,445 W1 1-A-3;1-A-4; 1-A-3;1-A-4;
1-A-5;1-A-6; 1-A-5;1-A-6;
1-A-7;1-A-8 & 1-A-7;1-A-8
1-A-9 & 1-A-9 (4)
II-2A 132,122,999 W2 2-A-1;2-A-2; 2-A-1;2-A-2;
2-A-3;2-A-4 2-A-3;2-A-4 (4)
IIB-1 20,133,511.01 W1 Group B Group B (4)
IIB-2 6,595,891.51 W2 Group B Group B (4)
II-3AB 105,019,061.62 W3 Group 3 Group 3
(other than (other than
Component P-3 Component P-3) (5)
and Class 3-X)
II-4AB 42,943,759.12 W4 Group 4 Group 4
(other than (other than
Component P-4 Component
and Class 4-X) P-4) (6)
II-5AB 71,747,609.34 W5 Group 5 Group 5
(other than (other than
Component P-5) Component P-5)
II-PO 966,733.51 0% P N/A
IIR-1 100.00 (7) W2 R-1 R-1
R-2 100.00 (7) W2 N/A N/A
- ---------------
</TABLE>
(1) For purposes of computing the annual Pass-Through Rate:
W1 is the rate computed by dividing (i) the sum of the amounts computed for each
Group 1 Mortgage Loan determined by multiplying the principal balance of each
Group 1 Mortgage Loan by the Net Rate of the Group 1 Mortgage Loan, by (ii) the
sum of the amounts computed for each Group 1 Mortgage Loan by multiplying the
Non-PO Percentage with respect to each Group 1 Mortgage Loan by the principal
balance of the Group 1 Mortgage Loan;
W2 is the rate computed by dividing (i) the sum of the amounts computed for each
Group 2 Mortgage Loan determined by multiplying the principal balance of each
Group 2 Mortgage Loan by the Net Rate of the Group 2 Mortgage Loan, by (ii) the
sum of the amounts computed for each Group 2 Mortgage Loan by multiplying the
Non-PO Percentage with respect to each Group 2 Mortgage Loan by the principal
balance of the Group 2 Mortgage Loan;
W3 is the rate computed by dividing (i) the sum of the amounts computed for each
Group 3 Mortgage Loan determined by multiplying the principal balance of each
Group 3 Mortgage Loan by the Net Rate of the Group 3 Mortgage Loan, by (ii) the
sum of the amounts computed for each Group 3 Mortgage Loan by multiplying the
Non-PO Percentage with respect to each Group 3 Mortgage Loan by the principal
balance of the Group 3 Mortgage Loan;
W4 is the rate computed by dividing (i) the sum of the amounts computed for each
Group 4 Mortgage Loan determined by multiplying the principal balance of each
Group 4 Mortgage Loan by the Net Rate of the Group 4 Mortgage Loan, by (ii) the
sum of the amounts computed for each Group 4 Mortgage Loan by multiplying the
Non-PO Percentage with respect to each Group 4 Mortgage Loan by the principal
balance of the Group 4 Mortgage Loan; and
W5 is the weighted average of the Net Rates of the Group 5 Mortgage Loans.
(2) 635 basis points and 65 basis points of interest on this REMIC II
Certificate shall be allocated to the Class 1-A-1 and Class 1-A-X1 Certificates,
respectively.
(3) 650 basis points and 50 basis points of interest on this REMIC II
Certificate shall be allocated the Class 1-A-2 and Class 1-A-X2 Certificates,
respectively.
(4) Interest from this REMIC II Certificate in excess of 7% shall be allocated
to the Class X Certificates.
(5) Interest from this REMIC II Certificate in excess of 7.25% shall be
allocated to the Class 3-X Certificates.
(6) Interest from this REMIC II Certificate in excess of 7% shall be allocated
to the Class 4-X Certificates.
(7) On each Distribution Date, funds, if any, remaining in REMIC II after
payment of principal and interest, as designated above, and any expenses of the
Trust will be distributed to the Class R- 2 Certificates. The first $200 of
principal payments on the Group 2 Mortgage Loans shall be distributed pro-rata
between the Class II R-1 Certificates and the Class R-2 Certificates.
(d) The Classes of the Certificates shall have the following designations,
initial principal amounts and Pass-Through Rates:
DESIGNATION INITIAL PRINCIPAL AMOUNT PASS-THROUGH RATE
- ----------- ------------------------ ------------------
P $966,733.51 (1)
1-A-1 $ 64,234,000 6.35%
1-A-X1 (2) 0.65%
1-A-2 $ 57,398,000 6.50%
1-A-X2 (2) 0.50%
1-A-3 $119,518,000 7.00%
1-A-4 $ 13,772,000 7.00%
1-A-5 $ 26,016,235 (3)
1-A-6 $ 5,574,908 (4)
1-A-7 $ 25,000,000 (3)
1-A-8 $ 7,142,857 (4)
1-A-9 $ 84,772,445 7.00%
2-A-1 $108,113,000 7.00%
2-A-2 $ 6,014,000 7.00%
2-A-3 $ 4,110,000 7.00%
2-A-4 $ 13,885,999 7.00%
X (5) (5)
B-1 $ 14,349,468 7.00%
B-2 $ 5,627,243 7.00%
B-3 $ 2,250,897 7.00%
B-4 $ 1,969,535 7.00%
B-5 $ 1,125,448 7.00%
B-6 $1,406,811.52 7.00%
3-A $ 96,087,329 7.25%
3-X (5) (5)
3-B-1 $ 4,465,865 7.25%
3-B-2 $ 1,786,347 7.25%
3-B-3 $ 1,103,331 7.25%
3-B-4 $ 683,015 7.25%
3-B-5 $ 367,777 7.25%
3-B-6 $ 525,397 7.25%
4-A $ 41,533,352 7.00%
4-X (5) (5)
4-B-1 $ 716,052 7.00%
4-B-2 $ 260,383 7.00%
4-B-3 $ 130,192 7.00%
4-B-4 $ 108,492 7.00%
4-B-5 $ 108,493 7.00%
4-B-6 $ 86,795.12 7.00%
5-A $ 69,056,699 (6)
5-B-1 $ 1,614,546 (6)
5-B-2 $ 430,545 (6)
5-B-3 $ 215,273 (6)
5-B-4 $ 179,394 (6)
5-B-5 $ 143,515 (6)
5-B-6 $ 107,637.34 (6)
R-1 $ 100 7.00%
R-2 $ 100 7.00%
- ------------
(1) The Class P Certificates are principal only certificates and will not
bear interest. The Current Principal Amount of the Class P Certificates
initially will be the amount shown above and is composed of Component P-1,
Component P-2, Component P-3, Component P-4, and Component P-5 equal to the
PO Percentage of each Discount Mortgage Loan in Mortgage Loan Groups 1, 2,
3 and 4, respectively, and in the case of Component P-5, a fixed amount of
principal payable from all Group 5 Mortgage Loans. The initial principal
amounts of Component P-1, Component P-2, Component P-3, Component P-4 and
Component P-5 are $301,423.25, $141,784.18, $60,134.30, $453,382.76 and
$10,000.00, respectively.
(2) The Notional Amount of the Class 1-A-X1 Certificates and the Class
1-A-X2 Certificates on any Distribution Date will be equal to the Current
Principal Amount of the Class 1-A-1 Certificates and the Class 1-A-2
Certificates, respectively, as of such date.
(3) During the initial Interest Accrual Period, interest will accrue on the
Class 1-A-5 and Class 1-A-7 Certificates at the rate of 7.00% and 6.5875%
per annum, respectively. During each Interest Accrual Period thereafter,
interest will accrue on the Class 1-A-5 Certificates at a per annum rate of
1.00% above LIBOR, determined monthly as described herein, subject to a
maximum rate of 8.50% and a minimum rate of 1.00%, and interest will accrue
on the Class 1-A-7 Certificates at a per annum rate of 0.90% above LIBOR,
determined monthly as described herein, subject to a maximum rate of 9.00%
and a minimum rate of 0.90%.
(4) During the initial Interest Accrual Period, interest will accrue on the
Class 1-A-6 and Class 1-A-8 Certificates at the rate of 7.00% and 8.44375%
per annum, respectively. During each Interest Accrual Period thereafter,
interest will accrue on the Class 1-A-6 Certificates at a per annum rate
equal to 35.00% - (4.6667 x LIBOR) determined monthly as described herein,
subject to a maximum rate of 35.00% and a minimum rate of 0.00%, and
interest will accrue on the Class 1-A-8 Certificates at a per annum rate
equal to 28.35% - (3.5 x LIBOR) determined monthly as described herein,
subject to a maximum rate of 28.35% and a minimum rate of 0.00%.
(5) The Class X Certificates, the Class 3-X Certificates and the Class 4-X
Certificates will have Notional Amounts equal to the aggregate Scheduled
Principal Balances of the Group 1 and Group 2 Mortgage Loans, the Group 3
Mortgage Loans and the Group 4 Mortgage Loans, respectively, and will bear
interest on their Notional Amounts at variable Pass-Through Rates equal, in
the case of the Class X Certificates, to the weighted average of the
excess, if any, of (a) the Net Rates on each Group 1 and 2 Mortgage Loan
over (b) 7.00% per annum; in the case of the Class 3-X Certificates, to the
weighted average of the excess, if any, of (a) the Net Rates on each Group
3 Mortgage Loan over (b) 7.25% per annum; and in the case of the Class 4-X
Certificates, to the weighted average of the excess, if any, of (a) the Net
Rates on each Group 4 Mortgage Loan over (b) 7.00% per annum. The Notional
Amount of the Class X Certificates is composed of two components
("Component X-1" and "Component X-2") equal to the Scheduled Principal
Balances of the Group 1 and Group 2 Mortgage Loans, respectively.
(6) All Group 5 Certificates other than the Component P-5 will bear
interest at a variable rate equal to the weighted average of the Net Rates
of the Group 5 Mortgage Loans.
(e) With respect to each Distribution Date, each Class of Certificates
shall accrue interest during the related Interest Accrual Period. With respect
to each Distribution Date and each such Class of Certificates, interest shall be
calculated, on the basis of a 360-day year comprised of twelve 30-day months,
based upon the respective Pass-Through Rate set forth, or determined as
provided, above and the Current Principal Amount or Notional Amount of such
Class applicable to such Distribution Date.
(f) (i) Commencing on December 29, 1997, with respect to the Class 1-A-7
and Class 1-A-8 Certificates, and on January 22, 1998, with respect to the Class
1-A-5 and Class 1-A-6 Certificates and monthly thereafter on the second business
day prior to the first day of the related Interest Accrual Period for the Class
1-A-5, Class 1-A-6, Class 1-A-7 and Class 1-A-8 Certificates (each, a "LIBOR
Determination Date), until the Current Principal Amounts of such Classes of
Certificates have been reduced to zero, the Trustee will request each of the
designated reference banks meeting the criteria set forth herein (the "Reference
Banks") to inform the Trustee of the quotation offered by its principal London
office for making one-month United States dollar deposits in leading banks in
the London interbank market, as of 11:00 a.m. (London time) on such LIBOR
Determination Date. (For purposes of calculating LIBOR, "business day" means a
day on which banks are open for dealing in foreign currency and exchange in
London, Chicago, Illinois and New York City.) In lieu of making a request of the
Reference Banks, the Trustee may rely on the quotations for those Reference
Banks that appear at such time on the Reuters Screen LIBO Page (as defined in
the International Swap Dealers Association Inc. Code of Standard Wording,
Assumptions and Provisions for Swaps, 1986 Edition), to the extent available.
(ii) LIBOR will be established by the Trustee on each LIBOR
Determination Date as follows:
(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous LIBOR Determination Date or (ii) the Reserve
Interest Rate. The "Reserve Interest Rate" shall be the rate per annum
which the Trustee determines to be either (i) the arithmetic mean (rounded
upwards if necessary to the nearest whole multiple of 1/32%) of the
one-month United States dollar lending rates that New York City banks
selected by the Seller are quoting, on the relevant LIBOR Determination
Date, to the principal London offices of at least two of the Reference
Banks to which such quotations are, in the opinion of the Trustee, being so
made, or (ii) in the event that the Trustee can determine no such
arithmetic mean, the lowest one-month United States dollar lending rate
which New York City banks selected by BSMSI are quoting on such LIBOR
Determination Date to leading European banks.
(c) If on the first LIBOR Determination Date, the Trustee is required
but is unable to determine the Reserve Interest Rate in the manner provided
in paragraph (b) above, LIBOR shall be 6.0%. If on any subsequent LIBOR
Determination Date, the Trustee is required but is unable to determine the
Reserve Interest Rate in the manner provided in paragraph (b) above, LIBOR
shall be LIBOR for the immediately preceding LIBOR Determination Date.
(iii) Each Reference Bank shall (i) be a leading bank engaged in
transactions in Eurodollar deposits in the international Eurocurrency market,
(ii) not control, be controlled by, or be under common control with the Seller,
and (iii) have an established place of business in London. If any such Reference
Bank should be unwilling or unable to act as such or if the Seller should
terminate the appointment of any such Reference Bank, the Seller will promptly
appoint another leading bank meeting the criteria specified above.
(iv) The establishment of LIBOR on each LIBOR Determination Date by
the Trustee and the Trustee's calculation of the rate of interest applicable to
the Class 1-A-5, Class 1-A-6, Class 1-A-7 and Class1-A-8 Certificates for the
related Interest Accrual Period shall (in the absence of manifest error) be
final and binding. Each such rate of interest may be obtained by telephoning the
Trustee at (800) 524-9472.
(g) The Certificates shall be substantially in the forms set forth in
Exhibit A-1 and A-2. On original issuance, the Trustee shall sign, countersign
and shall deliver them at the direction of the Seller. Pending the preparation
of definitive Certificates of any Class, the Trustee may sign and countersign
temporary Certificates that are printed, lithographed or typewritten, in
authorized denominations for Certificates of such Class, substantially of the
tenor of the definitive Certificates in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers or authorized signatories executing such Certificates may
determine, as evidenced by their execution of such Certificates. If temporary
Certificates are issued, the Seller will cause definitive Certificates to be
prepared without unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be exchangeable for definitive
Certificates upon surrender of the temporary Certificates at the office of the
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Certificates, the Trustee shall sign and countersign and
deliver in exchange therefor a like aggregate principal amount, in authorized
denominations for such Class, of definitive Certificates of the same Class.
Until so exchanged, such temporary Certificates shall in all respects be
entitled to the same benefits as definitive Certificates.
(h) Each Class of Book-Entry Certificates will be registered as a single
Certificate of such Class held by a nominee of the Depository or the DTC
Custodian, and beneficial interests will be held by investors through the
book-entry facilities of the Depository in minimum denominations of $25,000 and
in each case increments of $1.00 in excess thereof, except that one Certificate
of each such Class may be issued in a different amount so that the sum of the
denominations of all outstanding Certificates of such Class shall equal the
Current Principal Amount or Notional Amount of such Class on the Closing Date.
On the Closing Date, the Trustee shall execute and countersign Physical
Certificates all in an aggregate principal amount that shall equal the Current
Principal Amount of such Class on the Closing Date. The Class B-4, Class B-5,
Class B-6, Class 3-B-4, Class 3-B-5, Class 3-B-6, Class 4-B-4, Class 4-B-5,
Class 4-B-6, Class 5-B-4, Class 5-B-5 and Class 5-B-6 Certificates will be
issued in certificated fully-registered form in minimum denominations of $25,000
and increments of $1.00 in excess thereof, except that one Certificate of each
such Class may be issued in a different amount so that the sum of the
denominations of all outstanding Certificates of such Class shall equal the
Current Principal Amount of such Class on the Closing Date. The Class R-1 and
Class R-2 Certificates shall be issued in certificated fully-registered form in
the denomination of $100 each. Each Class of Global Certificates, if any, shall
be issued in fully registered form in minimum dollar denominations of $25,000
and integral multiples of $1.00 in excess thereof, except that one Certificate
of each Class may be in a different denomination so that the sum of the
denominations of all outstanding Certificates of such Class shall equal the
Current Principal Amount of such Class on the Closing Date. On the Closing Date,
the Trustee shall execute and countersign (i) in the case of the Class P, Class
1-A-1, Class 1-A-X1, Class 1-A-2, Class 1-A-X2, Class 1-A-3, Class 1-A-4, Class
1-A-5, Class 1-A-6, Class 1-A-7, Class 1-A-8, Class 1-A-9, Class 2-A-1, Class
2-A-2, Class 2-A-3, Class 2-A-4, Class X, Class B-1, Class B-2, Class B-3, Class
3-A, Class 3-X, Class 3-B-1, Class 3-B-2, Class 3-B-3, Class 4-A, Class 4-X,
Class 4-B-1, Class 4-B-2, Class 4-B-3, Class 5-A, Class 5-B-1, Class 5-B-2 and
Class 5-B-3 Certificates, the Certificate in the entire Current Principal Amount
of the Class and (ii) in the case of the Class B-4, Class B-5, Class B-6, Class
3-B-4, Class 3-B-5, Class 3-B-6, Class 4-B-4, Class 4-B-5, Class 4-B-6, Class
5-B-4, Class 5-B-5 and Class 5-B-6 Certificates, Individual Certificates all in
an aggregate principal amount that shall equal the Current Principal Amount of
each such Class on the Closing Date. The Certificates referred to in clause (i)
and if at any time there are to be Global Certificates, the Global Certificates
shall be delivered by the Seller to the Depository or pursuant to the
Depository's instructions, shall be delivered by the Seller on behalf of the
Depository to and deposited with the DTC Custodian. The Trustee shall sign the
Certificates by facsimile or manual signature and countersign them by manual
signature on behalf of the Trustee by one or more authorized signatories, each
of whom shall be Responsible Officers of the Trustee or its agent. A Certificate
bearing the manual and facsimile signatures of individuals who were the
authorized signatories of the Trustee or its agent at the time of issuance shall
bind the Trustee, notwithstanding that such individuals or any of them have
ceased to hold such positions prior to the delivery of such Certificate.
(i) No Certificate shall be entitled to any benefit under this Agreement,
or be valid for any purpose, unless there appears on such Certificate the
manually executed countersignature of the Trustee or its agent, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates issued on the Closing Date shall be dated the Closing Date. All
Certificates issued thereafter shall be dated the date of their
countersignature.
(j) The Closing Date is hereby designated as the "startup" day of each
REMIC within the meaning of Section 860G(a)(9) of the Code.
(k) For federal income tax purposes, each REMIC shall have a tax year that
is a calendar year and shall report income on an accrual basis.
(l) The Trustee shall cause each REMIC to elect to be treated as a REMIC
under Section 860D of the Code. Any inconsistencies or ambiguities in this
Agreement or in the administration of any Trust established hereby shall be
resolved in a manner that preserves the validity of such elections.
(m) The Assumed Final Distribution Dates for distributions on the Group 1
Certificates, the Group 2 Certificates, the Group B Certificates, the Group 3
Certificates, the Group 4 Certificates and the Group 5 Certificates are February
25, 2028, January 25, 2028, February 25, 2028, January 25, 2028, January 25,
2013 and January 25, 2028, respectively, (except that the Assumed Final
Distribution Date for the Class 2-A-2 Certificates is November 25, 2010).
Section 5.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a)
The Trustee shall maintain at its Corporate Trust Office 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.
(b) Subject to Subsection 5.01(a) and, in the case of any Global
Certificate or Physical Certificate upon the satisfaction of the conditions set
forth below, upon surrender for registration of transfer of any Certificate at
any office or agency of the Trustee maintained for such purpose, the Trustee
shall sign, countersign and shall deliver, in the name of the designated
transferee or transferees, a new Certificate of a like Class and aggregate
Fractional Undivided Interest, but bearing a different number.
(c) By acceptance of an Individual Certificate, whether upon original
issuance or subsequent transfer, each holder of such a Certificate acknowledges
the restrictions on the transfer of such Certificate set forth in the Securities
Legend and agrees that it will transfer such a Certificate only as provided
herein. In addition to the provisions of Subsection 5.02(h), the following
restrictions shall apply with respect to the transfer and registration of
transfer of an Individual Certificate to a transferee that takes delivery in the
form of an Individual Certificate:
(i) The Trustee shall register the transfer of an Individual
Certificate if the requested transfer is being made to a transferee who has
provided the Trustee with a Rule 144A Certificate or comparable evidence as
to its QIB status.
(ii) The Trustee shall register the transfer of any Individual
Certificate if (x) the transferor has advised the Trustee in writing that
the Certificate is being transferred to an Institutional Accredited
Investor; and (y) prior to the transfer the transferee furnishes to the
Trustee an Investment Letter (and the Trustee shall be fully protected in
so doing), provided that, if based upon an Opinion of Counsel to the effect
that the delivery of (x) and (y) above are not sufficient to confirm that
the proposed transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and other applicable laws, the Trustee shall as a condition of the
registration of any such transfer require the transferor to furnish such
other certifications, legal opinions or other information prior to
registering the transfer of an Individual Certificate as shall be set forth
in such Opinion of Counsel.
(d) Subject to Subsection 5.02(h), so long as a Global Certificate of such
Class is outstanding and is held by or on behalf of the Depository, transfers of
beneficial interests in such Global Certificate, or transfers by holders of
Individual Certificates of such Class to transferees that take delivery in the
form of beneficial interests in the Global Certificate, may be made only in
accordance with this Subsection 5.02(d) and in accordance with the rules of the
Depository:
(i) In the case of a beneficial interest in the Global Certificate
being transferred to an Institutional Accredited Investor, such transferee
shall be required to take delivery in the form of an Individual Certificate
or Certificates and the Trustee shall register such transfer only upon
compliance with the provisions of Subsection 5.02(c)(ii).
(ii) In the case of a beneficial interest in a Class of Global
Certificates being transferred to a transferee that takes delivery in the
form of an Individual Certificate or Certificates of such Class, except as
set forth in clause (i) above, the Trustee shall register such transfer
only upon compliance with the provisions of Subsection 5.02(c)(i).
(iii) In the case of an Individual Certificate of a Class being
transferred to a transferee that takes delivery in the form of a beneficial
interest in a Global Certificate of such Class, the Trustee shall register
such transfer if the transferee has provided the Trustee with a Rule 144A
Certificate or comparable evidence as to its QIB status.
(iv) No restrictions shall apply with respect to the transfer or
registration of transfer of a beneficial interest in the Global Certificate
of a Class to a transferee that takes delivery in the form of a beneficial
interest in the Global Certificate of such Class; provided that each such
transferee shall be deemed to have made such representations and warranties
contained in the Rule 144A Certificate as are sufficient to establish that
it is a QIB.
(e) Subject to Subsection 5.02(h), an exchange of a beneficial interest in
a Global Certificate of a Class for an Individual Certificate or Certificates of
such Class, an exchange of an Individual Certificate or Certificates of a Class
for a beneficial interest in the Global Certificate of such Class and an
exchange of an Individual Certificate or Certificates of a Class for another
Individual Certificate or Certificates of such Class (in each case, whether or
not such exchange is made in anticipation of subsequent transfer, and, in the
case of the Global Certificate of such Class, so long as such Certificate is
outstanding and is held by or on behalf of the Depository) may be made only in
accordance with this Subsection 5.02(e) and in accordance with the rules of the
Depository:
(i) A holder of a beneficial interest in a Global Certificate of a
Class may at any time exchange such beneficial interest for an Individual
Certificate or Certificates of such Class.
(ii) A holder of an Individual Certificate or Certificates of a Class
may exchange such Certificate or Certificates for a beneficial interest in
the Global Certificate of such Class if such holder furnishes to the
Trustee a Rule 144A Certificate or comparable evidence as to its QIB
status.
(iii) A holder of an Individual Certificate of a Class may exchange
such Certificate for an equal aggregate principal amount of Individual
Certificates of such Class in different authorized denominations without
any certification.
(f) (i) Upon acceptance for exchange or transfer of an Individual
Certificate of a Class for a beneficial interest in a Global Certificate of such
Class as provided herein, the Trustee shall cancel such Individual Certificate
and shall (or shall request the Depository to) endorse on the schedule affixed
to the applicable Global Certificate (or on a continuation of such schedule
affixed to the Global Certificate and made a part thereof) or otherwise make in
its books and records an appropriate notation evidencing the date of such
exchange or transfer and an increase in the certificate balance of the Global
Certificate equal to the certificate balance of such Individual Certificate
exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a beneficial interest
in a Global Certificate of a Class for an Individual Certificate of such
Class as provided herein, the Trustee shall (or shall request the
Depository to) endorse on the schedule affixed to such Global Certificate
(or on a continuation of such schedule affixed to such Global Certificate
and made a part thereof) or otherwise make in its books and records an
appropriate notation evidencing the date of such exchange or transfer and a
decrease in the certificate balance of such Global Certificate equal to the
certificate balance of such Individual Certificate issued in exchange
therefor or upon transfer thereof.
(g) The Securities Legend shall be placed on any Individual Certificate
issued in exchange for or upon transfer of another Individual Certificate or of
a beneficial interest in a Global Certificate.
(h) Subject to the restrictions on transfer and exchange set forth in this
Section 5.02, the holder of any Individual Certificate may transfer or exchange
the same in whole or in part (in an initial certificate balance equal to the
minimum authorized denomination or any integral multiple of $1.00 in excess
thereof) by surrendering such Certificate at the Corporate Trust Office, or at
the office of any transfer agent, together with an executed instrument of
assignment and transfer satisfactory in form and substance to the Trustee in the
case of transfer and a written request for exchange in the case of exchange. The
holder of a beneficial interest in a Global Certificate may, subject to the
rules and procedures of the Depository, cause the Depository (or its nominee) to
notify the Trustee in writing of a request for transfer or exchange of such
beneficial interest for an Individual Certificate or Certificates. Following a
proper request for transfer or exchange, the Trustee shall, within five Business
Days of such request made at such Corporate Trust Office, sign, countersign and
deliver at such Corporate Trust Office, to the transferee (in the case of
transfer) or holder (in the case of exchange) or send by first class mail at the
risk of the transferee (in the case of transfer) or holder (in the case of
exchange) to such address as the transferee or holder, as applicable, may
request, an Individual Certificate or Certificates, as the case may require, for
a like aggregate Fractional Undivided Interest and in such authorized
denomination or denominations as may be requested. The presentation for transfer
or exchange of any Individual Certificate shall not be valid unless made at the
Corporate Trust Office by the registered holder in person, or by a duly
authorized attorney-in-fact.
(i) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized denominations of a like Class and aggregate
Fractional Undivided Interest, upon surrender of the Certificates to be
exchanged at any such office or agency; PROVIDED, HOWEVER, that no Certificate
may be exchanged for new Certificates unless the original Fractional Undivided
Interest represented by each such new Certificate (i) is at least $25,000 with
respect to the Certificates other than the Class R-1 and R-2 Certificates, which
in each case shall be $100, or (ii) is acceptable to the Seller as indicated to
the Trustee in writing. Whenever any Certificates are so surrendered for
exchange, the Trustee shall sign and countersign and the Trustee shall deliver
the Certificates which the Certificateholder making the exchange is entitled to
receive.
(j) If the Trustee so requires, every Certificate presented or surrendered
for transfer or exchange shall be duly endorsed by, or be accompanied by a
written instrument of transfer, with a signature guarantee, in form satisfactory
to the Trustee, duly executed by the holder thereof or his or her attorney duly
authorized in writing.
(k) No service charge 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.
(l) The Trustee shall cancel all Certificates surrendered for transfer or
exchange but shall retain such Certificates in accordance with its standard
retention policy or for such further time as is required by the record retention
requirements of the Securities Exchange Act of 1934, as amended, and thereafter
may destroy such Certificates.
(m) The following legend shall be placed on each Class of Physical
Certificates (other than the Residual Certificates), whether upon original
issuance or upon issuance of any other Certificate of any such Class in exchange
therefor or upon transfer thereof:
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH
IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, UNLESS THE PROPOSED TRANSFEREE PROVIDES A REPRESENTATION OR
CERTIFICATION TO THE TRUSTEE TO THE EFFECT THAT THE PROPOSED TRANSFER
AND/OR HOLDING OF A CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR
OPERATION OF THE TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN ANY
PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO, PROHIBITED
TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE
96-23 AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE
PART OF THE MASTER SERVICER OR THE TRUSTEE.
Section 5.03. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. (a) 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 such security or
indemnity as it may require to save it harmless, and (iii) the Trustee has not
received notice that such Certificate has been acquired by a third Person, the
Trustee shall sign, countersign and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Fractional Undivided Interest but in each case bearing a different
number. The mutilated, destroyed, lost or stolen Certificate shall thereupon be
canceled of record by the Trustee and shall be of no further effect and evidence
no rights.
(b) Upon the issuance of any new Certificate under this Section 5.03, 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 duplicate Certificate issued pursuant to this Section 5.03 shall constitute
complete and indefeasible evidence of ownership in the Trust Fund, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Seller, the Master Servicers, the
Trustee and any agent of the Seller, the Master Servicers or the Trustee may
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
6.01 and for all other purposes whatsoever. Neither the Seller, the Master
Servicers, the Trustee nor any agent of the Seller, the Master Servicers or the
Trustee shall be affected by notice to the contrary. No Certificate shall be
deemed duly presented for a transfer effective on any Record Date unless the
Certificate to be transferred is presented no later than the close of business
on the third Business Day preceding such Record Date.
Section 5.05. TRANSFER RESTRICTIONS ON RESIDUAL CERTIFICATES. (a) Residual
Certificates, or interests therein, may not be transferred without the prior
express written consent of the Tax Matters Person and the Seller. As a
prerequisite to such consent, the proposed transferee must provide the Tax
Matters Person, the Seller and the Trustee with an affidavit that the proposed
transferee is not a Disqualified Organization (as defined in Subsection 5.05(b))
(and, unless the Tax Matters Person and the Seller consent to the transfer to a
person who is not a U.S. Person, an affidavit that it is a U.S. Person) as
provided in Subsection 5.05(b).
(b) No transfer, sale or other disposition of a Residual Certificate
(including a beneficial interest therein) may be made unless, prior to the
transfer, sale or other disposition of a Residual Certificate, the proposed
transferee (including the initial purchasers thereof) delivers to the Tax
Matters Person, the Trustee and the Seller an affidavit in the form attached
hereto as Exhibit E stating, among other things, that as of the date of such
transfer (i) such transferee is not any of (A) the United States, any state or
political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing (other
than an instrumentality that is a corporation all of whose activities are
subject to tax under Chapter 1 of Subtitle A of the Code and (except in the case
of FHLMC) a majority of whose board of directors is not selected by the United
States, or any state or political subdivision thereof), (B) any organization
that is exempt from any tax imposed by Chapter 1 of Subtitle A of the Code,
other than (x) a tax-exempt farmers' cooperative within the meaning of Section
521 of the Code or (y) an organization that is subject to the tax imposed by
Section 511 of the Code on "unrelated business taxable income" or (C) a
corporation operating on a cooperative basis that is engaged in furnishing
electric energy or providing telephone service to persons in rural areas (within
the meaning of Section 1381(a)(2)(C) of the Code) (any Person described in (A),
(B), or (C) being referred to herein as a "Disqualified Organization") and that
(ii) such transferee is not acquiring such Residual Certificate for the account
of a Disqualified Organization. The Tax Matters Person shall not consent to a
transfer of a Residual Certificate if it has actual knowledge that any statement
made in the affidavit issued pursuant to the preceding sentence is not true.
Notwithstanding any transfer, sale or other disposition of a Residual
Certificate to a Disqualified Organization, such transfer, sale or other
disposition shall be deemed to be of no legal force or effect whatsoever and
such Disqualified Organization shall not be deemed to be a Holder of a Residual
Certificate for any purpose hereunder, including, but not limited to, the
receipt of distributions thereon. If any purported transfer shall be in
violation of the provisions of this Subsection 5.05(b), then the prior Holder
thereof shall, upon discovery that the transfer of such Residual Certificate was
not in fact permitted by this Subsection 5.05(b), be restored to all rights as a
Holder thereof retroactive to the date of the purported transfer. None of the
Trustee, the Tax Matters Person or the Seller shall be under any liability to
any Person for any registration or transfer of a Residual Certificate that is
not permitted by this Subsection 5.05(b) or for making payments due on such
Residual Certificate to the purported Holder thereof or taking any other action
with respect to such purported Holder under the provisions of this Agreement so
long as the written affidavit referred to above was received with respect to
such transfer, and the Tax Matters Person, the Trustee and the Seller, as
applicable, had no knowledge that it was untrue. The prior Holder shall be
entitled to recover from any purported Holder of a Residual Certificate that was
in fact not a permitted transferee under this Subsection 5.05(b) at the time it
became a Holder all payments made on such Residual Certificate. Each Holder of a
Residual Certificate, by acceptance thereof, shall be deemed for all purposes to
have consented to the provisions of this Subsection 5.05(b) and to any amendment
of this Agreement deemed necessary (whether as a result of new legislation or
otherwise) by counsel of the Tax Matters Person or the Seller to ensure that the
Residual Certificates are not transferred to a Disqualified Organization and
that any transfer of such Residual Certificates will not cause the imposition of
a tax upon the Trust or cause REMIC I or REMIC II to fail to qualify as a REMIC.
(c) Unless the Tax Matters Person shall have consented in writing (which
consent may be withheld in the Tax Matters Person's sole discretion), the
Residual Certificates (including a beneficial interest therein) may not be
purchased by or transferred to any person who is not a "United States person,"
as such term is defined in Section 7701(a)(30) of the Code.
(d) By accepting a Residual Certificate, the purchaser thereof agrees to be
a Tax Matters Person, and appoints the Trustee to act as its agent with respect
to all matters concerning the tax obligations of the Trust.
Section 5.06. RESTRICTIONS ON TRANSFERABILITY OF PRIVATE CERTIFICATES. (a)
No offer, sale, transfer or other disposition (including pledge) of a Private
Certificate shall be made by any Holder thereof unless registered under the
Securities Act, or an exemption from the registration requirements of the
Securities Act and any applicable state securities or "Blue Sky" laws is
available and the prospective transferee (other than the Seller) of such
Certificate signs and delivers to the Trustee an Investment Letter, if the
transferee is an Institutional Accredited Investor, in the form set forth as
Exhibit F-1 hereto, or a Rule 144A Certificate, if the transferee is a QIB, in
the form set forth as Exhibit F-2 hereto. Notwithstanding the provisions of the
immediately preceding sentence, no restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest in a Physical
Certificate that is a Global Certificate of a Class to a transferee that takes
delivery in the form of a beneficial interest in the Global Certificate of such
Class provided that each such transferee shall be deemed to have made such
representations and warranties contained in the Rule 144A Certificate as are
sufficient to establish that it is a QIB. In the case of a proposed transfer of
a Private Certificate to a transferee other than a QIB, the Trustee may require
an Opinion of Counsel that such transaction is exempt from the registration
requirements of the Securities Act. The cost of such opinion shall not be an
expense of the Trustee or the Trust Fund.
(b) Each Class B-4, Class B-5, Class B-6, Class 3-B-4, Class 3-B-5, Class
3-B-6, Class 4-B-4, Class 4-B-5, Class 4-B-6, Class 5-B-4, Class 5-B-5 and Class
5-B-6 Certificate shall bear a Securities Legend.
Section 5.07. ERISA RESTRICTIONS. (a) Subject to the provisions of
subsection (b), no Class of Physical Certificates (other than the Residual
Certificates) may be acquired directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which is subject to Title
I of ERISA and/or Section 4975 of the Code, unless the proposed transferee
provides a representation or certification to the Trustee (upon which the
Trustee is authorized to rely) to the effect that neither the proposed transfer
and/or holding of a Certificate nor the servicing, management and operation of
the Trust: (i) will result in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code or will be covered under an individual or
class prohibited transaction exemption including but not limited to Department
of Labor Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for
Plan Asset Transactions Determined by Independent Qualified Professional Asset
Managers); PTE 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds); PTE 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts), PTE 95-60 (Class
Exemption for Certain Transactions Involving Insurance Company General
Accounts), and PTCE 96-23 (Class Exemption for Plan Asset Transactions
Determined by In-House Asset Managers or (ii) will give rise to any additional
fiduciary duties under ERISA on the part of either Master Servicer or the
Trustee.
(b) Any Person acquiring an interest in a Book-Entry Certificate or a
Global Certificate which is a Subordinate Certificate, by acquisition of such
Certificate, shall be deemed to have represented to the Trustee that it is
either: (i) not acquiring an interest in such Certificate directly or indirectly
by, or on behalf of, an employee benefit plan or other retirement arrangement
which is subject to Title I of ERISA and/or Section 4975 of the Code, or (ii)
such Person provides a representation or certification to the Trustee to the
effect that the transfer and/or holding of an interest in such Certificate and
the servicing, management and/or operation of the Trust and its assets: (I) will
not result in any prohibited transaction which is not covered under an
individual or class prohibited transaction exemption, including, but not limited
to, PTE 84-14, PTE 91-38, PTE 90-1, PTE 95-60 or PTE 96-23 and (II) will not
give rise to any additional fiduciary duties on the part of either Master
Servicer or the Trustee.
Section 5.08. RULE 144A INFORMATION. For so long as any Private
Certificates are outstanding and are "restricted securities" within the meaning
of Rule 144(a)(3) of the Securities Act, (1) each Master Servicer will provide
or cause to be provided to any holder of such Certificates and any prospective
purchaser thereof designated by such a holder, upon the request of such holder
or prospective purchaser, the information required to be provided to such holder
or prospective purchaser by Rule 144A(d)(4) under the Securities Act; and (2)
each Master Servicer shall update such information from time to time in order to
prevent such information from becoming false and misleading and will take such
other actions as are necessary to ensure that the safe harbor exemption from the
registration requirements of the Securities Act under Rule 144A is and will be
available for resales of such Certificates conducted in accordance with Rule
144A.
<PAGE>
ARTICLE VI
Payments to Certificateholders
Section 6.01. DISTRIBUTIONS ON THE CERTIFICATES. (a) Interest and principal
on the Certificates will be distributed monthly on each Distribution Date,
commencing in January 1998, in an aggregate amount equal to the Available Funds
for such Distribution Date.
(i) GROUP 1 SENIOR CERTIFICATES. (A) On each Distribution Date, the Group 1
Available Funds will be distributed in the following order of priority among the
Group 1 Senior Certificates except as otherwise noted and subject to the
provisions of Section 6.01(a)(iv) and 6.01(c):
FIRST, to the interest-bearing Classes of Group 1 Senior Certificates, the
Accrued Certificate Interest on each such Class for such Distribution Date.
As described below, Accrued Certificate Interest on each Class of Group 1
Certificates is subject to reduction in the event of certain Net Interest
Shortfalls allocable thereto. Any Net Interest Shortfalls shall be
allocated among the Group 1 Senior Certificates as provided under 6.01(e);
SECOND, to the interest-bearing Classes of Group 1 Senior Certificates, any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Group 1 Available Funds, any
shortfall in available amounts being allocated among such Classes in
proportion to the amount of such Accrued Certificate Interest remaining
undistributed for each such Class for such Distribution Dates;
THIRD, to the Group 1 Senior Certificates (other than the Class 1-A-X1 and
Class 1-A-X2 Certificates and the Component X-1) in reduction of the
Current Principal Amounts thereof:
(a) the Group 1 Senior P&I Optimal Principal Amount, in the following
order of priority:
first, to the Class 1-A-9 Certificates up to the Class 1-A-9
Optimal Principal Amount for such Distribution Date, until the
Current Principal Amount thereof has been reduced to zero;
second, sequentially, to the Class 1-A-1, Class 1-A-2, Class
1-A-3 and Class 1-A-4 Certificates, in that order, until their
respective Current Principal Amounts have been reduced to their
respective Planned Balances (as set forth in Exhibit I hereto)
for such Distribution Date;
third, concurrently to the Class 1-A-5, Class 1-A-6, Class 1-A-7
and Class 1-A-8 Certificates, pro rata, based on their respective
Current Principal Amounts, until the respective Current Principal
Amounts thereof have been reduced to zero; and
fourth, sequentially, to the Class 1-A-3, Class 1-A-4, Class
1-A-1 and Class 1-A-2 Certificates, in that order, without regard
to their respective Planned Balances for such Distribution Date,
until the respective Current Principal Amounts thereof have been
reduced to zero; and
(b) the Component P Principal Distribution Amount for the Component
P-1 for such Distribution Date, to the Class P Certificates,
until the Current Principal Amount of the Component P-1 has been
reduced to zero;
FOURTH, the Component P-1 Deferred Amount for such Distribution Date, to the
Class P Certificates; provided, that (i) on any Distribution Date, distributions
pursuant to this priority FOURTH and priority FOURTH of Section 6.01(a)(ii)
shall not exceed the excess (a "Component P-1 and P-2 Available Amount"), if
any, of (x) the sum of (A) the Group 1 Available Funds remaining after giving
effect to distributions pursuant to clauses FIRST through THIRD above and (B)
the Group 2 Available Funds remaining after giving effect to distributions
pursuant to clauses FIRST through THIRD under Section 6(a)(ii) over (y) the sum
of the amount of Accrued Certificate Interest for such Distribution Date and
Accrued Certificate Interest remaining undistributed from previous Distribution
Dates on all Classes of Group B Subordinate Certificates then outstanding
(provided that if the sum of the Component P-1 Deferred Amount and the Component
P-2 Deferred Amount exceeds the applicable Component P-1 and P-2 Available
Amount, the amount distributable pursuant to this clause FOURTH and the amount
distributable under clause FOURTH under Section 6 (a)(ii) shall be paid PRO RATA
based upon the respective amounts of the Component P-1 and Component P-2
Deferred Amounts), (ii) such distributions shall not reduce the Current
Principal Amount of the Component P-1, and (iii) no distribution will be made in
respect of the Component P-1 Deferred Amount after the Group 1 and 2 Cross-Over
Date;
(B) On each Distribution Date after the Group 1 and 2 Cross-Over Date,
distributions of principal on the outstanding Group 1 Senior Certificates (other
than the Class 1-A-X1 and Class 1-A-X2 Certificates and Component P-1 and
Component X-1) will be made pro rata among all such Group 1 Senior Certificates,
regardless of the allocation, or sequential nature, of principal payments
described in priority THIRD above, based upon the then Current Principal Amounts
of such Group 1 Senior Certificates.
(C) If, after distributions have been made pursuant to priorities FIRST and
SECOND of this Section 6(a)(i) on any Distribution Date, the remaining Group 1
Available Funds, are less than the sum of the Group 1 Senior P&I Optimal
Principal Amount and the Component P Principal Distribution Amount for Component
P-1 for such Distribution Date, such amounts shall be proportionately reduced,
and such remaining Group 1 Available Funds will be distributed on the Group 1
Senior Certificates (other than the Class 1-A-X1 Certificates, the Class 1-A-X2
Certificates and Component X-1) on the basis of such reduced amounts.
Notwithstanding any reduction in principal distributable to the Class P
Certificates pursuant to this paragraph, the principal balance of the Component
P-1 shall be reduced not only by principal so distributed but also by the
difference between (i) principal distributable to the Class P Certificates with
respect to the Component P-1 in accordance with clause (b) of priority THIRD
above and (ii) principal actually distributed to the Class P Certificates with
respect to Component P-1 after giving effect to this paragraph (such difference,
the "Component P-1 Cash Shortfall"). The Component P-1 Cash Shortfall with
respect to any Distribution Date will be added to the Component P-1 Deferred
Amount.
(D) The "Class 1-A-9 Optimal Principal Amount" for any Distribution Date
occurring prior to the Distribution Date in January 2003 will equal zero. The
Class 1-A-9 Optimal Principal Amount for any Distribution Date occurring after
the first five years following the Closing Date will be as follows: for any
Distribution Date during the sixth, seventh, eighth and ninth years after the
Closing Date, 30%, 40%, 60% and 80%, respectively, of the Class 1-A-9 Pro Rata
Optimal Principal Amount for such Distribution Date; and, for any Distribution
Date thereafter, 100% of the Class 1-A-9 Pro Rata Optimal Principal Amount for
such Distribution Date. Notwithstanding the foregoing, if on any Distribution
Date the Current Principal Amount of each Class of Group 1 Senior Certificates
(other than the Class 1-A-9 Certificates and the Component P-1) has been reduced
to zero, the Class 1-A-9 Optimal Principal Amount shall equal the Group 1 Senior
P&I Optimal Principal Amount to the extent not distributed on such Distribution
Date to other Classes of Group 1 Senior Certificates.
(E) For any Distribution Date, the "Class 1-A-9 Pro Rata Optimal Principal
Amount" shall be an amount equal to the product of (x) the Group 1 Senior P&I
Optimal Principal Amount for such Distribution Date multiplied by (y) a
fraction, the numerator of which is the sum of the Current Principal Amounts of
the Class 1-A-9 Certificates immediately prior to such Distribution Date and the
denominator of which is the aggregate Current Principal Amounts of all Classes
of Group 1 Senior Certificates (other than the Component P-1) immediately prior
to such Distribution Date.
(ii) GROUP 2 SENIOR CERTIFICATES. (A) On each Distribution Date, the Group
2 Available Funds will be distributed in the following order of priority among
the Group 2 Senior Certificates except as otherwise noted and subject to the
provisions of Sections 6.01(a)(iv) and 6.01(c):
FIRST, to the interest-bearing Classes of Group 2 Senior Certificates, the
Accrued Certificate Interest on each such Class for such Distribution Date.
As described below, Accrued Certificate Interest on each such Class of
Group 2 Certificates is subject to reduction in the event of certain Net
Interest Shortfalls allocable thereto. Any Net Interest Shortfalls shall be
allocated among the Group 2 Senior Certificates as provided under Section
6.01(e);
SECOND, to the interest-bearing Classes of Group 2 Senior Certificates, any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Group 2 Available Funds, any
shortfall in available amounts being allocated among such Classes in
proportion to the amount of such Accrued Certificate Interest remaining
undistributed for each such Class for such Distribution Dates;
THIRD, to the Group 2 Senior Certificates (other than the Component X-2) in
reduction of the Current Principal Amounts thereof:
(a) the Accrual Amount, in the following order of priority:
first, to the Class 2-A-2 Certificates until the Current
Principal Amount thereof has been reduced to zero; and
second, to the Class 2-A-3 Certificates until the Current
Principal Amount thereof has been reduced to zero;
(b) the Group 2 Senior P&I Optimal Principal Amount, in the following
order of priority:
first, concurrently, to the Class R-1 and Class R-2 Certificates,
PRO RATA, based upon their Current Principal Amounts, until the
respective Current Principal Amounts thereof have been reduced to
zero;
second, to the Class 2-A-4 Certificates up to the Class 2-A-4
Optimal Principal Amount for such Distribution Date, until the
Current Principal Amount thereof has been reduced to zero; and
third, sequentially to the Class 2-A-1, Class 2-A-2 and 2-A-3
Certificates, in that order, until their respective Current
Principal Amounts have been reduced to zero; and
(c) the Component P Principal Distribution Amount for the Component
P-2 for such Distribution Date, to the Class P Certificates,
until the Current Principal Amount of the Component P-2 has been
reduced to zero; and
FOURTH, the Component P-2 Deferred Amount for such Distribution Date, to the
Class P Certificates, provided, that (i) on any Distribution Date, distributions
pursuant to this priority FOURTH and priority FOURTH of Section 6.01(a)(i) shall
not exceed the applicable Component P-1 and P-2 Available Amount (provided that
if the sum of the Component P-1 Deferred Amount and the Component P-2 Deferred
Amount exceeds the applicable Component P-1 and P-2 Available Amount, the amount
distributable pursuant to this clause FOURTH and the amount distributable under
clause FOURTH under Section 6(a)(i) shall be paid PRO RATA based upon the
respective amounts of the Component P-1 and Component P-2 Deferred Amounts),
(ii) such distributions shall not reduce the Current Principal Amount of the
Component P-2, and (iii) no distribution will be made in respect of the
Component P-2 Deferred Amount after the Group 1 and 2 Cross-Over Date.
(B) On each Distribution Date after the Group 1 and 2 Cross-Over Date,
distributions of principal on the outstanding Group 2 Senior Certificates (other
than the Component P-2 and Component X-2) will be made pro rata among all such
Group 2 Senior Certificates, regardless of the allocation, or sequential nature,
of principal payments described in priority THIRD above, based upon the then
Current Principal Amounts of such Group 2 Senior Certificates.
(C) If, after distributions have been made pursuant to priorities FIRST,
SECOND and THIRD (a) under this Section 6(a)(ii) on any Distribution Date,
remaining Group 2 Available Funds are less than the sum of the Group 2 Senior
P&I Optimal Principal Amount and the Component P Principal Distribution Amount
for Component P-2 for such Distribution Date, such amounts shall be
proportionately reduced, and such remaining Group 2 Available Funds will be
distributed on the Group 2 Senior Certificates (other than the Component X-2) on
the basis of such reduced amounts. Notwithstanding any reduction in principal
distributable to the Class P Certificates pursuant to this paragraph, the
principal balance of the Component P-2 shall be reduced not only by principal so
distributed but also by the difference between (i) principal distributable to
the Class P Certificates with respect to Component P-2 in accordance with clause
(b) of priority THIRD above and (ii) principal actually distributed to the Class
P Certificates with respect to Component P-2 after giving effect to this
paragraph (such difference, the "Component P-2 Cash Shortfall"). The Component
P-2 Cash Shortfall with respect to any Distribution Date will be added to the
Component P-2 Deferred Amount.
(D) The "Class 2-A-4 Optimal Principal Amount" for any Distribution Date
occurring prior to the Distribution Date in January 2003 will equal zero. The
Class 2-A-4 Optimal Principal Amount for any Distribution Date occurring after
the first five years following the Closing Date will be as follows: for any
Distribution Date during the sixth, seventh, eighth and ninth years after the
Closing Date, 30%, 40%, 60% and 80%, respectively, of the Class 2-A-4 Pro Rata
Optimal Principal Amount for such Distribution Date; and, for any Distribution
Date thereafter, 100% of the Class 2-A-4 Pro Rata Optimal Principal Amount for
such Distribution Date. Notwithstanding the foregoing, if on any Distribution
Date the Current Principal Amount of each Class of Group 2 Senior Certificates
(other than the Class 2-A-4 Certificates and the Component P-2) has been reduced
to zero, the Class 2-A-4 Optimal Principal Amount shall equal the Group 2 Senior
P&I Optimal Principal Amount to the extent not distributed on such Distribution
Date to other Classes of Group 2 Senior Certificates or Residual Certificates.
(E) For any Distribution Date, the "Class 2-A-4 Pro Rata Optimal Principal
Amount" shall be an amount equal to the product of (x) the Group 2 Senior P&I
Optimal Principal Amount for such Distribution Date multiplied by (y) a
fraction, the numerator of which is the sum of the Current Principal Amounts of
the Class 2-A-4 Certificates immediately prior to such Distribution Date and the
denominator of which is the aggregate Current Principal Amounts of all Classes
of Group 2 Senior Certificates (other than the Component P-2) immediately prior
to such Distribution Date.
(iii) GROUP B SUBORDINATE CERTIFICATES. On each Distribution Date, subject
to the provisions of Section 6.01(a)(iv) and 6.01(c), the sum of the Group 1
Available Funds and the Group 2 Available Funds remaining after the
distributions described above under Sections 6.01(a)(i) and (a)(ii) will be
distributed among the Group B Subordinate Certificates sequentially, in the
following order, to the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5
and Class B-6 Certificates, in each case up to an amount equal to and in the
following order: (a) the Accrued Certificate Interest thereon for such
Distribution Date, (b) any Accrued Certificate Interest thereon remaining
undistributed from previous Distribution Dates and (c) such Class's Allocable
Share for such Distribution Date.
(iv) Notwithstanding any other provision of this Section 6.01, on each
Distribution Date prior to the occurrence of the Group 1 and 2 Cross-Over Date,
but after the reduction of the Current Principal Amount of either the Group 1
Senior Certificates or Group 2 Senior Certificates to zero, the remaining Class
or Classes of Group 1 Senior Certificates or Group 2 Senior Certificates, as the
case may be, will be entitled to receive in reduction of their Current Principal
Amounts, PRO RATA based upon their Current Principal Amounts immediately prior
to such Distribution Date, in addition to any Principal Prepayments allocated to
such remaining Class or Classes with respect to the related Mortgage Loan Group
of such remaining Class or Classes, 100% of the remaining Principal Prepayments
on any Mortgage Loan in the Mortgage Loan Group relating to the Senior
Certificate Group which has been reduced to zero. In addition, if on any
Distribution Date on which the aggregate Current Principal Amount of any
remaining Class or Classes of either the Group 1 Senior Certificates or the
Group 2 Senior Certificates would be greater than the aggregate Scheduled
Principal Balance of the Mortgage Loans in its related Mortgage Loan Group and
any Group B Subordinate Certificates are still outstanding, in each case after
giving effect to distributions to be made on such Distribution Date, 100% of the
Principal Prepayments otherwise allocable to the Group B Subordinate
Certificates on the Mortgage Loans of the other Mortgage Loan Group will be
distributed to such Class or Classes of Group 1 Senior Certificates or Group 2
Senior Certificates, as the case may be, in reduction of the Current Principal
Amounts thereof, until the aggregate Current Principal Amount of such Class or
Classes of Group 1 Senior Certificates or Group 2 Senior Certificates is an
amount equal to the aggregate Scheduled Principal Balance of the Mortgage Loans
in its related Mortgage Loan Group. Furthermore, if on any Distribution Date on
which the aggregate Current Principal Amount of any remaining Class or Classes
of either the Group 1 Senior Certificates or the Group 2 Senior Certificates is
greater than the aggregate Scheduled Principal Balance of the Mortgage Loans in
the related Mortgage Loan Group, an amount up to 1/12 of 7.00% per annum of any
excess of the Scheduled Principal Balance of the Mortgage Loans in the other
Mortgage Loan Group over the Current Principal Amount of the Certificates in the
other Certificate Group will be distributed to such Class or Classes of Group 1
Senior Certificates or Group 2 Senior Certificates, as the case may be, in an
amount up to 1/12 of 7.00% per annum of any excess of the Current Principal
Amount of such Certificates over the aggregate Scheduled Principal Balance of
the Mortgage Loans of the related Mortgage Loan Group until the Senior
Certificates receiving such amount have received the full amount of interest
which would otherwise be due to them net of any Net Interest Shortfalls before
the Group B Subordinate Certificates receive any distributions but after the
Group 1 and 2 Senior Certificates receive the principal and interest to which
they are entitled under clauses FIRST through THIRD of Sections 6.01(a)(i) and
(ii).
(v) GROUP 3 CERTIFICATES. (A) On each Distribution Date, the Group 3
Available Funds will be distributed in the following order of priority among the
Group 3 Certificates except as otherwise noted:
FIRST, to the interest-bearing Classes of Group 3 Senior Certificates, the
Accrued Certificate Interest on each such Class for such Distribution Date.
As described below, Accrued Certificate Interest on each Class of Group 3
Certificates is subject to reduction in the event of certain Net Interest
Shortfalls allocable thereto. Any Net Interest Shortfalls shall be
allocated among the Group 3 Senior Certificates as provided for under
Section 6.01(e);
SECOND, to the interest-bearing Classes of Group 3 Senior Certificates, any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Group 3 Available Funds, any
shortfall in available amounts being allocated among such Classes in
proportion to the amount of such Accrued Certificate Interest remaining
undistributed for each such Class for such Distribution Dates;
THIRD, to the Group 3 Senior Certificates (other than the Class 3-X
Certificates) in reduction of the Current Principal Amounts thereof:
(a) the Group 3 Senior P&I Optimal Principal Amount to the Class 3-A
Certificates, until the Current Principal Amount thereof has been
reduced to zero; and
(b) the Component P Principal Distribution Amount for the Component
P-3 for such Distribution Date, to the Class P Certificates,
until the Current Principal Amount of the Component P-3 has been
reduced to zero;
FOURTH, the Component P-3 Deferred Amount for such Distribution Date, to
the Class P Certificates; provided, that (i) on any Distribution Date,
distributions pursuant to this priority FOURTH shall not exceed the excess,
if any, of (x) the Group 3 Available Funds remaining after giving effect to
distributions pursuant to clauses FIRST through THIRD above over (y) the
sum of the amount of Accrued Certificate Interest for such Distribution
Date and Accrued Certificate Interest remaining undistributed from previous
Distribution Dates on all Classes of Group 3 Subordinate Certificates then
outstanding, (ii) such distributions shall not reduce the Current Principal
Amount of the Component P-3 and (iii) no distribution will be made in
respect of the Component P-3 Deferred Amount after the Group 3 Cross-Over
Date; and
FIFTH, sequentially, in the following order, to the Class 3-B-1, Class
3-B-2, Class 3-B-3, Class 3-B-4, Class 3-B-5 and Class 3-B-6 Certificates,
in each case up to an amount equal to and in the following order: (a) the
Accrued Certificate Interest thereon for such Distribution Date, (b) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (c) such Class's Allocable Share for such
Distribution Date.
(B) If, after distributions have been made pursuant to priorities FIRST and
SECOND under this Section 6(a)(v) on any Distribution Date, remaining Group 3
Available Funds, are less than the sum of the Group 3 Senior P&I Optimal
Principal Amount and the Component P Principal Distribution Amount for Component
P-3 for such Distribution Date, such amounts shall be proportionately reduced,
and such remaining Group 3 Available Funds will be distributed on the Group 3
Senior Certificates (other than the Class 3-X Certificates), on the basis of
such reduced amounts. Notwithstanding any reduction in principal distributable
to the Class P Certificates pursuant to this paragraph, the principal balance of
the Component P-3 shall be reduced not only by principal so distributed but also
by the difference between (i) principal distributable to the Class P
Certificates with respect to the Component P-3 in accordance with clause (b) of
priority THIRD above and (ii) principal actually distributed to the Class P
Certificates with respect to the Component P-3 after giving effect to this
paragraph (such difference, the "Component P-3 Cash Shortfall"). The Component
P-3 Cash Shortfall with respect to any Distribution Date will be added to the
Component P-3 Deferred Amount.
(vi) GROUP 4 CERTIFICATES. (A) On each Distribution Date, the Group 4
Available Funds will be distributed in the following order of priority among the
Group 4 Certificates except as otherwise noted:
FIRST, to the interest-bearing Classes of Group 4 Senior Certificates, the
Accrued Certificate Interest on each such Class for such Distribution Date.
As described below, Accrued Certificate Interest on each Class of Group 4
Certificates is subject to reduction in the event of certain Net Interest
Shortfalls allocable thereto. Any Net Interest Shortfalls shall be
allocated among the Group 4 Senior Certificates as provided under Section
6.01(e);
SECOND, to the interest-bearing Classes of Group 4 Senior Certificates, any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Group 4 Available Funds, any
shortfall in available amounts being allocated among such Classes in
proportion to the amount of such Accrued Certificate Interest remaining
undistributed for each such Class for such Distribution Dates;
THIRD, to the Group 4 Senior Certificates (other than the Class 4-X
Certificates) in reduction of the Current Principal Amounts thereof:
(a) the Group 4 Senior P&I Optimal Principal Amount to the Class 4-A
Certificates, until the Current Principal Amount thereof has been
reduced to zero; and
(b) the Component P Principal Distribution Amount for the Component
P-4 for such Distribution Date, to the Class P Certificates,
until the Current Principal Amount of the Component P-4 has been
reduced to zero;
FOURTH, the Component P-4 Deferred Amount for such Distribution Date, to
the Class P Certificates; provided, that (i) on any Distribution Date,
distributions pursuant to this priority FOURTH shall not exceed the excess,
if any, of (x) the Group 4 Available Funds remaining after giving effect to
distributions pursuant to clauses FIRST through THIRD above over (y) the
sum of the amount of Accrued Certificate Interest for such Distribution
Date and Accrued Certificate Interest remaining undistributed from previous
Distribution Dates on all Classes of Group 4 Subordinate Certificates then
outstanding, (ii) such distributions shall not reduce the Current Principal
Amount of the Component P-4 and (iii) no distribution will be made in
respect of the Component P-4 Deferred Amount after the Group 4 Cross-Over
Date; and
FIFTH, sequentially, in the following order, to the Class 4-B-1, Class
4-B-2, Class 4-B-3, Class 4-B-4, Class 4-B-5 and Class 4-B-6 Certificates,
in each case up to an amount equal to and in the following order: (a) the
Accrued Certificate Interest thereon for such Distribution Date, (b) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (c) such Class's Allocable Share for such
Distribution Date.
(B) If, after distributions have been made pursuant to priorities FIRST and
SECOND under this Section 6(a)(vi) above on any Distribution Date, remaining
Group 4 Available Funds, are less than the sum of the Group 4 Senior P&I Optimal
Principal Amount and the Component P Principal Distribution Amount for Component
P-4 for such Distribution Date, such amounts shall be proportionately reduced,
and such remaining Group 4 Available Funds will be distributed on the Group 4
Senior Certificates (other than the Class 4-X Certificates), on the basis of
such reduced amounts. Notwithstanding any reduction in principal distributable
to the Class P Certificates pursuant to this paragraph, the principal balance of
the Component P-4 shall be reduced not only by principal so distributed but also
by the difference between (i) principal distributable to the Class P
Certificates with respect to the Component P-4 in accordance with clause (b) of
priority THIRD above and (ii) principal actually distributed to the Class P
Certificates with respect to the Component P-4 after giving effect to this
paragraph (such difference, the "Component P-4 Cash Shortfall"). The Component
P-4 Cash Shortfall with respect to any Distribution Date will be added to the
Component P-4 Deferred Amount.
(vii) GROUP 5 CERTIFICATES. (A) On each Distribution Date, the Group 5
Available Funds will be distributed in the following order of priority among the
Group 5 Certificates except as otherwise noted:
FIRST, to the interest-bearing Class of Group 5 Senior Certificates, the
Accrued Certificate Interest on such Class for such Distribution Date. As
described below, Accrued Certificate Interest on such Class of Group 5
Certificates is subject to reduction in the event of certain Net Interest
Shortfalls allocable thereto. Any Net Interest Shortfalls shall be
allocated to the interest bearing Class of Group 5 Senior Certificates as
provided under Section 6.01(e);
SECOND, to the interest-bearing Class of Group 5 Senior Certificates, any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Group 5 Available Funds;
THIRD, to the Group 5 Senior Certificates in reduction of the Current
Principal Amounts thereof, the Group 5 Senior P&I Optimal Principal Amount,
concurrently, to the Class 5-A Certificates and the Component P-5, pro
rata, based on their Current Principal Amounts, until the respective
Current Principal Amounts thereof have been reduced to zero; and
FOURTH, sequentially, in the following order, to the Class 5-B-1, Class
5-B-2, Class 5-B-3, Class 5-B-4, Class 5-B-5 and Class 5-B-6 Certificates,
in each case up to an amount equal to and in the following order: (a) the
Accrued Certificate Interest thereon for such Distribution Date, (b) any
Accrued Certificate Interest thereon remaining undistributed from previous
Distribution Dates and (c) such Class's Allocable Share for such
Distribution Date.
(B) If, after distributions have been made pursuant to priorities FIRST and
SECOND under this Section 6(a)(vii) on any Distribution Date, remaining Group 5
Available Funds are less than the Group 5 Senior P&I Optimal Principal Amount
for such Distribution Date, such amounts shall be proportionately reduced, and
such remaining Group 5 Available Funds will be distributed on the Group 5 Senior
Certificates on the basis of such reduced amounts.
(b) "Pro rata" distributions among Classes of Certificates will be made in
proportion to the then Current Principal Amount of such Classes.
(c) On each Distribution Date, any Available Funds for Mortgage Loan Groups
1 and 2 remaining after payment of interest and principal as described above
with respect to the Group 1, 2 and B Certificates will be distributed, to the
Class R-1 Certificates; provided that if on any Distribution Date there are any
Group Available Funds remaining after payment of interest and principal to a
Class or Classes of Certificates entitled thereto, such Group Available Funds
will be added to the Group Available Funds for the other such Group before any
amounts are distributed to the Residual Certificates and such funds will be used
to pay down principal.
(d) No Accrued Certificate Interest will be payable with respect to any
Class of Certificates after the Distribution Date on which the Current Principal
Amount or Notional Amount of such Certificate has been reduced to zero.
(e) If on any Distribution Date the applicable Available Funds for the
Senior Certificates or Components of a Certificate Group is less than the
Accrued Certificate Interest on such Senior Certificates or Components for such
Distribution Date prior to reduction for Net Interest Shortfall and the interest
portion of Realized Losses, the shortfall will be allocated among the holders of
each Class of interest-bearing Senior Certificates or Components in such
Certificate Group in proportion to the respective amounts of Accrued Certificate
Interest that would have been allocated thereto in the absence of such Net
Interest Shortfall and/or Realized Losses for such Distribution Date. In
addition, the amount of any interest shortfalls with respect to the related
Mortgage Loan Group will constitute unpaid Accrued Certificate Interest and will
be distributable to holders of the Certificates of the related Classes or
Components entitled to such amounts on subsequent Distribution Dates, to the
extent of the applicable Available Funds after current interest distributions as
required herein. Any such amounts so carried forward will not bear interest.
Shortfalls in interest payments will not be offset by a reduction in the
servicing compensation of the Master Servicers or otherwise, except to the
extent of applicable Compensating Interest Payments.
Section 6.02. [Reserved]
Section 6.03. ALLOCATION OF LOSSES. (a) On or prior to each Determination
Date, each Master Servicer shall determine the amount of any Realized Loss in
respect of each Mortgage Loan in each Mortgage Loan Group which such Master
Servicer services that occurred during the immediately preceding calendar month.
The Trustee shall then with respect to each such Mortgage Loan in each Mortgage
Loan Group allocate Realized Losses on a pro rata basis between the PO
Percentage of the Scheduled Principal Balance of a Mortgage Loan which suffered
a Realized Loss and the Non-PO Percentage of the Scheduled Principal Balance of
such Mortgage Loan.
(b) (A) With respect to any Determination Date, with respect to Group 1
Certificates, the principal portion of each Realized Loss on a Group 1 Mortgage
Loan shall be allocated as follows:
(i) The applicable PO Percentage of any such Realized Loss
shall be allocated to the Component P-1; and
(ii) The applicable Non-PO Percentage of any such Realized
Loss shall be allocated as follows:
first, to the Class B-6 Certificates until the current
Principal Amount thereof has been reduced to zero;
second, to the Class B-5 Certificates until the Current
Principal Amount thereof has been reduced to zero;
third, to the Class B-4 Certificates until the Current
Principal Amount thereof has been reduced to zero;
fourth, to the Class B-3 Certificates until the Current
Principal Amount thereof has been reduced to zero;
fifth, to the Class B-2 Certificates until the Current
Principal Amount thereof has been reduced to zero;
sixth, to the Class B-1 Certificates until the Current
Principal amount thereof has been reduced to zero;
seventh, to the Classes of Group 1 Senior Certificates
(other than the Class 1-A-X1 and Class 1-A-X2 Certificates and Component
X-1 and Component P-1), pro rata, in accordance with their Current
Principal Amounts; and
(B) With respect to any Distribution Date, with respect to Group
2 Certificates, the principal portion of each Realized Loss on a Group 2
Mortgage Loan shall be allocated as follows:
(i) The applicable PO Percentage of any such Realized Loss
shall be allocated to the Component P-2; and
(ii) The applicable Non-PO Percentage of such Realized Loss
shall be allocated as follows:
first, to the Class B-6 Certificates until the Current
Principal Amount thereof has been reduced to zero;
second, to the Class B-5 Certificates until the Current
Principal Amount thereof has been reduced to zero;
third, to the Class B-4 Certificates until the Current
Principal Amount thereof has been reduced to zero;
fourth, to the Class B-3 Certificates until the Current
Principal Amount thereof has been reduced to zero;
fifth, to the Class B-2 Certificates until the Current
Principal Amount thereof has been reduced to zero;
sixth, to the Class B-1 Certificates until the Current
Principal Amount thereof has been reduced to zero;
seventh, to the Classes of Group 2 Senior Certificates
(other than the Component X-2 and Component P-2), pro rata, in accordance
with their Current Principal Amounts (except that the pro rata portion of
any Realized Losses that would otherwise be borne by the Class 2-A-1
Certificates will be borne by the Class 2-A-4 Certificates until the
Current Principal Amount of the Class 2-A-4 Certificates has been reduced
to zero); and
(C) With respect to any Distribution Date, with respect to Group
3 Certificates, the principal portion of each Realized Loss on a Group 3
Mortgage Loan shall be allocated as follows:
(i) The applicable PO Percentage of any such Realized Loss
shall be allocated to the Component P-3; and
(ii) The applicable Non-PO Percentage of any such Realized
Loss shall be allocated as follows:
first, to the Class 3-B-6 Certificates until the
Current Principal Amount thereof has been reduced to zero;
second, to the Class 3-B-5 Certificates until the
Current Principal Amount thereof has been reduced to zero;
third, to the Class 3-B-4 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fourth, to the Class 3-B-3 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fifth, to the Class 3-B-2 Certificates until the
Current Principal Amount thereof has been reduced to zero;
sixth, to the Class 3-B-1 Certificates until the
Current Principal amount thereof has been reduced to zero;
seventh, to the Class 3-A Certificates; and
(D) With respect to any Distribution Date, with respect to Group
4 Certificates, the principal portion of each Realized Loss on a Group 4
Mortgage Loan shall be allocated as follows:
(i) The applicable PO Percentage of any such Realized Loss
shall be allocated to the Component P-4; and
(ii) The applicable Non-PO Percentage of any such Realized
Loss shall be allocated as follows:
first, to the Class 4-B-6 Certificates until the
Current Principal Amount thereof has been reduced to zero;
second, to the Class 4-B-5 Certificates until the
Current Principal Amount thereof has been reduced to zero;
third, to the Class 4-B-4 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fourth, to the Class 4-B-3 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fifth, to the Class 4-B-2 Certificates until the
Current Principal Amount thereof has been reduced to zero;
sixth, to the Class 4-B-1 Certificates until the
Current Principal Amount thereof has been reduced to zero;
seventh, to the Class 4-A Certificates; and
(E) With respect to any Distribution Date, with respect to Group
5 Certificates, the principal portion of the Non-PO Percentage of each Realized
Loss shall be allocated as follows:
first, to the Class 5-B-6 Certificates until the
Current Principal Amount thereof has been reduced to zero;
second, to the Class 5-B-5 Certificates until the
Current Principal Amount thereof has been reduced to zero;
third, to the Class 5-B-4 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fourth, to the Class 5-B-3 Certificates until the
Current Principal Amount thereof has been reduced to zero;
fifth, to the Class 5-B-2 Certificates until the
Current Principal Amount thereof has been reduced to zero;
sixth, to the Class 5-B-1 Certificates until the
Current Principal Amount thereof has been reduced to zero;
seventh, to the Class 5-A Certificates and the
Component P-5 pro rata in accordance with their Current Principal Amounts;
(F) Notwithstanding the foregoing, no such allocation of any
Realized Loss shall be made on a Distribution Date to (A) any Class of Group 1
Certificates or Group 2 Certificates to the extent that such allocation would
result in the reduction of the aggregate Current Principal Amounts of all the
Group 1 Certificates and Group 2 Certificates as of such Distribution Date,
after giving effect to all distributions and prior allocations of Realized
Losses on such date, to an amount less than the aggregate Scheduled Principal
Balance of all of the Group 1 Mortgage Loans and the Group 2 Mortgage Loans as
of the first day of the month of such Distribution Date (such limitation, the
"Group 1 and 2 Loss Allocation Limitation"), (B) a Class of Group 3 Certificates
to the extent that such allocation would result in the reduction of the
aggregate Current Principal Amounts of all the Group 3 Certificates as of such
Distribution Date, after giving effect to all distributions and prior
allocations of Realized Losses on such date, to an amount less than the
aggregate Scheduled Principal Balance of the Group 3 Mortgage Loans as of the
first day of the month of such Distribution Date (such limitation, the "Group 3
Loss allocation Limitation"), (C) a Class of Group 4 Certificates to the extent
that such allocation would result in the reduction of the aggregate Current
Principal Amounts of all the Group 4 Certificates as of such Distribution Date,
after giving effect to all distributions and prior allocations of Realized
Losses on such date, to an amount less than the aggregate Scheduled Principal
Balance of the Group 4 Mortgage Loans as of the first day of the month of such
Distribution Date (such limitation, the "Group 4 Loss allocation Limitation")
and (D) a Class of Group 5 Certificates to the extent that such allocation would
result in the reduction of the aggregate Current Principal Amounts of all the
Group 5 Certificates as of such Distribution date, after giving effect to all
distributions and prior allocations of Realized Losses on such date, to an
amount less than the aggregate Scheduled Principal Balance of the Group 5
Mortgage Loans as of the first day of the month of such Distribution Date (such
limitation, the "Group 5 Loss Allocation Limitation").
(c) Any Realized Losses allocated to a Class of Certificates pursuant to
Subsection 6.03(b) shall be allocated among the Certificates of such Class in
proportion to their respective Current Principal Amounts. Any allocation of
Realized Losses pursuant to this Subsection 6.03(c) shall be accomplished by
reducing the Current Principal Amount of the related Certificates on the related
Distribution Date in accordance with Subsection 6.03(d).
(d) Realized Losses allocated in accordance with this Section 6.03 shall be
allocated on the Distribution Date in the month following the month in which
such loss was incurred and, in the case of the principal portion thereof, after
giving effect to distributions made on such Distribution Date, except that the
aggregate amount of Realized Losses to be allocated to the Component P-1,
Component P-2, Component P-3 and Component P-4 on such Distribution Date will be
taken into account in determining distributions in respect of the Component P-1
Deferred Amount, Component P-2 Deferred Amount, Component P-3 Deferred Amount
and Component P-4 Deferred Amount, respectively.
(e) On each Distribution Date, the Trustee shall determine the Group B
Subordinate Certificate Writedown Amount, Group 3 Subordinate Certificate
Writedown Amount, Group 4 Subordinate Certificate Writedown Amount and Group 5
Subordinate Certificate Writedown Amount, respectively, if any. Any such Group B
Subordinate Certificate Writedown Amount, Group 3 Subordinate Certificate
Writedown Amount, Group 4 Subordinate Certificate Writedown Amount or Group 5
Subordinate Certificate Writedown Amount, respectively, shall effect a
corresponding reduction in the Current Principal Amount of (i) if prior to the
Group 1 and 2 Cross-Over Date, the Group 3 Cross-Over Date, the Group 4
Cross-Over Date or Group 5 Cross-Over Date, as applicable, the Current Principal
Amounts of the Group B Subordinate Certificates, the Group 3 Subordinate
Certificates, the Group 4 Subordinate Certificates and the Group 5 Subordinate
Certificates, respectively, in the reverse order of their numerical Class
designations and (ii) from and after the the Group 3 Cross-Over Date, the Group
4 Cross-Over Date or Group 5 Cross-Over Date, as applicable, the Group 3 Senior
Certificates, the Group 4 Senior Certificates and the Group 5 Senior
Certificates, respectively, pro rata based on their respective Current Principal
Amounts, which reduction shall occur on such Distribution Date after giving
effect to distributions made on such Distribution Date.
(f) On each Distribution Date, on or prior to the Group 1 and 2 Cross-Over
Date, the Group 3 Cross-Over Date or the Group 4 Cross-Over Date, as applicable,
the Trustee shall determine the Component P Deferred Payment Writedown Amount
with respect to each of Component P-1 and Component P-2 and Component P-3 and
Component P-4, respectively, if any. Any such Component P Deferred Payment
Writedown Amount with respect to Component P-1 and Component P-2 or Component
P-3 or Component P-4 shall effect a corresponding reduction in the Current
Principal Amount of the Group B Subordinate Certificates, Group 3 Subordinate
Certificates or Group 4 Subordinate Certificates, respectively, in the reverse
order of their numerical Class designations.
(g) The interest portion of any Realized Losses on Group 1 Mortgage Loans,
Group 2 Mortgage Loans, Group 3 Mortgage Loans, Group 4 Mortgage Loans and Group
5 Mortgage Loans occurring on or prior to the Group 1 and 2 Cross-Over Date, the
Group 1 and 2 Cross-Over Date, the Group 3 Cross-Over Date, the Group 4
Cross-Over Date or the Group 5 Cross-Over Date, respectively, will not be
allocated among any Certificates, but will reduce the amount of Group 1
Available Funds, Group 2 Available Funds, Group 3 Available Funds, Group 4
Available Funds and Group 5 Available Funds, respectively, on the related
Distribution Date. As a result of the subordination of the Group B Subordinate
Certificates, Group 3 Subordinate Certificates, Group 4 Subordinate Certificates
and Group 5 Subordinate Certificates, respectively, in right of distribution,
such Realized Losses on the Group 1 and 2 Mortgage Loans, the Group 3 Mortgage
Loans, the Group 4 Mortgage Loans and the Group 5 Mortgage Loans, will be borne
first by the Group B Subordinate Certificates, Group 3 Subordinate Certificates,
Group 4 Subordinate Certificates and Group 5 Subordinate Certificates,
respectively, in inverse order of their numerical Class designations.
Section 6.04. [Reserved]
Section 6.05. PAYMENTS. (a) No later than the Determination Date, each
Master Servicer shall provide to the Trustee in such electronic format as the
Trustee may reasonably request any information with respect to the related
Mortgage Loans required to enable the Trustee to make, or cause its agent to
make, distributions on the Certificates and prepare reports to
Certificateholders.
(b) On each Distribution Date, other than the final Distribution Date, the
Trustee shall distribute to each Certificateholder of record on the directly
preceding Record Date the Certificateholder's PRO RATA share of its Class (based
on the aggregate Fractional Undivided Interest represented by such Holder's
Certificates) of all amounts required to be distributed on such Distribution
Date to such Class. The Trustee shall calculate such amounts based upon the
information provided by the Master Servicer pursuant to Subsection 6.05(a).
(c) Payment of the above amounts to each Certificateholder shall be made
(i) by check mailed to each Certificateholder entitled thereto at the address
appearing in the Certificate Register or (ii) upon receipt by the Trustee on or
before the fifth Business Day preceding the Record Date of written instructions
from a Certificateholder holding Certificates representing an initial aggregate
Current Principal Amount or Notional Amount of not less than $1,000,000 by wire
transfer to a United States dollar account maintained by the payee at any United
States depository institution with appropriate facilities for receiving such a
wire transfer; PROVIDED, however, that the final payment in respect of each
Class of Certificates will be made only upon presentation and surrender of such
respective Certificates at the office or agency of the Trustee specified in the
notice to Certificateholders of such final payment.
Section 6.06. STATEMENTS TO CERTIFICATEHOLDERS. (a) Concurrently with each
distribution to Certificateholders, the Trustee shall forward by first-class
mail to each Certificateholder, with a copy to the Seller, each Master Servicer
and the Rating Agencies, a statement setting forth the following information,
expressed with respect to clauses (i) through (vi) in the aggregate and as a
Fractional Undivided Interest representing an initial Current Principal Amount
of $1,000, or in the case of Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X and
Class 4-X Certificates, a Notional Amount of $1000, or in the case of the Class
R-1 or R-2 Certificates, an initial Current Principal Amount of $100:
(i) the Current Principal Amount (or Notional Amount in the case of
the Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X and Class 4-X
Certificates) of each Class of Certificates immediately prior to such
Distribution Date;
(ii) the amount of the distribution allocable to principal on each
applicable Class of Certificates;
(iii) the aggregate amount of interest accrued at the related
Pass-Through Rate with respect to each Class of interest-bearing
Certificates during the related Interest Accrual Period;
(iv) the Net Interest Shortfall and any other adjustments to interest
at the related Pass-Through Rate necessary to account for any difference
between interest accrued and aggregate interest distributed with respect to
each Class of interest-bearing Certificates;
(v) the amount of the distribution allocable to interest on each Class
of interest-bearing Certificates;
(vi) the Pass-Through Rates for each Class of interest-bearing
Certificates with respect to such Distribution Date;
(vii) the Current Principal Amount (or Notional Amount in the case of
the Class 1-A-X1, Class 1-A-X2, Class X, Class 3-X and Class 4-X
Certificates) of each Class of Certificates after such Distribution Date;
(viii) the amount of any Monthly Advances, Compensating Interest
Payments and outstanding unreimbursed advances by each Master Servicer
included in such distribution separately stated for each Mortgage Loan
Group;
(ix) the amount of any Realized Losses (listed separately for each
Mortgage Loan Group) during the related Prepayment Period and cumulatively
since the Cut-off Date and the amount and source (separately identified) of
any distribution in respect thereof included in such distribution;
(x) the amount of Scheduled Principal and Principal Prepayments,
(including but separately identifying the principal amount of principal
prepayments, Insurance Proceeds, the purchase price in connection with the
purchase of Mortgage Loans, cash deposits in connection with substitutions
of Mortgage Loans and Net Liquidation Proceeds) with respect to each
Mortgage Loan Group and the number and principal balance of Mortgage Loans
purchased or substituted for during the relevant period and cumulatively
since the Cut-off Date with respect to each Mortgage Loan Group;
(xi) the number of Mortgage Loans (excluding REO Property) in each
Mortgage Loan Group remaining in the Trust Fund as of the end of the
related Due Period;
(xii) information for each Mortgage Loan Group regarding any Mortgage
Loan delinquencies as of the end of the related Due Period, including the
aggregate number, aggregate Outstanding Principal Balance and aggregate
Scheduled Principal Balance of Mortgage Loans delinquent one month, two
months and three months or more;
(xiii) for each Mortgage Loan Group, the number of Mortgage Loans in
the foreclosure process as of the end of the related Due Period and the
aggregate Outstanding Principal Balance of such Mortgage Loans;
(xiv) for each Mortgage Loan Group, the number and aggregate
Outstanding Principal Balance of all Mortgage Loans as to which the
Mortgaged Property was REO Property as of the end of the related Due
Period;
(xv) the book value (the sum of (A) the Outstanding Principal Balance
of the Mortgage Loan, (B) accrued interest through the date of foreclosure
and (C) foreclosure expenses) of any REO Property in each Mortgage Loan
Group; PROVIDED THAT, in the event that such information is not available
to the relevant Master Servicer and the Trustee on the Distribution Date,
such information shall be furnished promptly after it becomes available;
(xvi) the amount of Realized Losses allocated to each Class of
Certificates since the prior Distribution Date and in the aggregate for all
prior Distribution Dates; and
(xvii) the then applicable Senior Percentage, Senior Prepayment
Percentage, Subordinate Percentage and Subordinate Prepayment Percentage
for each Certificate Group.
The information set forth above shall be calculated, or reported, as the
case may be, by the Trustee based on data provided by the Master Servicers
pursuant to Subsection 6.05(a) and, with respect to prior periods, Section 6.06,
upon which the Trustee may conclusively rely. The information furnished by the
Master Servicers shall be sufficient for the Trustee to calculate any statements
it is required to make.
(b) By April 30 of each year beginning in 1999, the Trustee will furnish a
report to each Holder of the Certificates of record at any time during the prior
calendar year as to the aggregate of amounts reported pursuant to subclauses
(a)(ii) and (a)(v) above with respect to the Certificates, plus information with
respect to the amount of servicing compensation and such other customary
information as each Master Servicer determines and advises the Trustee to be
necessary and/or to be required by the Internal Revenue Service or by a federal
or state law or rules or regulations to enable such Holders to prepare their tax
returns for such calendar year. Such obligations shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to the requirements of the Code.
Each Master Servicer shall supply to the Trustee in a timely manner the
information required for the statements described above which, where
appropriate, shall be the information from which the Trustee can calculate the
statements it is required to make.
Section 6.07. REPORTS TO THE TRUSTEE AND EACH MASTER SERVICER. (a) Not
later than 15 days after each Distribution Date, the Trustee shall forward to
each Master Servicer a statement setting forth the status of the Certificate
Account and the Custody Account and each subaccount thereof as of the close of
business on the last day of the month of the Distribution Date and showing, for
the month covered by such statement, deposits in or withdrawals from the
Certificate Account and the Custody Account.
(b) On or before the Determination Date, each Master Servicer shall provide
to the Trustee (and with respect to the information contained in subclause (xiv)
hereof, the Seller), with respect to the related Mortgage Loans in each Mortgage
Loan Group and the related REO Property, respectively, a Loan Summary and
Remittance Report in such electronic format as the Trustee may reasonably
request and in such hardcopy format as each Master Servicer and the Trustee
shall agree which, if there are Sub-Servicers, shall be based upon reports from
Sub-Servicers, if any, received by a Master Servicer on or before the seventh
Business Day of such month with respect to the related Mortgage Loans and
related REO Property in each Mortgage Loan Group and containing the following
information (in respect of the REO Property, only such information which is
applicable) (provided that the information marked with an "*" below may be
provided by a Master Servicer solely in a hardcopy format):
*(i) Aggregate deposits to and withdrawals from each subaccount of the
Certificate Account since the date of the prior statement, stated
separately for each category of deposit specified in Section 4.02 and each
category of withdrawal specified in Section 4.03, indicating separately the
aggregate of amounts withdrawn which are not applicable to a particular
Mortgage Loan in each Mortgage Loan Group;
(ii) Amount of each Group Available Funds expected for the related
Distribution Date and attributable to each of the following categories:
(A) regularly scheduled principal;
(B) Principal Prepayments (stated separately for (u) partial
prepayments, (v) full prepayments, (w) Net Liquidation Proceeds,
stating Liquidation Proceeds and Liquidation Expenses
separately), *(x) Insurance Proceeds, *(y) the purchase price in
connection with the purchase of a Mortgage Loan, and *(z) any
cash deposit in connection with the substitution of a related
Mortgage Loan;
(C) Regularly scheduled interest on the related Mortgage Loans;
*(D) Monthly Advances made by such Master Servicer;
*(E) Certificate Account Advances;
(F) Compensating Interest Payments; and
*(G) reimbursements in connection with losses on Permitted
Investments.
(iii) Aggregate Outstanding Principal Balances of the related Mortgage
Loans in each Mortgage Loan Group as of the related Due Date, without
giving effect to payments due on such date;
(iv) Realized Losses with respect to each Mortgage Loan Group for the
prior month;
(v) [intentionally omitted];
(vi) [intentionally omitted];
(vii) Aggregate Scheduled Principal Balance of the related Mortgage
Loans in each Mortgage Loan Group as of the related Due Date;
*(viii) Book value of any collateral acquired by means of foreclosure,
grant of deed in lieu of foreclosure or otherwise in respect of any related
Mortgage Loan in each Mortgage Loan Group;
(ix) Number and aggregate principal balance of related Mortgage Loans
in each Mortgage Loan Group which are 30, 60, 90 and 120 days delinquent as
calculated by such Master Servicer, those which are in foreclosure, those
with respect to which the related Mortgagor is bankrupt, and those which
are REO Property;
(x) Interest Shortfall with respect to the related Distribution Date
and portion thereof resulting from Voluntary Principal Prepayments in full
or the provisions of the Relief Act;
(xi) [intentionally omitted]
*(xii) Amount, if any, by which the aggregate of payments of scheduled
principal and interest on the related Mortgage Loans in each Mortgage Loan
Group that were due on the related Due Date and delinquent, other than as a
result of the Relief Act, as of the 18th day of such month exceeds the sum
of the Monthly Advances to be made by such Master Servicer and Certificate
Account Advances for such Distribution Date;
*(xiii) Applicable aggregate Master Servicing Fee for the related Due
Period; and
(xiv) Such other information regarding each related Mortgage Loan in
each Mortgage Loan Group, including, but not limited to, an updated
schedule of the Scheduled Principal Balances of such Mortgage Loans as of
the related Due Date, in such electronic format, as may be reasonably
requested by the Trustee and, if requested, in such hardcopy format as such
Master Servicer and the Trustee shall agree.
(c) Not later than three Business Days after each Distribution Date, the
Trustee shall provide written confirmation to each Master Servicer that the
Trustee's books and records are in accordance with the updated schedule of the
Scheduled Principal Balances of the related Mortgage Loans provided that month
by such Master Servicer, and if discrepancies exist, the Trustee shall list such
discrepancies on a schedule thereto with a copy to the Seller.
Section 6.08. MONTHLY ADVANCES. If the Scheduled Payment (together with any
advances from any Sub-Servicers) on an NAMC Mortgage Loan or a PHH Mortgage Loan
that was due on a related Due Date and is delinquent other than as a result of
application of the Relief Act exceeds the amount deposited in the Custody
Account or the Certificate Account which will be used for a Certificate Account
Advance with respect to such Mortgage Loan, NAMC (with respect to an NAMC
Mortgage Loan) or PHH (with respect to a PHH Mortgage Loan) will deposit in the
appropriate subaccount of the Certificate Account not later than the Advancing
Date immediately preceding the related Distribution Date an amount equal to such
deficiency, net of the related Master Servicing Fee for such Mortgage Loan
except to the extent such Master Servicer determines any such advance to be
nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future payments
on the Mortgage Loan for which such Monthly Advance was made. Subject to the
foregoing, such Master Servicer shall continue to make such advances through the
date that the related Mortgaged Property has, in the judgment of such Master
Servicer, been completely liquidated. Any amount used as a Certificate Account
Advance shall be replaced by the applicable Master Servicer by deposit in the
appropriate subaccount of the Certificate Account on or before any future date
on which and to the extent that funds in the appropriate subaccount of the
Certificate Account on such date are less than the amount required to be
transferred by such Master Servicer to such subaccount of the Certificate
Account. If applicable, on the fifth Business Day preceding each Distribution
Date, each Master Servicer shall present an Officer's Certificate to the Trustee
(i) stating that such Master Servicer elects not to make a Monthly Advance in a
stated amount and (ii) detailing the reason it deems the advance to be
nonrecoverable.
Section 6.09. COMPENSATING INTEREST PAYMENTS. Each Master Servicer shall
deposit in the Certificate Account not later than the Advancing Date immediately
preceding the related Distribution Date an amount equal to the lesser of (i) the
aggregate amounts determined pursuant to subclauses (a) and (b) of the
definition of Interest Shortfall as calculated with respect to Mortgage Loans
serviced by such Master Servicer for the related Distribution Date and (ii) the
applicable Master Servicing Fee for such Distribution Date (except that any
Master Servicing Fee of PHH that is based on a PHH Master Servicing Fee Rate in
excess of 0.20% shall not be considered in calculating the amount of any
Compensating Interest Payment due from PHH) (such amount, the "Compensating
Interest Payment"). A Master Servicer shall not be entitled to any reimbursement
of any Compensating Interest Payment.
Section 6.10. REPORTS OF FORECLOSURES AND ABANDONMENT OF MORTGAGED
PROPERTY. Each year each Master Servicer shall report or cause to be reported to
the Internal Revenue Service foreclosures and abandonments of any Mortgaged
Property as required by Section 6050J of the Code.
<PAGE>
ARTICLE VII
The Master Servicers
Section 7.01. LIABILITIES OF THE MASTER SERVICERS. Each Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by it herein. Only the NAMC Master
Servicer or the PHH Master Servicer, as the case may be, shall be liable with
respect to the servicing of the NAMC Mortgage Loans or the PHH Mortgage Loans,
respectively, and the REO Property for actions taken by any such person in
contravention of such Master Servicer's duties hereunder.
Section 7.02. MERGER OR CONSOLIDATION OF THE MASTER SERVICERS. (a) Each
Master Servicer will keep in full effect its existence, rights and franchises as
a corporation under the laws of the state of its incorporation, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its duties under this Agreement.
(b) Any Person into which either Master Servicer may be merged or
consolidated, or any corporation resulting from any merger or consolidation to
which either Master Servicer shall be a party, or any Person succeeding to the
business of either Master Servicer, shall be the successor of such Master
Servicer hereunder, without the execution or filing of any paper or further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 7.03. INDEMNIFICATION OF THE TRUSTEE. (a) Each Master Servicer
agrees to the extent described in Section 7.03(b) to indemnify the Indemnified
Persons for, and to hold them harmless against, any loss, liability or expense
incurred on their part, arising out of, or in connection with, this Agreement,
including the costs and expenses (including reasonable legal fees and expenses)
of defending themselves against any such claim other than (i) any loss,
liability or expense related to its failure to perform its duties in compliance
with this Agreement (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement and (ii) any loss, liability
or expense incurred by reason of such Person's willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder, provided that with respect to any
such claim, the Trustee shall have given each Master Servicer and the Seller
written notice thereof promptly after the Trustee shall have with respect to
such claim knowledge thereof.
(b) Only the NAMC Master Servicer will indemnify any Indemnified Person for
any loss, liability or expense which primarily relates to the servicing or
administration of the NAMC Mortgage Loans. Only the PHH Master Servicer will
indemnify any Indemnified Person for any loss, liability for expense which
primarily relates to the servicing or administration of the PHH Mortgage Loans.
The Seller will indemnify any Indemnified Person for any other loss, liability
or expense of any Indemnified Person not otherwise referred to in this
paragraph.
Section 7.04. LIMITATION ON LIABILITY OF THE MASTER SERVICERS AND OTHERS.
Subject to the obligation of each Master Servicer to indemnify the Indemnified
Persons pursuant to Section 7.03:
(a) Neither the Master Servicers nor any of the directors, officers,
employees or agents of either Master Servicer shall be under any liability to
the Indemnified Persons, the Seller, the Trust Fund or the Certificateholders
for taking any action or for refraining from taking any action in good faith
pursuant to this Agreement, or for errors in judgment; PROVIDED, however, that
this provision shall not protect either Master Servicer or any such Person
against any breach of warranties or representations made herein or any liability
which would otherwise be imposed by reason of such Person's willful misfeasance,
bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder.
(b) Each Master Servicer and any director, officer, employee or agent of
either Master Servicer may rely in good faith on any document of any kind PRIMA
FACIE properly executed and submitted by any Person respecting any matters
arising hereunder.
(c) Each Master Servicer and any director, officer, employee or agent of
either Master Servicer shall be indemnified by the Trust and held harmless
thereby against any loss, liability or expense incurred in connection with any
legal proceedings relating to this Agreement or the Certificates (including
reasonable legal fees and disbursements of counsel), other than (i) any loss,
liability or expense related to its failure to perform its duties in compliance
with this Agreement (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and (ii) any loss, liability
or expense incurred by reason of such Person's willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder.
(d) The Master Servicers shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties under
this Agreement and that in its opinion may involve it in any expense or
liability; PROVIDED, HOWEVER, each Master Servicer may in its discretion, with
the consent of the Trustee, 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 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 Fund,
and each Master Servicer shall be entitled to be reimbursed therefor out of the
Certificate Account as provided by Subsection 4.03(a). Nothing in this
Subsection 7.04(d) shall affect either Master Servicer's obligation to
supervise, or to take such actions as are necessary to ensure, the servicing and
administration of the Mortgage Loans pursuant to Subsection 3.01(a).
(e) In taking or recommending any course of action pursuant to this
Agreement, unless specifically required to do so pursuant to this Agreement, the
Master Servicers shall not be required to investigate or make recommendations
concerning potential liabilities which the Trust might incur as a result of such
course of action by reason of the condition of the Mortgaged Properties but
shall give notice to the Trustee if it has notice of such potential liabilities.
Section 7.05. MASTER SERVICERS NOT TO RESIGN. Except as provided in Section
7.07, neither Master Servicer shall resign from the obligations and duties
hereby imposed on it except upon a determination that any such duties hereunder
are no longer permissible under applicable law. Any such determination
permitting the resignation of either Master Servicer shall be evidenced by an
Opinion of Independent Counsel to such effect delivered to the Trustee. No such
resignation by either Master Servicer shall become effective until the Trustee
or a successor to such Master Servicer reasonably satisfactory to the Trustee
shall have assumed the responsibilities and obligations of such Master Servicer
in accordance with Section 8.02 hereof. The Trustee shall notify the Rating
Agencies of the resignation of a Master Servicer.
Section 7.06. [Reserved]
Section 7.07. SALE AND ASSIGNMENT OF MASTER SERVICING. Each Master Servicer
may sell and assign its rights and delegate its duties and obligations in their
entirety as Master Servicer under this Agreement; PROVIDED, HOWEVER, that: (i)
the purchaser or transferee accepting such assignment and delegation (a) shall
be a Person which shall be qualified to service mortgage loans for FNMA or
FHLMC; (b) shall have a net worth of not less than $10,000,000 (unless otherwise
approved by each Rating Agency pursuant to clause (ii) below); (c) shall be
reasonably satisfactory to the Trustee (as evidenced in a writing signed by the
Trustee); (d) shall execute and deliver to the Trustee an agreement, in form and
substance reasonably satisfactory to the Trustee, which contains an assumption
by such Person of the due and punctual performance and observance of each
covenant and condition to be performed or observed by it as master servicer
under this Agreement, any custodial agreement from and after the effective date
of such agreement; (ii) each Rating Agency shall be given prior written notice
of the identity of the proposed successor to either Master Servicer and each
Rating Agency's rating of the Certificates in effect immediately prior to such
assignment, sale and delegation will not be downgraded, qualified or withdrawn
as a result of such assignment, sale and delegation, as evidenced by a letter to
such effect delivered to each Master Servicer and the Trustee; and (iii) such
Master Servicer assigning and selling the master servicing shall deliver to the
Trustee an Officer's Certificate and an Opinion of Independent Counsel, each
stating that all conditions precedent to such action under this Agreement have
been completed and such action is permitted by and complies with the terms of
this Agreement. No such assignment or delegation shall affect any liability of
either Master Servicer arising prior to the effective date thereof.
<PAGE>
ARTICLE VIII
Default
Section 8.01. 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) and
only with respect to the defaulting Master Servicer:
(i) Either Master Servicer fails to cause to be deposited in the
Certificate Account any amount so required to be deposited pursuant to this
Agreement, and such failure continues unremedied for a period of two
Business Days after the date such deposit was required to be made; or
(ii) Either Master Servicer fails to observe or perform in any
material respect any other covenants and agreements set forth in the
Certificates or this Agreement to be performed by it, which covenants and
agreements materially affect the rights of Certificateholders, and such
failure continues unremedied for a period of 60 days after the date on
which written notice of such failure, properly requiring the same to be
remedied, shall have been given to such Master Servicer by the Trustee or
to such Master Servicer and the Trustee by the Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than 25% of
the Trust Fund; or
(iii) There is entered against either Master Servicer a decree or
order by a court or agency or supervisory authority having jurisdiction in
the premises for the appointment of a conservator, 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, and the continuance of any such decree or order is unstayed
and in effect for a period of 60 consecutive days, or an involuntary case
is commenced against either Master Servicer under any applicable insolvency
or reorganization statute and the petition is not dismissed within 60 days
after the commencement of the case; or
(iv) Either Master Servicer consents 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 such Master Servicer or substantially all of its property; or
either Master Servicer admits in writing its inability to pay its debts
generally as they become due, files a petition to take advantage of any
applicable insolvency or reorganization statute, makes an assignment for
the benefit of its creditors, or voluntarily suspends payment of its
obligations; or
(v) Either Master Servicer assigns or delegates its duties or rights
under this Agreement in contravention of the provisions permitting such
assignment or delegation under Sections 7.05 or 7.07.
In each and every such case, so long as such Event of Default with respect to a
Master Servicer shall not have been remedied, either the Trustee or the Holders
of Certificates evidencing Fractional Undivided Interests aggregating not less
than 51% of the principal of the Trust Fund, by notice in writing to such Master
Servicer (and to the Trustee if given by such Certificateholders), with a copy
to the Rating Agencies, may terminate all of the rights and obligations (but not
the liabilities) of such Master Servicer under this Agreement and in and to the
Mortgage Loans and/or the REO Property serviced by such Master Servicer and the
proceeds thereof. Upon the receipt by such Master Servicer of the written
notice, all authority and power of such Master Servicer under this Agreement,
whether with respect to the Certificates, the Mortgage Loans, REO Property or
under any other related agreements, including the Sub-Servicing Agreements (but
only to the extent that such other agreements relate to the Mortgage Loans or
REO Property) shall, subject to Section 8.02, automatically and without further
action pass to and be vested in the Trustee pursuant to this Section 8.01; and,
without limitation, the Trustee is hereby authorized and empowered to execute
and deliver, on behalf of such Master Servicer as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. Each Master Servicer
agrees to cooperate with the Trustee in effecting the termination of such Master
Servicer's rights and obligations hereunder, including, without limitation, the
transfer to the Trustee of (i) the property and amounts which are then or should
be part of the Trust or which thereafter become part of the Trust; (ii)
originals or copies of all documents of such Master Servicer reasonably
requested by the Trustee to enable it to assume such Master Servicer's duties
thereunder; and (iii) the rights and obligations of the NAMC Master Servicer
under the Sub-Servicing Agreements with respect to the NAMC Mortgage Loans and
the rights and obligations of the PHH Master Servicer under the Sub-Servicing
Agreements with respect to the PHH Mortgage Loans. In addition to any other
amounts which are then, or, notwithstanding the termination of its activities
under this Agreement, may become payable to such Master Servicer under this
Agreement, such Master Servicer shall be entitled to receive, out of any amount
received on account of a Mortgage Loan or REO Property, that portion of such
payments which it would have received as reimbursement pursuant to Section 3.14
if notice of termination had not been given. The termination of the rights and
obligations of a Master Servicer shall not affect any obligations incurred by
such Master Servicer prior to such termination.
Section 8.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) Upon the
receipt by either Master Servicer of a notice of termination pursuant to Section
8.01 or an Opinion of Independent Counsel pursuant to Section 7.05 to the effect
that such Master Servicer is legally unable to act or to delegate its duties to
a Person which is legally able to act, the Trustee shall automatically become
the successor in all respects to such Master Servicer in its capacity under this
Agreement and the transactions set forth or provided for herein and shall
thereafter be subject to all the responsibilities, duties, liabilities and
limitations on liabilities relating thereto placed on such Master Servicer by
the terms and provisions hereof; PROVIDED, HOWEVER, that the Trustee (i) shall
be under no obligation to purchase any Mortgage Loan pursuant to Section 10.01;
and (ii) shall have no obligation whatsoever with respect to any liability
(other than advances deemed recoverable and not previously made) incurred by
such Master Servicer at or prior to the time of receipt by such Master Servicer
of such notice or by the Trustee of such Opinion of Independent Counsel. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans which such Master Servicer would have been entitled to retain
if such Master Servicer had continued to act hereunder, except for those amounts
due such Master Servicer as reimbursement for advances previously made or
expenses previously incurred. Notwithstanding the above, the Trustee may, if it
shall be unwilling so to act, or shall, if it is legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution which is a FNMA- or
FHLMC-approved servicer, and with respect to a successor to such Master Servicer
only, having a net worth of not less than $10,000,000, as the successor to such
Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of such Master Servicer hereunder.
Pending appointment of a successor to either Master Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on the Mortgage Loans as it and
such successor shall agree; PROVIDED, HOWEVER, that no such compensation shall
be in excess of that permitted the Trustee under this Subsection 8.02(a), and
that such successor shall undertake and assume the obligations of the Trustee to
pay compensation to any third Person acting as an agent or independent
contractor in the performance of master servicing responsibilities hereunder.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(b) If the Trustee shall succeed to any duties of either Master Servicer
respecting the Mortgage Loans as provided herein, it shall do so in a separate
capacity and not in its capacity as Trustee and, accordingly, the provisions of
Article IX shall be inapplicable to the Trustee in its duties as the successor
to such Master Servicer in the servicing of the Mortgage Loans (although such
provisions shall continue to apply to the Trustee in its capacity as Trustee);
the provisions of Article VII, however, shall apply to it in its capacity as
successor master servicer.
Section 8.03. NOTIFICATION TO CERTIFICATEHOLDERS. Upon any termination or
appointment of a successor to a Master Servicer, the Trustee shall give prompt
written notice thereof to Certificateholders at their respective addresses
appearing in the Certificate Register and to the Rating Agencies.
Section 8.04. WAIVER OF DEFAULTS. The Trustee shall transmit by mail to all
Certificateholders, within 60 days after the occurrence of any Event of Default
known to the Trustee, unless such Event of Default shall have been cured, notice
of each such Event of Default hereunder known to the Trustee. The Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
51% of the Trust Fund may, on behalf of all Certificateholders, waive any
default by either Master Servicer in the performance of its obligations
hereunder and the consequences thereof, except a default in the making of or the
causing to be made any required distribution on the Certificates. Upon any such
waiver of a past default, such default shall be deemed to cease to exist, and
any Event of Default arising therefrom shall be deemed to have been timely
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived. The related Master Servicer shall give notice of any
such waiver to the Rating Agencies.
Section 8.05. LIST OF CERTIFICATEHOLDERS. Upon written request of three or
more Certificateholders of record, for purposes of communicating with other
Certificateholders with respect to their rights under this Agreement, the
Trustee will afford such Certificateholders access during business hours to the
most recent list of Certificateholders held by the Trustee.
<PAGE>
ARTICLE IX
Concerning the Trustee
Section 9.01. DUTIES OF TRUSTEE. (a) The Trustee, prior to the occurrence
of an Event of Default and after the curing or waiver of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement as duties of the Trustee. If an
Event of Default has occurred and has not been cured or waived, the Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and
subject to Section 8.02(b) use the same degree of care and skill in their
exercise, as a prudent person would exercise under the circumstances in the
conduct of his own affairs, but only with respect to the defaulting Master
Servicer.
(b) Upon receipt of all resolutions, certificates, statements, opinions,
reports, documents, orders or other instruments which are specifically required
to be furnished to the Trustee pursuant to any provision of this Agreement, the
Trustee shall examine them to determine whether they are in the form required by
this Agreement; PROVIDED, HOWEVER, that the Trustee shall not be responsible for
the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by each Master Servicer
hereunder.
(c) The Trustee shall make monthly distributions and the final distribution
to the Certificateholders as provided in Sections 6.01 and 10.01 herein.
(d) 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:
(i) Prior to the occurrence of an Event of Default, and after the
curing or waiver of all such Events of Default which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) The Trustee shall not be 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;
(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 directions of the Holders of Certificates evidencing Fractional
Undivided Interests aggregating not less than 25% of the Trust Fund, if
such action or non-action relates to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or other power conferred upon the Trustee, under this
Agreement; and
(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default or Event of Default unless a
Responsible Officer of the Trustee's Corporate Trust Office shall have
actual knowledge thereof. In the absence of such notice, the Trustee may
conclusively assume there is no such default or Event of Default.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of a Master Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, a Master Servicer in accordance with
the terms of this Agreement.
(e) All funds received by the Trustee and required to be deposited in the
Certificate Account and the Custody Account pursuant to this Agreement will be
promptly so deposited by the Trustee.
Section 9.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise
provided in Section 9.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting in reliance on any resolution, Officer's
Certificate, certificate of a Servicing Officer, certificate of auditors or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(ii) The Trustee may consult with counsel and any advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection with respect to any action taken or suffered or omitted by
it hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
(iii) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Agreement, other than its obligation
to give notices pursuant to this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request, order
or direction of any of the Certificateholders pursuant to the provisions of
this Agreement, unless such Certificateholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby. Nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default of which a Responsible Officer of the
Trustee's Corporate Trust Office 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 under the circumstances in the
conduct of his own affairs;
(iv) The Trustee shall not be 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 or waiver of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less
than 25% of the Trust Fund and provided that the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Trustee, reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement. The Trustee may require reasonable
indemnity against such expense or liability as a condition to taking any
such action. The reasonable expense of every such examination shall be paid
by the Certificateholders requesting the investigation;
(vi) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through agents or
attorneys; PROVIDED, HOWEVER, that the Trustee may not appoint any agent to
perform its custodial functions with respect to the Mortgage Files other
than any of its Affiliates or paying agent functions under this Agreement
without the express written consent of each Master Servicer, which consent
will not be unreasonably withheld. The Trustee shall not be liable or
responsible for the misconduct or negligence of any of the Trustee's agents
or attorneys or a custodian or paying agent appointed hereunder by the
Trustee with due care and, when required, with the consent of each Master
Servicer;
(vii) Should the Trustee deem the nature of any action required on its
part, other than a payment or transfer under Subsection 4.02(b) or Section
4.03, to be unclear, the Trustee may require prior to such action that it
be provided by the related Master Servicer with reasonable further
instructions;
(viii) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be accountable for other than its negligence or willful
misconduct in the performance of any such act;
(ix) The Trustee shall not be required to give any bond or surety with
respect to the execution of the trust created hereby or the powers granted
hereunder; and
(x) The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the
repurchase of any Mortgage Loan by BSMCC pursuant to this Agreement and/or
the Mortgage Loan Purchase Agreement or the eligibility of any Mortgage
Loan for purposes of this Agreement.
Section 9.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS. The
recitals contained herein and in the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) shall be taken as the
statements of the Seller, and the Trustee shall have no responsibility for their
correctness. The Trustee makes no representation as to the validity or
sufficiency of the Certificates (other than the signature and countersignature
of the Trustee on the Certificates) or of any Mortgage Loan except as expressly
provided in Sections 2.02 and 2.05 hereof. The Trustee's signature and
countersignature (or countersignature of its agent) on the Certificates shall be
solely in its capacity as Trustee and shall not constitute the Certificates an
obligation of the Trustee in any other capacity. The Trustee shall not be
accountable for the use or application by the Seller 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 with respect to the Mortgage Loans. Subject to the
provisions of Section 2.05, the Trustee shall not be responsible for the
legality or validity of this Agreement or any document or instrument relating to
this Agreement, the validity of the execution of this Agreement or of any
supplement hereto or instrument of further assurance, or the validity, priority,
perfection or sufficiency of the security for the Certificates issued hereunder
or intended to be issued hereunder. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage or any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust Fund or its ability to
generate the payments to be distributed to Certificateholders, under this
Agreement. The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to record this Agreement.
Section 9.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual
capacity or in any capacity other than as Trustee hereunder may become the owner
or pledgee of any Certificates with the same rights it would have if it were not
Trustee, and may otherwise deal with the parties hereto.
Section 9.05. TRUSTEE'S FEES AND EXPENSES. Each Master Servicer covenants
and agrees to pay to the Trustee its Applicable Percentage of the Trustee's Fees
with respect to the calendar month in which the Closing Date occurs. With
respect to the calendar month following the month in which the Closing Date
occurs and all subsequent calendar months, the Trustee's Fees shall be paid from
the Certificate Account, pursuant to Subsection 4.03(b). Each Master Servicer
will be liable for its Applicable Percentage of the Trustee's expenses,
including all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by the Trustee in the administration of the trusts hereunder as
set forth in a fee letter sent by the Trustee to the Seller (including the
reasonable compensation, expenses and disbursements of its counsel) except any
such expense, disbursement or advance as may arise from its negligence or
intentional misconduct or which is the responsibility of the Certificateholders
or the Trust Fund hereunder, and to the extent that the funds in the Certificate
Account are not sufficient to pay the Trustee's Fees, such Master Servicer's
Applicable Percentage of any such shortfall. Such compensation and reimbursement
obligation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust.
Section 9.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee and any
successor Trustee shall during the entire duration of this Agreement be a state
bank or trust company or a national banking association organized and doing
business under the laws of such state or the United States of America,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus and undivided profits of at least $40,000,000 or, in the
case of a successor Trustee, $50,000,000, subject to supervision or examination
by federal or state authority and, in the case of a successor Trustee other than
pursuant to Section 9.10, rated in one of the two highest long-term debt
categories of, or otherwise acceptable to, each of the Rating Agencies. The
Trustee shall not be an Affiliate of either Master Servicer, unless the Trustee
acts as successor Master Servicer hereunder. If the Trustee publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 9.06 the combined capital and surplus of such corporation shall be
deemed to be its total equity capital (combined capital and surplus) as set
forth in its most recent report of condition so published. In case at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 9.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.08.
Section 9.07. INSURANCE. The Trustee, at its own expense, shall at all
times maintain and keep in full force and effect: (i) fidelity insurance, (ii)
theft of documents insurance and (iii) forgery insurance (which may be
collectively satisfied by a "Financial Institution Bond" and/or a "Bankers'
Blanket Bond"). All such insurance shall be in amounts, with standard coverage
and subject to deductibles, as are customary for insurance typically maintained
by banks which act as custodians for investor-owned mortgage pools. A
certificate of an officer of the Trustee as to the Trustee's compliance with
this Section 9.07 shall be furnished to each Master Servicer or any
Certificateholder upon reasonable written request.
Section 9.08. RESIGNATION AND REMOVAL OF THE TRUSTEE. (a) The Trustee may
at any time resign and be discharged from the Trust hereby created by giving
written notice thereof to each Master Servicer, with a copy to the Rating
Agencies. Upon receiving such notice of resignation, the Master Servicers shall
promptly appoint a successor Trustee by written instrument, in triplicate, one
copy of which instrument shall be delivered to each of the resigning Trustee and
the successor Trustee. 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.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Master Servicers or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Master Servicers shall be entitled to remove the Trustee and appoint a successor
Trustee by written instrument, in triplicate, one copy of which instrument shall
be delivered to each of the Trustee so removed and the successor Trustee.
(c) The Holders of Certificates evidencing Fractional Undivided Interests
aggregating not less than 51% of the Trust Fund may at any time remove the
Trustee and appoint a successor Trustee by written instrument or instruments, in
quadruplicate, signed by such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered to each of
the Master Servicers, the Trustee so removed and the successor so appointed.
(d) No resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.08 shall become
effective except upon appointment of and acceptance of such appointment by the
successor Trustee as provided in Section 9.09.
Section 9.09. SUCCESSOR TRUSTEE. (a) Any successor Trustee appointed as
provided in Section 9.08 shall execute, acknowledge and deliver to each Master
Servicer and to its predecessor Trustee an instrument accepting such appointment
hereunder. The resignation or removal of the predecessor Trustee shall then
become effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall after payment of its
outstanding fees and expenses promptly deliver to the successor Trustee all
assets and records of the Trust held by it hereunder, and the Master Servicers
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.
(b) No successor Trustee shall accept appointment as provided in this
Section 9.09 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06.
(c) Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.09, the successor Trustee shall mail notice of the succession of
such Trustee hereunder to all Certificateholders at their addresses as shown in
the Certificate Register and to the Rating Agencies. Each Master Servicer shall
pay its Applicable Percentage of the cost of any mailing by the successor
Trustee.
Section 9.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any state bank or trust
company or national banking association into which the Trustee may be merged or
converted or with which it may be consolidated or any state bank or trust
company or national banking association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any state bank or trust
company or national banking association succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such state bank or trust company or national banking
association shall be eligible under the provisions of Section 9.06. Such
succession shall be valid 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 9.11. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
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 or property constituting the same may at the time be located, the Master
Servicers and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and the Master Servicers to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust, and to vest in such Person or Persons, in such capacity, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 9.11, such powers, duties, obligations, rights and trusts as the
Master Servicers and the Trustee may consider necessary or desirable.
(b) If a Master Servicer shall not have joined in such appointment within
15 days after the receipt by it of a written request so to do, or in case an
Event of Default with respect to a Master Servicer shall have occurred and be
continuing, the Trustee shall have the power to make such appointment without
such Master Servicer.
(c) No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 9.06 hereunder and
no notice to Certificateholders of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 9.08 hereof.
(d) In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 9.11, all rights, powers, duties and obligations
conferred or imposed upon the Trustee and required to be conferred on such
co-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 (whether as Trustee hereunder or as successor to a Master
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.
(e) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(f) To the extent not prohibited by law, any separate trustee or co-trustee
may, at any time, request the Trustee, its agent or attorney-in-fact, with full
power and authority, to do any lawful act under or with respect to 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.
(g) No trustee under this Agreement shall be personally liable by reason of
any act or omission of another trustee under this Agreement. The Master
Servicers and the Trustee acting jointly may at any time accept the resignation
of or remove any separate trustee or co-trustee, except that following the
occurrence of any Event of Default which has not been cured, the Trustee acting
alone may accept the resignation of or remove any separate trustee or
co-trustee.
Section 9.12. MASTER SERVICERS SHALL PROVIDE INFORMATION AS REASONABLY
REQUIRED. The Master Servicers shall furnish to the Trustee, during the term of
this Agreement, such periodic, special, or other reports or information (and in
such electronic format) as may reasonably be requested by the Trustee in order
to fulfill its duties and obligations under this Agreement.
Section 9.13. FEDERAL INFORMATION RETURNS AND REPORTS TO
CERTIFICATEHOLDERS. (a) For Federal income tax purposes, the taxable year of
each of REMIC I and REMIC II shall be a calendar year and the Trustee shall
maintain or cause the maintenance of the books of each of REMIC I and REMIC II
Assets on the accrual method of accounting.
(b) The Trustee shall prepare and file or cause to be filed with the
Internal Revenue Service Federal tax information returns with respect to each of
REMIC I and REMIC II, the Trust Fund, if applicable, and the Certificates
containing such information and at the times and in the manner as may be
required by the Code or applicable Treasury regulations, and shall furnish to
each Holder of Certificates at any time during the calendar year for which such
returns or reports are made such statements or information at the times and in
the manner as may be required thereby. In connection with the foregoing, the
Trustee shall provide the name and address of the person who can be contacted to
obtain information required to be reported to the holders of regular interests
in each of REMIC I and REMIC II (the "REMIC Reporting Agent") as required by IRS
Form 8811. The Trustee shall make the elections to treat each of REMIC I and
REMIC II as a REMIC (which election shall apply to the taxable period ending
December 31, 1997 and each calendar year thereafter) in such manner as the Code
or applicable Treasury regulations may prescribe. The Trustee shall sign all tax
information returns filed pursuant to this Section and any other returns as may
be required by the Code, and in doing so shall rely entirely upon, and shall
have no liability for information provided by, or calculations provided by, the
Seller or either Master Servicer. The Holder of the Class R-1 Certificate is
hereby designated as the "Tax Matters Person" (within the meaning of Treas. Reg.
ss.ss. 1.860F-4(d)) for REMIC I, and the Holder of the Class R-2 Certificate is
hereby designated as "Tax Matters Person" for REMIC II. The Trustee is hereby
designated and appointed as the agent of each such Tax Matters Person. Any
Holder of a Residual Certificate will by acceptance thereof appoint the Trustee
as agent and attorney-in-fact for the purpose of acting as Tax Matters Person
for each of REMIC I and REMIC II during such time as the Trustee does not own
any such Residual Certificate. In the event that the Code or applicable Treasury
regulations prohibit the Trustee from signing tax or information returns or
other statements, or the Trustee from acting as Tax Matters Person (as an agent
or otherwise), the Trustee shall take whatever action that in its sole good
faith judgment is necessary for the proper filing of such information returns or
for the provision of a tax matters person, including designation of the Holder
of a Residual Certificate to sign such returns or act as tax matters person.
Each Holder of a Residual Certificate shall be bound by this Section.
(c) The Trustee shall provide upon request such information (which shall be
provided by the Master Servicers) as required in Section 860D(a)(6)(B) of the
Code to the Internal Revenue Service, to any Person purporting to transfer a
Residual Certificate to a Person other than a transferee permitted by Section
5.05(b), and to any regulated investment company, real estate investment trust,
common trust fund, partnership, trust, estate, organization described in Section
1381 of the Code, or nominee holding an interest in a pass-through entity
described in Section 860E(e)(6) of the Code, any record holder of which is not a
transferee permitted by Section 5.05(b) (or which is deemed by statute to be an
entity with a disqualified member).
(d) The Trustee shall prepare and file or cause to be filed any state
income tax returns required under Applicable State Law with respect to each of
REMIC I and REMIC II or the Trust Fund.
<PAGE>
ARTICLE X
Termination
Section 10.01. TERMINATION UPON REPURCHASE BY THE SELLER OR ITS DESIGNEE OR
LIQUIDATION OF ALL MORTGAGE LOANS. (a) Subject to Section 10.02, the respective
obligations and responsibilities of the Seller, the Master Servicers and the
Trustee created hereby, other than the obligation of the Trustee or the Master
Servicers to make payments to Certificateholders as hereinafter set forth and to
the Trustee, shall terminate upon:
(i) the repurchase by or at the direction of the Seller or its
designee of all Mortgage Loans and all property remaining in the Trust at a
price equal to (a) 100% of the Outstanding Principal Balance of each
Mortgage Loan (other than a Mortgage Loan related to REO Property) as of
the date of repurchase, net of the principal portion of any unreimbursed
Monthly Advances made by the purchaser, together with interest at the
applicable Mortgage Interest Rate accrued but unpaid through and including
the last day of the month of repurchase, plus (b) the appraised value of
any REO Property, less the good faith estimate of the Seller of liquidation
expenses to be incurred in connection with its disposal thereof (but not
more than the Outstanding Principal Balance of the related Mortgage Loan,
together with interest at the applicable Mortgage Interest Rate accrued on
that balance but unpaid through and including the last day of the month of
repurchase), such appraisal to be calculated by an appraiser mutually
agreed upon by the Seller and the Trustee at the expense of the Seller; or
(ii) the later of the making of the final payment or other
liquidation, or any advance with respect thereto, of the last Mortgage Loan
remaining in the Trust Fund or the disposition of all property acquired
with respect to any Mortgage Loan; PROVIDED, HOWEVER, that in the event
that an advance has been made, but not yet recovered, at the time of such
termination, the Person having made such advance shall be entitled to
receive, notwithstanding such termination, any payments received subsequent
thereto with respect to which such advance was made.
(b) In no event, however, shall the Trust created hereby continue beyond
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date of this Agreement.
(c) [Intentionally omitted.]
(d) The right of the Seller or its designee to repurchase all Mortgage
Loans pursuant to Subsection 10.01(a)(i) above shall be exercisable only if (i)
the aggregate unpaid principal balance of such Mortgage Loans at the time of any
such repurchase is less than 5% of the Cut-off Date Balance or (ii) the Seller
based upon an Opinion of Counsel, has determined that the REMIC status of either
REMIC I or REMIC II has been lost or that a substantial risk exists that such
REMIC status will be lost for the then-current taxable year. At any time
thereafter, the Seller may elect to terminate the Trust at any time, and upon
such election, the Seller or its designee shall repurchase all the Mortgage
Loans.
(e) [Intentionally omitted].
(f) The Trustee shall give notice of any termination to the
Certificateholders, with a copy to the Rating Agencies, upon which the
Certificateholders shall surrender their Certificates to the Trustee for payment
of the final distribution and cancellation. Such notice shall be given by
letter, mailed not earlier than the 15th day and not later than the 25th day of
the month next preceding the month of such final distribution, and shall specify
(i) the Distribution Date upon which final payment of the Certificates will be
made upon presentation and surrender of the Certificates at the office of the
Trustee therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Trustee therein specified.
(g) If the option of the Seller to repurchase or cause the repurchase of
all Mortgage Loans under Subsection 10.01(a)(i) above is exercised, the Seller
and/or its designee, as the case may be, shall deliver to the Trustee for
deposit in the Certificate Account, by the Business Day prior to the applicable
Distribution Date, an amount equal to the repurchase price for the Mortgage
Loans being purchased by it and all property acquired with respect to such
Mortgage Loans remaining in the Trust. Upon the presentation and surrender of
the Certificates, the Trustee shall distribute an amount equal to (i) the amount
otherwise distributable to the Certificateholders (other than the holder of the
Class R-2 Certificate) on such Distribution Date but for such repurchase, (ii)
the Current Principal Amount and any accrued but unpaid interest at the
Pass-Through Rate to the Certificateholders of each Class, and (iii) the
remainder to the Class R-2 Certificateholder. If the relevant Group Available
Funds are not sufficient to pay all of the related Certificates in full, any
such deficiency will be allocated to the outstanding Class or Classes of
Subordinate Certificates in the related Certificate Group having the highest
numerical designation or if after the applicable Cross-Over Date to the Senior
Certificates of the related Certificate Group pro rata. Upon deposit of the
required repurchase price and following such final Distribution Date, the
Trustee shall promptly release to the Seller and/or its designee, as the case
may be, the Mortgage Files for the remaining Mortgage Loans, and the Accounts
shall terminate, subject to the Trustee's obligation to hold any amounts payable
to Certificateholders in trust without interest pending final distributions
pursuant to Subsection 10.01(i).
(h) In the event that this Agreement is terminated by reason of the payment
or liquidation of all Mortgage Loans or the disposition of all property acquired
with respect to all Mortgage Loans under Subsection 10.01(a)(ii) above, each
Master Servicer shall deliver to the Trustee for deposit in the appropriate
subaccount of the Certificate Account all distributable amounts remaining in the
Custody Account and shall cause any Sub-Servicers to deliver to the Trustee for
deposit in the appropriate subaccount of the Certificate Account all
distributable amounts remaining in their Protected Accounts. Upon the
presentation and surrender of the Certificates, the Trustee shall distribute to
the Certificateholders, in accordance with their respective interests, all
distributable amounts remaining in the Certificate Account. Upon deposit by any
Sub-Servicers of such distributable amounts and delivery to the Trustee of an
Officer's Certificate from each Master Servicer certifying that such deposit has
been made, and following such final Distribution Date, the Trustee shall
promptly release to such Master Servicer the Mortgage Files for the remaining
Mortgage Loans, and the Accounts shall terminate, subject to the Trustee's
obligation to hold any amounts payable to the Certificateholders in trust
without interest pending final distributions pursuant to Subsection 10.01(i).
(i) If not all of the Certificateholders shall surrender their Certificates
for cancellation within six months after the time specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice, not all the Certificates shall have been
surrendered for cancellation, the Trustee may take appropriate steps, or appoint
any agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds and other assets which remain subject to this Agreement.
Section 10.02 ADDITIONAL TERMINATION REQUIREMENTS. (a) If the option of the
Seller to repurchase all the Mortgage Loans under Subsection 10.01(a)(i) above
is exercised, the Trust and each of REMIC I and REMIC II shall be terminated in
accordance with the following additional requirements, unless the Trustee has
been furnished with an Opinion of Counsel to the effect that the failure of the
Trust to comply with the requirements of this Section 10.02 will not (i) result
in the imposition of taxes on "prohibited transactions" as defined in Section
860F of the Code on each of REMIC I and REMIC II or (ii) cause each of REMIC I
and REMIC II to fail to qualify as a REMIC at any time that any Regular
Certificates are outstanding:
(i) within 90 days prior to the final Distribution Date, at the
written direction of the Seller, the Trustee, as agent for the respective
Tax Matters Persons, shall adopt a plan of complete liquidation of the
Trust Fund and each of REMIC I and II provided to it by the Seller meeting
the requirements of a "Qualified Liquidation" under Section 860F of the
Code and any regulations thereunder as prepared by EMC;
(ii) at or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell for cash all of the assets of the Trust to or at the direction
of the Seller; and
(iii) at the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit from the Certificate
Account (or cause to be distributed or credited) (i) to the
Certificateholders, other than the Holder of the Class R-2 Certificate, the
Current Principal Amount of the Certificates plus 30 days' interest thereon
at the applicable Pass-Through Rate, and (ii) to the Class R-2
Certificateholder, all cash on hand from the Certificate Account (other
than cash retained to meet claims); and the Trust and each of REMIC I and
REMIC II shall terminate at such time.
(b) By their acceptance of the Residual Certificates, the Holders thereof
hereby (i) agree to adopt such a plan of complete liquidation upon the written
request of the Seller and to take such action in connection therewith as may be
reasonably requested by the Seller and (ii) appoint the Seller as their
attorney-in-fact, with full power of substitution, for purposes of adopting such
a plan of complete liquidation. The Trustee shall adopt such plan of liquidation
by filing the appropriate statement on the final tax return of REMIC I and REMIC
II.
<PAGE>
ARTICLE XI
Miscellaneous Provisions
Section 11.01. INTENT OF PARTIES. The parties intend that each of REMIC I
and REMIC II shall be treated as a REMIC for federal income tax purposes and
that the provisions of this Agreement should be construed in furtherance of this
intent.
Section 11.02. AMENDMENT. (a) This Agreement may be amended from time to
time by the Seller, the Trustee and the Master Servicers, without notice to or
the consent of any of the Certificateholders, to cure any ambiguity, to correct
or supplement any provisions herein that may be defective or inconsistent with
any other provisions herein, to comply with any changes in the Code or to make
any other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement;
PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of
Independent Counsel, adversely affect in any material respect the interests of
any Certificateholder.
(b) This Agreement may also be amended from time to time by the Seller, the
Trustee and the Master Servicers, with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
51% of the Trust Fund or of the applicable Class or Classes if such amendment
affects only such Class or Classes for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Certificateholders; PROVIDED,
HOWEVER, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) reduce the aforesaid percentage of Certificates the Holders of
which are required to consent to any such amendment, without the consent of the
Holders of all Certificates then outstanding, or (iii) cause either REMIC I or
REMIC II to fail to qualify as a REMIC for federal income tax purposes, as
evidenced by an Opinion of Independent Counsel which shall be provided to the
Trustee other than at the Trustee's expense. Notwithstanding any other provision
of this Agreement, for purposes of the giving or withholding of consents
pursuant to Section 11.02(b), Certificates registered in the name of or held for
the benefit of the Seller, a Master Servicer, a Sub-Servicer or the Trustee or
any Affiliate thereof shall be entitled to vote their Undivided Fractional
Interests with respect to matters affecting such Certificates.
(c) Promptly after the execution of any such amendment, the Trustee shall
furnish a copy of such amendment or written notification of the substance of
such amendment to each Certificateholder, with a copy to the Rating Agencies.
(d) In the case of an amendment under Subsection 11.02(b) above, it shall
not be necessary for the Certificateholders to approve the particular form of
such an amendment. Rather, it shall be sufficient if the Certificateholders
approve the substance of the amendment. The manner of obtaining such consents
and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable regulations as the
Trustee may prescribe.
Section 11.03. RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, 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. The Master
Servicers shall effect such recordation, at their expense upon the request in
writing of a Certificateholder, but only if such direction is accompanied by an
Opinion of Counsel (provided at the expense of the Certificateholder requesting
recordation) to the effect that such recordation would materially and
beneficially affect the interests of the Certificateholders or is required by
law.
Section 11.04. LIMITATION ON RIGHTS OF Certificateholders. (a) The death or
incapacity of any Certificateholder shall not terminate this Agreement or the
Trust, nor entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
(b) Except as expressly provided in this Agreement, no Certificateholders
shall have any right to vote or in any manner otherwise control the operation
and management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, be
construed so as to establish the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholders 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.
(c) 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, under or with respect to this Agreement against the Seller, the Master
Servicers or any successor to any such parties unless (i) such Certificateholder
previously shall have given to the Trustee a written notice of a continuing
default, as herein provided, (ii) the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than 51% of the Trust Fund
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs and
expenses and liabilities to be incurred therein or thereby, and (iii) the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding.
(d) No one or more Certificateholders shall have any right by virtue of any
provision of this Agreement to affect the rights of any other Certificateholders
or to obtain or seek to obtain priority or preference over any other such
Certificateholder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 11.04, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Section 11.05. 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 Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in person or by an agent duly appointed in writing.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is expressly required, to the Seller. 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 Seller,
if made in the manner provided in this Section 11.05.
(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 a
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. Where 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 or her
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the individual executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The ownership of Certificates (notwithstanding any notation of
ownership or other writing on such Certificates, except an endorsement in
accordance with Section 5.02 made on a Certificate presented in accordance with
Section 5.04) shall be proved by the Certificate Register, and neither the
Trustee, the Seller, the Master Servicers nor any successor to any such parties
shall be affected by any notice to the contrary.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action of the holder of any Certificate shall bind every future holder
of the same Certificate and the holder of every Certificate issued upon the
registration of transfer or exchange thereof, if applicable, or in lieu thereof
with respect to anything done, omitted or suffered to be done by the Trustee,
the Seller, the Master Servicers or any successor to any such party in reliance
thereon, whether or not notation of such action is made upon such Certificates.
(e) In determining whether the Holders of the requisite percentage of
Certificates evidencing Fractional Undivided Interests have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Trustee, the Seller, the Master Servicers or any
Sub-Servicer or any Affiliate thereof shall be disregarded, except as otherwise
provided in Section 11.02(b) and except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Certificates which the Trustee knows
to be so owned shall be so disregarded. Certificates which have been pledged in
good faith to the Trustee, the Seller, the Master Servicers or any Sub-Servicer
or any Affiliate thereof may be regarded as outstanding if the pledgor
establishes to the satisfaction of the Trustee the pledgor's right to act with
respect to such Certificates and that the pledgor is not an Affiliate of the
Trustee, the Seller, the Master Servicers or any Sub-Servicer, as the case may
be.
Section 11.06. [Reserved]
Section 11.07. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.08. NOTICES. All demands and notices hereunder shall be in
writing and shall be deemed given when delivered at or mailed by registered
mail, return receipt requested, postage prepaid, or by recognized overnight
courier, to (i) in the case of the Seller, 245 Park Avenue, New York, New York
10167, Attention: Vice President-Servicing (but with respect to monthly reports
sent pursuant to Section 6.07(b), Attention: Lynn Lin), or to such other address
as may hereafter be furnished to the other parties hereto in writing; in the
case of NAMC, 231 East Avenue, Albion, New York 14411, Attention: Craig Lindauer
or such other address as may hereafter be furnished to the other parties hereto
in writing; (iii) PHH, 600 Atrium Way, Mount Laurel, New Jersey 08054,
Attention: Jeff Frezza or such other address as may hereafter be furnished to
the other parties in writing; (iv) in the case of the Trustee, at its Corporate
Trust Office, or such other address as may hereafter be furnished to the other
parties hereto in writing; or (v) in the case of the Rating Agencies, Moody's,
99 Church Street, New York, New York 10007, Attention: Residential Mortgage
Surveillance Group and DCR, 55 E. Monroe, 38th Floor, Chicago, Illinois 60603,
Attention: Arleander Raiford. Any notice delivered to the Seller, the Master
Servicers or the Trustee under this Agreement shall be effective only upon
receipt. Any notice required or permitted to be mailed to a Certificateholder,
unless otherwise provided herein, shall be given by first-class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
Section 11.09. 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 severed from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the holders thereof.
Section 11.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto.
Section 11.11. ARTICLE AND SECTION HEADINGS. The article and section
headings herein are for convenience of reference only, and shall not limit or
otherwise affect the meaning hereof.
Section 11.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which when so executed and delivered shall be an original
but all of which together shall constitute one and the same instrument.
Section 11.13 NOTICE TO RATING AGENCIES. The article and section headings
herein are for convenience of reference only, and shall not limited or otherwise
affect the meaning hereof. The Trustee shall use its best efforts to promptly
provide notice to each Rating Agency with respect to each of the following of
which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not been cured;
3. The resignation or termination of either Master Servicer or the
Trustee;
4. The repurchase or substitution of Mortgage Loans;
5. The final payment to Certificateholders; and
6. Any change in the location of the Custody Account or the Certificate
Account.
In addition, in accordance with Section 6.06 and Section 3.16, the Trustee
and the Master Servicers, respectively, shall promptly furnish to each Rating
Agency copies of the following:
1. Each report to Certificateholders described in Section 6.06; and
2. Each annual independent public accountants' servicing report received
as described in Section 3.16.
<PAGE>
IN WITNESS WHEREOF, the Seller, NAMC, PHH and the Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
BEAR STEARNS MORTGAGE SECURITIES INC.,
as Seller
By: /S/ MARY HAGGERTY
Name: Mary Haggerty
Title: Vice President
NORTH AMERICAN MORTGAGE COMPANY, as a
Master Servicer
By: /S/ CHRISTOPHER S. DELFS
Name: Christopher S. Delfs
Title: SVP
PHH MORTGAGE SERVICES CORPORATION, as a
Master Servicer
By: /S/ ELAINE MONAHAN
Name: Elaine Monahan
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee
By: /S/ R. TARNAS
Name: R. Tarnas
Title: Vice President
Accepted and Agreed as to
Sections 2.02, 2.03A and 2.04
BEAR STEARNS MORTGAGE CAPITAL
CORPORATION
By: /S/ JOSEPH T. JURKOWSKI
Name: Joseph T. Jurkowski
Title: Authorized Officer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 30th day of December, 1997 before me, a notary public in and for
said State, personally appeared Mary P. Haggerty, known to me to be a Vice
President of Bear Stearns Mortgage Securities Inc., the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/S/ HEIDI KAHN
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 30th day of December, 1997 before me, a notary public in and for
said State, personally appeared Joseph Jurkowski, known to me to be a Director
and Authorized Officer of Bear Stearns Mortgage Capital Corporation, the
corporation that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/S/ HEIDI KAHN
Notary Public
[Notarial Seal]
<PAGE>
STATE OF FLORIDA )
) ss.:
COUNTY OF HILLSBOROUGH )
On the 29th day of December, 1997 before me, a notary public in and for
said State, personally appeared Chris S. Delfs, known to me to be a Senior Vice
President of North American Mortgage Company, the corporation that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/S/ DIANE M. FLOYD
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF BURLINGTON )
On the 29th day of December, 1997 before me, a notary public in and for
said State, personally appeared Elaine Monahan, known to me to be an Assistant
Vice President of PHH Mortgage Services Corporation, the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/S/ ELAINE L. MONAHAN
Notary Public
[Notarial Seal]
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On the 30th day of December, 1997 before me, a notary public in and for the
State of Illinois, personally appeared R. Tarnas, known to me who, being by me
duly sworn, did depose and say that he/she resides at Highland Park Illinois;
that he/she is a(n) Vice President of The First National Bank of Chicago, one of
the parties that executed the foregoing instrument; that he/she knows the seal
of said Bank; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said Bank; and that
he/she signed his/her name thereto by order of the Board of Directors of said
Bank.
/S/ SOMSRI HELMER
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
FORM OF FACE OF CERTIFICATES
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN, BEAR
STEARNS MORTGAGE SECURITIES INC., NORTH AMERICAN MORTGAGE COMPANY OR THE TRUSTEE
REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE AFFILIATES AND IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE
CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DIFFERENT
FROM THE DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY
ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. [CLASS DESIGNATION-PUBLIC] SERIES 1997-7
EVIDENCING A BENEFICIAL INTEREST IN A TRUST
CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS SOLD BY
BEAR STEARNS MORTGAGE SECURITIES INC.
CUSIP NO. ______
<S> <C> <C>
CUT-OFF DATE : DECEMBER 1, 1997 CLASS :
FIRST DISTRIBUTION DATE : JANUARY 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE : ________ __, 20__ OF THIS CERTIFICATE
MASTER SERVICERS : NORTH AMERICAN MORTGAGE COMPANY ("DENOMINATION") : $
PHH MORTGAGE SERVICES CORPORATION APPROXIMATE ORIGINAL CLASS
PASS-THROUGH RATE : ____% PRINCIPAL AMOUNT : $
</TABLE>
THIS CERTIFIES THAT CEDE & CO. is the registered owner of the Fractional
Undivided Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust")
consisting primarily of five groups ("Mortgage Loan Group 1," "Mortgage Loan
Group 2," "Mortgage Loan Group 3," "Mortgage Loan Group 4" and "Mortgage Loan
Group 5" and each, a "Mortgage Loan Group"), each of which constitutes a
separate sub-trust, generally consisting of conventional, first lien, fixed rate
mortgages secured by one- to four-family residences, and individual condominium
units located primarily in California, Texas and Massachusetts (collectively,
the "Mortgage Loans"), which will be sold to the Trust by Bear Stearns Mortgage
Securities Inc. ("BSMSI"). The Mortgage Loans were sold by Bear Stearns Mortgage
Capital Corporation to BSMSI. North American Mortgage Company ("NAMC") and PHH
Mortgage Services Corporation ("PHH") will act as master servicers of the
Mortgage Loans (the "Master Servicers," which term includes any successors
thereto under the Agreement referred to below). The Trust was created pursuant
to the Pooling and Servicing Agreement dated as of the Cut-off Date specified
above (the "Agreement"), by and among BSMSI, as seller, NAMC, as a master
servicer, PHH, as a master servicer, and The First National Bank of Chicago, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of its acceptance hereof assents and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior to the month
in which a Distribution Date (as hereinafter defined) occurs on the Current
Principal Amount hereof at a per annum rate equal to the Pass-Through Rate. The
Trustee will distribute on the 25th day of each month, or, if such 25th day is
not a Business Day, the immediately following Business Day (each, a
"Distribution Date"), commencing on the First Distribution Date specified above,
to the Person in whose name this Certificate is registered at the close of
business on the last Business Day of the calendar month preceding the month of
such Distribution Date, an amount equal to the product of the Fractional
Undivided Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Certificates of the same Class as this Certificate.
The Assumed Final Distribution Date is the Distribution Date immediately
following the latest scheduled maturity date of any Mortgage Loan in the related
Mortgage Loan Group and is not likely to be the date on which the Current
Principal Amount or Notional Amount, as applicable, of this Class of
Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee by check mailed
to the address of the Person entitled thereto as such name and address shall
appear on the Certificate Register or, if such Person so requests by notifying
the Trustee in writing as specified in the Agreement and if such Person holds
Certificates with an initial aggregate Current Principal Amount and/or initial
aggregate Notional Amount, as applicable, of not less than $1,000,000, in
immediately available funds (by wire transfer or otherwise) to the account
specified in writing by such Person to the Trustee. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED SIGNATORY OF THE
TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE ENTITLED TO ANY
BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE DULY
EXECUTED.
Dated: December 30, 1997
Countersigned: THE FIRST NATIONAL BANK OF CHICAGO,
Not in its individual capacity but
solely as Trustee
By__________________________________ By________________________________
Authorized signatory of The First AUTHORIZED OFFICER
National Bank of Chicago, not in its
individual capacity but solely as Trustee
<PAGE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN, BEAR
STEARNS MORTGAGE SECURITIES INC., NORTH AMERICAN MORTGAGE COMPANY OR THE TRUSTEE
REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE AFFILIATES AND IS NOT GUARANTEED OR
INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE
CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DIFFERENT
FROM THE DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY
ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE NAMED HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS
CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1),(2)(3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL
THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) A
REPRESENTATION OR CERTIFICATION AS TO COMPLIANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION. THIS
CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN
EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH IS SUBJECT TO TITLE
I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, AND/OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, UNLESS THE
PROPOSED TRANSFEREE PROVIDES A REPRESENTATION OR CERTIFICATION TO THE TRUST TO
THE EFFECT THAT THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE AND THE
SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS: (1) WILL NOT
RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR
CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO,
PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON
THE PART OF THE MASTER SERVICER OR THE TRUSTEE.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. [CLASS DESIGNATION-PUBLIC] SERIES 1997-7
EVIDENCING A BENEFICIAL INTEREST IN A TRUST
CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS SOLD BY
BEAR STEARNS MORTGAGE SECURITIES INC.
CUSIP NO. ______
<S> <C> <C>
CUT-OFF DATE : DECEMBER 1, 1997 CLASS :
FIRST DISTRIBUTION DATE : JANUARY 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE : ________ __, 20__ OF THIS CERTIFICATE
MASTER SERVICERS : NORTH AMERICAN MORTGAGE COMPANY ("DENOMINATION") : $
PHH MORTGAGE SERVICES CORPORATION APPROXIMATE ORIGINAL CLASS
PASS-THROUGH RATE : ____% PRINCIPAL AMOUNT : $
</TABLE>
THIS CERTIFIES THAT BEAR STEARNS SECURITIES CORP. is the registered owner of
the Fractional Undivided Interest evidenced hereby in the beneficial ownership
interest of Certificates of the same Class as this Certificate in a trust (the
"Trust") consisting primarily of five groups ("Mortgage Loan Group 1," "Mortgage
Loan Group 2," "Mortgage Loan Group 3," "Mortgage Loan Group 4" and "Mortgage
Loan Group 5" and each, a "Mortgage Loan Group"), each of which constitutes a
separate sub- trust, generally consisting of conventional, first lien, fixed
rate mortgages secured by one- to four-family residences, and individual
condominium units located primarily in California, Texas and Massachusetts
(collectively, the "Mortgage Loans"), which will be sold to the Trust by Bear
Stearns Mortgage Securities Inc. ("BSMSI"). The Mortgage Loans were sold by Bear
Stearns Mortgage Capital Corporation to BSMSI. North American Mortgage Company
("NAMC") and PHH Mortgage Services Corporation ("PHH") will act as master
servicers of the Mortgage Loans (the "Master Servicers," which term includes any
successors thereto under the Agreement referred to below). The Trust was created
pursuant to the Pooling and Servicing Agreement dated as of the Cut-off Date
specified above (the "Agreement"), by and among BSMSI, as seller, NAMC, as a
master servicer, PHH, as a master servicer, and The First National Bank of
Chicago, as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined herein,
capitalized terms used herein shall have the meaning ascribed to them in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound.
Interest on this Certificate will accrue during the month prior to the month
in which a Distribution Date (as hereinafter defined) occurs on the Current
Principal Amount hereof at a per annum rate equal to the Pass- Through Rate. The
Trustee will distribute on the 25th day of each month, or, if such 25th day is
not a Business Day, the immediately following Business Day (each, a
"Distribution Date"), commencing on the First Distribution Date specified above,
to the Person in whose name this Certificate is registered at the close of
business on the last Business Day of the calendar month preceding the month of
such Distribution Date, an amount equal to the product of the Fractional
Undivided Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Certificates of the same Class as this Certificate.
The Assumed Final Distribution Date is the Distribution Date immediately
following the latest scheduled maturity date of any Mortgage Loan in the related
Mortgage Loan Group and is not likely to be the date on which the Current
Principal Amount or Notional Amount, as applicable, of this Class of
Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee by check mailed
to the address of the Person entitled thereto as such name and address shall
appear on the Certificate Register or, if such Person so requests by notifying
the Trustee in writing as specified in the Agreement and if such Person holds
Certificates with an initial aggregate Current Principal Amount and/or initial
aggregate Notional Amount, as applicable, of not less than $1,000,000, in
immediately available funds (by wire transfer or otherwise) to the account
specified in writing by such Person to the Trustee. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED SIGNATORY OF THE
TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE ENTITLED TO ANY
BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE DULY
EXECUTED.
Dated: December 30, 1997
Countersigned: THE FIRST NATIONAL BANK OF CHICAGO,
Not in its individual capacity but
solely as Trustee
By__________________________________ By________________________________
Authorized signatory of The First AUTHORIZED OFFICER
National Bank of Chicago, not in its
individual capacity but solely as Trustee
<PAGE>
EXHIBIT A-2
FORM OF REVERSE OF CERTIFICATES
<PAGE>
BEAR STEARNS MORTGAGE SECURITIES INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-7
This Certificate is one of a duly authorized issue of Certificates
designated as set forth on the face hereof (the "Certificates"), issued in
forty-eight Classes. The Certificates, in the aggregate, evidence the entire
beneficial ownership interest in the Trust formed pursuant to the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the Trust for payment hereunder and that the Trustee is
not liable to the Certificateholders for any amount payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced hereby, and the rights, duties and
immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Master Servicers and the rights of the Certificateholders under the Agreement
from time to time by the Master Servicers and the Trustee with the consent of
the Holders of Certificates evidencing Fractional Undivided Interests
aggregating not less than 51% (or in certain cases, Holders of Certificates of
affected Classes evidencing such percentage of the Fractional Undivided
Interests thereof). Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Certificate is registrable with the Trustee upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in the City of Chicago, State of Illinois,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Fractional Undivided
Interest will be issued to the designated transferee. In the case of classes of
Certificates not registered under the Securities Act of 1933, as amended,
additional documentation will be required to be provided to the Trustee prior to
the effectiveness of a transfer.
The Certificates are issuable only as registered Certificates without
coupons in the Classes and denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates evidencing the same
Class and in the same aggregate Fractional Undivided Interest, as requested by
the Holder surrendering the same.
No service charge will be made to the Certificateholders for any such
registration of transfer, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Master Servicers, the Trustee and any agent of any of them may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Master Servicers, the Trustee nor any
such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust created thereby
(other than the obligations to make payments to Certificateholders with respect
to the termination of the Agreement) shall terminate upon the earlier of (i) the
later of the (A) final payment or other liquidation (or Monthly Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust and (B)
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and the remittance of all funds due under the
Agreement, or (ii) the optional repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust in accordance with the
terms of the Agreement. Such optional repurchase may be made only on or after
the Distribution Date on which the aggregate unpaid principal balance of the
Mortgage Loans is less than 10% of the aggregate Cut-off Date Scheduled
Principal Balance of the Mortgage Loans. The exercise of such right will effect
the early retirement of the related Certificates. The Trust also may be
terminated on any Distribution Date upon the determination, based upon an
opinion of counsel, that REMIC status of REMIC I or REMIC II has been lost or
that a substantial risk exists that such status will be lost for the then
current year. In no event, however, will the Trust created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name and address including postal zip code assignee)
the within Certificate and hereby authorizes the transfer of registration of
such interest to the assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new Certificate of a
like denomination and Class, to the above named assignee and deliver such
Certificate to the following address:
Dated:
____________________________________________
Signature by or on behalf of assignor
____________________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________________________
FOR THE ACCOUNT OF ____________________________________________________________
ACCOUNT NUMBER ______________, OR, IF MAILED BY CHECK TO ______________________
_______________________________________________________________________________
APPLICABLE STATEMENTS SHOULD BE MAILED TO _____________________________________
_______________________________________________________________________________
THIS INFORMATION IS PROVIDED BY ______________________________________________,
THE ASSIGNEE NAMED ABOVE, OR _________________________________________________,
as its agent.
<PAGE>
EXHIBIT B-1
MORTGAGE LOAN SCHEDULE
INTENTIONALLY OMITTED
SEE EXHIBIT 3 TO MORTGAGE LOAN PURCHASE AGREEMENT
[AVAILABLE UPON REQUEST FROM BEAR STEARNS MORTGAGE SECURITIES INC.]
<PAGE>
EXHIBIT B-2
NAMC MORTGAGE LOAN SCHEDULE
INTENTIONALLY OMITTED
SEE EXHIBIT 3 TO MORTGAGE LOAN PURCHASE AGREEMENT
[AVAILABLE UPON REQUEST FROM BEAR STEARNS MORTGAGE SECURITIES INC.]
<PAGE>
EXHIBIT B-3
PHH MORTGAGE LOAN SCHEDULE
INTENTIONALLY OMITTED
SEE EXHIBIT 3 TO MORTGAGE LOAN PURCHASE AGREEMENT
[AVAILABLE UPON REQUEST FROM BEAR STEARNS MORTGAGE SECURITIES INC.]
<PAGE>
EXHIBIT C-1
REPRESENTATIONS AND WARRANTIES OF BSMCC
CONCERNING THE MORTGAGE LOANS
(a) The information set forth in the Mortgage Loan Schedule is true,
complete and correct in all material respects as of the Cut-Off Date;
(b) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simply in real property securing the related
Mortgage Note, free and clear of all adverse claims, liens and encumbrances
having priority over the first lien of the Mortgage subject only to certain
permitted exceptions;
(c) The Mortgage Loan has not been delinquent thirty (30) days or more at
any time prior to the Cut-Off Date for such Mortgage Loan. As of the Closing
Date, the Mortgage Loan is not delinquent in payment more than 30 days and has
not been dishonored; there are no defaults under the terms of the Mortgage Loan;
and BSMCC has not advanced funds, or induced, solicited or knowingly received
any advance of funds from a party other than the owner of the Mortgage Property
subject to the Mortgage, directly or indirectly, for the payment of any amount
required by the Mortgage Loan;
(d) There are no delinquent taxes, ground rents, assessments or other
outstanding charges affecting the related Mortgaged Property;
(e) The Mortgage Note and the Mortgage are 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 and the
Mortgage, or the exercise of any right thereunder, render the Mortgage Note or
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, set-off, counterclaim or defense has
been asserted with respect thereto;
(f) The Mortgage has not been satisfied, canceled or subordinated, in whole
or in part, or rescinded, and the Mortgage Property has not been released from
the lien of the Mortgage, in whole or in part, except with respect to certain
releases in part that do not materially affect the value of the Mortgaged
Property, nor has any instrument been executed that would effect any such
satisfaction, release, cancellation, subordination or rescission;
(g) Immediately prior to the transfer and assignment to the Purchaser, the
Mortgage Note and the Mortgage were not subject to an assignment or pledge, and
BSMCC had good and marketable title to and was the sole owner thereof and had
full right to transfer and sell the Mortgage Loan to the Seller free and clear
of any encumbrance, equity, lien, pledge, charge, claim or security interest;
(h) There is no default, breach, violation or event of acceleration
existing under the Mortgage or the related Mortgage Note and no event, which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event permitting
acceleration; and neither BSMCC nor any prior mortgagee has waived any default,
breach, violation or event permitting acceleration;
(i) There are no mechanics, or similar liens or claims which have been
filed for work, labor or material affecting the related Mortgaged Property which
are or may be liens prior to or equal to the lien of the related Mortgage;
(j) All improvements subject to the Mortgage lie wholly within the
boundaries and building restriction lines of the Mortgaged Property (and wholly
within the project with respect to a condominium unit) except for DE MINIMUS
encroachments permitted by the FNMA Guide (MBS Special Servicing Option) and
which has been noted on the appraisal, and no improvements on adjoining
properties encroach upon the Mortgaged Property except those which are insured
against by a title insurance policy and all improvements on the property comply
with all applicable zoning and subdivision laws and ordinances;
(k) The Mortgaged Property at origination of the Mortgage Loan was and
currently is free of damage and waste and at origination of the Mortgage Loan
there was, and there currently is, no proceeding pending for the total or
partial condemnation thereof; and
(l) No Mortgage Loan has a Loan-to-Value Ratio in excess of 95.00%. The
original Loan-to-Value Ratio of each Mortgage Loan either was not more than
95.00% or the excess over 80.00% is insured as to payments defaults by a Primary
Mortgage Insurance Policy issued by a primary mortgage insurer acceptable to
FNMA and Freddie Mac until the Loan-to-Value Ratio of such Mortgage Loan is
reduced to 80.00%.
(m) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simply in real property securing the related
Mortgage Note, free and clear of all adverse claims, liens and encumbrances
having priority over the first lien of the Mortgage subject only to (1) the lien
of non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to or otherwise considered in the appraisal made for the originator of
Mortgage Loan, or (B) which do not adversely affect the appraised value of the
Mortgage Property as set forth in such appraisal, and (3) other matters to which
like properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
(n) The terms of the Mortgage Note and the Mortgage have not been impaired,
waived, altered or modified in any respect, except by written instruments which
have been recorded to the extent any such recordation is required by applicable
law, and copies of which written instruments are included in the Mortgage File.
No other instrument of waiver, alteration or modification has been executed, and
no Mortgage has been released, in whole or in part, from the terms thereof
except in connection with an assumption agreement, which assumption agreement is
part of the Mortgage File and the terms of which are reflected in the Mortgage
Loan Schedule;
(o) All such standard hazard policies are in effect and on the date of
origination contained a standard mortgagee clause naming BSMCC and its
successors in interest as loss payee and such clause is still in effect and all
premiums due thereon have been paid. If the Mortgaged Property is located in an
area identified by the Federal Emergency Management Agency as having special
flood hazards under the Flood Disaster Protection Act of 1973, as amended, such
Mortgaged Property is covered by flood insurance in an amount not less than that
set forth in Section 4.10. The Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(p) Any and all requirements of any federal, state or local law including,
without limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects;
(q) The Mortgage is a valid, subsisting and enforceable first lien on the
Mortgage Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air conditioning
systems affixed to such buildings, and all additions, alterations and
replacements made at any time with respect to the foregoing securing the
Mortgage Note's original principal balance. The Mortgage and the Mortgage Note
do not contain any evidence of any other security interest or other interest or
right thereto. Such lien is free and clear of all adverse claims, liens and
encumbrances having priority over the first lien of the Mortgage subject only to
permitted encumbrances set forth in clause (b) (1), (2) and (3) herein. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein;
(r) The Mortgage Note and the related Mortgage are original and genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in all respects in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors, and BSMCC has taken all action necessary to transfer such rights of
enforceability to the Purchaser. All parties to the Mortgage Note and the
Mortgage had the legal capacity to enter into the Mortgage Loan and to execute
and deliver the Mortgage Note and the Mortgage. The Mortgage Note and the
Mortgage have been duly and properly executed by such parties. The proceeds of
the Mortgage Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with;
(s) The Mortgage Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance, issued by a title
insurer qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring (subject to the exceptions contained in (b) (1),
(2) and (3) above) BSMCC, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the Mortgage Loan.
BSMCC is the sole insured of such lender's title insurance policy, such lender's
title insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by the Purchase
Agreement and this Agreement and will inure to the benefit of the Purchaser and
its assigns without any further act. No claims have been made under such
lender's title insurance policy, and no prior holder of the related Mortgage has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;
(t) The Mortgage Loan was originated by or for BSMCC. The Mortgage Loan
complies in all material respects with all the terms, conditions and
requirements of BSMCC's underwriting standards in effect at the time of
originations of such Mortgage Loan; provided, that certain Mortgage Loans may
have characteristics outside of such underwriting guidelines where compensating
factors are present acceptable to the mortgage banking industry. The Mortgage
Notes and Mortgages are on uniform Fannie Mae/Freddie Mac instruments or are on
forms acceptable to Fannie Mae or Freddie Mac. The Mortgage Loan bears interest
at a fixed rate as set forth in the Mortgage Loan Schedule, and Monthly Payments
under the Mortgage Note are due and payable on the first day of each month. The
Mortgage Loan contains the usual and enforceable provisions of the originator at
the time of origination for the acceleration of the payment of the unpaid
principal amount if the related Mortgaged Property is sold without the prior
consent of the mortgagee thereunder;
(u) The related Mortgage contains enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security provided thereby,
including, (1) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (2) otherwise by judicial foreclosure. There is no homestead
or other exemption available to the Mortgagor which would interfere with the
right to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage;
(v) If the Mortgage constitutes a deed of trust, a trustee, duly qualified
if required under applicable law to act as such, has been properly designated
and currently so serves and is named in the Mortgage, and no fees or expenses
are or will become payable by the Purchaser to the trustee under the deed of
trust, except in connection with a trustees sale or attempted sale after default
by the Mortgagor;
(w) The Mortgage File contains an appraisal of the related Mortgaged
Property made and signed prior to the final approval of the mortgage loan
application by a Qualified Appraiser, approved by BSMCC. The appraisal is in a
form generally acceptable to Fannie Mae or Freddie Mac;
(x) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to
above and such collateral does not serve as security for any other obligation;
(y) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of such mortgage loans;
(z) The Mortgage Loan does not contain "graduated payment" features or,
except with respect to the Mortgage Loans listed in Exhibits K-1 and K-2,
"buydown" features;
(aa) The Mortgage Loan has an original term to maturity of not more than
thirty years, with interest payable in arrears on the first day of each month.
The Mortgage Loan does not contain terms or provisions which would result in
negative amortization;
(bb) Each of the Mortgaged Properties consists of a single parcel of real
property with single-family residence erected thereon, or a two- to four-family
dwelling, or an individual condominium unit in a condominium project or an
individual unit in a planned unit development. No Mortgaged Property consists of
a single parcel of real property with a cooperative housing development erected
thereon. Any condominium unit or planned unit development either conforms with
applicable Fannie Mae or Freddie Mac requirements regarding such dwellings or is
covering by a waiver confirming that such condominium unit or planned unit
development is acceptable to Fannie Mae or Freddie Mac or is otherwise
"warrantable" with respect thereto. No Mortgaged Property is a townhouse, a
mobile home or manufactured dwelling. To the best of BSMCC's knowledge each
Mortgaged Property is lawfully occupied under applicable law;
(cc) The Mortgage Loans were originated with full or alternative
documentation;
(dd) The Assignment of Mortgage is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged Property is
located; and
(ee) BSMCC is either, and each Mortgage Loan was originated by, a savings
and loan association, savings bank, commercial bank, credit union, insurance
company or similar institution which is supervised and examined by a federal or
State authority, or by a mortgagee approved by the Secretary of Housing and
Urban Development pursuant to Section 203 and 211 of the National Housing Act.
<PAGE>
EXHIBIT C-2
REPRESENTATIONS AND WARRANTIES OF NAMC
CONCERNING THE NAMC MORTGAGE LOANS
(a) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simply in real property securing the related
Mortgage Note, free and clear of all adverse claims, liens and encumbrances
having priority over the first lien of the Mortgage subject only to (1) the lien
of non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to or otherwise considered in the appraisal made for the originator of
Mortgage Loan, or (B) which do not adversely affect the appraised value of the
Mortgage Property as set forth in such appraisal, and (3) other matters to which
like properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
(b) The terms of the Mortgage Note and the Mortgage have not been impaired,
waived, altered or modified in any respect, except by written instruments which
have been recorded to the extent any such recordation is required by applicable
law, and copies of which written instruments are included in the Mortgage File.
No other instrument of waiver, alteration or modification has been executed, and
no Mortgage has been released, in whole or in part, from the terms thereof
except in connection with an assumption agreement, which assumption agreement is
part of the Mortgage File and the terms of which are reflected in the Mortgage
Loan Schedule;
(c) All such standard hazard policies are in effect and on the date of
origination contained a standard mortgagee clause naming NAMC and its successors
in interest as loss payee and such clause is still in effect and all premiums
due thereon have been paid. If the Mortgaged Property is located in an area
identified by the Federal Emergency Management Agency as having special flood
hazards under the Flood Disaster Protection Act of 1973, as amended, such
Mortgaged Property is covered by flood insurance in an amount not less than that
set forth in Section 4.10. The Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(d) Any and all requirements of any federal, state or local law including,
without limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects;
(e) The Mortgage is a valid, subsisting and enforceable first lien on the
Mortgage Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air conditioning
systems affixed to such buildings, and all additions, alterations and
replacements made at any time with respect to the foregoing securing the
Mortgage Note's original principal balance. The Mortgage and the Mortgage Note
do not contain any evidence of any other security interest or other interest or
right thereto. Such lien is free and clear of all adverse claims, liens and
encumbrances having priority over the first lien of the Mortgage subject only to
permitted encumbrances set forth in clause (b) (1), (2) and (3) herein. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein;
(f) The Mortgage Note and the related Mortgage are original and genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in all respects in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors, and BSMCC has taken all action necessary to transfer such rights of
enforceability to the Purchaser. All parties to the Mortgage Note and the
Mortgage had the legal capacity to enter into the Mortgage Loan and to execute
and deliver the Mortgage Note and the Mortgage. The Mortgage Note and the
Mortgage have been duly and properly executed by such parties. The proceeds of
the Mortgage Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with;
(g) The Mortgage Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance, issued by a title
insurer qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring (subject to the exceptions contained in (b) (1),
(2) and (3) above) NAMC, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the Mortgage Loan. NAMC
is the sole insured of such lender's title insurance policy, such lender's title
insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by the Purchase
Agreement and this Agreement and will inure to the benefit of the Purchaser and
its assigns without any further act. No claims have been made under such
lender's title insurance policy, and no prior holder of the related Mortgage has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;
(h) The Mortgage Loan was originated by or for NAMC. The Mortgage Loan
complies in all material respects with all the terms, conditions and
requirements of NAMC's underwriting standards in effect at the time of
originations of such Mortgage Loan; provided, that certain Mortgage Loans may
have characteristics outside of such underwriting guidelines where compensating
factors are present acceptable to the mortgage banking industry. The Mortgage
Notes and Mortgages are on uniform Fannie Mae/Freddie Mac instruments or are on
forms acceptable to Fannie Mae or Freddie Mac. The Mortgage Loan bears interest
at a fixed rate as set forth in the Mortgage Loan Schedule, and Monthly Payments
under the Mortgage Note are due and payable on the first day of each month. The
Mortgage Loan contains the usual and enforceable provisions of the originator at
the time of origination for the acceleration of the payment of the unpaid
principal amount if the related Mortgaged Property is sold without the prior
consent of the mortgagee thereunder;
(i) The related Mortgage contains enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security provided thereby,
including, (1) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (2) otherwise by judicial foreclosure. There is no homestead
or other exemption available to the Mortgagor which would interfere with the
right to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage;
(j) If the Mortgage constitutes a deed of trust, a trustee, duly qualified
if required under applicable law to act as such, has been properly designated
and currently so serves and is named in the Mortgage, and no fees or expenses
are or will become payable by the Purchaser to the trustee under the deed of
trust, except in connection with a trustees sale or attempted sale after default
by the Mortgagor;
(k) The Mortgage File contains an appraisal of the related Mortgaged
Property made and signed prior to the final approval of the mortgage loan
application by a Qualified Appraiser, approved by NAMC. The appraisal is in a
form generally acceptable to Fannie Mae or Freddie Mac;
(l) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to
above and such collateral does not serve as security for any other obligation;
(m) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of such mortgage loans;
(n) The Mortgage Loan does not contain "graduated payment" features or,
except with respect to the Mortgage Loans listed in Exhibit K-1, "buydown"
features;
(o) The Mortgage Loan has an original term to maturity of not more than
thirty years, with interest payable in arrears on the first day of each month.
The Mortgage Loan does not contain terms or provisions which would result in
negative amortization;
(p) Each of the Mortgaged Properties consists of a single parcel of real
property with single-family residence erected thereon, or a two- to four-family
dwelling, or an individual condominium unit in a condominium project or an
individual unit in a planned unit development. No Mortgaged Property consists of
a single parcel of real property with a cooperative housing development erected
thereon. Any condominium unit or planned unit development either conforms with
applicable Fannie Mae or Freddie Mac requirements regarding such dwellings or is
covering by a waiver confirming that such condominium unit or planned unit
development is acceptable to Fannie Mae or Freddie Mac or is otherwise
"warrantable" with respect thereto. No Mortgaged Property is a townhouse, a
mobile home or manufactured dwelling. To the best of NAMC's knowledge each
Mortgaged Property is lawfully occupied under applicable law;
(q) The Mortgage Loans were originated with full or alternative
documentation;
(r) The Assignment of Mortgage is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged Property is
located; and
(s) NAMC is either, and each Mortgage Loan was originated by, a savings and
loan association, savings bank, commercial bank, credit union, insurance company
or similar institution which is supervised and examined by a federal or State
authority, or by a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Section 203 and 211 of the National Housing Act.
<PAGE>
EXHIBIT C-3
REPRESENTATIONS AND WARRANTIES OF PHH
CONCERNING THE PHH MORTGAGE LOANS
(a) The Mortgage creates a first lien or a first priority ownership
interest in an estate in fee simply in real property securing the related
Mortgage Note, free and clear of all adverse claims, liens and encumbrances
having priority over the first lien of the Mortgage subject only to (1) the lien
of non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to or otherwise considered in the appraisal made for the originator of
Mortgage Loan, or (B) which do not adversely affect the appraised value of the
Mortgage Property as set forth in such appraisal, and (3) other matters to which
like properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
(b) The terms of the Mortgage Note and the Mortgage have not been impaired,
waived, altered or modified in any respect, except by written instruments which
have been recorded to the extent any such recordation is required by applicable
law, and copies of which written instruments are included in the Mortgage File.
No other instrument of waiver, alteration or modification has been executed, and
no Mortgage has been released, in whole or in part, from the terms thereof
except in connection with an assumption agreement, which assumption agreement is
part of the Mortgage File and the terms of which are reflected in the Mortgage
Loan Schedule;
(c) All such standard hazard policies are in effect and on the date of
origination contained a standard mortgagee clause naming PHH and its successors
in interest as loss payee and such clause is still in effect and all premiums
due thereon have been paid. If the Mortgaged Property is located in an area
identified by the Federal Emergency Management Agency as having special flood
hazards under the Flood Disaster Protection Act of 1973, as amended, such
Mortgaged Property is covered by flood insurance in an amount not less than that
set forth in Section 4.10. The Mortgage obligates the Mortgagor thereunder to
maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(d) Any and all requirements of any federal, state or local law including,
without limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects;
(e) The Mortgage is a valid, subsisting and enforceable first lien on the
Mortgage Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air conditioning
systems affixed to such buildings, and all additions, alterations and
replacements made at any time with respect to the foregoing securing the
Mortgage Note's original principal balance. The Mortgage and the Mortgage Note
do not contain any evidence of any other security interest or other interest or
right thereto. Such lien is free and clear of all adverse claims, liens and
encumbrances having priority over the first lien of the Mortgage subject only to
permitted encumbrances set forth in clause (b) (1), (2) and (3) herein. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein;
(f) The Mortgage Note and the related Mortgage are original and genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in all respects in accordance with its terms subject to bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors, and PHH has taken all action necessary to transfer such rights of
enforceability to the Purchaser. All parties to the Mortgage Note and the
Mortgage had the legal capacity to enter into the Mortgage Loan and to execute
and deliver the Mortgage Note and the Mortgage. The Mortgage Note and the
Mortgage have been duly and properly executed by such parties. The proceeds of
the Mortgage Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with;
(g) The Mortgage Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance, issued by a title
insurer qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring (subject to the exceptions contained in (b) (1),
(2) and (3) above) PHH, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the Mortgage Loan. PHH
is the sole insured of such lender's title insurance policy, such lender's title
insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by the Purchase
Agreement and this Agreement and will inure to the benefit of the Purchaser and
its assigns without any further act. No claims have been made under such
lender's title insurance policy, and no prior holder of the related Mortgage has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;
(h) The Mortgage Loan was originated by or for PHH. The Mortgage Loan
complies in all material respects with all the terms, conditions and
requirements of PHH's underwriting standards in effect at the time of
originations of such Mortgage Loan; provided, that certain Mortgage Loans may
have characteristics outside of such underwriting guidelines where compensating
factors are present acceptable to the mortgage banking industry. The Mortgage
Notes and Mortgages are on uniform Fannie Mae/Freddie Mac instruments or are on
forms acceptable to Fannie Mae or Freddie Mac. The Mortgage Loan bears interest
at a fixed rate as set forth in the Mortgage Loan Schedule, and Monthly Payments
under the Mortgage Note are due and payable on the first day of each month. The
Mortgage Loan contains the usual and enforceable provisions of the originator at
the time of origination for the acceleration of the payment of the unpaid
principal amount if the related Mortgaged Property is sold without the prior
consent of the mortgagee thereunder;
(i) The related Mortgage contains enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security provided thereby,
including, (1) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (2) otherwise by judicial foreclosure. There is no homestead
or other exemption available to the Mortgagor which would interfere with the
right to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage;
(j) If the Mortgage constitutes a deed of trust, a trustee, duly qualified
if required under applicable law to act as such, has been properly designated
and currently so serves and is named in the Mortgage, and no fees or expenses
are or will become payable by the Purchaser to the trustee under the deed of
trust, except in connection with a trustees sale or attempted sale after default
by the Mortgagor;
(k) The Mortgage File contains an appraisal of the related Mortgaged
Property made and signed prior to the final approval of the mortgage loan
application by a Qualified Appraiser, approved by PHH. The appraisal is in a
form generally acceptable to Fannie Mae or Freddie Mac;
(l) The related Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to
above and such collateral does not serve as security for any other obligation;
(m) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of such mortgage loans;
(n) The Mortgage Loan does not contain "graduated payment" features or,
except with respect to the Mortgage Loans listed in Exhibit K-2, "buydown"
features;
(o) The Mortgage Loan has an original term to maturity of not more than
thirty years, with interest payable in arrears on the first day of each month.
The Mortgage Loan does not contain terms or provisions which would result in
negative amortization;
(p) Each of the Mortgaged Properties consists of a single parcel of real
property with single-family residence erected thereon, or a two- to four-family
dwelling, or an individual condominium unit in a condominium project or an
individual unit in a planned unit development. No Mortgaged Property consists of
a single parcel of real property with a cooperative housing development erected
thereon. Any condominium unit or planned unit development either conforms with
applicable Fannie Mae or Freddie Mac requirements regarding such dwellings or is
covering by a waiver confirming that such condominium unit or planned unit
development is acceptable to Fannie Mae or Freddie Mac or is otherwise
"warrantable" with respect thereto. No Mortgaged Property is a townhouse, a
mobile home or manufactured dwelling. To the best of PHH's knowledge each
Mortgaged Property is lawfully occupied under applicable law;
(q) The Mortgage Loans were originated with full or alternative
documentation;
(r) The Assignment of Mortgage is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged Property is
located; and
(s) PHH is either, and each Mortgage Loan was originated by, a savings and
loan association, savings bank, commercial bank, credit union, insurance company
or similar institution which is supervised and examined by a federal or State
authority, or by a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Section 203 and 211 of the National Housing Act.
<PAGE>
EXHIBIT D
REQUEST FOR RELEASE
(for Trustee)
LOAN INFORMATION
Name of Mortgagor: _________________________________________
Loan No.: _________________________________________
TRUSTEE
Name: The First National Bank of Chicago
Address: One National Plaza, Suite 0126
Chicago, Illinois 60670
Trustee Mortgage
File No.: _________________________________________
MASTER SERVICER
Name: _________________________________________
Address: _________________________________________
_________________________________________
Certificates: Mortgage Pass-Through Certificates, Series 1997-7
The undersigned hereby acknowledges that it has received from The First
National Bank of Chicago, as Trustee for the holders of Bear Stearns Mortgage
Securities Inc. Mortgage Pass-Through Certificates, Series 1997-7, the documents
referred to below (the "Documents"). All capitalized terms not otherwise defined
in this Request for Release shall have the meanings given them in the Pooling
and Servicing Agreement dated as of December 1, 1997 (the "Pooling and Servicing
Agreement") among the Trustee, NAMC, PHH and Bear Stearns Mortgage Securities
Inc.
( ) Mortgage Note dated ________, 19__, in the original principal sum of
$____________, made by _____________, payable to, or endorsed to the
order of, the Trustee.
( ) Mortgage recorded on _____________ as instrument no. _____________
in the County Recorder's Office of the County of _______________,
State of ____________ in book/reel/docket _______________ of official
records at page/image ________.
( ) Deed of Trust recorded on _______________ as instrument no.
_________ in the County Recorder's Office of the County of
_______________, State of _______________ in book/reel/docket
__________ of official records at page/image ____________________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
______________ as instrument no. ______ in the County Recorder's
Office of the County of _______________, State of _______________ in
book/reel/docket __________ of official records at page/image
________________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage:
( )
( )
( )
The undersigned hereby acknowledges and agrees as follows:
(1) The related Master Servicer shall, and if the related Master
Servicer releases the Documents to a Sub-Servicer or related Insurer the
related Master Servicer shall cause such Sub-Servicer or related Insurer
to, hold and retain possession of the Documents in trust for the benefit of
the Trustee, solely for the purposes provided in the Agreement.
(2) The related Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions nor
shall the related Master Servicer assert or seek to assert any claims or
rights of setoff to or against the Documents or any proceeds thereof.
(3) The related Master Servicer shall return the Documents to the
Trustee when the need therefor no longer exists, and in any event within 21
days of such Master Servicer's receipt thereof, unless the Mortgage Loan
relating to the Documents has been liquidated and the proceeds thereof have
been remitted to the Certificate Account or the Documents are being used to
pursue foreclosure or other legal proceedings and except as expressly
provided in the Agreement.
(4) Prior to the return of the Documents to the Trustee, the related
Master Servicer shall, and if the related Master Servicer releases such
Documents to a Sub-Servicer or related Insurer, the related Master Servicer
shall cause such Sub-Servicer or related Insurer to, retain the Documents
in its control unless the Documents have been delivered to an attorney, or
to a public trustee or other public official as required by law, to
initiate or pursue legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or nonjudicially, and the related
Master Servicer has delivered to the Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which the
Documents were delivered and the purpose or purposes of such delivery.
(5) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the related Master
Servicer shall at all times be earmarked for the account of the Trustee,
and the related Master Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the possession, custody or
control of the related Master Servicer.
Date: ______________________, 19__
__________________________________
[NAME OF MASTER SERVICER]
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT E
Affidavit pursuant to Section
860E(e)(4) of the Internal Revenue
Code of 1986, as amended, and for
other purposes
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the "Investor"), a
[savings institution] [corporation] duly organized and existing under the laws
of [the State of__________] [the United States], on behalf of which he makes
this affidavit.
2. That (i) the Investor is not a "disqualified organization" as defined in
Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended (the
"Code"), and will not be a disqualified organization as of [Closing Date] [date
of purchase]; (ii) it is not acquiring the Bear Stearns Mortgage Securities Inc.
Mortgage Pass-Through Certificates, Series 1997-7, [Class R-1] [Class R-2]
Certificates (the "Residual Certificates") for the account of a disqualified
organization; (iii) it consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by Bear Stearns Mortgage Securities
Inc. (upon advice of counsel) to constitute a reasonable arrangement to ensure
that the Residual Certificates will not be owned directly or indirectly by a
disqualified organization; and (iv) it will not transfer such Residual
Certificates unless (a) it has received from the transferee an affidavit in
substantially the same form as this affidavit containing these same four
representations and (b) as of the time of the transfer, it does not have actual
knowledge that such affidavit is false.
3. That the Investor is one of the following: (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity taxable as
such created or organized in or under the laws of the United States or any
political subdivision thereof or (iii) an estate that is subject to U.S. federal
income tax regardless of the source of its income, or (iv) a trust other than a
"foreign trust,' as defined in Section 7701(a)(31) of the Code.
4. That the Investor's taxpayer identification number is ______________.
5. That no purpose of the acquisition of the Residual Certificates is to
avoid or impede the assessment or collection of tax.
6. That the Investor understands that, as the holder of the Residual
Certificates, the Investor may incur tax liabilities in excess of any cash flows
generated by such Residual Certificates.
7. That the Investor intends to pay taxes associated with holding the
Residual Certificates as they become due.
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be executed
on its behalf, pursuant to authority of its Board of Directors, by its [Title of
Officer] this __ day of __ , 199___.
[NAME OF INVESTOR]
By: __________________________________
[Name of Officer]
[Title of Officer]
[Address of Investor for receipt
of distributions]
Address of Investor for
receipt of tax information:
<PAGE>
Personally appeared before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.
Subscribed and sworn before me this ___ day of ________, 199_.
NOTARY PUBLIC
COUNTY OF
STATE OF
My commission expires the ___ day of ________, 199_.
<PAGE>
EXHIBIT F-1
FORM OF INVESTMENT LETTER
[Date]
[SELLER]
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670
Bear Stearns Mortgage Securities Inc.
245 Park Avenue
New York, New York 10167
Re: BSMSI Series 1997-7 Mortgage Pass-Through
Certificates (the "Certificates"), including the Class
B-4, Class B-5, Class B-6, Class 3-B-4, Class 3-B-5,
Class 3-B-6, Class 4-B-4, Class 4-B-5, Class 4-B-6,
Class 5-B-4, Class 5-B-5 and Class 5-B-6 Certificates
(the "PRIVATELY OFFERED CERTIFICATES")
Dear Ladies and Gentlemen:
In connection with our purchase of Privately Offered Certificates, we
confirm that:
(i) we understand that the Privately Offered Certificates are
not being registered under the Securities Act of 1933, as
amended (the "Act") or any applicable state securities or
"Blue Sky" laws, and are being sold to us in a transaction
that is exempt from the registration requirements of such
laws;
(ii) any information we desired concerning the Certificates,
including the Privately Offered Certificates, the trust in
which the Certificates represent the entire beneficial
ownership interest (the "Trust") or any other matter we
deemed relevant to our decision to purchase Privately
Offered Certificates has been made available to us;
(iii) we are able to bear the economic risk of investment in
Privately Offered Certificates; we are an institutional
"accredited investor" as defined in Section 501(a) of
Regulation D promulgated under the Act and a sophisticated
institutional investor;
(iv) we are acquiring Privately Offered Certificates for our own
account, not as nominee for any other person, and not with a
present view to any distribution or other disposition of the
Privately Offered Certificates;
(v) we agree the Privately Offered Certificates must be held
indefinitely by us (and may not be sold, pledged,
hypothecated or in any way disposed of) unless subsequently
registered under the Act and any applicable state securities
or "Blue Sky" laws or an exemption from the registration
requirements of the Act and any applicable state securities
or "Blue Sky" laws is available;
(vi) we agree that in the event that at some future time we wish
to dispose of or exchange any of the Privately Offered
Certificates (such disposition or exchange not being
currently foreseen or contemplated), we will not transfer or
exchange any of the Privately Offered Certificates unless:
(A) (1) the sale is to an Eligible Purchaser (as
defined below), (2) a letter to substantially the same
effect as either this letter or, if the Eligible Purchaser
is a Qualified Institutional Buyer as defined under Rule
144A of the Act, the Rule 144A and Related Matters
Certificate in the form attached to the Pooling and
Servicing Agreement (as defined below) (or such other
documentation as may be acceptable to the Trustee) is
executed promptly by the purchaser and delivered to the
addressees hereof and (3) all offers or solicitations in
connection with the sale, whether directly or through any
agent acting on our behalf, are limited only to Eligible
Purchasers and are not made by means of any form of general
solicitation or general advertising whatsoever; and
(B) if the Privately Offered Certificate is not
registered under the Act (as to which we acknowledge you
have no obligation), the Privately Offered Certificate is
sold in a transaction that does not require registration
under the Act and any applicable state securities or "blue
sky" laws and, if The First National Bank of Chicago (the
"Trustee") so requests, a satisfactory Opinion of Counsel is
furnished to such effect, which Opinion of Counsel shall be
an expense of the transferor or the transferee;
(vii) we agree to be bound by all of the terms (including those
relating to restrictions on transfer) of the Pooling and
Servicing (as defined below), pursuant to which the Trust
was formed; we have reviewed carefully and understand the
terms of the Pooling and Servicing Agreement;
(viii) we either: (i) are not acquiring the Privately Offered
Certificate directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which
is subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, and/or section 4975 of the
Internal Revenue Code of 1986, as amended, or (ii) are
providing such other evidence acceptable to the Trustee to
the effect that the proposed transfer and/or holding of a
Privately Offered Certificate and the servicing, management
and/or operation of the Trust and its assets: (I) will not
result in any prohibited transaction which is not covered
under an individual or class prohibited transaction
exemption, including, but not limited to, Prohibited
Transaction Exemption ("PTE") 84-14, PTE 91-38, PTE 90-1,
PTE 95-60 or PTE 96-23 and (II) will not give rise to any
additional fiduciary duties on the part of the Master
Servicer or the Trustee.
(ix) We understand that each of the Class B-4, B-5, Class B-6,
Class 3-B-4, Class 3-B-5, Class 3-B-6, Class 4-B-4, Class
4-B-5, Class 4-B-6, Class 5-B-4, Class 5-B-5 and 5-B-6
Certificates bears, and will continue to bear, a legend to
substantiate the following effect: "THIS CERTIFICATE HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS
CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN
CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR"
WITHIN THE MEANING THEREOF IN RULE 501(a)(1), (2), (3) or
(7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL
OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING
NOT FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B)
THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE
TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY
OTHER APPLICABLE JURISDICTION. THIS CERTIFICATE MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN
EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH
IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, UNLESS THE
PROPOSED TRANSFEREE PROVIDES A REPRESENTATION OR
CERTIFICATION TO THE EFFECT THAT THE PROPOSED TRANSFER
AND/OR HOLDING OF A CERTIFICATE AND THE SERVICING,
MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS: (I)
WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT
COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION
EXEMPTION, INCLUDING, BUT NOT LIMITED TO, PROHIBITED
TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1,
PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF EITHER MASTER
SERVICER OR THE TRUSTEE."
"ELIGIBLE PURCHASER" means a corporation, partnership or other entity which
we have reasonable grounds to believe and do believe (i) can make
representations with respect to itself to substantially the same effect as the
representations set forth herein, and (ii) is either a Qualified Institutional
Buyer as defined under Rule 144A of the Act or an institutional "Accredited
Investor" as defined under Rule 501 of the Act.
Terms not otherwise defined herein shall have the meanings assigned to them
in the Pooling and Servicing Agreement dated as of December 1, 1997 among Bear
Stearns Mortgage Securities Inc., North American Mortgage Company, PHH Mortgage
Services Corporation and The First National Bank of Chicago, as Trustee (the
"Pooling and Servicing Agreement").
If the Purchaser proposes that its Certificates be registered in the name
of a nominee on its behalf, the Purchaser has identified such nominee below, and
has caused such nominee to complete the Nominee Acknowledgment at the end of
this letter.
Name of Nominee (if any):___________________
<PAGE>
IN WITNESS WHEREOF, this document has been executed by the undersigned who
is duly authorized to do so on behalf of the undersigned Eligible Purchaser on
the ____ day of ________, 19__.
Very truly yours,
[PURCHASER]
By: ______________________________
(Authorized Officer)
[By: _____________________________
Attorney-in-fact]
<PAGE>
Nominee Acknowledgment
The undersigned hereby acknowledges and agrees that as to the Certificates
being registered in its name, the sole beneficial owner thereof is and shall be
the Purchaser identified above, for whom the undersigned is acting as nominee.
[NAME OF NOMINEE]
By: _____________________________
(Authorized Officer)
[By: ___________________________
Attorney-in-fact]
<PAGE>
EXHIBIT F-2
FORM OF RULE 144A AND RELATED MATTERS CERTIFICATE
[Date]
[SELLER]
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Bear Stearns Mortgage Securities Inc.
245 Park Avenue
New York, New York 10167
Re: BSMSI Series 1997-7 Mortgage Pass-Through
Certificates, Class B-4, Class B-5, Class B-6,
Class 3-B-4, Class 3-B-5, Class 3-B-6, Class
4-B-4, Class 4-B-5, Class 4-B-6, Class 5-B-4,
Class 5-B-5 and Class 5-B-6 Certificates (the
"Privately Offered CERTIFICATES")
Dear Ladies and Gentlemen:
In connection with our purchase of Privately Offered Certificates, the
undersigned certifies to each of the parties to whom this letter is addressed
that it is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act of 1933, as amended (the "Act")) as follows:
1. It owned and/or invested on a discretionary basis eligible securities
(excluding affiliate's securities, bank deposit notes and CD's, loan
participations, repurchase agreements, securities owned but subject to a
repurchase agreement and swaps), as described below:
Date: _____________, 19__ (must be on or after the close of its most recent
fiscal year)
Amount: $_________________; and
2. The dollar amount set forth above is:
a. greater than $100 million and the undersigned is one of the following
entities:
(1) / / an insurance company as defined in Section 2(13) of the Act;
or (1)
or
(2) / / investment company registered under the Investment Company
Act or any business development company as defined in Section
2(a)(48) of the Investment COmpany Act of 1940; or
(3) / / a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; or
(4) / / a plan (i) established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, the laws of which permit the
purchase of securities of this type, for the benefit of its
employees and (ii) the governing investment guidelines of which
permit the purchase of securities of this type; or
(5) / / a business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940; or
(6) / / a corporation (other than a U.S. bank, savings and loan
association or equivalent foreign institution), partnership,
Massachusetts or similar business trust, or an organization
described in Section 501(c)(3) of the Internal Revenue Code; or
(7) / / a U.S. bank, savings and loan association or equivalent
foreign institution, which has an audited net worth of at least
$25 million as demonstrated in its latest annual financial
statements; or
(8) / / an investment adviser registered under the Investment
Advisers Act; or
b. / / greater than $10 million, and the undersigned is a broker-dealer
registered with the SEC; or
c. / / less than $10 million, and the undersigned is a broker-dealer
registered with the SEC and will only purchase Rule 144A
securities in transactions in which it acts as a riskless
principal (as defined in Rule 144A); or
________________________________
1 A purchase by an insurance company for one or more of its separate
accounts, as defined by Section 2(a)(37) of the Investment Company Act of
1940, which are neither registered nor required to be registered
thereunder, shall be deemed to be a purchase for the account of such
insurance company.
<PAGE>
d. / / less than $100 million, and the undersigned is an
investment company registered under the Investment Company Act of
1940, which, together with one or more registered investment
companies having the same or an affiliated investment adviser,
owns at least $100 million of eligible securities; or
e. / / less than $100 million, and the undersigned is an entity, all
the equity owners of which are qualified institutional buyers.
The undersigned further certifies that it is purchasing a Privately Offered
Certificate for its own account or for the account of others that independently
qualify as "Qualified Institutional Buyers" as defined in Rule 144A. It is aware
that the sale of the Privately Offered Certificates is being made in reliance on
its continued compliance with Rule 144A. It is aware that the transferor may
rely on the exemption from the provisions of Section 5 of the Act provided by
Rule 144A. The undersigned understands that the Privately Offered Certificates
may be resold, pledged or transferred only to (i) a person reasonably believed
to be a Qualified Institutional Buyer that purchases for its own account or for
the account of a Qualified Institutional Buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance in Rule 144A, or (ii) an
institutional "accredited investor," as such term is defined under Rule 501 of
the Act in a transaction that otherwise does not constitute a public offering.
The undersigned agrees that if at some future time it wishes to dispose of
or exchange any of the Privately Offered Certificates, it will not transfer or
exchange any of the Privately Offered Certificates to a Qualified Institutional
Buyer without first obtaining a Rule 144A and Related Matters Certificate in the
form hereof from the transferee and delivering such certificate to the
addressees hereof. Prior to making any transfer of Privately Offered
Certificates, if the proposed Transferee is an institutional "accredited
investor," the transferor shall obtain from the transferee and deliver to the
addressees hereof an Investment Letter in the form attached to the Pooling and
Servicing Agreement dated as of December 1, 1997 among Bear Stearns Mortgage
Securities Inc., as Seller, North American Mortgage Company, PHH Mortgage
Services Corporation and The First National Bank of Chicago, as Trustee,
pursuant to which the Certificates were issued.
The undersigned certifies that it either: (i) is not acquiring the
Privately Offered Certificate directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which is subject to Title
I of the Employee Retirement Income Security Act of 1974, as amended, and/or
section 4975 of the Internal Revenue Code of 1986, as amended, or (ii) is
providing such other evidence acceptable to the Trustee to the effect that the
proposed transfer and/or holding of a Privately Offered Certificate and the
servicing, management and/or operation of the Trust and its assets: (I) will not
result in any prohibited transaction which is not covered under an individual or
class prohibited transaction exemption, including, but not limited to,
Prohibited Transaction Exemption ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
or PTE 96-23 and (II) will not give rise to any additional fiduciary duties on
the part of the Master Servicer or the Trustee.
If the Purchaser proposes that its Certificates be registered in the name
of a nominee on its behalf, the Purchaser has identified such nominee below, and
has caused such nominee to complete the Nominee Acknowledgment at the end of
this letter.
<PAGE>
Name of Nominee (if any):___________________
IN WITNESS WHEREOF, this document has been executed by the undersigned who
is duly authorized to do so on behalf of the undersigned Eligible Purchaser on
the ____ day of ________, 19__.
Very truly yours,
[PURCHASER]
By: ______________________________
(Authorized Officer)
[By: _____________________________
Attorney-in-fact]
<PAGE>
Nominee Acknowledgment
The undersigned hereby acknowledges and agrees that as to the Certificates
being registered in its name, the sole beneficial owner thereof is and shall be
the Purchaser identified above, for whom the undersigned is acting as nominee.
[NAME OF NOMINEE]
By: ______________________________
(Authorized Officer)
[By: ____________________________
Attorney-in-fact]
<PAGE>
EXHIBIT G
FORM OF INITIAL CERTIFICATION
[Seller]
[Master Servicer]
Re: Pooling and Servicing Agreement dated as of
December 1, 1997, among Bear Stearns Mortgage
Securities Inc., as seller, North American
Mortgage Company, as a master servicer, PHH
Mortgage Services, as a master servicer, and The
First National Bank of Chicago, as trustee
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-7
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as otherwise noted on the attached exception report, that as to each Mortgage
Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has reviewed the Mortgage File and
the Mortgage Loan Schedule and has determined that: (i) all documents required
to be included in the Mortgage File pursuant to the Pooling and Servicing
Agreement are in its possession; (ii) such documents have been reviewed by it
and appear regular on their face, have, where applicable, been executed and
relate to such Mortgage Loan; and (iii) based on examination by it, and only as
to such documents, the information set forth in the Mortgage Loan Schedule as to
Mortgagor Name, original principal balance and loan number respecting such
Mortgage Loan is correct and accurately reflects the information in the Mortgage
Loan File.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representation that any documents specified in subclauses (iv), (v) and (vii) of
Section 2.01(b) should be included in any Mortgage File. The Trustee makes no
representations as to: (i) the validity, legality, enforceability or genuineness
of any of the documents contained in each Mortgage File of any of the Mortgage
Loans identified on the Mortgage Loan Schedule or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
By: _______________________________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF FINAL CERTIFICATION
Bear Stearns Mortgage Securities Inc.
245 Park Avenue
New York, New York 10167
North American Mortgage Company
6200 Courtney Campbell Causeway, Suite 300
Tampa, Florida 33607
PHH Mortgage Services Corporation
600 Atrium Way
Mount Laurel, New Jersey 08054
Re: Pooling and Servicing Agreement dated as of
December 1, 1997, among Bear Stearns Mortgage
Securities Inc., as seller, North American
Mortgage Company, as a master servicer, PHH
Mortgage Services, as a master servicer, and The
First National Bank of Chicago, as trustee
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-7
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as otherwise noted on the attached exception report, that as to each Mortgage
Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on the attachment hereto) it has received the documents set forth
in Section 2.01 and has determined that (i) all documents required to be
included in the Mortgage File pursuant to the Pooling and Servicing Agreement
are in its possession; (ii) such documents have been reviewed by it and appear
regular on their face, have, where applicable, been executed and relate to such
Mortgage Loan; and (iii) based on examination by it, and only as to such
documents, the information set forth in the Mortgage Loan Schedule as to
Mortgagor name, original principal balance and loan number respecting such
Mortgage Loan is correct and accurately reflects the information in the Mortgage
Loan File.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representation that any documents specified in subclauses (iv), (v) and (vii) of
Section 2.01(b) should be included in any Mortgage File. The Trustee makes no
representations as to: (i) the validity, legality, enforceability or genuineness
of any of the documents contained in each Mortgage File of any of the Mortgage
Loans identified on the Mortgage Loan Schedule or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
By: ___________________________________________
Name:
Title:
<PAGE>
EXHIBIT I
PLANNED BALANCES OF THE PAC CERTIFICATES
<PAGE>
EXHIBIT J
LIST OF PHH MORTGAGE LOANS
FOR WHICH MORTGAGE NOTES ARE LOST
<PAGE>
EXHIBIT K-1
LIST OF NAMC
MORTGAGE LOANS WITH BUYDOWN FEATURES
INTENTIONALLY OMITTED
[AVAILABLE UPON REQUEST FROM BEAR STEARNS MORTGAGE SECURITIES INC.]
<PAGE>
EXHIBIT K-2
LIST OF PHH
MORTGAGE LOANS WITH BUYDOWN FEATURES
INTENTIONALLY OMITTED
[AVAILABLE UPON REQUEST FROM BEAR STEARNS MORTGAGE SECURITIES INC.]
