SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported): September 29, 1998
CWMBS, INC., (as depositor under the Pooling and Servicing
Agreement, dated as of September 1, 1998, providing for the
issuance of the CWMBS, INC., CHL Mortgage Pass-Through Trust
1998-18, Mortgage Pass-Through Certificates, Series 1998-18).
CWMBS, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-53861 95-4596514
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation File Number Identification No.)
4500 Park Granada
Calabasas, California 91302
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (818) 225-3240
- -----------------------------------------------------------------
<PAGE>
Item 5. Other Events.
On September 29, 1998, CWMBS, Inc. (the "Company") entered into a Pooling
and Servicing Agreement dated as of September 1, 1998 (the "Pooling and
Servicing Agreement"), by and among the Company, as depositor, Countrywide Home
Loans, Inc. ("CHL"), as seller and as master servicer, and The Bank of New
York, as trustee (the "Trustee"), providing for the issuance of the Company's
Mortgage Pass-Through Certificates, Series 1998-18. The Pooling and Servicing
Agreement is annexed hereto as Exhibit 99.1.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. The Pooling and Servicing Agreement, dated as of September
1, 1998, by and among the Company, CHL and the Trustee.
<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 hereunto duly authorized.
CWMBS, INC.
By: /s/ Celia Coulter
Celia Coulter
Vice President
Dated: October 26, 1998
Exhibit Index
Exhibit Page
99.1. Pooling and Servicing Agreement,
dated as of September 1, 1998, by
and among, the Company, CHL
and the Trustee. 6
<PAGE>
EXHIBIT 99.1
<PAGE>
EXECUTION COPY
-----------------------------------
CWMBS, INC.,
Depositor
COUNTRYWIDE HOME LOANS, INC.,
Seller and Master Servicer
and
THE BANK OF NEW YORK,
Trustee
-----------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1998
-----------------------------------
CHL MORTGAGE PASS-THROUGH TRUST 1998-18
-----------------------------------
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT........................................................1
ARTICLE I
DEFINITIONS
Definitions................................................................I-1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans...........................II-1
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans............II-4
SECTION 2.03. Representations, Warranties and Covenants of the
Seller and Master Servicer.............................II-5
SECTION 2.04. Representations and Warranties of the Depositor as
to the Mortgage Loans..................................II-7
SECTION 2.05. Delivery of Opinion of Counsel in Connection with
Substitutions..........................................II-7
SECTION 2.06. Execution and Delivery of Certificates.................II-8
SECTION 2.07. REMIC Matters..........................................II-8
SECTION 2.08. Covenants of the Master Servicer.......................II-8
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.............III-1
SECTION 3.02. Subservicing; Enforcement of the Obligations
of Servicers..........................................III-2
SECTION 3.03. Rights of the Depositor and the Trustee in Respect
of the Master Servicer................................III-2
SECTION 3.04. Trustee to Act as Master Servicer.....................III-2
SECTION 3.05. Collection of Mortgage Loan Payments; Certificate
Account; Distribution Account.........................III-3
SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.......................................III-5
SECTION 3.07. Access to Certain Documentation and Information
Regarding the Mortgage Loans..........................III-5
SECTION 3.08. Permitted Withdrawals from the Certificate Account
and Distribution Account..............................III-6
SECTION 3.09. Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies............................III-7
SECTION 3.10. Enforcement of Due-on-Sale Clauses; Assumption
Agreements............................................III-8
SECTION 3.11. Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans..................III-10
SECTION 3.12. Trustee to Cooperate; Release of Mortgage Files.......III-12
SECTION 3.13. Documents Records and Funds in Possession of
Master Servicer to be Held for the Trustee............III-12
SECTION 3.14. Servicing Compensation................................III-13
SECTION 3.15. Access to Certain Documentation.......................III-13
SECTION 3.16. Annual Statement as to Compliance.....................III-13
SECTION 3.17. Annual Independent Public Accountants' Servicing
Statement; Financial Statements.......................III-14
SECTION 3.18. Errors and Omissions Insurance; Fidelity Bonds........III-14
ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances...............................................IV-1
SECTION 4.02. Priorities of Distribution.............................IV-1
SECTION 4.03. [Reserved].............................................IV-6
SECTION 4.04. Allocation of Realized Losses..........................IV-6
SECTION 4.05. [Reserved].............................................IV-8
SECTION 4.06. Monthly Statements to Certificateholders...............IV-8
SECTION 4.07. Determination of Pass-Through Rates for COFI
Certificates..........................................IV-10
SECTION 4.08. Determination of Pass-Through Rates for LIBOR
Certificates..........................................IV-11
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates........................................V-1
SECTION 5.02. Certificate Register; Registration of Transfer
and Exchange of Certificates............................V-1
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.......V-5
SECTION 5.04. Persons Deemed Owners...................................V-6
SECTION 5.05. Access to List of Certificateholders' Names
and Addresses... ................V-6
SECTION 5.06. Maintenance of Office or Agency.........................V-6
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the Depositor and the
Master Servicer........................................VI-1
SECTION 6.02. Merger or Consolidation of the Depositor or the
Master Servicer........................................VI-1
SECTION 6.03. Limitation on Liability of the Depositor, the
Seller, the Master Servicer and Others.................VI-1
SECTION 6.04. Limitation on Resignation of Master Servicer...........VI-2
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.....................................VII-1
SECTION 7.02. Trustee to Act; Appointment of Successor..............VII-2
SECTION 7.03. Notification to Certificateholders....................VII-3
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee....................................VIII-1
SECTION 8.02. Certain Matters Affecting the Trustee................VIII-2
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
Loans................................................VIII-3
SECTION 8.04. Trustee May Own Certificates.........................VIII-3
SECTION 8.05. Trustee's Fees and Expenses..........................VIII-3
SECTION 8.06. Eligibility Requirements for Trustee.................VIII-4
SECTION 8.07. Resignation and Removal of Trustee...................VIII-4
SECTION 8.08. Successor Trustee....................................VIII-5
SECTION 8.09. Merger or Consolidation of Trustee...................VIII-5
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee........VIII-5
SECTION 8.11. Tax Matters..........................................VIII-7
SECTION 8.12. Periodic Filings.....................................VIII-8
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Purchase of all
Mortgage Loans.........................................IX-1
SECTION 9.02. Final Distribution on the Certificates.................IX-1
SECTION 9.03. Additional Termination Requirements....................IX-2
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment...............................................X-1
SECTION 10.02. Recordation of Agreement; Counterparts..................X-2
SECTION 10.03. Governing Law...........................................X-2
SECTION 10.04. Intention of Parties....................................X-3
SECTION 10.05. Notices.................................................X-3
SECTION 10.06. Severability of Provisions..............................X-4
SECTION 10.07. Assignment..............................................X-4
SECTION 10.08. Limitation on Rights of Certificateholders..............X-4
SECTION 10.09. Inspection and Audit Rights.............................X-5
SECTION 10.10. Certificates Nonassessable and Fully Paid...............X-5
SCHEDULES
Schedule I Mortgage Loan Schedule.....................................S-I-1
Schedule II: Representations and Warranties
of the Seller/Master Servicer.............................S-II-1
Schedule III: Representations and Warranties as to the
Mortgage Loans...........................................S-III-1
Schedule IV: Principal Balances Schedule [if applicable]...............S-IV-1
Schedule V: Form of Monthly Master Servicer Report.....................S-V-1
EXHIBITS
Exhibit A: Form of Senior Certificate (excluding Notional
Amount Certificates).........................................A-1
Exhibit B: Form of Subordinated Certificate.............................B-1
Exhibit C: Form of Class A-R Certificate................................C-1
Exhibit D: Form of Notional Amount Certificate..........................D-1
Exhibit E: Form of Reverse of Certificates..............................E-1
Exhibit F: Form of Initial Certification................................F-1
Exhibit G: Form of Delay Delivery Certification.........................G-1
Exhibit H: Form of Final Certification of Trustee.......................H-1
Exhibit I: Transfer Affidavit...........................................I-1
Exhibit J: Form of Transferor Certificate...............................J-1
Exhibit K: Form of Investment Letter [Non-Rule 144A]....................K-1
Exhibit L: Form of Rule 144A Letter.....................................L-1
Exhibit M: Request for Release (for Trustee)............................M-1
Exhibit N: Request for Release (Mortgage Loan)
Paid in Full, Repurchased and Replaced)......................N-1
Exhibit O: [Reserved]...................................................O-1
THIS POOLING AND SERVICING AGREEMENT, dated as of September 1, 1998,
among CWMBS, INC., a Delaware corporation, as depositor (the "Depositor"),
COUNTRYWIDE HOME LOANS, INC., a New York corporation, as seller (in such
capacity, the "Seller") and as master servicer (in such capacity, the "Master
Servicer"), and THE BANK OF NEW YORK, a banking corporation organized under
the laws of the State of New York, as trustee (the "Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby conveyed
to the Trustee in return for the Certificates. The Trust Fund for federal
income tax purposes will consist of two REMICs. The Subsidiary REMIC will
consist of all of the assets constituting the Trust Fund and will be evidenced
by the Subsidiary REMIC Regular Interests (which will be uncertificated and
will represent the "regular interests" in the Subsidiary REMIC) and the SR
Interest as the single "residual interest" in the Subsidiary REMIC. The
Trustee will hold the Subsidiary REMIC Regular Interests. The Master REMIC
will consist of the Subsidiary REMIC Regular Interests and will be evidenced
by the Regular Certificates (which will represent the "regular interests" in
the Master REMIC) and the MR Interest as the single "residual interest" in the
Master REMIC. The Class A-R Certificates will represent beneficial ownership
of the SR Interest and the MR Interest. The "latest possible maturity date"
for federal income tax purposes of all interests created hereby will be the
Latest Possible Maturity Date.
The following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in excess
thereof in which such Classes shall be issuable (except that one Certificate
of each Class of Certificates may be issued in a different amount and, in
addition, one Residual Certificate representing the Tax Matters Person
Certificate may be issued in a different amount):
<TABLE>
<CAPTION>
- --------------- -------------------- ---------------- ---------------- ----------------
Integral
Initial Class Multiples in
Certificate Pass-Through Minimum excess of
Balance Rate Denomination Minimum
- --------------- -------------------- ---------------- ---------------- ----------------
- --------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class I-A-1 $ 104,886,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-2 $ 23,835,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-3 $ 22,773,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-4 $ 44,961,100.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-5 $ 60,046,311.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-6 $ 35,667,446.00 (1) $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-7 $ 11,889,149.00 (1) $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-8 $ 18,048,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-9 $ 39,957,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-10 $ 2,459,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-11 $ 29,968,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-12 $ 176,512,000.00 6.50% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-A-13 $ (2) 6.75% $ 25,000(5) $1,000(5)
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-1 $ 183,296,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-2 $ 23,289,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-3 $ 31,567,070.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-4 $ 45,093,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-5 $ 40,056,342.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-6 $ 2,235,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-7 $ 30,062,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-8 $ 25,052,000.00 6.25% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-9 $ 2,113,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-A-10 $ (2) 6.75% $ 25,000(5) $1,000(5)
- --------------- -------------------- ---------------- ---------------- ----------------
Class PO $ 1,715,075.00 (3) $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class X-1 $ (2) (4) $ 25,000(5) $1,000(5)
- --------------- -------------------- ---------------- ---------------- ----------------
Class X-2 $ (2) (4) $ 25,000(5) $1,000(5)
- --------------- -------------------- ---------------- ---------------- ----------------
Class A-R(6) $ 100.00 6.75% $ 100 N/A
- --------------- -------------------- ---------------- ---------------- ----------------
Class M-1 $ 12,909,956.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-B-1 $ 6,004,631.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-B-2 $ 3,602,778.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-B-3 $ 2,401,852.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-B-4 $ 1,501,157.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class I-B-5 $ 2,101,624.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class M-2 $ 7,610,750.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-B-1 $ 4,206,000.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-B-2 $ 1,602,250.00 6.75% $ 25,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-B-3 $ 1,602,250.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-B-4 $ 801,125.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
Class II-B-5 $ 1,201,572.00 6.75% $100,000 $1,000
- --------------- -------------------- ---------------- ---------------- ----------------
</TABLE>
- -------------------
(1) The Class I-A-6 and Class I-A-7 Certificates will bear interest during
the initial Interest Accrual Period at the applicable Initial
Pass-Through Rate set forth below, and will bear interest during each
Interest Accrual Period thereafter, subject to the applicable Maximum
and Minimum Pass-Through Rates, at the per annum rate determined as
described below:
- --------- -------------------- -------------------- --------------------------
Initial Maximum/Minimum Formula for Calculation of
Class Pass-Through Rate Pass-Through Rate Pass-Through Rate
- --------- -------------------- -------------------- --------------------------
I-A-6 6.25234% 9.00%/0.60% LIBOR + 60 basis points
- --------- -------------------- -------------------- --------------------------
I-A-7 8.24298% 25.2%/0.00% 25.2%-(3.0 x LIBOR)
- --------- -------------------- -------------------- --------------------------
(2) The Class I-A-13, Class II-A-10, Class X-1 and Class X-2 Certificates
will be Notional Amount Certificates, will have no principal balance and
will bear interest on their respective Notional Amounts (initially
expected to be approximately $6,537,481, $1,855,703, $495,597,254 and
$332,009,565, respectively).
(3) The Class PO Certificates will be Principal Only Certificates and will
not bear interest.
(4) The Pass-Through Rate for the Class X-1 Certificates for any
Distribution Date will be equal to the excess of (a) the weighted
average of the Net Mortgage Rates of the Non-Discount Mortgage Loans in
Loan Group 1 over (b) 6.75% per annum. The Pass-Through Rate for the
Class X-2 Certificates for any Distribution Date will be equal to the
excess of (a) the weighted average of the Net Mortgage Rates of the
Non-Discount Loans in Loan Group 2 over (b) 6.75% per annum. The
Pass-Through Rates for the Class X-1 and Class X-2 Certificates for the
first Distribution Date are expected to be approximately 0.437% and
0.406% per annum, respectively).
(5) Denominations are based on the Notional Amount of such Class.
(6) The Class A-R Certificates will represent the beneficial ownership of
the SR Interest (described in the table below) and the MR Interest. The
initial principal balance and interest rate applicable to the MR
Interest shall be equal to the initial Class Certificate Balance and
Pass-Through Rate, respectively, of the Class A-R Certificates.
Principal of and interest on the Subsidiary REMIC Regular Interests
and the SR Interest shall be allocated to the Corresponding Classes of
Certificates in the manner set forth in the following table:
Corresponding Class of Certificates(1)
--------------------------------------
<TABLE>
<CAPTION>
- ------------ --------------------- --------------- ---------------- -------------------
Subsidiary
REMIC Initial Principal Allocation Allocation
Interest Balance Interest Rate of Principal of Interest
- ------------ --------------------- --------------- ---------------- -------------------
- ------------ --------------------- --------------- ---------------- -------------------
<S> <C> <C> <C> <C>
1 $ 104,886,000.00 6.75% I-A-1 I-A-1
- ------------ --------------------- --------------- ---------------- -------------------
2 $ 23,835,000.00 6.75% I-A-2 I-A-2
- ------------ --------------------- --------------- ---------------- -------------------
3 $ 22,773,000.00 6.75% I-A-3 I-A-3
- ------------ --------------------- --------------- ---------------- -------------------
4 $ 44,961,100.00 6.75% I-A-4 I-A-4
- ------------ --------------------- --------------- ---------------- -------------------
5 $ 60,046,311.00 6.75% I-A-5 I-A-5
- ------------ --------------------- --------------- ---------------- -------------------
6 $ 35,667,446.00 (2) I-A-6 I-A-6
- ------------ --------------------- --------------- ---------------- -------------------
7 $ 11,889,149.00 (2) I-A-7 I-A-7
- ------------ --------------------- --------------- ---------------- -------------------
8 $ 18,048,000.00 6.75% I-A-8 I-A-8
- ------------ --------------------- --------------- ---------------- -------------------
9 $ 39,957,000.00 6.75% I-A-9 I-A-9
- ------------ --------------------- --------------- ---------------- -------------------
10 $ 2,459,000.00 6.75% I-A-10 I-A-10
- ------------ --------------------- --------------- ---------------- -------------------
11 $ 29,968,000.00 6.75% I-A-11 I-A-11
- ------------ --------------------- --------------- ---------------- -------------------
12 $ 176,512,000.00 6.75% I-A-12 I-A-12, I-A-13(3)
- ------------ --------------------- --------------- ---------------- -------------------
13 $ 183,296,000.00 6.75% II-A-1 II-A-1
- ------------ --------------------- --------------- ---------------- -------------------
14 $ 23,289,000.00 6.75% II-A-2 II-A-2
- ------------ --------------------- --------------- ---------------- -------------------
15 $ 31,567,070.00 6.75% II-A-3 II-A-3
- ------------ --------------------- --------------- ---------------- -------------------
16 $ 45,093,000.00 6.75% II-A-4 II-A-4
- ------------ --------------------- --------------- ---------------- -------------------
17 $ 40,056,342.00 6.75% II-A-5 II-A-5
- ------------ --------------------- --------------- ---------------- -------------------
18 $ 2,235,000.00 6.75% II-A-6 II-A-6
- ------------ --------------------- --------------- ---------------- -------------------
19 $ 30,062,000.00 6.75% II-A-7 II-A-7
- ------------ --------------------- --------------- ---------------- -------------------
20 $ 25,052,000.00 6.25% II-A-8 II-A-8, II-A-10(4)
- ------------ --------------------- --------------- ---------------- -------------------
21 $ 2,113,000.00 6.75% II-A-9 II-A-9
- ------------ --------------------- --------------- ---------------- -------------------
22 $ 1,715,075.00 (5) PO N/A
- ------------ --------------------- --------------- ---------------- -------------------
23 $ (6) (7) N/A X-1
- ------------ --------------------- --------------- ---------------- -------------------
24 $ (8) (9) N/A X-2
- ------------ --------------------- --------------- ---------------- -------------------
25 $ 100.00 6.75% A-R(10) A-R(10)
- ------------ --------------------- --------------- ---------------- -------------------
26 $ 12,909,956.00 6.75% M-1 M-1
- ------------ --------------------- --------------- ---------------- -------------------
27 $ 6,004,631.00 6.75% I-B-1 I-B-1
- ------------ --------------------- --------------- ---------------- -------------------
28 $ 3,602,778.00 6.75% I-B-2 I-B-2
- ------------ --------------------- --------------- ---------------- -------------------
29 $ 2,401,852.00 6.75% I-B-3 I-B-3
- ------------ --------------------- --------------- ---------------- -------------------
30 $ 1,501,157.00 6.75% I-B-4 I-B-4
- ------------ --------------------- --------------- ---------------- -------------------
31 $ 2,101,623.82 6.75% I-B-5 I-B-5
- ------------ --------------------- --------------- ---------------- -------------------
32 $ 7,610,750.00 6.75% M-2 M-2
- ------------ --------------------- --------------- ---------------- -------------------
33 $ 4,206,000.00 6.75% II-B-1 II-B-1
- ------------ --------------------- --------------- ---------------- -------------------
34 $ 1,602,250.00 6.75% II-B-2 II-B-2
- ------------ --------------------- --------------- ---------------- -------------------
35 $ 1,602,250.00 6.75% II-B-3 II-B-3
- ------------ --------------------- --------------- ---------------- -------------------
36 $ 801,125.00 6.75% II-B-4 II-B-4
- ------------ --------------------- --------------- ---------------- -------------------
37 $ 1,201,572.00 6.75% II-B-5 II-B-5
- ------------ --------------------- --------------- ---------------- -------------------
38 (11) (11) MR(10) MR(10)
- ------------ --------------------- --------------- ---------------- -------------------
</TABLE>
- ----------------------
(1) The amount of principal and interest allocable from a Subsidiary REMIC
Regular Interest to its Corresponding Class of Certificates on any
Distribution Date shall be 100%.
(2) The Interest Rate for Subsidiary REMIC Interests 6 and 7 for any
Distribution Date will be equal to the Pass-Through Rate applicable to
the Class I-A-6 and Class I-A-7 Certificates, respectively, with respect
to such Distribution Date.
(3) Interest at a rate of 0.25% on Subsidiary Regular Interest 12 will be
allocated to the Class I-A-13 Certificates; interest at a rate of 6.50%
on Subsidiary Regular Interest 12 will be allocated to the Class I-A-12
Certificates.
(4) Interest at a rate of 0.50% on Subsidiary Regular Interest 20 will be
allocated to the Class II-A-10 Certificates; interest at a rate of 6.25%
on Subsidiary Regular Interest 20 will be allocated to the Class II-A-8
Certificates.
(5) Subsidiary REMIC Regular Interest 22 will be a principal only Subsidiary
REMIC Regular Interest and will not bear interest.
(6) The Notional Amount of Subsidiary REMIC Interest 23 with respect to any
Distribution Date will be equal to the Notional Amount of the Class X-1
Certificates with respect to such Distribution Date.
(7) The Interest Rate for Subsidiary REMIC Interest 23 for any Distribution
Date will be equal to the Pass-Through Rate applicable to the Class X-1
Certificates with respect to such Distribution Date.
(8) The Notional Amount of Subsidiary REMIC Interest 24 with respect to any
Distribution Date will be equal to the Notional Amount of the Class X-2
Certificates with respect to such Distribution Date.
(9) The Interest Rate for Subsidiary REMIC Interest 24 for any Distribution
Date will be equal to the Pass-Through Rate applicable to the Class X-2
Certificates with respect to such Distribution Date.
(10) The beneficial ownership of the MR Interest and the SR Interest is
represented by the Class A-R Certificates.
(11) The SR Interest will have no principal balance and will not bear
interest.
Set forth below are designations of Classes of Certificates to the categories
used herein:
Accretion Directed
Certificates......................... None.
Accrual Components................... None.
Book-Entry Certificates.............. All Classes of Certificates other than
the Physical Certificates.
Certificate Group 1 Certificates..... Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4, Class I-A-5, Class I-A-6,
Class I-A-7, Class I-A-8, Class I-A-9,
Class I-A-10, Class I-A-11, Class
I-A-12, Class I-A-13, Class X-1, Class
M-1, Class I-B-1, Class I-B-2, Class
I-B-3, Class I-B-4 and Class I-B-5
Certificates and Class PO-1 Component.
Certificate Group 2 Certificates..... Class II-A-1, Class II-A-2, Class
II-A-3, Class II-A-4, Class II-A-5,
Class II-A-6, Class II-A-7, Class
II-A-8, Class II-A-9, Class II-A-10,
Class X-2, Class A-R, Class M-2, Class
II-B-1, Class II-B-2, Class II-B-3,
Class II-B-4 and Class II-B-5
Certificates and Class PO-2 Component.
Certificate Group 1
Senior Certificates................ Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4, Class I-A-5, Class I-A-6,
Class I-A-7, Class I-A-8, Class I-A-9,
Class I-A-10, Class I-A-11, Class
I-A-12, Class I-A-13, and Class X-1
Certificates and Class PO-1 Component.
Certificate Group 1
Subordinated Certificates.......... Class M-1, Class I-B-1, Class I-B-2,
Class I-B-3, Class I-B-4 and Class
I-B-5 Certificates.
Certificate Group 2
Senior Certificates................ Class II-A-1, Class II-A-2, Class
II-A-3, Class II-A-4, Class II-A-5,
Class II-A-6, Class II-A-7, Class
II-A-8, Class II-A-9, Class II-A-10,
Class X-2 and Class A-R Certificates
and Class PO-2 Component.
Certificate Group 2
Subordinated Certificates.......... Class M-2, Class II-B-1, Class II-B-2,
Class II-B-3, Class II-B-4 and Class
II-B-5 Certificates.
Class M Certificates................. Class M-1 and Class M-2 Certificates.
Class X Certificates................. Class X-1 and Class X-2 Certificates.
Component Certificates............... Class II-A-7 and Class PO
Certificates.
Components........................... For purposes of calculating
distributions, the Component
Certificates will be comprised of
multiple payment components having the
designations, Initial Component
Balances and Pass-Through Rates set
forth below:
Initial
Component
Designation Balance Pass-Through Rate
----------- ------- -----------------
Class II-A-7-1 Component $27,938,000 6.75%
Class II-A-7-2 Component $2,124,000 6.75%
Class PO-1 Component $939,108 6.75%
Class PO-2 Component $775,967 6.75%
Delay Certificates................... All interest-bearing Classes of
Certificates other than the Non-Delay
Certificates, if any.
ERISA-Restricted
Certificates......................... Class PO, Class X-1 and Class X-2
Certificates, Residual Certificates
and Subordinated Certificates.
Floating Rate Certificates........... Class I-A-6 Certificates.
Inverse Floating Rate
Certificates......................... Class I-A-7 Certificates.
COFI Certificates.................... None.
LIBOR Certificates................... Class I-A-6 and Class I-A-7
Certificates.
Non-Delay Certificates............... LIBOR Certificates.
Notional Amount
Certificates......................... Class I-A-13, Class II-A-10, Class X-1
and Class X-2 Certificates.
Offered Certificates................. All Classes of Certificates other than
the Private Certificates.
Physical Certificates................ Class PO and Class X-2 Certificates
and the Private Certificates and
Residual Certificates.
Planned Principal Classes............ None.
Primary Planned Principal
Classes.............................. None.
Principal Only
Certificates......................... Class PO Certificates.
Private Certificates................. Class I-B-3, Class II-B-3 and Class
I-B-4, Class II-B-4, Class I-B-5, and
Class II-B-5 Certificates.
Rating Agencies...................... S&P, DCR and Fitch
Regular Certificates................. All Classes of Certificates, other
than the Residual Certificates.
Residual Certificates................ Class A-R Certificates.
Scheduled Principal
Classes.............................. None.
Secondary Planned Principal
Class................................ None.
Senior Certificates.................. Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4, Class I-A-5, Class I-A-6,
Class I-A-7, Class I-A-8, Class I-A-9,
Class I-A-10, Class I-A-11, Class I-A-
12, Class I-A-13, Class II-A-1, Class
II-A-2, Class II-A-3, Class II-A-4,
Class II-A-5, Class II-A-6, Class
II-A-7, Class II-A-8, Class II-A-9,
Class II-A-10, Class X-1, Class X-2,
Class A-R and Class PO Certificates.
Subordinated Certificates ........... Class M-1, Class M-2, Class I-B-1,
Class II-B-1, Class I-B-2, Class
II-B-2, Class I-B-3, Class II-B-3,
Class I-B-4, Class II-B-4, Class
I-B-5, and Class II-B-5 Certificates.
Support Classes...................... None.
Targeted Principal
Classes.............................. None.
With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Accretion Directed Certificates: As specified in the Preliminary
-------------------------------
Statement.
Accrual Amount: With respect to any Accrual Components and any
--------------
Distribution Date prior to the applicable Accrual Termination Date, the amount
allocable to interest on each such Class of Accrual Certificates with respect
to such Distribution Date pursuant to Section 4.02(a)(iii).
Accrual Components: As specified in the Preliminary Statement.
------------------
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time,
----------------------
the per annum rate equal to the Mortgage Rate less the Master Servicing Fee
Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any
--------------------------
time, the per annum rate equal to the Mortgage Rate less the related Expense
Rate. For purposes of determining whether any Substitute Mortgage Loan is a
Discount Mortgage Loan or a Non-Discount Mortgage Loan and for purposes of
calculating the applicable PO Percentage and applicable Non-PO Percentage,
each Substitute Mortgage Loan shall be deemed to have an Adjusted Net Mortgage
Rate equal to the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan for
which it is substituted.
Advance: As to a Loan Group, the payment required to be made by the
-------
Master Servicer with respect to any Distribution Date pursuant to Section
4.01, the amount of any such payment being equal to the aggregate of payments
of principal and interest (net of the Master Servicing Fee and net of any net
income in the case of any REO Property) on the Mortgage Loans in such Loan
Group that were due on the related Due Date and not received as of the close
of business on the related Determination Date, less the aggregate amount of
any such delinquent payments that the Master Servicer has determined would
constitute a Nonrecoverable Advance if advanced.
Agreement: This Pooling and Servicing Agreement and all amendments
---------
or supplements hereto.
Allocable Share: As to any Distribution Date and any Mortgage Loan
---------------
in a Loan Group (i) with respect to the Class X Certificates in the related
Certificate Group, (a) the ratio that (x) the excess, if any, of the Adjusted
Net Mortgage Rate with respect to such Mortgage Loan over the Required Coupon
bears to (y) such Adjusted Net Mortgage Rate or (b) if the Adjusted Net
Mortgage Rate with respect to such Mortgage Loan does not exceed the Required
Coupon, zero, (ii) with respect to each Class PO Component in the related
Certificate Group, zero and (iii) with respect to each other Class of
Certificates in the related Certificate Group, the product of (a) the lesser
of (I) the ratio that the Required Coupon bears to such Adjusted Net Mortgage
Rate and (II) one, multiplied by (b) the ratio that the amount calculated with
respect to such Distribution Date for such Class pursuant to clause (i) of the
definition of Class Optimal Interest Distribution Amount (without giving
effect to any reduction of such amount pursuant to Section 4.02(d)) bears to
the amount calculated with respect to such Distribution Date for each Class of
Certificates pursuant to clause (i) of the definition of Class Optimal
Interest Distribution Amount (without giving effect to any reduction of such
amount pursuant to Section 4.02(d)).
Amount Available for Senior Principal: As to any Distribution Date
-------------------------------------
and Certificate Group, Available Funds for such Distribution Date and
Certificate Group reduced by the aggregate amount distributable (or allocable
to the Accrual Amount, if applicable) on such Distribution Date in respect of
interest on the Senior Certificates in such Certificate Group pursuant to
Section 4.02(a)(ii).
Amount Held for Future Distribution: As to any Distribution Date and
-----------------------------------
the Mortgage Loans in a Loan Group, the aggregate amount held in the
Certificate Account at the close of business on the related Determination Date
on account of (i) related Principal Prepayments received after the related
Prepayment Period and Liquidation Proceeds received in the month of such
Distribution Date and (ii) all related Scheduled Payments due after the
related Due Date.
Applicable Credit Support Percentage: As defined in Section 4.02(e).
------------------------------------
Appraised Value: With respect to any Mortgage Loan, the Appraised
---------------
Value of the related Mortgaged Property shall be: (i) with respect to a
Mortgage Loan other than a Refinancing Mortgage Loan, the lesser of (a) the
value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Mortgage Loan and (b) the sales price of the Mortgaged
Property at the time of the origination of such Mortgage Loan; (ii) with
respect to a Refinancing Mortgage Loan other than a Streamlined Documentation
Mortgage Loan, the value of the Mortgaged Property based upon the appraisal
made at the time of the origination of such Refinancing Mortgage Loan; and
(iii) with respect to a Streamlined Documentation Mortgage Loan, (a) if the
loan-to-value ratio with respect to the Original Mortgage Loan at the time of
the origination thereof was 75% or less, (or 70% or less for Mortgaged
Properties in California) the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of the Original Mortgage Loan
and (b) if the loan-to-value ratio with respect to the Original Mortgage Loan
at the time of the origination thereof was greater than 75% (or greater than
70% for Mortgaged Properties in California), the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.
Available Funds: With respect to a Certificate Group, as to any
---------------
Distribution Date and the Mortgage Loans in the related Loan Group, the sum of
(a) the aggregate amount held in the Certificate Account at the close of
business on the related Determination Date in respect of such Mortgage Loans
net of the related Amount Held for Future Distribution and net of amounts
permitted to be withdrawn from the Certificate Account pursuant to clauses
(i)-(viii), inclusive, of Section 3.08(a) in respect of such Mortgage Loans
and amounts permitted to be withdrawn from the Distribution Account pursuant
to clauses (i)-(iii) inclusive of Section 3.08(b) in respect of such Mortgage
Loans, (b) the amount of the related Advance and (c) in connection with
Defective Mortgage Loans, as applicable, the aggregate of the Purchase Prices
and Substitution Adjustment Amounts deposited on the related Distribution
Account Deposit Date.
Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
---------------
amended.
Bankruptcy Coverage Termination Date: As to each Certificate Group,
------------------------------------
the point in time at which the applicable Bankruptcy Loss Coverage Amount for
such Certificate Group is reduced to zero.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
---------------
Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss
shall not be deemed a Bankruptcy Loss hereunder so long as the Master Servicer
has notified the Trustee in writing that the Master Servicer is diligently
pursuing any remedies that may exist in connection with the related Mortgage
Loan and either (A) the related Mortgage Loan is not in default with regard to
payments due thereunder or (B) delinquent payments of principal and interest
under the related Mortgage Loan and any related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by the Master
Servicer, in either case without giving effect to any Debt Service Reduction
or Deficient Valuation.
Bankruptcy Loss Coverage Amount: As of any Determination Date and
-------------------------------
Certificate Group, the Bankruptcy Loss Coverage Amount shall equal the related
Initial Bankruptcy Coverage Amount as reduced by (i) the aggregate amount of
Bankruptcy Losses allocated to the Certificates in such Certificate Group
since the Cut-off Date and (ii) any permissible reductions in the Bankruptcy
Loss Coverage Amount as evidenced by a letter of each Rating Agency to the
Trustee to the effect that any such reduction will not result in a downgrading
of the then current ratings assigned to the Classes of Certificates rated by
it.
Blanket Mortgage: The mortgage or mortgages encumbering the
----------------
Cooperative Property.
Book-Entry Certificates: As specified in the Preliminary Statement.
-----------------------
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which banking institutions in the City of New York, New York, or the
State of California or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law or executive order to be
closed.
Certificate: Any one of the Certificates executed by the Trustee in
-----------
substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts
-------------------
created and maintained by the Master Servicer pursuant to Section 3.05 with a
depository institution in the name of the Master Servicer for the benefit of
the Trustee on behalf of Certificateholders and designated "Countrywide Home
Loans, Inc. in trust for the registered holders of CWMBS, Inc. Mortgage
Pass-Through Certificates Series 1998-18."
Certificate Balance: With respect to any Certificate at any date,
-------------------
the maximum dollar amount of principal to which the Holder thereof is then
entitled hereunder, such amount being equal to the Denomination thereof (A)
minus the sum of (i) all distributions of principal previously made with
respect thereto and (ii) all Realized Losses allocated thereto and, in the
case of any Subordinated Certificates, all other reductions in Certificate
Balance previously allocated thereto pursuant to Section 4.03 and (B) in the
case of any Class of Accrual Certificates, increased by the Accrual Amount
added to the Class Certificate Balance of such Class prior to such date.
Certificate Group: Either the Certificate Group 1 Certificates or
-----------------
the Certificate Group 2 Certificates.
Certificate Group 1 Certificates: As specified in the Preliminary
--------------------------------
Statement.
Certificate Group 1 Senior Certificates: As specified in the
---------------------------------------
Preliminary Statement.
Certificate Group 1 Subordinated Certificates: As specified in the
---------------------------------------------
Preliminary Statement.
Certificate Group 2 Certificates: As specified in the Preliminary
--------------------------------
Statement.
Certificate Group 2 Senior Certificates: As specified in the
---------------------------------------
Preliminary Statement.
Certificate Group 2 Subordinated Certificates: As specified in the
---------------------------------------------
Preliminary Statement.
Certificate Owner: With respect to a Book-Entry Certificate, the
-----------------
Person who is the beneficial owner of such Book-Entry Certificate.
Certificate Register: The register maintained pursuant to Section
--------------------
5.02 hereof.
Certificateholder or Holder: The person in whose name a Certificate
---------------------------
is registered in the Certificate Register, except that, solely for the purpose
of giving any consent pursuant to this Agreement, any Certificate registered
in the name of the Depositor or any affiliate of the Depositor shall be deemed
not to be Outstanding and the Percentage Interest evidenced thereby shall not
be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect such consent has been obtained;
provided, however, that if any such Person (including the Depositor) owns 100%
of the Percentage Interests evidenced by a Class of Certificates, such
Certificates shall be deemed to be Outstanding for purposes of any provision
hereof that requires the consent of the Holders of Certificates of a
particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor
or any affiliate of the Depositor in determining which Certificates are
registered in the name of an affiliate of the Depositor.
Class: All Certificates bearing the same class designation as set
-----
forth in the Preliminary Statement.
Class Certificate Balance: With respect to any Class and as to any
-------------------------
date of determination, the aggregate of the Certificate Balances of all
Certificates of such Class as of such date.
Class Interest Shortfall: As to any Distribution Date and Class or
------------------------
any Transfer Balance, the amount by which the amount described in clause (i)
of the definition of Class Optimal Interest Distribution Amount for such Class
or Transfer Balance, as applicable, exceeds the amount of interest actually
distributed on such Class or Transfer Balance, as applicable, on such
Distribution Date pursuant to such clause (i).
Class Optimal Interest Distribution Amount: With respect to any
------------------------------------------
Distribution Date and interest bearing Class or any Transfer Balance, or, with
respect to any interest bearing Component, any Component thereof, the sum of
(i) one month's interest accrued during the related Interest Accrual Period at
the applicable Pass-Through Rate for such Class or Transfer Balance, as
applicable, on the related Class Certificate Balance, Transfer Balance,
Component Balance or Notional Amount, as applicable, subject to reduction as
provided in Section 4.02(d) and (ii) any Class Unpaid Interest Amounts for
such Class, Component or Transfer Balance, as applicable.
Class PO Deferred Amount: As to any Distribution Date and any
------------------------
Certificate Group, the aggregate of the applicable PO Percentage of each
Realized Loss, other than any Excess Loss, to be allocated to the Class PO
Component of such Certificate Group on such Distribution Date on or prior to
the related Senior Credit Support Depletion Date or previously allocated to
such Class PO Component and not yet paid to the Holders of the Principal Only
Certificates.
Class Subordination Percentage: With respect to any Distribution
------------------------------
Date and each Class of Subordinated Certificates in a Certificate Group, the
fraction (expressed as a percentage) the numerator of which is the sum of (a)
the Class Certificate Balance of such Class of Subordinated Certificates and
(b) any related Transfer Balance, immediately prior to such Distribution Date
and the denominator of which is the sum of (a) the aggregate of the Class
Certificate Balances immediately prior to such Distribution Date of all
Classes of Certificates in such Certificate Group and (b) the related Transfer
Balance in the same Certificate Group immediately prior to such Distribution
Date.
Class Unpaid Interest Amounts: As to any Distribution Date and Class
-----------------------------
of interest bearing Certificates or any Transfer Balance, the amount by which
the aggregate Class Interest Shortfalls for such Class or Transfer Balance, as
applicable, on prior Distribution Dates exceeds the amount distributed on such
Class on prior Distribution Dates pursuant to clause (ii) of the definition of
Class Optimal Interest Distribution Amount.
Closing Date: September 29, 1998.
------------
Code: The Internal Revenue Code of 1986, including any successor or
----
amendatory provisions.
COFI: The Monthly Weighted Average Cost of Funds Index for the
----
Eleventh District Savings Institutions published by the Federal Home Loan Bank
of San Francisco.
COFI Certificates: As specified in the Preliminary Statement.
-----------------
Component: As specified in the Preliminary Statement.
---------
Component Balance: With respect to any Component and any
-----------------
Distribution Date, the Initial Component Balance thereof on the Closing Date,
less all amounts applied in reduction of the principal balance of such
Component and Realized Losses allocated thereto on previous Distribution
Dates.
Component Certificates: As specified in the Preliminary Statement.
----------------------
Cooperative Corporation: The entity that holds title (fee or an
-----------------------
acceptable leasehold estate) to the real property and improvements
constituting the Cooperative Property and which governs the Cooperative
Property, which Cooperative Corporation must qualify as a Cooperative Housing
Corporation under Section 216 of the Code.
Coop Shares: Shares issued by a Cooperative Corporation.
-----------
Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
----------------
Proprietary Lease.
Cooperative Property: The real property and improvements owned by
--------------------
the Cooperative Corporation, including the allocation of individual dwelling
units to the holders of the Coop Shares of the Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
----------------
Property.
Corporate Trust Office: The designated office of the Trustee in the
----------------------
State of New York at which at any particular time its corporate trust business
with respect to this Agreement shall be administered, which office at the date
of the execution of this Agreement is located at 101 Barclay Street, 12E, New
York, New York 10286 (Attn: Mortgage-Backed Securities Group, CWMBS, Inc.
Series 1998-18, facsimile no. (212) 815-4135, and which is the address to
which notices to and correspondence with the Trustee should be directed.
Corresponding Classes of Certificates: With respect to each
-------------------------------------
Subsidiary REMIC Regular Interest, any Class of Certificates or Components
appearing opposite such Subsidiary REMIC Regular Interest in the Preliminary
Statement.
Cross-Collateralization Date: With respect to a Certificate Group,
----------------------------
the Distribution Date on which a Transfer Balance is created in favor of such
Certificate Group.
Current Transfer Payment: As to any Distribution Date and Transferor
------------------------
Group, an amount equal to the lesser of (i) the amount of the Special Hazard
Loss (other than a Special Hazard Loss which is an Excess Loss) allocated to
the Lowest Class in such Transferor Group and (ii) the amount otherwise
distributable as principal of such Lowest Class on such Distribution Date.
Cut-off Date: September 1, 1998.
------------
Cut-off Date Pool Principal Balance: $1,001,026,537.
-----------------------------------
Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated
------------------------------
Principal Balance thereof as of the close of business on the Cut-off Date.
Debt Service Reduction: With respect to any Mortgage Loan, a
----------------------
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of
principal.
Defective Mortgage Loan: Any Mortgage Loan which is required to be
-----------------------
repurchased pursuant to Section 2.02 or 2.03.
Deficient Valuation: With respect to any Mortgage Loan, a valuation
-------------------
by a court of competent jurisdiction of the Mortgaged Property in an amount
less than the then-outstanding indebtedness under the Mortgage Loan, or any
reduction in the amount of principal to be paid in connection with any
Scheduled Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.
Definitive Certificates: Any Certificate evidenced by a Physical
-----------------------
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.02(e).
Delay Certificates: As specified in the Preliminary Statement.
------------------
Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
-----------------------------
portion of a related Mortgage File is not delivered to Trustee on the Closing
Date. As to either Loan Group, the number of Delay Delivery Mortgage Loans
shall not exceed 50% of the aggregate number of Mortgage Loans in such Loan
Group as of the Closing Date.
Deleted Mortgage Loan: As defined in Section 2.03(c) hereof.
---------------------
Denomination: With respect to each Certificate, the amount set forth
------------
on the face thereof as the "Initial Certificate Balance of this Certificate"
or the "Initial Notional Amount of this Certificate" or, if neither of the
foregoing, the Percentage Interest appearing on the face thereof.
Depositor: CWMBS, Inc., a Delaware corporation, or its successor in
---------
interest.
Depository: The initial Depository shall be The Depository Trust
----------
Company, the nominee of which is CEDE & Co., as the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code
of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
----------------------
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: As to any Distribution Date, the 22nd day of
------------------
each month or if such 22nd day is not a Business Day the next preceding
Business Day; provided, however, that if such 22nd day or such Business Day,
whichever is applicable, is less than two Business Days prior to the related
Distribution Date, the Determination Date shall be the first Business Day
which is two Business Days preceding such Distribution Date.
Discount Mortgage Loan: Any Mortgage Loan with an Adjusted Net
----------------------
Mortgage Rate that is less than the Required Coupon.
Distribution Account: The separate Eligible Account created and
--------------------
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Certificateholders and designated "The Bank of New York
in trust for registered holders of CWMBS, Inc. Mortgage Pass-Through
Certificates, Series 1998-18." Funds in the Distribution Account shall be held
in trust for the Certificateholders for the uses and purposes set forth in
this Agreement.
Distribution Account Deposit Date: As to any Distribution Date,
---------------------------------
12:30 p.m. Pacific time on the Business Day immediately preceding such
Distribution Date.
Distribution Date: The 25th day of each calendar month after the
-----------------
initial issuance of the Certificates, or if such 25th day is not a Business
Day, the next succeeding Business Day, commencing in October 1998.
Due Date: With respect to any Distribution Date, the first day of
--------
the month in which the related Distribution Date occurs.
Duff & Phelps: Duff & Phelps Credit Rating Company, or any successor
-------------
thereto. If Duff & Phelps is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 10.05(b) the address for notices to Duff &
Phelps shall be Duff & Phelps Credit Rating Company, 55 East Monroe Street,
38th floor, Chicago, Illinois 60603, Attention: MBS Monitoring, or such other
address as Duff & Phelps may hereafter furnish to the Depositor and the Master
Servicer.
Eligible Account: Any of (i) an account or accounts maintained with
----------------
a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the debt obligations of such holding company) have the
highest short-term ratings of each Rating Agency at the time any amounts are
held on deposit therein, or (ii) an account or accounts in a depository
institution or trust company in which such accounts are insured by the FDIC
(to the limits established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of
Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its
fiduciary capacity or (iv) any other account acceptable to each Rating Agency.
Eligible Accounts may bear interest, and may include, if otherwise qualified
under this definition, accounts maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as
-----
amended.
ERISA-Restricted Certificate: As specified in the Preliminary
----------------------------
Statement.
Escrow Account: The Eligible Account or Accounts established and
--------------
maintained pursuant to Section 3.06(a) hereof.
Event of Default: As defined in Section 7.01 hereof.
----------------
Excess Loss: With respect to any Certificate Group, the amount of
-----------
any (i) Fraud Loss on a Mortgage Loan in the related Loan Group realized after
the Fraud Loss Coverage Termination Date for such Certificate Group, (ii)
Special Hazard Loss on a Mortgage Loan in the related Loan Group realized
after the Special Hazard Coverage Termination Date or (iii) Bankruptcy Loss on
a Mortgage Loan in the related Loan Group realized after the Bankruptcy
Coverage Termination Date for such Certificate Group.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
---------------
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received in the calendar month in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the
Master Servicer as Nonrecoverable Advance(s) with respect to such Mortgage
Loan pursuant to Section 3.08(a)(iii), exceeds (i) the unpaid principal
balance of such Liquidated Mortgage Loan as of the Due Date in the month in
which such Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued
interest at the Mortgage Rate from the Due Date as to which interest was last
paid or advanced (and not reimbursed) to Certificateholders up to the Due Date
applicable to the Distribution Date immediately following the calendar month
during which such liquidation occurred.
Expense Rate: As to each Mortgage Loan, the sum of the related
------------
Master Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
------
Act of 1989.
Fitch: Fitch IBCA, Inc., or any successor thereto. If Fitch is
-----
designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 10.05(b) the address for notices to Fitch shall be Fitch IBCA, Inc.,
One State Street Plaza, New York, New York 10004, Attention: Residential
Mortgage Surveillance Group, or such other address as Fitch may hereafter
furnish to the Depositor and the Master Servicer.
FNMA: The Federal National Mortgage Association, a federally
----
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
----------
occurred.
Fraud Losses: Realized Losses on Mortgage Loans as to which a loss
------------
is sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a
loss by reason of the denial of coverage under any related Primary Insurance
Policy because of such fraud, dishonesty or misrepresentation.
Fraud Loss Coverage Amount: As of the Closing Date, $12,009,262 with
--------------------------
respect to Group 1 and $8,011,268 with respect to Group 2, subject to
reduction from time to time, by the amount of Fraud Losses allocated to the
Certificates in the corresponding Certificate Group. In addition, on each
anniversary of the Cut-off Date, the Fraud Loss Coverage Amount for each Loan
Group will be reduced as follows: (a) on the first, second, third and fourth
anniversaries of the Cut-off Date, to an amount equal to the lesser of (i) 1%
of the aggregate of the Stated Principal Balances of all Mortgage Loans in the
related Loan Group and (ii) the excess of the Fraud Loss Coverage Amount for
the Certificates in the corresponding Certificate Group as of the preceding
anniversary of the Cut-off Date over the cumulative amount of Fraud Losses on
the Mortgage Loans in the related Loan Group allocated to the Certificates in
the corresponding Certificate Group since such preceding anniversary; and (b)
on the fifth anniversary of the Cut-off Date, to zero.
Fraud Loss Coverage Termination Date: As to each Certificate Group,
------------------------------------
the point in time at which the applicable Fraud Loss Coverage Amount is
reduced to zero.
Group 1 Priority Amount: As to any Distribution Date, the amount
-----------------------
equal to the sum of (i) the product of (A) Scheduled Principal Distribution
Amounts for Loan Group 1, (B) the Shift Percentage and (C) the Group 1
Priority Percentage and (ii) the product (A) Unscheduled Principal
Distribution Amounts for Loan Group 1, (B) the Prepayment Shift Percentage and
(C) the Group 1 Priority Percentage.
Group 2 Priority Amount: As to any Distribution Date, the amount
-----------------------
equal to the sum of (i) the product of (A) Scheduled Principal Distribution
Amounts for Loan Group 2, (B) the Shift Percentage and (C) the Group 2
Priority Percentage and (ii) the product (A) Unscheduled Principal
Distribution Amounts for Loan Group 2, (B) the Prepayment Shift Percentage and
(C) the Group 2 Priority Percentage.
Group 1 Priority Percentage: As to any Distribution Date, a
---------------------------
fraction, the numerator of which is equal to the Class Certificate Balance of
the Class I-A-5 Certificates on such Distribution Date and the denominator of
which is equal to the aggregate Class Certificate Balances of the Group 1
Certificates (other than the Class PO-1 Component) on such Distribution Date.
Group 2 Priority Percentage: As to any Distribution Date, a
---------------------------
fraction, the numerator of which is equal to the Class Certificate Balance of
the Class II-A-5 Certificates on such Distribution Date and the denominator of
which is equal to the aggregate Class Certificate Balances of the Group 2
Certificates (other than the Class PO-2 Component) on such Distribution Date.
Index: With respect to any Interest Accrual Period for the COFI
-----
Certificates, the then-applicable index used by the Trustee pursuant to
Section 4.05 to determine the applicable Pass-Through Rate for such Interest
Accrual Period for the COFI Certificates.
Indirect Participant: A broker, dealer, bank or other financial
--------------------
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.
Initial Bankruptcy Coverage Amount: With respect to Certificate
----------------------------------
Group 1, $193,716, and with respect to Certificate Group 2, $127,068.
Initial Component Balance: As specified in the Preliminary
-------------------------
Statement.
Insurance Policy: With respect to any Mortgage Loan included in the
----------------
Trust Fund, any insurance policy, including all riders and endorsements
thereto in effect, including any replacement policy or policies for any
Insurance Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any
------------------
Insurance Policy, in each case other than any amount included in such
Insurance Proceeds in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or any
----------------
other insurance policy with respect to the Mortgage Loans.
Interest Accrual Period: With respect to each Class of Delay
-----------------------
Certificates, corresponding Subsidiary REMIC Regular Interest and any
Distribution Date, the calendar month prior to the month of such Distribution
Date. With respect to any Non-Delay Certificates, corresponding Subsidiary
REMIC Regular Interest and any Distribution Date, the one month period
commencing on the 25th day of the month preceding the month in which such
Distribution Date occurs and ending on the 24th day of the month in which such
Distribution Date occurs.
Interest Determination Date: With respect to (a) any Interest
---------------------------
Accrual Period for any LIBOR Certificates and (b) any Interest Accrual Period
for the COFI Certificates for which the applicable Index is LIBOR, the second
Business Day prior to the first day of such Interest Accrual Period.
Interest Rate: With respect to each Subsidiary REMIC Interest, the
-------------
applicable rate set forth or calculated in the manner described in the
Preliminary Statement.
Last Scheduled Distribution Date: With respect to each Class of
--------------------------------
Certificates in each Certificate Group, the Distribution Date in the month
immediately following the month of the latest scheduled maturity date for any
of the Mortgage Loans in the related Loan Group.
Latest Possible Maturity Date: The Distribution Date following the
-----------------------------
third anniversary of the scheduled maturity date of the Mortgage Loan having
the latest scheduled maturity date as of the Cut-off Date.
Lender PMI Mortgage Loan: Certain Mortgage Loans with Loan-to-Value
------------------------
Ratios at origination of greater than 80% as to which the lender (rather than
the borrower) acquires the Primary Insurance Policy and charges the related
borrower an interest premium.
LIBOR: The London interbank offered rate for one-month United States
-----
dollar deposits calculated in the manner described in Section 4.08.
LIBOR Certificates: As specified in the Preliminary Statement.
------------------
Liquidated Mortgage Loan: With respect to any Distribution Date, a
------------------------
defaulted Mortgage Loan (including any REO Property) which was liquidated in
the calendar month preceding the month of such Distribution Date and as to
which the Master Servicer has determined (in accordance with this Agreement)
that it has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan, including the final disposition of an REO
Property.
Liquidation Proceeds: Amounts, including Insurance Proceeds,
--------------------
received in connection with the partial or complete liquidation of defaulted
Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise
or amounts received in connection with any condemnation or partial release of
a Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Master Servicing Fees,
Servicing Advances and Advances.
Loan Group: Either of Loan Group 1 or Loan Group 2, as applicable.
----------
Loan Group 1: All Mortgage Loans identified as Loan Group 1 Mortgage
------------
Loans on the Mortgage Loan Schedule.
Loan Group 2: All Mortgage Loans identified as Loan Group 2 Mortgage
------------
Loans on the Mortgage Loan Schedule.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
-------------------
date of determination, the fraction (expressed as a percentage) the numerator
of which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the
related Mortgaged Property.
Lost Mortgage Note: Any Mortgage Note the original of which was
------------------
permanently lost or destroyed and has not been replaced.
Lowest Class: The Class of Subordinated Certificates, regardless of
------------
Certificate Group, then outstanding which has the lowest rating assigned by
any Rating Agency as of the Closing Date. As of the Closing Date, the
Subordinated Certificates in each of the Certificate Groups had the following
ratings:
====================== =======================
Certificate Certificate
Group 1 Group 2
====================== =======================
M-1 = AA M-2 = AA
====================== =======================
I-B-1 = A II-B-1 = A
====================== =======================
I-B-2 = BBB II-B-2 = BBB
====================== =======================
I-B-3 = BB II-B-3 = BB
====================== =======================
I-B-4 = B II-B-4 = B
====================== =======================
I-B-5 = Not Rated II-B-5 = Not Rated
(lowest rating) (lowest rating)
====================== =======================
Maintenance: With respect to any Cooperative Unit, the rent paid by
-----------
the Mortgagor to the Cooperative Corporation pursuant to the Proprietary
Lease.
Majority in Interest: As to any Class of Regular Certificates, the
--------------------
Holders of Certificates of such Class evidencing, in the aggregate, at least
51% of the Percentage Interests evidenced by all Certificates of such Class.
Master REMIC: As described in the Preliminary Statement.
------------
Master Servicer: Countrywide Home Loans, Inc., a New York
---------------
corporation, and its successors and assigns, in its capacity as master
servicer hereunder.
Master Servicer Advance Date: As to any Distribution Date, 12:30
----------------------------
p.m. Pacific time on the Business Day immediately preceding such Distribution
Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution
--------------------
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due
Date in the month of such Distribution Date (prior to giving effect to any
Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 3.14.
Master Servicing Fee Rate: With respect to each Mortgage Loan, 0.25%
-------------------------
per annum.
Monthly Statement: The statement delivered to the Certificateholders
-----------------
pursuant to Section 4.04.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
-------
If Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 10.05(b) the address for notices to Moody's shall be
Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Residential Pass-Through Monitoring, or such other address as
Moody's may hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.01 hereof
-------------
pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: Such of the mortgage loans transferred and assigned
--------------
to the Trustee pursuant to the provisions hereof as from time to time are held
as a part of the Trust Fund (including any REO Property), the mortgage loans
so held being identified in the Mortgage Loan Schedule, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.
Mortgage Loan Schedule: The list of Mortgage Loans (as from time to
----------------------
time amended by the Master Servicer to reflect the addition of Substitute
Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant to the
provisions of this Agreement) transferred to the Trustee as part of the Trust
Fund and from time to time subject to this Agreement, attached hereto as
Schedule I, setting forth the following information with respect to each
Mortgage Loan by Loan Group:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Cut-off Date Principal Balance;
(vi) the first payment date of the Mortgage Loan;
(vii) the Scheduled Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is either (a)
a detached single family dwelling (b) a dwelling in a de minimis
PUD, (c) a condominium unit or PUD (other than a de minimis PUD),
(d) a two- to four-unit residential property or (e) a Cooperative
Unit;
(xi) the Mortgage Rate;
(xii) a code indicating whether the Mortgage Loan is a Lender PMI
Mortgage Loan and, in the case of any Lender PMI Mortgage Loan, a
percentage representing the amount of the related interest premium
charged to the borrower;
(xiii) the purpose for the Mortgage Loan;
(xiv) the type of documentation program pursuant to which the
Mortgage Loan was originated; and
(xv) the Master Servicing Fee for the Mortgage Loan.
Such schedule shall also set forth the total of the amounts
described under (iv) and (v) above for all of the Mortgage Loans.
Mortgage Note: The original executed note or other evidence of
-------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note
-------------
from time to time, net of any interest premium charged by the mortgagee to
obtain or maintain any Primary Insurance Policy.
Mortgaged Property: The underlying property securing a Mortgage
------------------
Loan, which, with respect to a Cooperative Loan, is the related Coop Shares
and Proprietary Lease.
Mortgagor: The obligor(s) on a Mortgage Note.
---------
MR Interest: The sole class of "residual interest" in the Master
-----------
REMIC.
National Cost of Funds Index: The National Monthly Median Cost of
----------------------------
Funds Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.
Net Prepayment Interest Shortfalls: As to any Distribution Date and
----------------------------------
Loan Group, the amount by which the aggregate of Prepayment Interest
Shortfalls for such Loan Group during the related Prepayment Period exceeds an
amount equal to one-half of the aggregate Master Servicing Fee for such
Distribution Date before reduction of the Master Servicing Fee in respect of
such Prepayment Interest Shortfalls.
Non-Delay Certificates: As specified in the Preliminary Statement.
----------------------
Non-Discount Mortgage Loan: Any Mortgage Loan with an Adjusted Net
--------------------------
Mortgage Rate that is greater than or equal to the Required Coupon.
Non-PO Formula Principal Amount: As to any Distribution Date and
-------------------------------
Certificate Group, the sum of the applicable Non-PO Percentage of (a) the
principal portion of each Scheduled Payment (without giving effect, prior to
the applicable Bankruptcy Coverage Termination Date, to any reductions thereof
caused by any Debt Service Reductions or Deficient Valuations) due on each
Mortgage Loan in the related Loan Group on the related Due Date, (b) the
Stated Principal Balance of each Mortgage Loan in the related Loan Group that
was repurchased by the Seller or the Master Servicer pursuant to this
Agreement as of such Distribution Date, (c) the Substitution Adjustment Amount
in connection with any Deleted Mortgage Loan in such Loan Group received with
respect to such Distribution Date, (d) any Insurance Proceeds or Liquidation
Proceeds allocable to recoveries of principal of Mortgage Loans in the related
Loan Group that are not yet Liquidated Mortgage Loans received during the
calendar month preceding the month of such Distribution Date, (e) with respect
to each Mortgage Loan in a Loan Group that became a Liquidated Mortgage Loan
during the calendar month preceding the month of such Distribution Date, the
amount of the Liquidation Proceeds allocable to principal received during the
calendar month preceding the month of such Distribution Date with respect to
such Mortgage Loan and (f) all Principal Prepayments for such Loan Group
received during the related Prepayment Period.
Non-PO Percentage: As to any Discount Mortgage Loan in a Loan Group,
-----------------
a fraction (expressed as a percentage) the numerator of which is the Adjusted
Net Mortgage Rate of such Discount Mortgage Loan and the denominator of which
is the Required Coupon. As to any Non-Discount Mortgage Loan, 100%.
Nonrecoverable Advance: Any portion of an Advance previously made or
----------------------
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.
Notice of Final Distribution: The notice to be provided pursuant to
----------------------------
Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.
Notional Amount: With respect to any Distribution Date and the Class
---------------
X-1 Certificates, the aggregate of the Stated Principal Balances of the
Non-Discount Mortgage Loans in Loan Group 1 as of the Due Date in the month of
such Distribution Date (prior to giving effect to any Scheduled Payments due
on such Mortgage Loans on such Due Date). With respect to any Distribution
Date and the Class X-2 Certificates, the aggregate of the Stated Principal
Balances of the Non-Discount Mortgage Loans in Loan Group 2 as of the Due Date
in the month of such Distribution Date (prior to giving effect to any
Scheduled Payments due on such Mortgage Loans on such Due Date). With respect
to any Distribution Date and the Class I-A-13 Certificates, 3.7037037037% of
the Class Certificate Balance of the Class I-A-12 Certificates immediately
prior to such Distribution Date. With respect to any Distribution Date and the
Class II-A-10 Certificates, 7.4074074074% of the Class Certificate Balance of
the Class II-A-8 Certificates immediately prior to such Distribution Date.
Notional Amount Certificates: As specified in the Preliminary
----------------------------
Statement.
Offered Certificates: As specified in the Preliminary Statement.
--------------------
Officer's Certificate: A certificate (i) signed by the Chairman of
---------------------
the Board, the Vice Chairman of the Board, the President, a Managing Director,
a Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for
in this Agreement, signed by a Servicing Officer, as the case may be, and
delivered to the Depositor and the Trustee, as the case may be, as required by
this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Master Servicer, including, in-house counsel,
reasonably acceptable to the Trustee; provided, however, that with respect to
the interpretation or application of the REMIC Provisions, such counsel must
(i) in fact be independent of the Depositor and the Master Servicer, (ii) not
have any direct financial interest in the Depositor or the Master Servicer or
in any affiliate of either, and (iii) not be connected with the Depositor or
the Master Servicer as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
Optional Termination: The termination of the trust created hereunder
--------------------
in connection with the purchase of the Mortgage Loans pursuant to Section
9.01(a) hereof.
Original Applicable Credit Support Percentage: With respect to each
---------------------------------------------
of the following Classes of Subordinated Certificates, the corresponding
percentage described below, as of the Closing Date:
Certificate Group 1 Certificate Group 2
- ------------------------------- -------------------------------
Class Percentage Class Percentage
- ----- ---------- ----- ----------
Class M-1 4.75% Class M-2 4.25%
Class I-B-1 2.60% Class II-B-1 2.35%
Class I-B-2 1.60% Class II-B-2 1.30%
Class I-B-3 1.00% Class II-B-3 0.90%
Class I-B-4 0.60% Class II-B-4 0.50%
Class I-B-5 0.35% Class II-B-5 0.30%
Original Mortgage Loan: The mortgage loan refinanced in connection
----------------------
with the origination of a Refinancing Mortgage Loan.
Original Subordinated Principal Balance: As to the Certificate Group
---------------------------------------
1 Subordinated Certificates, $28,521,998 and as to the Certificate Group 2
Subordinated Certificates $17,023,947.
OTS: The Office of Thrift Supervision.
---
Outside Reference Date: As to any Interest Accrual Period for the
----------------------
COFI Certificates, the close of business on the tenth day thereof.
Outstanding: With respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with
-------------------------
a Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.
Ownership Interest: As to any Residual Certificate, any ownership
------------------
interest in such Certificate including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial.
Pass-Through Rate: For any interest bearing Class of Certificates or
-----------------
Component, the per annum rate set forth or calculated in the manner described
in the Preliminary Statement.
Percentage Interest: As to any Certificate, the percentage interest
-------------------
evidenced thereby in distributions required to be made on the related Class,
such percentage interest being set forth on the face thereof or equal to the
percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.
Permitted Investments: At any time, any one or more of the following
---------------------
obligations and securities:
(i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any state
of the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency, or such lower
rating as will not result in the downgrading or withdrawal of the
ratings then assigned to the Certificates by each Rating Agency;
(iii) commercial or finance company paper which is then receiving
the highest commercial or finance company paper rating of each
Rating Agency, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the
Certificates by each Rating Agency;
(iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or
state banking authorities, provided that the commercial paper and/or
long term unsecured debt obligations of such depository institution
or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper or
long-term unsecured debt obligations of such holding company, but
only if Moody's is not a Rating Agency) are then rated one of the
two highest long-term and the highest short-term ratings of each
Rating Agency for such securities, or such lower ratings as will not
result in the downgrading or withdrawal of the rating then assigned
to the Certificates by either Rating Agency;
(v) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent that such
deposits are fully insured by the FDIC;
(vi) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation containing, at the time of
the issuance of such agreements, such terms and conditions as will
not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by either Rating Agency;
(vii) repurchase obligations with respect to any security described
in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal)
described in clause (iv) above;
(viii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any
state thereof which, at the time of such investment, have one of the
two highest ratings of each Rating Agency (except if the Rating
Agency is Moody's, such rating shall be the highest commercial paper
rating of Moody's for any such securities), or such lower rating as
will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by either Rating Agency, as evidenced
by a signed writing delivered by each Rating Agency;
(ix) units of a taxable money-market portfolio having the highest
rating assigned by each Rating Agency (except if Fitch or Duff &
Phelps is a Rating Agency and has not rated the portfolio, the
highest rating assigned by Moody's) and restricted to obligations
issued or guaranteed by the United States of America or entities
whose obligations are backed by the full faith and credit of the
United States of America and repurchase agreements collateralized by
such obligations; and
(x) such other investments bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by either Rating Agency, as evidenced by a signed
writing delivered by each Rating Agency.
provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect
to the obligations underlying such instrument.
Permitted Transferee: Any person other than (i) the United States,
--------------------
any State or political subdivision thereof, or any agency or instrumentality
of any of the foregoing, (ii) a foreign government, International Organization
or any agency or instrumentality of either of the foregoing, (iii) an
organization (except certain farmers' cooperatives described in section 521 of
the Code) which is exempt from tax imposed by Chapter 1 of the Code (including
the tax imposed by section 511 of the Code on unrelated business taxable
income) on any excess inclusions (as defined in section 860E(c)(l) of the
Code) with respect to any Residual Certificate, (iv) rural electric and
telephone cooperatives described in section 1381(a)(2)(C) of the Code, (v) an
"electing large partnership" as defined in section 775 of the Code, (vi) a
Person that is not a citizen or resident of the United States, a corporation,
partnership, or other entity created or organized in or under the laws of the
United States, any state thereof or the District of Columbia, an estate whose
income from sources without the United States is includible in gross income
for United States federal income tax purposes regardless of its connection
with the conduct of a trade or business within the United States or a trust if
a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States fiduciaries have
the authority to control all substantial decisions of the trust unless such
Person has furnished the transferor and the Trustee with a duly completed
Internal Revenue Service Form 4224 or any applicable successor form, and (vi)
any other Person so designated by the Depositor based upon an Opinion of
Counsel that the Transfer of an Ownership Interest in a Residual Certificate
to such Person may cause the REMIC hereunder to fail to qualify as a REMIC at
any time that the Certificates are outstanding. The terms "United States,"
"State" and "International Organization" shall have the meanings set forth in
section 7701 of the Code or successor provisions. A corporation will not be
treated as an instrumentality of the United States or of any State or
political subdivision thereof for these purposes if all of its activities are
subject to tax and, with the exception of the Federal Home Loan Mortgage
Corporation, a majority of its board of directors is not selected by such
government unit.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Physical Certificate: As specified in the Preliminary Statement.
--------------------
Planned Balance: Not applicable.
---------------
Planned Principal Classes: As specified in the Preliminary
-------------------------
Statement.
PO Formula Principal Amount: As to any Distribution Date and
---------------------------
Certificate Group, the sum of the applicable PO Percentage of (a) the
principal portion of each Scheduled Payment (without giving effect, prior to
the applicable Bankruptcy Coverage Termination Date, to any reductions thereof
caused by any Debt Service Reductions or Deficient Valuations) due on each
Mortgage Loan in the related Loan Group on the related Due Date, (b) the
Stated Principal Balance of each Mortgage Loan in the related Loan Group that
was repurchased by the Seller or the Master Servicer pursuant to this
Agreement as of such Distribution Date, (c) the Substitution Adjustment Amount
in connection with any Deleted Mortgage Loan in the related Loan Group
received with respect to such Distribution Date, (d) any Insurance Proceeds or
Liquidation Proceeds allocable to recoveries of principal of Mortgage Loans in
the related Loan Group that are not yet Liquidated Mortgage Loans received
during the calendar month preceding the month of such Distribution Date, (e)
with respect to each Mortgage Loan in the related Loan Group that became a
Liquidated Mortgage Loan during the month preceding the calendar month of such
Distribution Date, the amount of Liquidation Proceeds allocable to principal
received with respect to such Mortgage Loan during the month preceding the
month of such Distribution Date with respect to such Mortgage Loan and (f) all
Principal Prepayments with respect to the Mortgage Loans in the related Loan
Group received during the related Prepayment Period.
PO Percentage: As to any Discount Mortgage Loan, a fraction
-------------
(expressed as a percentage) the numerator of which is the excess of the
Required Coupon over the Adjusted Net Mortgage Rate of such Discount Mortgage
Loan and the denominator of which is the Required Coupon. As to any
Non-Discount Mortgage Loan, 0%.
Pool Stated Principal Balance: As to any Distribution Date, the
-----------------------------
aggregate of the Stated Principal Balances of the Mortgage Loans which were
Outstanding Mortgage Loans on the Due Date in the month preceding the month of
such Distribution Date.
Prepayment Interest Excess: As to any Principal Prepayment received
--------------------------
by the Master Servicer from the first day through the fifteenth day of any
calendar month (other than the calendar month in which the Cut-off Date
occurs), all amounts paid by the related Mortgagor in respect of interest on
such Principal Prepayment. All Prepayment Interest Excess shall be paid to the
Master Servicer as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date, Mortgage
-----------------------------
Loan and Principal Prepayment received on or after the sixteenth day of the
month preceding the month of such Distribution Date (or, in the case of the
first Distribution Date, on or after the Cut-off Date) and on or before the
last day of the month preceding the month of such Distribution Date, the
amount, if any, by which one month's interest at the related Mortgage Rate,
net of the Master Servicing Fee Rate, on such Principal Prepayment exceeds the
amount of interest paid in connection with such Principal Prepayment.
Prepayment Period: As to any Distribution Date, the period from the
-----------------
16th day of the calendar month preceding the month of such Distribution Date
(or, in the case of the first Distribution Date, from the Cut-off Date)
through the 15th of the month of such Distribution Date.
Prepayment Shift Percentage: As to any Distribution Date occurring
---------------------------
during the five years beginning on the first Distribution Date, 0%.
Thereafter, the Prepayment Shift Percentage for any Distribution Date
occurring on or after the fifth anniversary of the first Distribution Date
will be as follows: for any Distribution Date in the first year thereafter,
30%; for any Distribution Date in the second year thereafter, 40%; for any
Distribution Date in the third year thereafter, 60%; for any Distribution Date
in the fourth year thereafter, 80%; and for any Distribution Date thereafter,
100%.
Primary Insurance Policy: Each policy of primary mortgage guaranty
------------------------
insurance or any replacement policy therefor with respect to any Mortgage
Loan.
Principal Only Certificates: As specified in the Preliminary
---------------------------
Statement and including, as to each Certificate Group, the related Component
of Class PO Certificates.
Primary Planned Principal Classes: As specified in the Preliminary
---------------------------------
Statement.
Principal Prepayment: Any payment of principal by a Mortgagor on a
--------------------
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance
with the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by a
----------------------------
Mortgagor of the entire principal balance of a Mortgage Loan.
Private Certificate: As specified in the Preliminary Statement.
-------------------
Pro Rata Share: As to any Distribution Date and any Class of
--------------
Subordinated Certificates and related Transfer Balance, the portion of the
Subordinated Principal Distribution Amount for the related Certificate Group
allocable to such Class and related Transfer Balance, equal to the product of
such Subordinated Principal Distribution Amount on such Distribution Date and
a fraction, the numerator of which is the sum of (i) the related Class
Certificate Balance of such Class and (ii) the outstanding balance of the
Transfer Balance related to such Class of Subordinated Certificates and the
denominator of which is the sum of (i) the aggregate of the Class Certificate
Balances of the Subordinated Certificates of such Certificate Group and (ii)
the outstanding balance of the Transfer Balance relating to a Class of
Subordinated Certificates in such Certificate Group.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
-----------------
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.
Prospectus Supplement: The Prospectus Supplement dated September 25,
---------------------
1998 relating to the Offered Certificates.
PUD: Planned Unit Development.
---
Purchase Price: With respect to any Mortgage Loan required to be
--------------
purchased by the Seller pursuant to Section 2.02 or 2.03 hereof or purchased
at the option of the Master Servicer pursuant to Section 3.11, an amount equal
to the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on
the date of such purchase, and (ii) accrued interest thereon at the applicable
Mortgage Rate (or at the applicable Adjusted Mortgage Rate if (x) the
purchaser is the Master Servicer or (y) if the purchaser is the Seller and the
Seller is the Master Servicer) from the date through which interest was last
paid by the Mortgagor to the Due Date in the month in which the Purchase Price
is to be distributed to Certificateholders.
Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection
with the insurance policy issued by such insurer, duly authorized and licensed
in such states to transact a mortgage guaranty insurance business in such
states and to write the insurance provided by the insurance policy issued by
it, approved as a FNMA-approved mortgage insurer and having a claims paying
ability rating of at least "AA" or equivalent rating by a nationally
recognized statistical rating organization. Any replacement insurer with
respect to a Mortgage Loan must have at least as high a claims paying ability
rating as the insurer it replaces had on the Closing Date.
Rating Agency: Each of the Rating Agencies specified in the
-------------
Preliminary Statement. If any such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the
Depositor, notice of which designation shall be given to the Trustee.
References herein to a given rating category of a Rating Agency shall mean
such rating category without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan, an
-------------
amount (not less than zero or more than the Stated Principal Balance of the
Mortgage Loan) as of the date of such liquidation, equal to (i) the Stated
Principal Balance of the Liquidated Mortgage Loan as of the date of such
liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from the Due
Date as to which interest was last paid or advanced (and not reimbursed) to
Certificateholders up to the Due Date in the month in which Liquidation
Proceeds are required to be distributed on the Stated Principal Balance of
such Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation
Proceeds, if any, received during the month in which such liquidation
occurred, to the extent applied as recoveries of interest at the Adjusted Net
Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect
to each Mortgage Loan which has become the subject of a Deficient Valuation,
if the principal amount due under the related Mortgage Note has been reduced,
the difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of the
Mortgage Loan as reduced by the Deficient Valuation. With respect to each
Mortgage Loan which has become the subject of a Debt Service Reduction and any
Distribution Date, the amount, if any, by which the principal portion of the
related Scheduled Payment has been reduced.
Recognition Agreement: With respect to any Cooperative Loan, an
---------------------
agreement between the Cooperative Corporation and the originator of such
Mortgage Loan which establishes the rights of such originator in the
Cooperative Property.
Record Date: With respect to any Distribution Date, the close of
-----------
business on the last Business Day of the month preceding the month in which
such Distribution Date occurs.
Reference Bank: As defined in Section 4.07.
--------------
Refinancing Mortgage Loan: Any Mortgage Loan originated in
-------------------------
connection with the refinancing of an existing mortgage loan.
Regular Certificates: As specified in the Preliminary Statement.
--------------------
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
----------
amended.
Relief Act Reductions: With respect to any Distribution Date and any
---------------------
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which (i) interest
collectible on such Mortgage Loan for the most recently ended calendar month
is less than (ii) interest accrued thereon for such month pursuant to the
Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the
-----
meaning of section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final regulation,
-------------------
revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.
REMIC Provisions: Provisions of the federal income tax law relating
----------------
to real estate mortgage investment conduits, which appear at sections 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations promulgated thereunder, as the foregoing may be in effect from
time to time as well as provisions of applicable state laws.
REO Property: A Mortgaged Property acquired by the Trust Fund
------------
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Request for Release: The Request for Release submitted by the Master
-------------------
Servicer to the Trustee, substantially in the form of Exhibits M and N, as
appropriate.
Required Coupon: 6.75% per annum.
---------------
Required Insurance Policy: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under
this Agreement.
Residual Certificates: As specified in the Preliminary Statement.
---------------------
Responsible Officer: When used with respect to the Trustee, any Vice
-------------------
President, any Assistant Vice President, the Secretary, any Assistant
Secretary, any Trust Officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also to whom, with respect to a particular matter, such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
Restricted Classes: As defined in Section 4.02(e).
------------------
Scheduled Balances: Not applicable.
------------------
Scheduled Classes: As specified in the Preliminary Statement.
-----------------
Scheduled Payment: The scheduled monthly payment on a Mortgage Loan
-----------------
due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless otherwise specified herein, shall give effect to any
related Debt Service Reduction and any Deficient Valuation that affects the
amount of the monthly payment due on such Mortgage Loan.
Scheduled Principal Distribution Amount: As to any Distribution Date
---------------------------------------
and Loan Group, an amount equal to the sum of all amounts described in clauses
(a) through (d) of the definition of Non-PO Formula Principal Amount for such
Loan Group and Distribution Date; provided, however, that if a Bankruptcy Loss
that is an Excess Loss is sustained with respect to a Mortgage Loan in the
related Loan Group that is not a Liquidated Mortgage Loan, the Scheduled
Principal Distribution Amounts will be reduced on the related Distribution
Date by the applicable Non-PO Percentage of the principal portion of such
Bankruptcy Loss.
Secondary Planned Principal Clauses: As specified in the Preliminary
-----------------------------------
Statement.
Securities Act: The Securities Act of 1933, as amended.
--------------
Seller: Countrywide Home Loans, Inc., a New York corporation, and
------
its successors and assigns, in its capacity as seller of the Mortgage Loans to
the Depositor.
Senior Certificates: As specified in the Preliminary Statement.
-------------------
Senior Credit Support Depletion Date: As to either Certificate
------------------------------------
Group, the date on which the Class Certificate Balance of each Class of
Subordinated Certificates in such Certificate Group has been reduced to zero.
Senior Percentage: As to any Distribution Date and Certificate Group
-----------------
prior to a Cross-Collateralization Date, the percentage equivalent of a
fraction the numerator of which is the aggregate of the Class Certificate
Balances of the Classes of Senior Certificates (other than the related Class
PO Component) of such Certificate Group as of such date and the denominator of
which is the aggregate of the Class Certificate Balances of all Classes of
Certificates (other than the related Class PO Component) in such Certificate
Group as of such date. As to any Distribution Date and Certificate Group for
which a Cross-Collateralization Date has occurred, the percentage equivalent
of a fraction the numerator of which is the sum of (a) the aggregate of the
Class Certificate Balances of the Classes of Senior Certificates of such
Certificate Group (other than the related Class PO Component) and (b) any
related Transfer Balance, in each case, as of such date and the denominator of
which is the sum of (i) the aggregate of the Class Certificate Balances of the
Classes of such Certificate Group (other than the related Class PO Component)
and (ii) any related Transfer Balance, in each case as of such date.
Senior Prepayment Percentage: As to any Certificate Group and for
----------------------------
any Distribution Date during the five years beginning on the first
Distribution Date, 100%. The Senior Prepayment Percentage for any Distribution
Date and Certificate Group occurring on or after the fifth anniversary of the
first Distribution Date will, except as provided herein, be as follows: for
any Distribution Date in the first year thereafter, the related Senior
Percentage plus 70% of the related Subordinated Percentage for such
Distribution Date; for any Distribution Date in the second year thereafter,
the related Senior Percentage plus 60% of the related Subordinated Percentage
for such Distribution Date; for any Distribution Date in the third year
thereafter, the related Senior Percentage plus 40% of the related Subordinated
Percentage for such Distribution Date; for any Distribution Date in the fourth
year thereafter, the related Senior Percentage plus 20% of the related
Subordinated Percentage for such Distribution Date; and for any Distribution
Date thereafter, the related Senior Percentage for such Distribution Date
(unless on any of the foregoing Distribution Dates the related Senior
Percentage exceeds the initial Senior Percentage, in which case the Senior
Prepayment Percentage for such Distribution Date will once again equal 100%).
Notwithstanding the foregoing, no decrease in the Senior Prepayment Percentage
will occur unless both of the Senior Step Down Conditions are satisfied.
Senior Principal Distribution Amount: As to any Distribution Date
------------------------------------
and Certificate Group, the sum of (i) the related Senior Percentage of the
applicable Non-PO Percentage of all amounts described in clauses (a) through
(d) of the definition of "Non-PO Formula Principal Amount" for such
Certificate Group for such Distribution Date, (ii) with respect to each
Mortgage Loan in the related Loan Group that became a Liquidated Mortgage Loan
during the calendar month preceding the month of such Distribution Date, the
lesser of (x) the related Senior Percentage of the applicable Non-PO
Percentage of the Stated Principal Balance of such Mortgage Loan and (y)
either (A) the related Senior Prepayment Percentage, or (B) if an Excess Loss
was sustained with respect to such Liquidated Mortgage Loan during such prior
calendar month, the related Senior Percentage, of the applicable Non-PO
Percentage of the amount of the Liquidation Proceeds allocable to principal
received with respect to such Mortgage Loan, and (iii) the related Senior
Prepayment Percentage of the applicable Non-PO Percentage of the amounts
described in clause (f) of the definition of "Non-PO Formula Principal Amount"
for such Certificate Group for such Distribution Date; provided, however, that
if a Bankruptcy Loss that is an Excess Loss is sustained with respect to a
Mortgage Loan in the related Loan Group that is not a Liquidated Mortgage
Loan, such Senior Principal Distribution Amount will be reduced on the related
Distribution Date by the related Senior Percentage of the applicable Non-PO
Percentage of the principal portion of such Bankruptcy Loss.
Senior Step Down Conditions: As of the first Distribution Date as to
---------------------------
which any decrease in the Senior Prepayment Percentage applies, (i) the
outstanding principal balance of all Mortgage Loans in the related Loan Group
delinquent 60 days or more (averaged over the preceding six month period), as
a percentage of the aggregate principal balance of the Subordinate
Certificates of the related Certificate Group on such Distribution Date, does
not equal or exceed 50% and (ii) cumulative Realized Losses with respect to
the Mortgage Loans in the related Loan Group do not exceed (i) with respect to
the Distribution Date on the fifth anniversary of the first Distribution Date,
30% of the related Original Subordinated Principal Balance, (b) with respect
to the Distribution Date on the sixth anniversary of the first Distribution
Date, 35% of the related Original Subordinated Principal Balance, (c) with
respect to the Distribution Date on the seventh anniversary of the first
Distribution Date, 40% of the related Original Subordinated Principal Balance,
(d) with respect to the Distribution Date on the eighth anniversary of the
first Distribution Date, 45% of the related Original Subordinated Principal
Balance and (e) with respect to the Distribution Date on the ninth anniversary
of the first Distribution Date, 50% of the related Original Subordinated
Principal Balance.
Servicing Advances: All customary, reasonable and necessary "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.09.
Servicing Officer: Any officer of the Master Servicer involved in,
-----------------
or responsible for, the administration and servicing of the Mortgage Loans
whose name and facsimile signature appear on a list of servicing officers
furnished to the Trustee by the Master Servicer on the Closing Date pursuant
to this Agreement, as such list may from time to time be amended.
Shift Percentage: As of any Distribution Date occurring during the
----------------
five years beginning on the first Distribution Date, 0% and for each
Distribution Date occurring on or after the fifth anniversary of the first
Distribution Date, 100%.
Special Hazard Coverage Termination Date: As to both Certificate
----------------------------------------
Groups, the point in time at which the Special Hazard Loss Coverage Amount is
reduced to zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged
-------------------
Property on account of direct physical loss but not including (i) any loss of
a type covered by a hazard insurance policy or a flood insurance policy
required to be maintained with respect to such Mortgaged Property pursuant to
Section 3.09 to the extent of the amount of such loss covered thereby, or (ii)
any loss caused by or resulting from:
(a) normal wear and tear;
(b) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees (without
regard to any portion of the loss not covered by any errors and omissions
policy);
(c) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues and then only for
the ensuing loss;
(d) nuclear or chemical reaction or nuclear radiation or radioactive
or chemical contamination, all whether controlled or uncontrolled, and
whether such loss be direct or indirect, proximate or remote or be in
whole or in part caused by, contributed to or aggravated by a peril
covered by the definition of the term "Special Hazard Loss";
(e) hostile or warlike action in time of peace and war, including
action in hindering, combating or defending against an actual, impending
or expected attack:
1. by any government or sovereign power, de jure or de facto,
or by any authority maintaining or using military, naval or air
forces; or
2. by military, naval or air forces; or
3. by an agent of any such government, power, authority or
forces;
(f) any weapon of war employing nuclear fission, fusion or other
radioactive force, whether in time of peace or war; or
(g) insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or
defending against such an occurrence, seizure or destruction under
quarantine or customs regulations, confiscation by order of any
government or public authority or risks of contraband or illegal
transportation or trade.
Special Hazard Loss Coverage Amount: With respect to the first
-----------------------------------
Distribution Date, $10,438,856. With respect to any Distribution Date after
the first Distribution Date, the lesser of (a) the greatest of (i) 1% of the
aggregate of the principal balances of the Mortgage Loans in both Loan Groups,
(ii) twice the principal balance of the largest Mortgage Loan in either Loan
Group and (iii) the aggregate of the principal balances of all Mortgage Loans
in both Loan Groups secured by Mortgaged Properties located in the single
California postal zip code area having the highest aggregate principal balance
of any such zip code area and (b) the Special Hazard Loss Coverage Amount as
of the Closing Date less the amount, if any, of Special Hazard Losses
allocated to the Certificates since the Closing Date. All principal balances
for the purpose of this definition will be calculated as of the first day of
the calendar month preceding the month of such Distribution Date after giving
effect to Scheduled Payments on the Mortgage Loans then due, whether or not
paid.
Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which
----------------------------
a Special Hazard Loss has occurred.
SR Interest: The sole class of "residual interest" in the Subsidiary
-----------
REMIC.
S&P: Standard & Poor's, a division of The McGraw-Hill Companies,
---
Inc. If S&P is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 10.05(b) the address for notices to S&P shall be Standard
& Poor's, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Mortgage Surveillance Monitoring, or such other address as S&P may hereafter
furnish to the Depositor and the Master Servicer.
Startup Day: The Closing Date.
-----------
Stated Principal Balance: As to any Mortgage Loan and Due Date, the
------------------------
unpaid principal balance of such Mortgage Loan as of such Due Date as
specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any moratorium or
similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Mortgage Loan) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment
by the related Mortgagor.
Streamlined Documentation Mortgage Loan: Any Mortgage Loan
---------------------------------------
originated pursuant to the Seller's Streamlined Loan Documentation Program
then in effect.
Subordinated Certificates: As specified in the Preliminary
-------------------------
Statement.
Subordinated Percentage: As to any Distribution Date and Certificate
-----------------------
Group, 100% minus the related Senior Percentage for such Distribution Date.
Subordinated Prepayment Percentage: As to any Distribution Date and
----------------------------------
Certificate Group, 100% minus the related Senior Prepayment Percentage for
such Distribution Date.
Subordinated Principal Distribution Amount: With respect to any
------------------------------------------
Distribution Date and Certificate Group, an amount equal to (A) the sum of (i)
the related Subordinated Percentage of the applicable Non-PO Percentage of all
amounts described in clauses (a) through (d) of the definition of "Non-PO
Formula Principal Amount" for such Certificate Group for such Distribution
Date, (ii) with respect to each Mortgage Loan in the related Loan Group that
became a Liquidated Mortgage Loan during the calendar month preceding the
month of such Distribution Date, the applicable Non-PO Percentage of the
amount of the Liquidation Proceeds allocable to principal received with
respect to such Mortgage Loan after application of such amounts to the related
Senior Certificates pursuant to clause (ii) of the definition of Senior
Principal Distribution Amount, up to the related Subordinated Percentage of
the applicable Non-PO Percentage of the Stated Principal Balance of such
Mortgage Loan and (iii) the related Subordinated Prepayment Percentage of the
applicable Non-PO Percentage of all amounts described in clause (f) of the
definition of "Non-PO Formula Principal Amount" for such Certificate Group for
such Distribution Date reduced by (B) the amount of any payments in respect of
Class PO Deferred Amounts for such Certificate Group on the related
Distribution Date.
Subservicer: Any person to whom the Master Servicer has contracted
-----------
for the servicing of all or a portion of the Mortgage Loans pursuant to
Section 3.02 hereof.
Subsidiary REMIC: With respect to each Subsidiary REMIC Interest,
----------------
the applicable rate set forth or calculated in the manner described in the
Preliminary Statement.
Subsidiary REMIC Interest: Any one of the Subsidiary REMIC Regular
-------------------------
Interests or the SR Interest.
Subsidiary REMIC Regular Interest: Any one of the "regular
---------------------------------
interests" in the Subsidiary REMIC described in the Preliminary Statement.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller
------------------------
for a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit M,
(i) have a Stated Principal Balance, after deduction of the principal portion
of the Scheduled Payment due in the month of substitution, not in excess of,
and not more than 10% less than the Stated Principal Balance of the Deleted
Mortgage Loan; (ii) be accruing interest at a rate no lower than and not more
than 1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv)
have a remaining term to maturity no greater than (and not more than one year
less than that of) the Deleted Mortgage Loan; (v) not be a Cooperative Loan
unless the Deleted Mortgage Loan was a Cooperative Loan and (vi) comply with
each representation and warranty set forth in Section 2.03 hereof.
Substitution Adjustment Amount: The meaning ascribed to such term
------------------------------
pursuant to Section 2.03.
Support Classes: As specified in the Preliminary Statement.
---------------
Targeted Balances: With respect to any Targeted Principal Classes
-----------------
and any Distribution Date appearing in Schedule IV hereto, the applicable
amount appearing opposite such Distribution Date for such respective Class.
Targeted Principal Classes: As specified in the Preliminary
--------------------------
Statement.
Tax Matters Person: The person designated as "tax matters person" in
------------------
the manner provided under Treasury regulation ss. 1.860F-4(d) and temporary
Treasury regulation ss. 301.6231(a)(7)1T. Initially, the Tax Matters Person
shall be the Trustee.
Tax Matters Person Certificate: The Class A-R Certificate with a
------------------------------
Denomination of $0.05.
Transfer: Any direct or indirect transfer or sale of any Ownership
--------
Interest in a Residual Certificate.
Transfer Balance: As to any Distribution Date and Transferor Group,
----------------
(i) the excess, if any, of the Special Hazard Loss (other than a Special
Hazard Loss which is an Excess Loss) allocated to the Lowest Class in such
Certificate Group, over the Current Transfer Payment in respect of such
Special Hazard Loss, minus (ii) the payments, if any, made in respect of such
excess on prior Distribution Dates, minus any other reductions in such excess
as provided herein.
Transferee Group: As to any Distribution Date, the Certificate Group
----------------
which is related to the Loan Group which incurred a Special Hazard Loss (other
than a Special hazard Loss which is an Excess Loss) all or a portion of which
is to be allocated to the Subordinated Certificates in the other Certificate
Group on such Distribution Date as provided in Section 4.04.
Transferor Group: As to any Distribution Date, the Certificate Group
----------------
which includes the Lowest Class to which a Special Hazard Loss (other than a
Special hazard Loss which is an Excess Loss) is allocated; provided, however,
-------- -------
that the Certificate Group which includes the Lowest Class and is related to
the Loan Group which incurred the Special Hazard Loss, is not a Transferor
Group.
Trustee: The Bank of New York and its successors and, if a successor
-------
trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
-----------
one-twelfth of the Trustee Fee Rate multiplied by the Pool Stated Principal
Balance with respect to such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per annum
----------------
rate agreed upon in writing on or prior to the Closing Date by the Trustee and
the Depositor.
Trust Fund: The corpus of the trust created hereunder consisting of
----------
(i) the Mortgage Loans and all interest and principal received on or with
respect thereto after the Cut-off Date, other than such amounts which were due
on the Mortgage Loans on or before the Cut-off Date; (ii) the Certificate
Account and the Distribution Account and all amounts deposited therein
pursuant to the applicable provisions of this Agreement; (iii) property that
secured a Mortgage Loan and has been acquired by foreclosure, deed-in-lieu of
foreclosure or otherwise; and (v) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing.
Unscheduled Principal Distribution Amounts: As to any Distribution
------------------------------------------
Date and Loan Group, an amount equal to the sum of (i) with respect to each
Mortgage Loan in the related Loan Group that became a Liquidated Mortgage Loan
during the calendar month preceding the month of such Distribution Date, the
Non-PO Percentage of the Liquidation Proceeds allocable to principal received
with respect to such Mortgage Loan and (ii) the applicable Non-PO Percentage
of the amount described in clause (f) of the definition of "Non-PO Formula
Principal Amount" for such Distribution Date with respect to the Mortgage
Loans in the related Loan Group.
Voting Rights: The portion of the voting rights of all of the
-------------
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to each Class of
Notional Amount Certificates, if any (such Voting Rights to be allocated among
the holders of Certificates of each such Class in accordance with their
respective Percentage Interests), and (b) the remaining Voting Rights (or 100%
of the Voting Rights if there is no Class of Notional Amount Certificates)
shall be allocated among Holders of the remaining Classes of Certificates in
proportion to the Certificate Balances of their respective Certificates on
such date.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
-----------------------------
(a) The Seller, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Depositor, without recourse, all the right, title and interest of the Seller
in and to the Mortgage Loans, including all interest and principal received or
receivable by the Seller on or with respect to the Mortgage Loans after the
Cut-off Date and all interest and principal payments on the Mortgage Loans
received prior to the Cut-off Date in respect of installments of interest and
principal due thereafter, but not including payments of principal and interest
due and payable on the Mortgage Loans on or before the Cut-off Date. On or
prior to the Closing Date, the Seller shall deliver to the Depositor or, at
the Depositor's direction, to the Trustee or other designee of the Depositor,
the Mortgage File for each Mortgage Loan listed in the Mortgage Loan Schedule
(except that, in the case of the Delay Delivery Mortgage Loans, such delivery
may take place within thirty (30) days following the Closing Date). Such
delivery of the Mortgage Files shall be made against payment by the Depositor
of the purchase price, previously agreed to by the Seller and Depositor, for
the Mortgage Loans. With respect to any Mortgage Loan that does not have a
first payment date on or before the Due Date in the month of the first
Distribution Date, the Seller shall deposit into the Distribution Account on
or before the Distribution Account Deposit Date relating to the first
Distribution Date, an amount equal to one month's interest at the related
Adjusted Mortgage Rate on the Cut-off Date Principal Balance of such Mortgage
Loan.
(b) The Depositor, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to
the Trustee for the benefit of the Certificateholders, without recourse, all
the right, title and interest of the Depositor in and to the Trust Fund
together with the Depositor's right to require the Seller to cure any breach
of a representation or warranty made herein by the Seller or to repurchase or
substitute for any affected Mortgage Loan in accordance herewith.
(c) In connection with the transfer and assignment set forth in
clause (b) above, the Depositor has delivered or caused to be delivered to the
Trustee (or, in the case of the Delay Delivery Mortgage Loans, will deliver or
cause to be delivered to the Trustee within thirty (30) days following the
Closing Date) for the benefit of the Certificateholders the following documents
or instruments with respect to each Mortgage Loan so assigned:
(i) (A) the original Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: "Pay to the order of
without recourse," with all intervening endorsements
-----------
showing a complete chain of endorsement from the originator to the
Person endorsing the Mortgage Note (each such endorsement being
sufficient to transfer all right, title and interest of the party so
endorsing, as noteholder or assignee thereof, in and to that
Mortgage Note); or
(B) with respect to any Lost Mortgage Note, a lost note
affidavit from the Seller stating that the original Mortgage Note
was lost or destroyed, together with a copy of such Mortgage Note;
(ii) except as provided below, the original recorded Mortgage or a
copy of such Mortgage certified by the Seller as being a true and
complete copy of the Mortgage;
(iii) a duly executed assignment of the Mortgage (which may be
included in a blanket assignment or assignments), together with,
except as provided below, all interim recorded assignments of such
mortgage (each such assignment, when duly and validly completed, to
be in recordable form and sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which the
assignment relates); provided that, if the related Mortgage has not
been returned from the applicable public recording office, such
assignment of the Mortgage may exclude the information to be
provided by the recording office;
(iv) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any;
(v) except as provided below, the original or duplicate original
lender's title policy and all riders thereto; and
(vi) in the case of a Cooperative Loan, the originals of the
following documents or instruments:
(a) The Coop Shares, together with a stock power in blank;
(b) The executed Security Agreement;
(c) The executed Proprietary Lease;
(d) The executed Recognition Agreement;
(e) The executed assignment of Recognition Agreement;
(f) The executed UCC-1 financing statement with evidence of
recording thereon which have been filed in all places required
to perfect the Seller's interest in the Coop Shares and the
Proprietary Lease; and
(g) Executed UCC-3 financing statements or other appropriate
UCC financing statements required by state law, evidencing a
complete and unbroken line from the mortgagee to the Trustee
with evidence of recording thereon (or in a form suitable for
recordation).
In the event that in connection with any Mortgage Loan the Depositor
cannot deliver (a) the original recorded Mortgage, (b) all interim recorded
assignments or (c) the lender's title policy (together with all riders
thereto) satisfying the requirements of clause (ii), (iii) or (v) above,
respectively, concurrently with the execution and delivery hereof because such
document or documents have not been returned from the applicable public
recording office in the case of clause (ii) or (iii) above, or because the
title policy has not been delivered to either the Master Servicer or the
Depositor by the applicable title insurer in the case of clause (v) above, the
Depositor shall promptly deliver to the Trustee, in the case of clause (ii) or
(iii) above, such original Mortgage or such interim assignment, as the case
may be, with evidence of recording indicated thereon upon receipt thereof from
the public recording office, or a copy thereof, certified, if appropriate, by
the relevant recording office, but in no event shall any such delivery of the
original Mortgage and each such interim assignment or a copy thereof,
certified, if appropriate, by the relevant recording office, be made later
than one year following the Closing Date, or, in the case of clause (v) above,
no later than 120 days following the Closing Date; provided, however, in the
event the Depositor is unable to deliver by such date each Mortgage and each
such interim assignment by reason of the fact that any such documents have not
been returned by the appropriate recording office, or, in the case of each
such interim assignment, because the related Mortgage has not been returned by
the appropriate recording office, the Depositor shall deliver such documents
to the Trustee as promptly as possible upon receipt thereof and, in any event,
within 720 days following the Closing Date. The Depositor shall forward or
cause to be forwarded to the Trustee (a) from time to time additional original
documents evidencing an assumption or modification of a Mortgage Loan and (b)
any other documents required to be delivered by the Depositor or the Master
Servicer to the Trustee. In the event that the original Mortgage is not
delivered and in connection with the payment in full of the related Mortgage
Loan and the public recording office requires the presentation of a "lost
instruments affidavit and indemnity" or any equivalent document, because only
a copy of the Mortgage can be delivered with the instrument of satisfaction or
reconveyance, the Master Servicer shall execute and deliver or cause to be
executed and delivered such a document to the public recording office. In the
case where a public recording office retains the original recorded Mortgage or
in the case where a Mortgage is lost after recordation in a public recording
office, the Seller shall deliver to the Trustee a copy of such Mortgage
certified by such public recording office to be a true and complete copy of
the original recorded Mortgage.
As promptly as practicable subsequent to such transfer and
assignment, and in any event, within thirty (30) days thereafter, the Trustee
shall (i) affix the Trustee's name to each assignment of Mortgage, as the
assignee thereof, (ii) cause such assignment to be in proper form for
recording in the appropriate public office for real property records and (iii)
cause to be delivered for recording in the appropriate public office for real
property records the assignments of the Mortgages to the Trustee, except that,
with respect to any assignments of Mortgage as to which the Trustee has not
received the information required to prepare such assignment in recordable
form, the Trustee's obligation to do so and to deliver the same for such
recording shall be as soon as practicable after receipt of such information
and in any event within thirty (30) days after receipt thereof and that the
Trustee need not cause to be recorded any assignment which relates to a
Mortgage Loan (a) the Mortgaged Property and Mortgage File relating to which
are located in California or (b) in any other jurisdiction under the laws of
which in the opinion of counsel the recordation of such assignment is not
necessary to protect the Trustee's and the Certificateholders' interest in the
related Mortgage Loan.
In the case of Mortgage Loans that have been prepaid in full as of
the Closing Date, the Depositor, in lieu of delivering the above documents to
the Trustee, will deposit in the Certificate Account the portion of such
payment that is required to be deposited in the Certificate Account pursuant
to Section 3.08 hereof.
Notwithstanding anything to the contrary in this Agreement, within
thirty days after the Closing Date, the Seller shall either (i) deliver to the
Depositor, or at the Depositor's direction, to the Trustee or other designee
of the Depositor the Mortgage File as required pursuant to this Section 2.01
for each Delay Delivery Mortgage Loan or (ii) (A) substitute a Substitute
Mortgage Loan for the Delay Delivery Mortgage Loan or (B) repurchase the
Delayed Delivery Mortgage Loan, which substitution or repurchase shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan
for purposes of such Section 2.03), provided, however, that if the Seller
-------- -------
fails to deliver a Mortgage File for any Delay Delivery Mortgage Loan within
the thirty-day period provided in the prior sentence, the Seller shall use its
best reasonable efforts to effect a substitution, rather than a repurchase of,
such Deleted Mortgage Loan and provided further that the cure period provided
for in Section 2.02 or in Section 2.03 shall not apply to the initial delivery
of the Mortgage File for such Delay Delivery Mortgage Loan, but rather the
Seller shall have five (5) Business Days to cure such failure to deliver. At
the end of such thirty-day period, the Trustee shall send a Delay Delivery
Certification for the Delay Delivery Mortgage Loans delivered during such
thirty-day period in accordance with the provisions of Section 2.02.
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.
--------------------------------------------
The Trustee acknowledges receipt of the documents identified in the
Initial Certification in the form annexed hereto as Exhibit F and declares
that it holds and will hold such documents and the other documents delivered
to it constituting the Mortgage Files, and that it holds or will hold such
other assets as are included in the Trust Fund, in trust for the exclusive use
and benefit of all present and future Certificateholders. The Trustee
acknowledges that it will maintain possession of the Mortgage Notes in the
State of California, unless otherwise permitted by the Rating Agencies.
The Trustee agrees to execute and deliver on the Closing Date to the
Depositor, the Master Servicer and the Seller an Initial Certification in the
form annexed hereto as Exhibit F. Based on its review and examination, and
only as to the documents identified in such Initial Certification, the Trustee
acknowledges that such documents appear regular on their face and relate to
such Mortgage Loan. The Trustee shall be under no duty or obligation to
inspect, review or examine said documents, instruments, certificates or other
papers to determine that the same are genuine, enforceable or appropriate for
the represented purpose or that they have actually been recorded in the real
estate records or that they are other than what they purport to be on their
face.
On or about the thirtieth (30th) day after the Closing Date, the
Trustee shall deliver to the Depositor, the Master Servicer and the Seller a
Delay Delivery Certification in the form annexed hereto as Exhibit G, with any
applicable exceptions noted thereon.
Not later than 90 days after the Closing Date, the Trustee shall
deliver to the Depositor, the Master Servicer and the Seller a Final
Certification in the form annexed hereto as Exhibit H, with any applicable
exceptions noted thereon.
If, in the course of such review, the Trustee finds any document
constituting a part of a Mortgage File which does not meet the requirements of
Section 2.01, the Trustee shall list such as an exception in the Final
Certification; provided, however that the Trustee shall not make any
-------- -------
determination as to whether (i) any endorsement is sufficient to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note or (ii) any assignment is in recordable
form or is sufficient to effect the assignment of and transfer to the assignee
thereof under the mortgage to which the assignment relates. The Seller shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if the Seller does not correct or cure such
defect within such period, the Seller shall either (a) substitute for the
related Mortgage Loan a Substitute Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03, or (b) purchase such Mortgage Loan from the Trustee within 90 days from
the date the Seller was notified of such defect in writing at the Purchase
Price of such Mortgage Loan; provided, however, that in no event shall such
substitution or purchase occur more than 540 days from the Closing Date,
except that if the substitution or purchase of a Mortgage Loan pursuant to
this provision is required by reason of a delay in delivery of any documents
by the appropriate recording office, and there is a dispute between either the
Master Servicer or the Seller and the Trustee over the location or status of
the recorded document, then such substitution or purchase shall occur within
720 days from the Closing Date. The Trustee shall deliver written notice to
each Rating Agency within 270 days from the Closing Date indicating each
Mortgage Loan (a) which has not been returned by the appropriate recording
office or (b) as to which there is a dispute as to location or status of such
Mortgage Loan. Such notice shall be delivered every 90 days thereafter until
the related Mortgage Loan is returned to the Trustee. Any such substitution
pursuant to (a) above or purchase pursuant to (b) above shall not be effected
prior to the delivery to the Trustee of the Opinion of Counsel required by
Section 2.05 hereof, if any, and any substitution pursuant to (a) above shall
not be effected prior to the additional delivery to the Trustee of a Request
for Release substantially in the form of Exhibit N. No substitution is
permitted to be made in any calendar month after the Determination Date for
such month. The Purchase Price for any such Mortgage Loan shall be deposited
by the Seller in the Certificate Account on or prior to the Distribution
Account Deposit Date for the Distribution Date in the month following the
month of repurchase and, upon receipt of such deposit and certification with
respect thereto in the form of Exhibit N hereto, the Trustee shall release the
related Mortgage File to the Seller and shall execute and deliver at the
Seller's request such instruments of transfer or assignment prepared by the
Seller, in each case without recourse, as shall be necessary to vest in the
Seller, or a designee, the Trustee's interest in any Mortgage Loan released
pursuant hereto.
The Trustee shall retain possession and custody of each Mortgage
File in accordance with and subject to the terms and conditions set forth
herein. The Master Servicer shall promptly deliver to the Trustee, upon the
execution or receipt thereof, the originals of such other documents or
instruments constituting the Mortgage File as come into the possession of the
Master Servicer from time to time.
It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements of Section 2.01 above shall constitute the sole remedy respecting
such defect available to the Trustee, the Depositor and any Certificateholder
against the Seller.
SECTION 2.03. Representations, Warranties and Covenants of the
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Seller and Master Servicer.
--------------------------
(a) Countrywide Home Loans, Inc., in its capacities as Seller and
Master Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the
Depositor and the Trustee, as of the Closing Date, or if so specified therein,
as of the Cut-off Date.
(b) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.03(b) that materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan, the party discovering such breach shall give prompt notice thereof to
the other parties. The Seller hereby covenants that within 90 days of the
earlier of its discovery or its receipt of written notice from any party of a
breach of any representation or warranty made pursuant to Section 2.03(b)
which materially and adversely affects the interests of the Certificateholders
in any Mortgage Loan, it shall cure such breach in all material respects, and
if such breach is not so cured, shall, (i) if such 90-day period expires prior
to the second anniversary of the Closing Date, remove such Mortgage Loan (a
"Deleted Mortgage Loan") from the Trust Fund and substitute in its place a
---------------------
Substitute Mortgage Loan, in the manner and subject to the conditions set
forth in this Section; or (ii) repurchase the affected Mortgage Loan or
Mortgage Loans from the Trustee at the Purchase Price in the manner set forth
below; provided, however, that any such substitution pursuant to (i) above
-------- -------
shall not be effected prior to the delivery to the Trustee of the Opinion of
Counsel required by Section 2.05 hereof, if any, and any such substitution
pursuant to (i) above shall not be effected prior to the additional delivery
to the Trustee of a Request for Release substantially in the form of Exhibit N
and the Mortgage File for any such Substitute Mortgage Loan. The Seller shall
promptly reimburse the Master Servicer and the Trustee for any expenses
reasonably incurred by the Master Servicer or the Trustee in respect of
enforcing the remedies for such breach. With respect to the representations
and warranties described in this Section which are made to the best of the
Seller's knowledge, if it is discovered by either the Depositor, the Seller or
the Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of
the related Mortgage Loan or the interests of the Certificateholders therein,
notwithstanding the Seller's lack of knowledge with respect to the substance
of such representation or warranty, such inaccuracy shall be deemed a breach
of the applicable representation or warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller
shall deliver to the Trustee for the benefit of the Certificateholders the
Mortgage Note, the Mortgage, the related assignment of the Mortgage, and such
other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01.
No substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of
the Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted
Mortgage Loan for such month and thereafter the Seller shall be entitled to
retain all amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders to reflect the removal of such Deleted Mortgage Loan and
the substitution of the Substitute Mortgage Loan or Loans and the Master
Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee. Upon
such substitution, the Substitute Mortgage Loan or Loans shall be subject
to the terms of this Agreement in all respects, and the Seller shall be deemed
to have made with respect to such Substitute Mortgage Loan or Loans, as of the
date of substitution, the representations and warranties made pursuant to
Section 2.03(b) with respect to such Mortgage Loan. Upon any such substitution
and the deposit to the Certificate Account of the amount required to be
deposited therein in connection with such substitution as described in the
following paragraph, the Trustee shall release the Mortgage File held for the
benefit of the Certificateholders relating to such Deleted Mortgage Loan to
the Seller and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, as shall be necessary to vest title in the Seller, or its
designee, the Trustee's interest in any Deleted Mortgage Loan substituted for
pursuant to this Section 2.03.
For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer
will determine the amount (if any) by which the aggregate principal balance of
all such Substitute Mortgage Loans as of the date of substitution is less than
the aggregate Stated Principal Balance of all such Deleted Mortgage Loans
(after application of the scheduled principal portion of the monthly payments
due in the month of substitution). The amount of such shortage (the
"Substitution Adjustment Amount") plus an amount equal to the aggregate of any
------------------------------
unreimbursed Advances with respect to such Deleted Mortgage Loans shall be
deposited in the Certificate Account by the Seller on or before the
Distribution Account Deposit Date for the Distribution Date in the month
succeeding the calendar month during which the related Mortgage Loan became
required to be purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan,
the Purchase Price therefor shall be deposited in the Certificate Account
pursuant to Section 3.05 on or before the Distribution Account Deposit Date
for the Distribution Date in the month following the month during which the
Seller became obligated hereunder to repurchase or replace such Mortgage Loan
and upon such deposit of the Purchase Price, the delivery of the Opinion of
Counsel required by Section 2.05 and receipt of a Request for Release in the
form of Exhibit N hereto, the Trustee shall release the related Mortgage File
held for the benefit of the Certificateholders to such Person, and the Trustee
shall execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to transfer title from the Trustee. It is understood and
agreed that the obligation under this Agreement of any Person to cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and
is continuing shall constitute the sole remedy against such Persons respecting
such breach available to Certificateholders, the Depositor or the Trustee on
their behalf.
The representations and warranties made pursuant to this Section
2.03 shall survive delivery of the respective Mortgage Files to the Trustee
for the benefit of the Certificateholders.
SECTION 2.04. Representations and Warranties of the Depositor as to
-----------------------------------------------------
the Mortgage Loans.
------------------
The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date hereof or such other date set
forth herein that as of the Closing Date, and following the transfer of the
Mortgage Loans to it by the Seller, the Depositor had good title to the
Mortgage Loans and the Mortgage Notes were subject to no offsets, defenses or
counterclaims.
The Depositor hereby assigns, transfers and conveys to the Trustee
all of its rights with respect to the Mortgage Loans including, without
limitation, the representations and warranties of the Seller made pursuant to
Section 2.03(b) hereof, together with all rights of the Depositor to require
the Seller to cure any breach thereof or to repurchase or substitute for any
affected Mortgage Loan in accordance with this Agreement.
It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the Mortgage Files to
the Trustee. Upon discovery by the Depositor or the Trustee of a breach of any
of the foregoing representations and warranties set forth in this Section 2.04
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating
Agency.
SECTION 2.05. Delivery of Opinion of Counsel in Connection with
-------------------------------------------------
Substitutions.
-------------
(a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.02 or Section 2.03 shall be made more than
90 days after the Closing Date unless the Seller delivers to the Trustee an
Opinion of Counsel, which Opinion of Counsel shall not be at the expense of
either the Trustee or the Trust Fund, addressed to the Trustee, to the effect
that such substitution will not (i) result in the imposition of the tax on
"prohibited transactions" on the Trust Fund or contributions after the Startup
Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively,
or (ii) cause the Trust Fund to fail to qualify as a REMIC at any time that
any Certificates are outstanding.
(b) Upon discovery by the Depositor, the Seller, the Master
Servicer, or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the
party discovering such fact shall promptly (and in any event within five (5)
Business Days of discovery) give written notice thereof to the other parties.
In connection therewith, the Trustee shall require the Seller, at the Seller's
option, to either (i) substitute, if the conditions in Section 2.03(c) with
respect to substitutions are satisfied, a Substitute Mortgage Loan for the
affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within
90 days of such discovery in the same manner as it would a Mortgage Loan for a
breach of representation or warranty made pursuant to Section 2.03. The
Trustee shall reconvey to the Seller the Mortgage Loan to be released pursuant
hereto in the same manner, and on the same terms and conditions, as it would a
Mortgage Loan repurchased for breach of a representation or warranty contained
in Section 2.03.
SECTION 2.06. Execution and Delivery of Certificates.
--------------------------------------
The Trustee acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed
and delivered to or upon the order of the Depositor, the Certificates in
authorized denominations evidencing directly or indirectly the entire
ownership of the Trust Fund. The Trustee agrees to hold the Trust Fund and
exercise the rights referred to above for the benefit of all present and
future Holders of the Certificates and to perform the duties set forth in this
Agreement to the best of its ability, to the end that the interests of the
Holders of the Certificates may be adequately and effectively protected.
SECTION 2.07. REMIC Matters.
-------------
The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests
created hereby. The "Startup Day" for purposes of the REMIC Provisions shall
be the Closing Date. The "tax matters person" with respect to each REMIC
hereunder shall be the Trustee and the Trustee shall hold the Tax Matters
Person Certificate. Each REMIC's fiscal year shall be the calendar year.
SECTION 2.08. Covenants of the Master Servicer.
--------------------------------
The Master Servicer hereby covenants to the Depositor and the
Trustee as follows:
(a) the Master Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy;
and
(b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor,
any affiliate of the Depositor or the Trustee and prepared by the
Master Servicer pursuant to this Agreement will contain any untrue
statement of a material fact or omit to state a material fact
necessary to make such information, certificate, statement or report
not misleading.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.
-----------------------------------------
For and on behalf of the Certificateholders, the Master Servicer
shall service and administer the Mortgage Loans in accordance with the terms
of this Agreement and customary and usual standards of practice of prudent
mortgage loan servicers. In connection with such servicing and administration,
the Master Servicer shall have full power and authority, acting alone and/or
through Subservicers as provided in Section 3.02 hereof, to do or cause to be
done any and all things that it may deem necessary or desirable in connection
with such servicing and administration, including but not limited to, the
power and authority, subject to the terms hereof (i) to execute and deliver,
on behalf of the Certificateholders and the Trustee, customary consents or
waivers and other instruments and documents, (ii) to consent to transfers of
any Mortgaged Property and assumptions of the Mortgage Notes and related
Mortgages (but only in the manner provided in this Agreement), (iii) to
collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) to
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan; provided that the Master Servicer shall
not take any action that is inconsistent with or prejudices the interests of
the Trust Fund or the Certificateholders in any Mortgage Loan or the rights
and interests of the Depositor, the Trustee and the Certificateholders under
this Agreement. The Master Servicer shall represent and protect the interests
of the Trust Fund in the same manner as it protects its own interests in
mortgage loans in its own portfolio in any claim, proceeding or litigation
regarding a Mortgage Loan, and shall not make or permit any modification,
waiver or amendment of any Mortgage Loan which would cause the Trust Fund to
fail to qualify as a REMIC or result in the imposition of any tax under
Section 860F(a) or Section 860G(d) of the Code. Without limiting the
generality of the foregoing, the Master Servicer, in its own name or in the
name of the Depositor and the Trustee, is hereby authorized and empowered by
the Depositor and the Trustee, when the Master Servicer believes it
appropriate in its reasonable judgment, to execute and deliver, on behalf of
the Trustee, the Depositor, the Certificateholders or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans, and with respect to the Mortgaged Properties held for the benefit of
the Certificateholders. The Master Servicer shall prepare and deliver to the
Depositor and/or the Trustee such documents requiring execution and delivery
by either or both of them as are necessary or appropriate to enable the Master
Servicer to service and administer the Mortgage Loans to the extent that the
Master Servicer is not permitted to execute and deliver such documents
pursuant to the preceding sentence. Upon receipt of such documents, the
Depositor and/or the Trustee shall execute such documents and deliver them to
the Master Servicer.
In accordance with the standards of the preceding paragraph, the
Master Servicer shall advance or cause to be advanced funds as necessary for
the purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.06, and further
as provided in Section 3.08. The costs incurred by the Master Servicer, if
any, in effecting the timely payments of taxes and assessments on the
Mortgaged Properties and related insurance premiums shall not, for the purpose
of calculating monthly distributions to the Certificateholders, be added to
the Stated Principal Balances of the related Mortgage Loans, notwithstanding
that the terms of such Mortgage Loans so permit.
SECTION 3.02. Subservicing; Enforcement of the Obligations of
-----------------------------------------------
Servicers.
---------
(a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided,
--------
however, that such subservicing arrangement and the terms of the related
- -------
subservicing agreement must provide for the servicing of such Mortgage Loans
in a manner consistent with the servicing arrangements contemplated hereunder.
Unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Master Servicer in servicing the Mortgage Loans
include actions taken or to be taken by a Subservicer on behalf of the Master
Servicer. Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or arrangements
between the Master Servicer and a Subservicer or reference to actions taken
through a Subservicer or otherwise, the Master Servicer shall remain obligated
and liable to the Depositor, the Trustee and the Certificateholders for the
servicing and administration of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or
liability by virtue of such subservicing agreements or arrangements or by
virtue of indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Master Servicer alone were
servicing and administering the Mortgage Loans. All actions of each
Subservicer performed pursuant to the related subservicing agreement shall be
performed as an agent of the Master Servicer with the same force and effect as
if performed directly by the Master Servicer.
(b) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect
to the Mortgage Loans that are received by a Subservicer regardless of whether
such payments are remitted by the Subservicer to the Master Servicer.
SECTION 3.03. Rights of the Depositor and the Trustee in Respect of
-----------------------------------------------------
the Master Servicer.
-------------------
The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise the
related rights of the Master Servicer hereunder; provided that the Master
Servicer shall not be relieved of any of its obligations hereunder by virtue
of such performance by the Depositor or its designee. Neither the Trustee nor
the Depositor shall have any responsibility or liability for any action or
failure to act by the Master Servicer nor shall the Trustee or the Depositor
be obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
SECTION 3.04. Trustee to Act as Master Servicer.
----------------------------------
In the event that the Master Servicer shall for any reason no longer
be the Master Servicer hereunder (including by reason of an Event of Default),
the Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that
the Trustee shall not be (i) liable for losses of the Master Servicer pursuant
to Section 3.09 hereof or any acts or omissions of the predecessor Master
Servicer hereunder), (ii) obligated to make Advances if it is prohibited from
doing so by applicable law, (iii) obligated to effectuate repurchases or
substitutions of Mortgage Loans hereunder including, but not limited to,
repurchases or substitutions of Mortgage Loans pursuant to Section 2.02 or
2.03 hereof, (iv) responsible for expenses of the Master Servicer pursuant to
Section 2.03 or (v) deemed to have made any representations and warranties of
the Master Servicer hereunder). Any such assumption shall be subject to
Section 7.02 hereof. If the Master Servicer shall for any reason no longer be
the Master Servicer (including by reason of any Event of Default), the Trustee
or its successor shall succeed to any rights and obligations of the Master
Servicer under each subservicing agreement.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each subservicing agreement or substitute subservicing
agreement and the Mortgage Loans then being serviced thereunder and an
accounting of amounts collected or held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the substitute
subservicing agreement to the assuming party.
SECTION 3.05. Collection of Mortgage Loan Payments; Certificate
-------------------------------------------------
Account; Distribution Account.
-----------------------------
(a) The Master Servicer shall make reasonable efforts in accordance
with the customary and usual standards of practice of prudent mortgage
servicers to collect all payments called for under the terms and provisions of
the Mortgage Loans to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any related Required Insurance
Policy. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive any late payment charge or any prepayment charge or
penalty interest in connection with the prepayment of a Mortgage Loan and (ii)
extend the due dates for payments due on a Mortgage Note for a period not
greater than 180 days; provided, however, that the Master Servicer cannot
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extend the maturity of any such Mortgage Loan past the date on which the final
payment is due on the latest maturing Mortgage Loan as of the Cut-off Date. In
the event of any such arrangement, the Master Servicer shall make Advances on
the related Mortgage Loan in accordance with the provisions of Section 4.01
during the scheduled period in accordance with the amortization schedule of
such Mortgage Loan without modification thereof by reason of such
arrangements. The Master Servicer shall not be required to institute or join
in litigation with respect to collection of any payment (whether under a
Mortgage, Mortgage Note or otherwise or against any public or governmental
authority with respect to a taking or condemnation) if it reasonably believes
that enforcing the provision of the Mortgage or other instrument pursuant to
which such payment is required is prohibited by applicable law. The Master
Servicer shall establish and maintain a Certificate Account into which the
Master Servicer shall deposit or cause to be deposited on a daily basis within
one Business Day of receipt, except as otherwise specifically provided herein,
the following payments and collections remitted by Subservicers or received by
it in respect of Mortgage Loans subsequent to the Cut-off Date (other than in
respect of principal and interest due on the Mortgage Loans on or before the
Cut-off Date) and the following amounts required to be deposited hereunder:
(i) all payments on account of principal on the Mortgage Loans,
including Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans, net
of the related Master Servicing Fee;
(iii) all Insurance Proceeds and Liquidation Proceeds, other than
proceeds to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures;
(iv) any amount required to be deposited by the Master Servicer
pursuant to Section 3.05(e) in connection with any losses on Permitted
Investments;
(v) any amounts required to be deposited by the Master Servicer
pursuant to Section 3.09(b), 3.09(d), and in respect of net monthly
rental income from REO Property pursuant to Section 3.11 hereof;
(vi) all Substitution Adjustment Amounts;
(vii) all Advances made by the Master Servicer pursuant to Section
4.01; and
(viii) any other amounts required to be deposited hereunder.
In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to the
monthly payment remitted by the Mortgagor, the Master Servicer shall cause
funds to be deposited into the Certificate Account in an amount required to
cause an amount of interest to be paid with respect to such Mortgage Loan
equal to the amount of interest that has accrued on such Mortgage Loan from
the preceding Due Date at the Mortgage Rate net of the related Master
Servicing Fee on such date.
The foregoing requirements for remittance by the Master Servicer
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted by
the Master Servicer. In the event that the Master Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Certificate Account to withdraw such amount from
the Certificate Account, any provision herein to the contrary notwithstanding.
Such withdrawal or direction may be accomplished by delivering written notice
thereof to the Trustee or such other institution maintaining the Certificate
Account which describes the amounts deposited in error in the Certificate
Account. The Master Servicer shall maintain adequate records with respect to
all withdrawals made pursuant to this Section. All funds deposited in the
Certificate Account shall be held in trust for the Certificateholders until
withdrawn in accordance with Section 3.08.
(b) [Reserved]
(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Trustee shall, promptly upon
receipt, deposit in the Distribution Account and retain therein the following:
(i) the aggregate amount remitted by the Master Servicer to the
Trustee pursuant to Section 3.08(a)(ix);
(ii) any amount deposited by the Master Servicer pursuant to Section
3.05(d) in connection with any losses on Permitted Investments; and
(iii) any other amounts deposited hereunder which are required to be
deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw
such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering an
Officer's Certificate to the Trustee which describes the amounts deposited in
error in the Distribution Account. All funds deposited in the Distribution
Account shall be held by the Trustee in trust for the Certificateholders until
disbursed in accordance with this Agreement or withdrawn in accordance with
Section 3.08. In no event shall the Trustee incur liability for withdrawals
from the Distribution Account at the direction of the Master Servicer.
(d) Each institution at which the Certificate Account or the
Distribution Account is maintained shall invest the funds therein as directed
in writing by the Master Servicer in Permitted Investments, which shall mature
not later than (i) in the case of the Certificate Account, the second Business
Day next preceding the related Distribution Account Deposit Date (except that
if such Permitted Investment is an obligation of the institution that
maintains such account, then such Permitted Investment shall mature not later
than the Business Day next preceding such Distribution Account Deposit Date)
and (ii) in the case of the Distribution Account, the Business Day next
preceding the Distribution Date (except that if such Permitted Investment is
an obligation of the institution that maintains such fund or account, then
such Permitted Investment shall mature not later than such Distribution Date)
and, in each case, shall not be sold or disposed of prior to its maturity. All
such Permitted Investments shall be made in the name of the Trustee, for the
benefit of the Certificateholders. All income and gain net of any losses
realized from any such investment of funds on deposit in the Certificate
Account or the Distribution Account shall be for the benefit of the Master
Servicer as servicing compensation and shall be remitted to it monthly as
provided herein. The amount of any realized losses in the Certificate Account
or the Distribution Account incurred in any such account in respect of any
such investments shall promptly be deposited by the Master Servicer in the
Certificate Account or paid to the Trustee for deposit into the Distribution
Account, as applicable. The Trustee in its fiduciary capacity shall not be
liable for the amount of any loss incurred in respect of any investment or
lack of investment of funds held in the Certificate Account or the
Distribution Account and made in accordance with this Section 3.05.
(e) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed change of the
location of the Certificate Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and
the Depositor of any proposed change of the location of the Distribution
Account prior to any change thereof.
SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
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Escrow Accounts.
---------------
(a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit and retain therein
all collections from the Mortgagors (or advances by the Master Servicer) for
the payment of taxes, assessments, hazard insurance premiums or comparable
items for the account of the Mortgagors. Nothing herein shall require the
Master Servicer to compel a Mortgagor to establish an Escrow Account in
violation of applicable law.
(b) Withdrawals of amounts so collected from the Escrow Accounts may
be made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to
reimburse the Master Servicer out of related collections for any payments made
pursuant to Sections 3.01 hereof (with respect to taxes and assessments and
insurance premiums) and 3.09 hereof (with respect to hazard insurance), to
refund to any Mortgagors any sums determined to be overages, to pay interest,
if required by law or the terms of the related Mortgage or Mortgage Note, to
Mortgagors on balances in the Escrow Account or to clear and terminate the
Escrow Account at the termination of this Agreement in accordance with Section
9.01 hereof. The Escrow Accounts shall not be a part of the Trust Fund.
(c) The Master Servicer shall advance any payments referred to in
Section 3.06(a) that are not timely paid by the Mortgagors on the date when
the tax, premium or other cost for which such payment is intended is due, but
the Master Servicer shall be required so to advance only to the extent that
such advances, in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer out of Insurance Proceeds, Liquidation
Proceeds or otherwise.
SECTION 3.07. Access to Certain Documentation and Information
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Regarding the Mortgage Loans.
----------------------------
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage
Loans and all accounts, insurance information and other matters relating to
this Agreement, such access being afforded without charge, but only upon
reasonable request and during normal business hours at the office designated
by the Master Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and reasonable access to information
and documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates;
provided that the Master Servicer shall be entitled to be reimbursed by each
such Certificateholder for actual expenses incurred by the Master Servicer in
providing such reports and access.
SECTION 3.08. Permitted Withdrawals from the Certificate Account and
------------------------------------------------------
Distribution Account.
--------------------
(a) The Master Servicer may from time to time make withdrawals from
the Certificate Account for the following purposes:
(i) to pay to the Master Servicer (to the extent not previously
retained by the Master Servicer) the servicing compensation to which it
is entitled pursuant to Section 3.14, and to pay to the Master Servicer,
as additional servicing compensation, earnings on or investment income
with respect to funds in or credited to the Certificate Account;
(ii) to reimburse the Master Servicer for unreimbursed Advances made
by it, such right of reimbursement pursuant to this subclause (ii) being
limited to amounts received on the Mortgage Loan(s) in respect of which
any such Advance was made;
(iii) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made;
(iv) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds;
(v) to reimburse the Master Servicer for (a) unreimbursed Servicing
Advances, the Master Servicer's right to reimbursement pursuant to this
clause (a) with respect to any Mortgage Loan being limited to amounts
received on such Mortgage Loan(s) which represent late recoveries of the
payments for which such advances were made pursuant to Section 3.01 or
Section 3.06 and (b) for unpaid Master Servicing Fees as provided in
Section 3.11 hereof;
(vi) to pay to the purchaser, with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased pursuant to
Section 2.02, 2.03 or 3.11, all amounts received thereon after the date
of such purchase;
(vii) to reimburse the Seller, the Master Servicer or the Depositor
for expenses incurred by any of them and reimbursable pursuant to Section
6.03 hereof;
(viii) to withdraw any amount deposited in the Certificate Account
and not required to be deposited therein;
(ix) on or prior to the Distribution Account Deposit Date, to
withdraw an amount equal to the related Available Funds and the Trustee
Fee for such Distribution Date and remit such amount to the Trustee for
deposit in the Distribution Account; and
(x) to clear and terminate the Certificate Account upon termination
of this Agreement pursuant to Section 9.01 hereof.
The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Certificate Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Certificate
Account pursuant to subclause (iii), the Master Servicer shall deliver to the
Trustee an Officer's Certificate of a Servicing Officer indicating the amount
of any previous Advance determined by the Master Servicer to be a
Nonrecoverable Advance and identifying the related Mortgage Loans(s), and
their respective portions of such Nonrecoverable Advance.
(b) The Trustee shall withdraw funds from the Distribution Account
for distributions to Certificateholders, in the manner specified in this
Agreement (and to withhold from the amounts so withdrawn, the amount of any
taxes that it is authorized to withhold pursuant to the last paragraph of
Section 8.11). In addition, the Trustee may from time to time make withdrawals
from the Distribution Account for the following purposes:
(i) to pay to itself the Trustee Fee for the related Distribution
Date;
(ii) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Distribution Account;
(iii) to withdraw and return to the Master Servicer any amount
deposited in the Distribution Account and not required to be deposited
therein; and
(iv) to clear and terminate the Distribution Account upon
termination of the Agreement pursuant to Section 9.01 hereof.
SECTION 3.09. Maintenance of Hazard Insurance; Maintenance of
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Primary Insurance Policies.
--------------------------
(a) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is at
least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (y) the
outstanding principal balance of the Mortgage Loan and (z) an amount such that
the proceeds of such policy shall be sufficient to prevent the Mortgagor
and/or the mortgagee from becoming a co-insurer. Each such policy of standard
hazard insurance shall contain, or have an accompanying endorsement that
contains, a standard mortgagee clause. Any amounts collected by the Master
Servicer under any such policies (other than the amounts to be applied to the
restoration or repair of the related Mortgaged Property or amounts released to
the Mortgagor in accordance with the Master Servicer's normal servicing
procedures) shall be deposited in the Certificate Account. Any cost incurred
by the Master Servicer in maintaining any such insurance shall not, for the
purpose of calculating monthly distributions to the Certificateholders or
remittances to the Trustee for their benefit, be added to the principal
balance of the Mortgage Loan, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs shall be recoverable by the Master Servicer out of
late payments by the related Mortgagor or out of Liquidation Proceeds to the
extent permitted by Section 3.08 hereof. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor or
maintained on property acquired in respect of a Mortgage other than pursuant
to such applicable laws and regulations as shall at any time be in force and
as shall require such additional insurance. If the Mortgaged Property is
located at the time of origination of the Mortgage Loan in a federally
designated special flood hazard area and such area is participating in the
national flood insurance program, the Master Servicer shall cause flood
insurance to be maintained with respect to such Mortgage Loan. Such flood
insurance shall be in an amount equal to the least of (i) the original
principal balance of the related Mortgage Loan, (ii) the replacement value of
the improvements which are part of such Mortgaged Property, and (iii) the
maximum amount of such insurance available for the related Mortgaged Property
under the national flood insurance program.
(b) In the event that the Master Servicer shall obtain and maintain
a blanket policy insuring against hazard losses on all of the Mortgage Loans,
it shall conclusively be deemed to have satisfied its obligations as set forth
in the first sentence of this Section, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent
to those commercially available and maintained by comparable servicers. If
such policy contains a deductible clause, the Master Servicer shall, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section, and there
shall have been a loss that would have been covered by such policy, deposit in
the Certificate Account the amount not otherwise payable under the blanket
policy because of such deductible clause. In connection with its activities as
Master Servicer of the Mortgage Loans, the Master Servicer agrees to present,
on behalf of itself, the Depositor, and the Trustee for the benefit of the
Certificateholders, claims under any such blanket policy.
(c) The Master Servicer shall not take any action which would result
in non-coverage under any applicable Primary Insurance Policy of any loss
which, but for the actions of the Master Servicer, would have been covered
thereunder. The Master Servicer shall not cancel or refuse to renew any such
Primary Insurance Policy that is in effect at the date of the initial issuance
of the Certificates and is required to be kept in force hereunder unless the
replacement Primary Insurance Policy for such canceled or non-renewed policy
is maintained with a Qualified Insurer.
Except with respect to any Lender PMI Mortgage Loans, the Master
Servicer shall not be required to maintain any Primary Insurance Policy (i)
with respect to any Mortgage Loan with a Loan-to-Value Ratio less than or
equal to 80% as of any date of determination or, based on a new appraisal, the
principal balance of such Mortgage Loan represents 80% or less of the new
appraised value or (ii) if maintaining such Primary Insurance Policy is
prohibited by applicable law. With respect to the Lender PMI Mortgage Loans,
the Master Servicer shall maintain the Primary Insurance Policy for the life
of such Mortgage Loans.
The Master Servicer agrees to effect the timely payment of the
premiums on each Primary Insurance Policy, and such costs not otherwise
recoverable shall be recoverable by the Master Servicer from the related
liquidation proceeds.
(d) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself, the
Trustee and Certificateholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under any Primary Insurance Policies
respecting defaulted Mortgage Loans. Any amounts collected by the Master
Servicer under any Primary Insurance Policies shall be deposited in the
Certificate Account.
SECTION 3.10. Enforcement of Due-on-Sale Clauses; Assumption
----------------------------------------------
Agreements.
----------
(a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master Servicer
shall to the extent that it has knowledge of such conveyance, enforce any
due-on-sale clause contained in any Mortgage Note or Mortgage, to the extent
permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage
under any Required Insurance Policy. Notwithstanding the foregoing, the Master
Servicer is not required to exercise such rights with respect to a Mortgage
Loan if the Person to whom the related Mortgaged Property has been conveyed or
is proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto and the consent of the mortgagee
under such Mortgage Note or Mortgage is not otherwise so required under such
Mortgage Note or Mortgage as a condition to such transfer. In the event that
the Master Servicer is prohibited by law from enforcing any such due-on-sale
clause, or if coverage under any Required Insurance Policy would be adversely
affected, or if nonenforcement is otherwise permitted hereunder, the Master
Servicer is authorized, subject to Section 3.10(b), to take or enter into an
assumption and modification 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 Mortgage Note and, unless prohibited by applicable
state law, the Mortgagor remains liable thereon, provided that the Mortgage
Loan shall continue to be covered (if so covered before the Master Servicer
enters such agreement) by the applicable Required Insurance Policies. The
Master Servicer, subject to Section 3.10(b), is also authorized with the prior
approval of the insurers under any Required Insurance Policies to enter into a
substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted
as Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the
foregoing, the Master Servicer shall not be deemed to be in default under this
Section by reason of any transfer or assumption which the Master Servicer
reasonably believes it is restricted by law from preventing, for any reason
whatsoever.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in any case in which
a Mortgaged Property has been conveyed to a Person by a Mortgagor, and such
Person is to enter into an assumption agreement or modification agreement or
supplement to the Mortgage Note or Mortgage that requires the signature of the
Trustee, or if an instrument of release signed by the Trustee is required
releasing the Mortgagor from liability on the Mortgage Loan, the Master
Servicer shall prepare and deliver or cause to be prepared and delivered to
the Trustee for signature and shall direct, in writing, the Trustee to execute
the assumption agreement with the Person to whom the Mortgaged Property is to
be conveyed and such modification agreement or supplement to the Mortgage Note
or Mortgage or other instruments as are reasonable or necessary to carry out
the terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged
Property to such Person. In connection with any such assumption, no material
term of the Mortgage Note may be changed. In addition, the substitute
Mortgagor and the Mortgaged Property must be acceptable to the Master Servicer
in accordance with its underwriting standards as then in effect. Together with
each such substitution, assumption or other agreement or instrument delivered
to the Trustee for execution by it, the Master Servicer shall deliver an
Officer's Certificate signed by a Servicing Officer stating that the
requirements of this subsection have been met in connection therewith. The
Master Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of
the original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.
SECTION 3.11. Realization Upon Defaulted Mortgage Loans; Repurchase
-----------------------------------------------------
of Certain Mortgage Loans.
-------------------------
The Master Servicer shall use reasonable efforts to foreclose upon
or otherwise comparably convert the ownership of properties securing such of
the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments.
In connection with such foreclosure or other conversion, the Master Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and meet the requirements of the insurer under any Required
Insurance Policy; provided, however, that the Master Servicer shall not be
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required to expend its own funds in connection with any foreclosure or towards
the restoration of any property unless it shall determine (i) that such
restoration and/or foreclosure will increase the proceeds of liquidation of
the Mortgage Loan after reimbursement to itself of such expenses and (ii) that
such expenses will be recoverable to it through Liquidation Proceeds
(respecting which it shall have priority for purposes of withdrawals from the
Certificate Account). The 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 from the liquidation
proceeds with respect to the related Mortgaged Property, as provided in the
definition of Liquidation Proceeds. If the Master Servicer has knowledge that
a Mortgaged Property which the Master Servicer is contemplating acquiring in
foreclosure or by deed in lieu of foreclosure is located within a 1 mile
radius of any site listed in the Expenditure Plan for the Hazardous Substance
Clean Up Bond Act of 1984 or other site with environmental or hazardous waste
risks known to the Master Servicer, the Master Servicer will, prior to
acquiring the Mortgaged Property, consider such risks and only take action in
accordance with its established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders. The
Trustee's name shall be placed on the title to such REO Property solely as the
Trustee hereunder and not in its individual capacity. The Master Servicer
shall ensure that the title to such REO Property references the Pooling and
Servicing Agreement and the Trustee's capacity thereunder. Pursuant to its
efforts to sell such REO Property, the Master Servicer shall either itself or
through an agent selected by the Master Servicer protect and conserve such REO
Property in the same manner and to such extent as is customary in the locality
where such REO Property is located and may, incident to its conservation and
protection of the interests of the Certificateholders, rent the same, or any
part thereof, as the Master Servicer deems to be in the best interest of the
Certificateholders for the period prior to the sale of such REO Property. The
Master Servicer shall prepare for and deliver to the Trustee a statement with
respect to each REO Property that has been rented showing the aggregate rental
income received and all expenses incurred in connection with the management
and maintenance of such REO Property at such times as is necessary to enable
the Trustee to comply with the reporting requirements of the REMIC Provisions.
The net monthly rental income, if any, from such REO Property shall be
deposited in the Certificate Account no later than the close of business on
each Determination Date. The Master Servicer shall perform the tax reporting
and withholding required by Sections 1445 and 6050J of the Code with respect
to foreclosures and abandonments, the tax reporting required by Section 6050H
of the Code with respect to the receipt of mortgage interest from individuals
and any tax reporting required by Section 6050P of the Code with respect to
the cancellation of indebtedness by certain financial entities, by preparing
such tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Trust Fund unless the Trustee
shall have been supplied with an Opinion of Counsel to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such
two-year period will not result in the imposition of taxes on "prohibited
transactions" of any REMIC hereunder as defined in section 860F of the Code or
cause any REMIC hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding, in which case the Trust Fund may continue to
hold such Mortgaged Property (subject to any conditions contained in such
Opinion of Counsel). Notwithstanding any other provision of this Agreement, no
Mortgaged Property acquired by the Trust Fund shall be rented (or allowed to
continue to be rented) or otherwise used for the production of income by or on
behalf of the Trust Fund in such a manner or pursuant to any terms that would
(i) cause such Mortgaged Property to fail to qualify as "foreclosure property"
within the meaning of section 860G(a)(8) of the Code or (ii) subject any REMIC
hereunder to the imposition of any federal, state or local income taxes on the
income earned from such Mortgaged Property under Section 860G(c) of the Code
or otherwise, unless the Master Servicer has agreed to indemnify and hold
harmless the Trust Fund with respect to the imposition of any such taxes.
In the event of a default on a Mortgage Loan one or more of whose
obligor is not a United States Person, as that term is defined in Section
7701(a)(30) of the Code, in connection with any foreclosure or acquisition of
a deed in lieu of foreclosure (together, "foreclosure") in respect of such
Mortgage Loan, the Master Servicer will cause compliance with the provisions
of Treasury Regulation Section 1.1445-2(d)(3) (or any successor thereto)
necessary to assure that no withholding tax obligation arises with respect to
the proceeds of such foreclosure except to the extent, if any, that proceeds
of such foreclosure are required to be remitted to the obligors on such
Mortgage Loan.
The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of
bringing such a proceeding. The income earned from the management of any REO
Properties, net of reimbursement to the Master Servicer for expenses incurred
(including any property or other taxes) in connection with such management and
net of unreimbursed Master Servicing Fees, Advances and Servicing Advances,
shall be applied to the payment of principal of and interest on the related
defaulted Mortgage Loans (with interest accruing as though such Mortgage Loans
were still current) and all such income shall be deemed, for all purposes in
this Agreement, to be payments on account of principal and interest on the
related Mortgage Notes and shall be deposited into the Certificate Account. To
the extent the net income received during any calendar month is in excess of
the amount attributable to amortizing principal and accrued interest at the
related Mortgage Rate on the related Mortgage Loan for such calendar month,
such excess shall be considered to be a partial prepayment of principal of the
related Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Master Servicer for any related unreimbursed
Servicing Advances and Master Servicing Fees; second, to reimburse the Master
Servicer for any unreimbursed Advances; third, to reimburse the Certificate
Account for any Nonrecoverable Advances (or portions thereof) that were
previously withdrawn by the Master Servicer pursuant to Section 3.08(a)(iii)
that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to
the extent no Advance has been made for such amount or any such Advance has
been reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted
Net Mortgage Rate to the Due Date occurring in the month in which such amounts
are required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated
Mortgage Loan will be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.14.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Trust Fund any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Certificate Account and the Trustee, upon receipt of a certificate from the
Master Servicer in the form of Exhibit N hereto, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared
by the purchaser of such Mortgage Loan, in each case without recourse, as
shall be necessary to vest in the purchaser of such Mortgage Loan any Mortgage
Loan released pursuant hereto and the purchaser of such Mortgage Loan shall
succeed to all the Trustee's right, title and interest in and to such Mortgage
Loan and all security and documents related thereto. Such assignment shall be
an assignment outright and not for security. The purchaser of such Mortgage
Loan shall thereupon own such Mortgage Loan, and all security and documents,
free of any further obligation to the Trustee or the Certificateholders with
respect thereto.
SECTION 3.12. Trustee to Cooperate; Release of Mortgage Files.
-----------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the
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 delivering, or causing to be delivered a "Request for
Release" substantially in the form of Exhibit N. Upon receipt of such request,
the Trustee shall promptly release the related Mortgage File to the Master
Servicer, and the Trustee shall at the Master Servicer's direction execute and
deliver to the Master Servicer the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such instrument
releasing the lien of the Mortgage in each case provided by the Master
Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance, any fidelity bond or errors or omissions
policy, or for the purposes of effecting a partial release of any Mortgaged
Property from the lien of the Mortgage or the making of any corrections to the
Mortgage Note or the Mortgage or any of the other documents included in the
Mortgage File, the Trustee shall, upon delivery to the Trustee of a Request
for Release in the form of Exhibit M signed by a Servicing Officer, release
the Mortgage File to the Master Servicer. Subject to the further limitations
set forth below, the Master Servicer shall cause the Mortgage File or
documents so released to be returned to the Trustee when the need therefor by
the Master Servicer no longer exists, unless the Mortgage Loan is liquidated
and the proceeds thereof are deposited in the Certificate Account, in which
case the Master Servicer shall deliver to the Trustee a Request for Release in
the form of Exhibit N, signed by a Servicing Officer.
If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this
Agreement, the Master Servicer shall deliver or cause to be delivered to the
Trustee, for signature, as appropriate, any court pleadings, requests for
trustee's sale or other documents necessary to effectuate such foreclosure or
any legal action brought to obtain judgment against the Mortgagor on the
Mortgage Note or the Mortgage or to obtain a deficiency judgment or to enforce
any other remedies or rights provided by the Mortgage Note or the Mortgage or
otherwise available at law or in equity.
SECTION 3.13. Documents Records and Funds in Possession of Master
---------------------------------------------------
Servicer to be Held for the Trustee.
-----------------------------------
Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or which otherwise
are collected by the Master Servicer as Liquidation Proceeds or Insurance
Proceeds in respect of any Mortgage Loan. All Mortgage Files and funds
collected or held by, or under the control of, the Master Servicer in respect
of any Mortgage Loans, whether from the collection of principal and interest
payments or from Liquidation Proceeds, including but not limited to, any funds
on deposit in the Certificate Account, shall be held by the Master Servicer
for and on behalf of the Trustee and shall be and remain the sole and
exclusive property of the Trustee, subject to the applicable provisions of
this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Certificate Account, Distribution Account or any Escrow Account, or any funds
that otherwise are or may become due or payable to the Trustee for the benefit
of the Certificateholders, to any claim, lien, security interest, judgment,
levy, writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that
the Master Servicer shall be entitled to set off against and deduct from any
such funds any amounts that are properly due and payable to the Master
Servicer under this Agreement.
SECTION 3.14. Servicing Compensation.
----------------------
As compensation for its activities hereunder, the Master Servicer
shall be entitled to retain or withdraw from the Certificate Account an amount
equal to the Master Servicing Fee for each Mortgage Loan, provided that the
aggregate Master Servicing Fee with respect to any Distribution Date shall be
reduced (i) by an amount equal to the aggregate of the Prepayment Interest
Shortfalls, if any, with respect to such Distribution Date, but not below an
amount equal to one-half of the aggregate Master Servicing Fee for such
Distribution Date before reduction thereof in respect of such Prepayment
Interest Shortfalls, and (ii) with respect to the first Distribution Date, an
amount equal to any amount to be deposited into the Distribution Account by
the Depositor pursuant to Section 2.01(a) and not so deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late
payment charges and all income and gain net of any losses realized from
Permitted Investments shall be retained by the Master Servicer to the extent
not required to be deposited in the Certificate Account pursuant to Section
3.05 hereof. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder
(including payment of any premiums for hazard insurance and any Primary
Insurance Policy and maintenance of the other forms of insurance coverage
required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.
SECTION 3.15. Access to Certain Documentation.
-------------------------------
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Subordinated
Certificates and the examiners and supervisory agents of the OTS, the FDIC and
such other authorities, access to the documentation regarding the Mortgage
Loans required by applicable regulations of the OTS and the FDIC. Such access
shall be afforded without charge, but only upon reasonable and prior written
request and during normal business hours at the offices designated by the
Master Servicer. Nothing in this Section shall limit the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Master Servicer to
provide access as provided in this Section as a result of such obligation
shall not constitute a breach of this Section.
SECTION 3.16. Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustee
on or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 1999 fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of the performance of the Master
Servicer under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Master Servicer has fulfilled all its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and
the nature and status thereof. The Trustee shall forward a copy of each such
statement to each Rating Agency.
SECTION 3.17. Annual Independent Public Accountants' Servicing
------------------------------------------------
Statement; Financial Statements.
-------------------------------
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 1999 fiscal year, the Master Servicer at its expense
shall cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute
of Certified Public Accountants to furnish a statement to the Trustee and the
Depositor to the effect that such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans under this Agreement
or of mortgage loans under pooling and servicing agreements substantially
similar to this Agreement (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby) and that,
on the basis of such examination, conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FNMA and FHLMC, such servicing has been
conducted in compliance with such pooling and servicing agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FNMA and FHLMC requires it to report. In
rendering such statement, such firm may rely, as to matters relating to direct
servicing of mortgage loans by Subservicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FNMA and FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer. Copies
of such statement shall be provided by the Trustee to any Certificateholder
upon request at the Master Servicer's expense, provided such statement is
delivered by the Master Servicer to the Trustee.
SECTION 3.18. Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations
as Master Servicer hereunder and (b) a fidelity bond in respect of its
officers, employees and agents. Each such policy or policies and bond shall,
together, comply with the requirements from time to time of FNMA or FHLMC for
persons performing servicing for mortgage loans purchased by FNMA or FHLMC. In
the event that any such policy or bond ceases to be in effect, the Master
Servicer shall obtain a comparable replacement policy or bond from an insurer
or issuer, meeting the requirements set forth above as of the date of such
replacement.
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances.
--------
The Master Servicer shall determine on or before each Master
Servicer Advance Date whether it is required to make an Advance pursuant to
the definition thereof. If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date,
either (i) deposit into the Certificate Account an amount equal to the Advance
or (ii) make an appropriate entry in its records relating to the Certificate
Account that any related Amount Held for Future Distribution has been used by
the Master Servicer in discharge of its obligation to make any such Advance.
Any funds so applied shall be replaced by the Master Servicer by deposit in
the Certificate Account no later than the close of business on the next Master
Servicer Advance Date. The Master Servicer shall be entitled to be reimbursed
from the Certificate Account for all Advances of its own funds made pursuant
to this Section as provided in Section 3.08. The obligation to make Advances
with respect to any Mortgage Loan shall continue if such Mortgage Loan has
been foreclosed or otherwise terminated and the related Mortgaged Property has
not been liquidated.
The Master Servicer shall deliver to the Trustee on the related
Master Servicer Advance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Advance determined by the Master
Servicer to be a Nonrecoverable Advance.
SECTION 4.02. Priorities of Distribution.
--------------------------
(a) With respect to the Available Funds for each Certificate Group,
on each Distribution Date, the Trustee shall withdraw such Available Funds
from the Distribution Account and apply such funds to distributions on
specified Classes of Certificates in such Certificate Group, in the following
order and priority and, in each case, to the extent of such Available Funds
remaining:
(i) [Reserved];
(ii) to each interest-bearing Class of Senior Certificates in
the related Certificate Group, an amount allocable to interest equal
to the related Class Optimal Interest Distribution Amount, any
shortfall being allocated pro rata among such Classes in proportion
to the amount of the Class Optimal Interest Distribution Amount that
would have been distributed in the absence of such shortfall;
(iii) [Reserved]
(iv) to each Class of Senior Certificates in such Certificate
Group, concurrently as follows:
(x) to the related Class PO Component, an amount allocable
to principal equal to the applicable PO Formula Principal
Amount, up to the outstanding Component Balance of the
applicable Component of the Class PO Certificates; and
(y) on each Distribution Date prior to the related Senior
Credit Support Depletion Date, to the other Classes of Senior
Certificates in such Certificate Group, the applicable Non-PO
Formula Principal Amount, up to the amount of the related
Senior Principal Distribution Amount for each Certificate
Group, to the related Senior Certificates of such Certificate
Group:
(I) with respect to Certificate Group 1, to the following Classes of
Senior Certificates, concurrently, as follows:
(i) 7.8740704109% to the Class I-A-4 Certificates until the
Class Certificate Balance thereof is reduced to zero, and (ii)
92.1259295891% in the following order of priority:
(a) to the Class I-A-5 Certificates, the Group 1 Priority
Amount, until the Class Certificate Balance thereof is reduced
to zero;
(b) concurrently,
(1) 28.2080520668% to the Class I-A-1 Certificates,
until the Class Certificate Balance thereof is reduced to
zero,
(2) 47.4711561735% to the Class I-A-12 Certificates,
until the Class Certificate Balance thereof is reduced to
zero,
(3) 8.7209208509%, sequentially, to the Class I-A-10
and Class I-A-11 Certificates, in that order, until the
respective Class Certificate Balances thereof are reduced
to zero, and
(4) 15.5998709087%, sequentially, to the Class I-A-8
and Class I-A-9 Certificates, in that order, until the
respective Class Certificate Balances thereof are reduced
to zero;
(c) sequentially, to the Class I-A-2 and Class I-A-3
Certificates, in that order, until the respective Class
Certificate Balances thereof are reduced to zero;
(d) concurrently to the Class I-A-6 Certificates and Class
I-A-7 Certificates, pro rata, based on the respective Class
Certificate Balances thereof until the Class Certificate
Balances thereof are reduced to zero; and
(e) to the Class I-A-5 Certificates, until the Class
Certificate Balance thereof is reduced to zero;
(II) with respect to Certificate Group 2, to the following Classes
of Senior Certificates in the following order of priority:
(i) to the Class II-A-5 Certificates, the Group 2 Priority
Amount, until the Class Certificate Balance thereof is reduced to
zero;
(ii) concurrently, (a) 13.1579097105% sequentially to the Class
A-R and Class II-A-4 Certificates, in that order until the
respective Class Certificate Balances thereof are reduced to zero
and (b) 86.8420902895% in the following order of priority:
(1) concurrently,
(A) 12.5389595818%, sequentially, to the Class
II-A-6 Certificates and the Class II-A-7-1 Component,
in that order, until the Class Certificate Balance
and Component Balance thereof are reduced to zero,
(B) 76.1721120041% to the Class II-A-1
Certificates, until the Class Certificate Balance
thereof is reduced to zero, and
(C) 11.2889284141%, sequentially, to the Class
II-A-8 and Class II-A-9 Certificates, in that order,
until the respective Class Certificate Balances
thereof are reduced to zero;
(2) concurrently, 91.6420729548% to the Class II-A-2
Certificates until the Class Certificate Balance thereof is
reduced to zero and 8.3579270452% to the Class II-A-7-2
Component until the Component Balance thereof is reduced to
zero; and
(3) to the Class II-A-3 Certificates, until the Class
Certificate Balance thereof is reduced to zero.
(iii) to the Class II-A-5 Certificates, until the Class
Certificate Balance thereof is reduced to zero.
(v) to each of the Class PO Components, any Class PO Deferred
Amount for such Certificate Group, up to an amount not to exceed the
amount calculated pursuant to clause (A) of the definition of the
Subordinated Principal Distribution Amount for the related
Certificate Group actually received or advanced for such
Distribution Date (with such amount to be allocated first from
amounts calculated pursuant to (A)(i) and (ii) then from (iii) of
the definition of Subordinated Principal Distribution Amount);
(vi) to each Class of Subordinated Certificates in the
respective Certificate Groups, subject to paragraph (e) below, in
the following order of priority:
(A) to the Class M Certificates in the related
Certificate Group, an amount allocable to interest equal
to the Class Optimal Interest Distribution Amount for such
Class for such Distribution Date;
(B) to the Class M Certificates in the related
Certificate Group, an amount allocable to principal equal
to its Pro Rata Share for such Distribution Date until the
Class Certificate Balance thereof is reduced to zero;
(C) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-1", an
amount allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Class for such
Distribution Date;
(D) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-1", an
amount allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(E) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-2", an
amount allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Class for such
Distribution Date;
(F) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-2", an
amount allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(G) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-3", an
amount allocable to interest equal to the amount of the
Class Optimal Interest Distribution Amount for such Class
for such Distribution Date;
(H) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-3", an
amount allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(I) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-4", an
amount allocable to interest equal to the amount of the
Class Optimal Interest Distribution Amount for such Class
for such Distribution Date;
(J) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-4", an
amount allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class Certificate
Balance thereof has been reduced to zero;
(K) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-5", an
amount allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Class for such
Distribution Date; and
(L) to the Class of Subordinated Certificates in the
related Certificate Group with a designation of "B-5", an
amount allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class Certificate
Balance thereof is reduced to zero.
(vii) notwithstanding the foregoing:
(A) If such Certificate Group is a Transferor Group,
the Current Transfer Payment shall not be distributable to
the Lowest Class in such Transferor Group but shall
instead be distributed to the Lowest Class in the
applicable Transferee Group.
(B) If such Certificate Group is a Transferee Group,
the Current Transfer Payment from the Transferor Group
shall be distributed as principal of the last Class of
Certificates then outstanding; provided, however, that
distributions in respect of principal of any Class of
Certificates shall not exceed the Class Certificate
Balance thereof immediately prior to such Distribution
Date.
(C) amounts of interest and/or principal otherwise
payable to the then outstanding Lowest Class in a
Transferor Group will be allocated on a pro rata basis
between such Lowest Class and the related Transfer Balance
based upon the related Class Certificate Balance of such
Lowest Class and the outstanding balance of the Transfer
Balance immediately prior to such Distribution Date; and
(D) amounts of interest and/or principal allocated to
a Transfer Balance for a Certificate Group pursuant to
(vii)(A) above will be paid to the last Class or Classes
in the related Transferee Group as additional interest
and/or principal (with amounts distributed as interest to
be paid to the last Classes in a Transferee Group on a
weighted average basis); and
(viii) to the Class A-R Certificates, in respect to the MR
Interest, any remaining funds in the Master REMIC and in respect of
the SR Interest, any remaining funds in the Subsidiary REMIC.
On any Distribution Date, amounts distributed in respect of Class PO Deferred
Amounts will not reduce the Component Balance of the related Class PO
Component.
On any Distribution Date, to the extent the Amount Available for
Senior Principal for a Certificate Group is insufficient to make the full
distribution required to be made pursuant to clause (iv)(x) above, (A) the
amount distributable on the Class PO Component in such Certificate Group in
respect of principal shall be equal to the product of (1) the Amount Available
for Senior Principal for such Certificate Group and (2) a fraction, the
numerator of which is the PO Formula Principal Amount for such Certificate
Group and the denominator of which is the sum of the PO Formula Principal
Amount and the Senior Principal Distribution Amount for such Certificate Group
and (B) the amount distributable on the Senior Certificates in such
Certificate Group, other than the related Class PO Component, in respect of
principal shall be equal to the product of (1) the Amount Available for Senior
Principal for such Certificate Group and (2) a fraction, the numerator of
which is the Senior Principal Distribution Amount for such Certificate Group
and the denominator of which is the sum of the Senior Principal Distribution
Amount and the PO Formula Principal Amount for such Certificate Group.
(b) [Reserved]
(c) On each Distribution Date on or after the Senior Credit Support
Depletion Date for a Certificate Group, notwithstanding the allocation and
priority set forth in Section 4.02(a)(iv)(y), the portion of Available Funds
available to be distributed to the Senior Certificates for such Certificate
Group specified in such Section (other than the applicable Class PO Component)
will be distributed among such Classes in such Certificate Group, pro rata, on
the basis of their respective Class Certificate Balances (prior to making any
distributions on such Distribution Date) and until the Class Certificate
Balances thereof are reduced to zero.
(d) On each Distribution Date, the amount referred to in clause (i)
of the definition of Class Optimal Interest Distribution Amount for such
Distribution Date for each applicable Class of Certificates and Transfer
Balance shall be reduced by (i) the related Class' and Transfer Balance's pro
rata share (based on the applicable Class Optimal Interest Distribution Amount
for each before reduction pursuant to this Section 4.02(d) of Net Prepayment
Interest Shortfalls for the related Loan Group, and (ii) the related Class'
and Transfer Balance's Allocable Share of (A) after the Special Hazard
Coverage Termination Date, with respect to each Mortgage Loan in the related
Loan Group that became a Special Hazard Mortgage Loan during the calendar
month preceding the month of such Distribution Date, the excess of one month's
interest at the related Adjusted Net Mortgage Rate on the Stated Principal
Balance of such Mortgage Loan as of the Due Date in such month over the amount
of Liquidation Proceeds applied as interest on such Mortgage Loan with respect
to such month, (B) after the applicable Bankruptcy Coverage Termination Date,
with respect to each applicable Mortgage Loan in the related Loan Group that
became subject to a Bankruptcy Loss during the calendar month preceding the
month of such Distribution Date, the interest portion of the related Debt
Service Reduction or Deficient Valuation, (C) each Relief Act Reduction for
the related Loan Group incurred during the calendar month preceding the month
of such Distribution Date and (D) after the applicable Fraud Loss Coverage
Termination Date, with respect to each Mortgage Loan in the related Loan Group
that became a Fraud Loan during the calendar month preceding the month of such
Distribution Date the excess of one month's interest at the related Adjusted
Net Mortgage Rate on the Stated Principal Balance of such Mortgage Loan as of
the Due Date in such month over the amount of Liquidation Proceeds applied as
interest on such Mortgage Loan with respect to such month.
(e) Notwithstanding the priority and allocation contained in Section
4.02(a), if, with respect to any Class of Subordinated Certificates, on any
Distribution Date the sum of the related Class Subordination Percentages of
such Class and of all Classes of Subordinated Certificates in the related
Certificate Group which have a higher numerical Class designation than such
Class (the "Applicable Credit Support Percentage") is less than the Original
------------------------------------
Applicable Credit Support Percentage for such Class, no distribution of
Principal Prepayments will be made to any such Classes and related Transfer
Balance, if any (the "Restricted Classes") and the amount of such Principal
------------------
Prepayments otherwise distributable to the Restricted Classes shall be
distributed to the Classes of Subordinated Certificates in the related
Certificate Group having lower numerical Class designations than such Class,
pro rata, based on their respective Class Certificate Balances immediately
prior to such Distribution Date and shall be distributed in the sequential
order set forth in Section 4.02(a)(vi).
(f) On each Distribution Date, Available Funds shall be applied to
distributions on the Subsidiary REMIC Regular Interests, in each case in an
amount sufficient to make the distributions on the respective Corresponding
Classes of Certificates on such Distribution Date in accordance with the
provisions of Section 4.02(a).
SECTION 4.03. [Reserved]
SECTION 4.04. Allocation of Realized Losses.
-----------------------------
(a) On or prior to each Determination Date, the Trustee shall
determine the total amount of Realized Losses, including Excess Losses, with
respect to the related Distribution Date. For purposes of allocating losses to
the Subordinated Certificates, the Class M Certificates will be deemed to have
a lower numerical class designation, and to be of a higher relative payment
priority, than each other Class of related Subordinated Certificates.
Realized Losses on the Mortgage Loans in a Loan Group with respect
to any Distribution Date shall be allocated as follows:
(i) the applicable PO Percentage of any Realized Loss, including any
Excess Loss, shall be allocated to the Class PO Component of the related
Certificate Group until the Component Balance thereof is reduced to zero;
and
(ii) (A) the applicable Non-PO Percentage of any Realized Loss
(other than a Special Hazard Loss or an Excess Loss) shall be allocated
first, to Subordinated Certificates of such Certificate Group in reverse
order of their respective numerical Class designations (beginning with
the Class of Subordinated Certificates then outstanding with the highest
numerical Class designation), until the respective Class Certificate
Balance of each such Class is reduced to zero, and second, to the Senior
Certificates of such Certificate Group (other than the Class PO Component
and the applicable Class X Certificate), pro rata, on the basis of their
respective Class Certificate Balances or, in the case of any Accrual
Certificates, on the basis of the lesser of their Class Certificate
Balance and their initial Class Certificate Balance, in each case
immediately prior to the related Distribution Date until the respective
Class Certificate Balance of each such Class is reduced to zero;
(B) the applicable Non-PO Percentage of any Special Hazard
Loss (other than a Special Hazard Loss which is an Excess Loss)
shall be allocated first, to the Lowest Class outstanding,
regardless of Certificate Group (if there is more than one Class
which is the Lowest Class, such Special Hazard Loss, other than an
Excess Loss, will be allocated to such Classes concurrently on a pro
rata basis) in each case until the Class Certificate Balances
thereof are reduced to zero, second, to the Senior Certificates of
such Certificate Group (other than the related Class PO Component
and Class X Certificate), pro rata, on the basis of their respective
Class Certificate Balances in each case immediately prior to the
related Distribution Date until the Class Certificate Balances
thereof have been reduced to zero.
(C) the applicable Non-PO Percentage of any Excess Losses
shall be allocated to the Certificates and Transfer Balance, if any,
then outstanding in the related Certificate Group, pro rata, on the
basis of their respective Class Certificate Balances (or, in the
case of any Accrual Certificates, on the basis of the lesser of the
Class Certificate Balance and the initial Class Certificate Balance
thereof) and related Transfer Balance, as applicable, immediately
prior to the related Distribution Date.
(b) Prior to the occurrence of a Special Hazard Loss in any Loan
Group, if the sum of (i) the amount of any payments on the Class PO Component
in the related Certificate Group in respect of Class PO Deferred Amounts and
(ii) the amount, if any, by which the aggregate of the Class Certificate
Balances of all outstanding Classes of Certificates in such Certificate Group
(after giving effect to the distribution of principal and the allocation of
Realized Losses and Class PO Deferred Amounts on such Distribution Date)
exceeds the aggregate of the Stated Principal Balances of the Mortgage Loans
in the related Loan Group for the following Distribution Date, the Class
Certificate Balance of the Class of Subordinated Certificates then outstanding
in the related Certificate Group with the highest numerical Class designation
will be reduced by the amount of such excess. On and after the occurrence of a
Special Hazard Loss in a Loan Group, if the sum of (i) the aggregate of the
Class Certificate Balances of all outstanding Classes of Certificates in both
Certificate Groups and (ii) the aggregate of all Transfer Balances outstanding
(in each case after giving effect to the distribution of principal and the
allocation of Realized Losses on such Distribution Date) exceeds the aggregate
of the Stated Principal Balances of the Mortgage Loans in both Loan Groups for
the following Distribution Date, the Class Certificate Balance of the Lowest
Class outstanding (and any related Transfer Balance), regardless of
Certificate Group will be reduced by the amount of such excess (if there is
more than one Class which is the Lowest Class, such excess will be allocated
to such Classes concurrently on a pro rata basis).
(c) Any Realized Loss allocated to a Class of Certificates or any
reduction in the Class Certificate Balance of a Class of Certificates pursuant
to Section 4.04(a) shall be allocated among the Certificates of such Class and
any related Transfer Balance in proportion to their respective Certificate
Balances and Transfer Balance.
(d) Any allocation of Realized Losses to a Certificate, to any
Component or to any Transfer Balance or any reduction in the Certificate
Balance of a Certificate or of a Transfer Balance pursuant to Section 4.04(a)
shall be accomplished by reducing the Certificate Balance, Component Balance
or Transfer Balance thereof, as applicable, immediately following the
distributions made on the related Distribution Date in accordance with the
definition of "Certificate Balance," "Component Balance" or "Transfer
Balance," as the case may be. Realized Losses allocated to the Class II-A-7
Certificates will be allocated pro rata among the Components thereof based on
their respective Component Balances.
SECTION 4.05. [Reserved].
SECTION 4.06. Monthly Statements to Certificateholders.
----------------------------------------
(a) Not later than each Distribution Date, the Trustee shall prepare
and cause to be forwarded by first class mail to each Certificateholder, the
Master Servicer, the Depositor and each Rating Agency a statement setting
forth with respect to the related distribution for each Certificate Group:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest, any Class Unpaid
Interest Shortfall included in such distribution and any remaining Class
Unpaid Interest Shortfall after giving effect to such distribution;
(iii) if the distribution to the Holders of such Class of
Certificates is less than the full amount that would be distributable to
such Holders if there were sufficient funds available therefor, the
amount of the shortfall and the allocation thereof as between principal
and interest;
(iv) the Class Certificate Balance of each Class of Certificates and
any Transfer Balance after giving effect to the distribution of principal
on such Distribution Date;
(v) the Pool Stated Principal Balance for the following Distribution
Date, the aggregate of the Stated Principal Balances of the Mortgage
Loans in Loan Group 1 and the aggregate of the Stated Principal Balances
of the Mortgage Loans in Loan Group 2;
(vi) the Senior Percentage and Subordinated Percentage for each
Certificate Group for the following Distribution Date;
(vii) the amount of the Master Servicing Fees paid to or retained by
the Master Servicer with respect to such Distribution Date and related
Loan Group;
(viii) the Pass-Through Rate for each such Class of Certificates
with respect to such Distribution Date;
(ix) the amount of Advances included in the distribution on such
Distribution Date and the aggregate amount of Advances outstanding as of
the close of business on such Distribution Date;
(x) the number and aggregate principal amounts of Mortgage Loans by
Loan Group (A) delinquent (exclusive of Mortgage Loans in foreclosure)
(1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more
days and (B) in foreclosure and delinquent (1) 1 to 30 days (2) 31 to 60
days (3) 61 to 90 days and (4) 91 or more days, as of the close of
business on the last day of the calendar month preceding such
Distribution Date;
(xi) with respect to any Mortgage Loan in each Loan Group that
became an REO Property during the preceding calendar month, the loan
number and Stated Principal Balance of such Mortgage Loan as of the close
of business on the Determination Date preceding such Distribution Date
and the date of acquisition thereof;
(xii) the total number and principal balance of any REO Properties
in each Loan Group (and market value, if available) as of the close of
business on the Determination Date preceding such Distribution Date;
(xiii) the Senior Prepayment Percentage for each Certificate Group
for the following Distribution Date;
(xiv) the aggregate amount of Realized Losses for each Certificate
Group incurred during the preceding calendar month and aggregate Realized
Losses through such Distribution Date; and
(xv) the Special Hazard Loss Coverage Amount, the related Fraud Loss
Coverage Amount and the related Bankruptcy Loss Coverage Amount, in each
case as of the related Determination Date; and
(xvi) with respect to the second Distribution Date, the number and
aggregate balance of any Delay Delivery Mortgage Loans in each Loan Group
not delivered within thirty days after the Closing Date.
(b) The Trustee's responsibility for disbursing the above
information to the Certificateholders is limited to the availability,
timeliness and accuracy of the information provided by the Master Servicer.
(c) On or before the fifth Business Day following the end of each
Prepayment Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to the
Trustee (which delivery may be by electronic data transmission) a report in
substantially the form set forth as Schedule V hereto.
(d) Within a reasonable period of time after the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at
any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i), (a)(ii) and (a)(vii)
of this Section 4.06 aggregated for such calendar year or applicable portion
thereof during which such Person was a Certificateholder. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee pursuant
to any requirements of the Code as from time to time in effect.
SECTION 4.07. Determination of Pass-Through Rates for COFI
--------------------------------------------
Certificates.
------------
The Pass-Through Rate for each Class of COFI Certificates for each
Interest Accrual Period after the initial Interest Accrual Period shall be
determined by the Trustee as provided below on the basis of the Index and the
applicable formulae appearing in footnotes corresponding to the COFI
Certificates in the table relating to the Certificates in the Preliminary
Statement.
Except as provided below, with respect to each Interest Accrual
Period following the initial Interest Accrual Period, the Trustee shall not
later than two Business Days following the publication of the applicable Index
determine the Pass-Through Rate at which interest shall accrue in respect of
the COFI Certificates during the related Interest Accrual Period.
Except as provided below, the Index to be used in determining the
respective Pass-Through Rates for the COFI Certificates for a particular
Interest Accrual Period shall be COFI for the second calendar month preceding
such Interest Accrual Period. If at the Outside Reference Date for any
Interest Accrual Period, COFI for the second calendar month preceding such
Interest Accrual Period has not been published, the Trustee shall use COFI for
the third calendar month preceding such Interest Accrual Period. If COFI for
neither the second nor third calendar months preceding any Interest Accrual
Period has been published on or before the related Outside Reference Date, the
Index for such Interest Accrual Period and for all subsequent Interest Accrual
Periods shall be the National Cost of Funds Index for the third calendar month
preceding such Interest Accrual Period (or the fourth preceding calendar month
if such National Cost of Funds Index for the third preceding calendar month
has not been published by such Outside Reference Date). In the event that the
National Cost of Funds Index for neither the third nor fourth calendar months
preceding an Interest Accrual Period has been published on or before the
related Outside Reference Date, then for such Interest Accrual Period and for
each succeeding Interest Accrual Period, the Index shall be LIBOR, determined
in the manner set forth below.
On each Interest Determination Date so long as the COFI Certificates
are outstanding and the applicable Index therefor is LIBOR, the Trustee shall
either (i) request each Reference Bank 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 Interest Determination Date or (ii) in lieu of
making any such request, rely on such Reference Bank quotations 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.
With respect to any Interest Accrual Period for which the applicable
Index is LIBOR, LIBOR for such Interest Accrual Period will be established by
the Trustee on the related Interest Determination Date as follows:
(a) If on any Interest 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
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
(b) If on any Interest 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 Interest 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 Trustee are quoting, on the relevant Interest
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 the Trustee are
quoting on such Interest Determination Date to leading European banks.
From such time as the applicable Index becomes LIBOR until all of
the COFI Certificates are paid in full, the Trustee will at all times retain
at least four Reference Banks for the purposes of determining LIBOR with
respect to each interest Determination Date. The Master Servicer initially
shall designate the Reference Banks. Each "Reference Bank" shall be a leading
bank engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, shall not control, be controlled by, or be under common
control with, the Trustee and shall 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 Master Servicer should terminate its appointment as Reference
Bank, the Trustee shall promptly appoint or cause to be appointed another
Reference Bank. The Trustee shall have no liability or responsibility to any
Person for (i) the selection of any Reference Bank for purposes of determining
LIBOR or (ii) any inability to retain at least four Reference Banks which is
caused by circumstances beyond its reasonable control.
In determining LIBOR and any Pass-Through Rate for the COFI
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely
and shall be protected in relying upon the offered quotations (whether
written, oral or on the Reuters Screen) from the Reference Banks or the New
York City banks as to LIBOR or the Reserve Interest Rate, as appropriate, in
effect from time to time. The Trustee shall not have any liability or
responsibility to any Person for (i) the Trustee's selection of New York City
banks for purposes of determining any Reserve Interest Rate or (ii) its
inability, following a good-faith reasonable effort, to obtain such quotations
from the Reference Banks or the New York City banks or to determine such
arithmetic mean, all as provided for in this Section 4.07.
The establishment of LIBOR and each Pass-Through Rate for the COFI
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.
SECTION 4.08. Determination of Pass-Through Rates for LIBOR
---------------------------------------------
Certificates.
------------
(A) On each Interest Determination Date so long as the LIBOR
Certificates are outstanding, the Trustee will determine LIBOR on the basis of
the British Bankers' Association ("BBA") "Interest Settlement Rate" for
one-month deposits in U.S. dollars as found on Telerate page 3750 as of 11:00
a.m. London time on each LIBOR Determination Date. Interest Settlement Rates
currently are based on rates quoted by sixteen BBA designated banks as being,
in the view of such banks, the offered rate at which deposits are being quoted
to prime banks in the London interbank market. Such Interest Settlement Rates
are calculated by eliminating the four highest rates and the four lowest
rates, averaging the eight remaining rates, carrying the result (expressed as
a percentage) out to six decimal places, and rounding to five decimal places.
"Telerate Page 3750" means the display page currently so designated on the
Bridge Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices.)
If on the initial LIBOR Determination Date, the Trustee is required
but unable to determine LIBOR in the manner provided in the described above,
LIBOR for the next Interest Accrual Period will be 5.65234%.
(B) If LIBOR cannot be determined as provided in paragraph (A) of
this Section 4.08, the Trustee shall either (i) request each Reference Bank 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 Interest
Determination Date or (ii) in lieu of making any such request, rely on such
Reference Bank quotations 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. LIBOR for the next Interest Accrual Period will be
established by the Trustee on each interest Determination Date as follows:
(a) If on any interest 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
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
(b) If on any Interest 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 Interest 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 Trustee are quoting, on the relevant Interest
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 the Trustee are
quoting on such Interest Determination Date to leading European banks.
(c) If on any interest 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 as determined on
the preceding Interest Determination Date, or, in the case of the first
Interest Determination Date, 5.65625%.
Until all of the LIBOR Certificates are paid in full, the Trustee
will at all times retain at least four Reference Banks for the purpose of
determining LIBOR with respect to each Interest Determination Date. The Master
Servicer initially shall designate the Reference Banks. Each "Reference Bank"
shall be a leading bank engaged in transactions in Eurodollar deposits in the
international Eurocurrency market, shall not control, be controlled by, or be
under common control with, the Trustee and shall 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 Master Servicer should terminate its appointment as
Reference Bank, the Trustee shall promptly appoint or cause to be appointed
another Reference Bank. The Trustee shall have no liability or responsibility
to any Person for (i) the selection of any Reference Bank for purposes of
determining LIBOR or (ii) any inability to retain at least four Reference
Banks which is caused by circumstances beyond its reasonable control.
(C) The Pass-Through Rate for each Class of LIBOR Certificates for
each Interest Accrual Period shall be determined by the Trustee on each
Interest Determination Date so long as the LIBOR Certificates are outstanding
on the basis of LIBOR and the respective formulae appearing in footnotes
corresponding to the LIBOR Certificates in the table relating to the
Certificates in the Preliminary Statement.
In determining LIBOR, any Pass-Through Rate for the LIBOR
Certificates, any Interest Settlement Rate, or any Reserve Interest Rate, the
Trustee may conclusively rely and shall be protected in relying upon the
offered quotations (whether written, oral or on the Dow Jones Markets) from
the BBA designated banks, the Reference Banks or the New York City banks as to
LIBOR, the Interest Settlement Rate or the Reserve Interest Rate, as
appropriate, in effect from time to time. The Trustee shall not have any
liability or responsibility to any Person for (i) the Trustee's selection of
New York City banks for purposes of determining any Reserve Interest Rate or
(ii) its inability, following a good-faith reasonable effort, to obtain such
quotations from, the BBA designated banks, the Reference Banks or the New York
City banks or to determine such arithmetic mean, all as provided for in this
Section 4.0.8.
The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
----------------
The Certificates shall be substantially in the forms attached hereto
as exhibits. The Certificates shall be issuable in registered form, in the
minimum denominations, integral multiples in excess thereof (except that one
Certificate in each Class may be issued in a different amount which must be in
excess of the applicable minimum denomination) and aggregate denominations per
Class set forth in the Preliminary Statement.
Subject to Section 9.02 hereof respecting the final distribution on
the Certificates, on each Distribution Date the Trustee shall make
distributions to each Certificateholder of record on the preceding Record Date
either (x) by wire transfer in immediately available funds to the account of
such holder at a bank or other entity having appropriate facilities therefor,
if (i) such Holder has so notified the Trustee at least five Business Days
prior to the related Record Date and (ii) such Holder shall hold (A) a
Notional Amount Certificate, (B) 100% of the Class Certificate Balance of any
Class of Certificates or (C) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 or (y) by check mailed by
first class mail to such Certificateholder at the address of such holder
appearing in the Certificate Register.
The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall
bind the Trustee, notwithstanding that such individuals or any of them have
ceased to be so authorized prior to the countersignature and delivery of such
Certificates or did not hold such offices at the date of such Certificate. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless countersigned by the Trustee by manual signature, 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 shall be dated the date of their countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be
issued at the direction of the Depositor, or any affiliate thereof.
The Depositor shall provide, or cause to be provided, to the Trustee
on a continuous basis, an adequate inventory of Certificates to facilitate
transfers.
SECTION 5.02. Certificate Register; Registration of Transfer and
--------------------------------------------------
Exchange of Certificates.
------------------------
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.06 hereof, a Certificate Register
for the Trust Fund in which, subject to the provisions of subsections (b) and
(c) below and 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. Upon surrender for registration
of transfer of any Certificate, the Trustee shall execute and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of the same Class and aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same Class in authorized denominations and
evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee. Whenever
any Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate, and deliver the Certificates which the Certificateholder making
the exchange is entitled to receive. Every Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Trustee duly
executed by the holder thereof or his attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but 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 may be required.
All Certificates surrendered for registration of transfer or
exchange shall be cancelled and subsequently destroyed by the Trustee in
accordance with the Trustee's customary procedures.
(b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws. In
the event that a transfer is to be made in reliance upon an exemption from the
Securities Act and such laws, in order to assure compliance with the
Securities Act and such laws, the Certificateholder desiring to effect such
transfer and such Certificateholder's prospective transferee shall each
certify to the Trustee in writing the facts surrounding the transfer in
substantially the forms set forth in Exhibit J (the "Transferor Certificate")
and (i) deliver a letter in substantially the form of either Exhibit K (the
"Investment Letter") or Exhibit L (the "Rule 144A Letter") or (ii) there shall
be delivered to the Trustee at the expense of the transferor an Opinion of
Counsel that such transfer may be made pursuant to an exemption from the
Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. The Trustee and the Master
Servicer shall cooperate with the Depositor in providing the Rule 144A
information referenced in the preceding sentence, including providing to the
Depositor such information regarding the Certificates, the Mortgage Loans and
other matters regarding the Trust Fund as the Depositor shall reasonably
request to meet its obligation under the preceding sentence. Each Holder of a
Private Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee and the Depositor, the Seller and the Master
Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.
No transfer of an ERISA-Restricted Certificate shall be made unless
the Trustee shall have received either (i) a representation from the
transferee of such Certificate acceptable to and in form and substance
satisfactory to the Trustee (in the event such Certificate is a Class PO or
Class X-2 Certificate, a Private Certificate or a Residual Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit K or Exhibit
L), to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject
to Section 4975 of the Code, nor a person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect
such transfer, (ii) if the purchaser is an insurance company, a representation
that the purchaser is an insurance company which is purchasing such
Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60 or (iii) in the case of any such
ERISA-Restricted Certificate presented for registration in the name of an
employee benefit plan subject to ERISA, or a plan or arrangement subject to
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on
behalf of any such plan or arrangement, or using such plan's or arrangement's
assets, an Opinion of Counsel satisfactory to the Trustee, which Opinion of
Counsel shall not be an expense of either the Trustee or the Trust Fund,
addressed to the Trustee to the effect that the purchase or holding of such
ERISA-Restricted Certificate will not result in the assets of the Trust Fund
being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee to any
obligation in addition to those expressly undertaken in this Agreement or to
any liability. For purposes of the preceding sentence, with respect to an
ERISA-Restricted Certificate that is not Class PO or Class X-2 Certificates, a
Private Certificate or a Residual Certificate, in the event the representation
letter referred to in the preceding sentence is not so furnished, such
representation shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. Notwithstanding anything else to the contrary
herein, any purported transfer of an ERISA-Restricted Certificate to or on
behalf of an employee benefit plan subject to ERISA or to the Code without the
delivery to the Trustee of an Opinion of Counsel satisfactory to the Trustee
as described above shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in
fact not permitted by this Section 5.02(b) or for making any payments due on
such Certificate to the Holder thereof or taking any other action with respect
to such Holder under the provisions of this Agreement so long as the transfer
was registered by the Trustee in accordance with the foregoing requirements.
(c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee.
(ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and the Trustee
shall not register the Transfer of any Residual Certificate unless, in
addition to the certificates required to be delivered to the Trustee
under subparagraph (b) above, the Trustee shall have been furnished with
an affidavit (a "Transfer Affidavit") of the initial owner or the
------------------
proposed transferee in the form attached hereto as Exhibit I.
(iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer Affidavit from
any other Person to whom such Person attempts to Transfer its Ownership
Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit
from any Person for whom such Person is acting as nominee, trustee or
agent in connection with any Transfer of a Residual Certificate and (C)
not to Transfer its Ownership Interest in a Residual Certificate or to
cause the Transfer of an Ownership Interest in a Residual Certificate to
any other Person if it has actual knowledge that such Person is not a
Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest
in a Residual Certificate in violation of the provisions of this Section
5.02(c) shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported transferee shall become a Holder
of a Residual Certificate in violation of the provisions of this Section
5.02(c), then the last preceding Permitted Transferee shall be restored
to all rights as Holder thereof retroactive to the date of registration
of Transfer of such Residual Certificate. The Trustee shall be under no
liability to any Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by Section 5.02(b) and this
Section 5.02(c) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder
under the provisions of this Agreement so long as the Transfer was
registered after receipt of the related Transfer Affidavit, Transferor
Certificate and either the Rule 144A Letter or the Investment Letter. The
Trustee shall be entitled but not obligated to recover from any Holder of
a Residual Certificate that was in fact not a Permitted Transferee at the
time it became a Holder or, at such subsequent time as it became other
than a Permitted Transferee, all payments made on such Residual
Certificate at and after either such time. Any such payments so recovered
by the Trustee shall be paid and delivered by the Trustee to the last
preceding Permitted Transferee of such Certificate.
(v) The Depositor shall use its best efforts to make available, upon
receipt of written request from the Trustee, all information necessary to
compute any tax imposed under Section 860E(e) of the Code as a result of
a Transfer of an Ownership Interest in a Residual Certificate to any
Holder who is not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which
Opinion of Counsel shall not be an expense of the Trust Fund, the Trustee, the
Seller or the Master Servicer, to the effect that the elimination of such
restrictions will not cause any REMIC hereunder to fail to qualify as a REMIC
at any time that the Certificates are outstanding or result in the imposition
of any tax on the Trust Fund, a Certificateholder or another Person. Each
Person holding or acquiring any Ownership Interest in a Residual Certificate
hereby consents to any amendment of this Agreement which, based on an Opinion
of Counsel furnished to the Trustee, is reasonably necessary (a) to ensure
that the record ownership of, or any beneficial interest in, a Residual
Certificate is not transferred, directly or indirectly, to a Person that is
not a Permitted Transferee and (b) to provide for a means to compel the
Transfer of a Residual Certificate which is held by a Person that is not a
Permitted Transferee to a Holder that is a Permitted Transferee.
(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 in connection with transfer shall be at
the expense of the parties to such transfers.
(e) Except as provided below, the Book-Entry Certificates shall at
all times remain registered in the name of the Depository or its nominee and
at all times: (i) registration of the Certificates may not be transferred by
the Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the
Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository, Depository Participants and indirect participating
firms as representatives of the Certificate Owners of the Book-Entry
Certificates for purposes of exercising the rights of holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants
with respect to indirect participating firms and persons shown on the books of
such indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall
be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. 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.
If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option
advises the Trustee in writing that it elects to terminate the book-entry
system through the Depository or (z) after the occurrence of an Event of
Default, Certificate Owners representing at least 51% of the Certificate
Balance of the Book-Entry Certificates together advise the Trustee and the
Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such
event and of the availability of definitive, fully-registered Certificates
(the "Definitive Certificates") to Certificate Owners requesting the same.
Upon surrender to the Trustee of the related Class of Certificates by the
Depository, accompanied by the instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Master Servicer, the Depositor nor the Trustee shall be liable for any delay
in delivery of such instruction and each may conclusively rely on, and shall
be protected in relying on, such instructions. The Master Servicer shall
provide the Trustee with an adequate inventory of certificates to facilitate
the issuance and transfer of Definitive Certificates. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or
to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder; provided that the
Trustee shall not by virtue of its assumption of such obligations become
liable to any party for any act or failure to act of the Depository.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Master Servicer and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with 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 replacement Certificate
issued pursuant to this Section 5.03 shall constitute complete and
indefeasible evidence of ownership, 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.
---------------------
The Master Servicer, the Trustee and any agent of the Master
Servicer 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 as provided in this Agreement and for all other purposes
whatsoever, and neither the Master Servicer, the Trustee nor any agent of the
Master Servicer or the Trustee shall be affected by any notice to the
contrary.
SECTION 5.05. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses.
---------
If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from
the Trustee, then the Trustee shall, within ten Business Days after the
receipt of such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The
Depositor and every Certificateholder, by receiving and holding a Certificate,
agree that the Trustee shall not be held accountable by reason of the
disclosure of any such information as to the list of the Certificateholders
hereunder, regardless of the source from which such information was derived.
SECTION 5.06. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at its expense
an office or offices or agency or agencies in New York City where Certificates
may be surrendered for registration of transfer or exchange. The Trustee
initially designates its Corporate Trust Office for such purposes. The Trustee
will give prompt written notice to the Certificateholders of any change in
such location of any such office or agency.
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the Depositor and the Master
------------------------------------------------------
Servicer.
--------
The Depositor and the Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by them herein.
SECTION 6.02. Merger or Consolidation of the Depositor or the Master
------------------------------------------------------
Servicer.
--------
The Depositor and the Master Servicer will each keep in full effect
its existence, rights and franchises as a corporation under the laws of the
United States or under the laws of one of the states thereof and will each
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, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party,
or any person succeeding to the business of the Depositor or the Master
Servicer, shall be the successor of the Depositor or the Master Servicer, as
the case may be, hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided, however, that the successor or
surviving Person to the Master Servicer shall be qualified to sell mortgage
loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.
SECTION 6.03. Limitation on Liability of the Depositor, the Seller,
-----------------------------------------------------
the Master Servicer and Others.
------------------------------
None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Seller, the Master
Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability which would otherwise be
imposed by reasons of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Depositor, the Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the
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. The Depositor, the Seller, the Master Servicer and any director,
officer, employee or agent of the Depositor, the Seller or the Master Servicer
shall be indemnified by the Trust Fund and held harmless against any loss,
liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. None of the Depositor, the Seller or the
Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its respective duties
hereunder and which in its opinion may involve it in any expense or liability;
provided, however, that any of the Depositor, the Seller or the Master
- -------- -------
Servicer may in its discretion undertake any such action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties
of the parties hereto and interests of the Trustee and 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 the Depositor, the Seller and the Master Servicer shall be
entitled to be reimbursed therefor out of the Certificate Account.
SECTION 6.04. Limitation on Resignation of Master Servicer.
--------------------------------------------
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer and
receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, without regard to the guaranty provided by the
Policies, or (b) upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a successor master
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities and obligations hereunder.
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events:
(i) any failure by the Master Servicer to deposit in the
Certificate Account or remit to the Trustee any payment required to
be made under the terms of this Agreement, which failure shall
continue unremedied for five days after the date upon which written
notice of such failure shall have been given to the Master Servicer
by the Trustee or the Depositor or to the Master Servicer and the
Trustee by the Holders of Certificates having not less than 25% of
the Voting Rights evidenced by the Certificates; or
(ii) any failure by the Master Servicer to observe or perform
in any material respect any other of the covenants or agreements on
the part of the Master Servicer contained in this Agreement, which
failure materially affects the rights of Certificateholders, that
failure continues unremedied for a period of 60 days after the date
on which written notice of such failure shall have been given to the
Master Servicer by the Trustee or the Depositor, or to the Master
Servicer and the Trustee by the Holders of Certificates evidencing
not less than 25% of the Voting Rights evidenced by the
Certificates; provided, however, that the sixty-day cure period
shall not apply to the initial delivery of the Mortgage File for
Delay Delivery Mortgage Loans nor the failure to substitute or
repurchase in lieu thereof; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of
a receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been
entered against the Master Servicer and such decree or order shall
have remained in force undischarged or unstayed for a period of 60
consecutive days; or
(iv) the Master Servicer shall consent to the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or all or substantially all of the
property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations.
If an Event of Default described in clauses (i) to (vi) of this
Section shall occur, then, and in each and every such case, so long as such
Event of Default shall not have been remedied, the Trustee may, or at the
direction of the Holders of Certificates evidencing not less than 66 2/3% of
the Voting Rights evidenced by the Certificates, the Trustee shall by notice
in writing to the Master Servicer (with a copy to each Rating Agency),
terminate all of the rights and obligations of the Master Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, other
than its rights as a Certificateholder hereunder. On and after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer hereunder, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee. The Trustee shall
thereupon make any Advance which the Master Servicer failed to make subject to
Section 3.04 hereof. The Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the 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. Unless expressly provided in such written notice, no such
termination shall affect any obligation of the Master Servicer to pay amounts
owed pursuant to Article VIII. The Master Servicer agrees to cooperate with
the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be
credited to the Certificate Account, or thereafter be received with respect to
the Mortgage Loans.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of
any late collection of a Scheduled Payment on a Mortgage Loan which was due
prior to the notice terminating such Master Servicer's rights and obligations
as Master Servicer hereunder and received after such notice, that portion
thereof to which such Master Servicer would have been entitled pursuant to
Sections 3.08(a)(i) through (viii), and any other amounts payable to such
Master Servicer hereunder the entitlement to which arose prior to the
termination of its activities hereunder.
SECTION 7.02. Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall, subject to and
to the extent provided in Section 3.04, be the successor to the Master
Servicer in its capacity as master servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof and applicable law including the
obligation to make Advances pursuant to Section 4.01. As compensation
therefor, the Trustee shall be entitled to all funds relating to the Mortgage
Loans that the Master Servicer would have been entitled to charge to the
Certificate Account or Distribution Account if the Master Servicer had
continued to act hereunder. Notwithstanding the foregoing, if the Trustee has
become the successor to the Master Servicer in accordance with Section 7.01
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it
is prohibited by applicable law from making Advances pursuant to Section 4.01
hereof or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution the appointment of which does not adversely affect the then
current rating of the Certificates by each Rating Agency as the successor to
the Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder. Any
successor to the Master Servicer shall be an institution which is a FNMA and
FHLMC approved seller/servicer in good standing, which has a net worth of at
least $15,000,000, and which is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustee an agreement accepting
such delegation and assignment, which contains an assumption by such Person of
the rights, powers, duties, responsibilities, obligations and liabilities of
the Master Servicer (other than liabilities of the Master Servicer under
Section 6.03 hereof incurred prior to termination of the Master Servicer under
Section 7.01), with like effect as if originally named as a party to this
Agreement; and provided further that each Rating Agency acknowledges that its
rating of the Certificates in effect immediately prior to such assignment and
delegation will not be qualified or reduced, without regard to the guaranty
provided by the Policies, as a result of such assignment and delegation.
Pending appointment of a successor to the Master Servicer hereunder, the
Trustee, unless the Trustee is prohibited by law from so acting, shall,
subject to Section 3.04 hereof, 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
Mortgage Loans as it and such successor shall agree; provided, however, that
-------- -------
no such compensation shall be in excess of the Master Servicing Fee permitted
the Master Servicer hereunder. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate
any such succession. Neither the Trustee nor any other successor master
servicer shall be deemed to be in default hereunder by reason of any failure
to make, or any delay in making, any distribution hereunder or any portion
thereof or any failure to perform, or any delay in performing, any duties or
responsibilities hereunder, in either case caused by the failure of the Master
Servicer to deliver or provide, or any delay in delivering or providing, any
cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the term
of its service as master servicer maintain in force the policy or policies
that the Master Servicer is required to maintain pursuant to Section 6.05.
SECTION 7.03. Notification to Certificateholders.
----------------------------------
(a) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has occurred and remains
uncured, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee that are specifically required to be furnished
pursuant to any provision of this Agreement 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
such resolution, certificate, statement, opinion, report, document, order or
other instrument.
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) unless an Event of Default known to the Trustee shall have
occurred and be continuing, 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 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 which it believed in good faith to be
genuine and to have been duly executed by the proper authorities
respecting any matters arising hereunder;
(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 finally proven that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates evidencing
not less than 25% of the Voting Rights of Certificates relating to
the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties and the Trustee shall have no
responsibility to ascertain or confirm the genuineness of any
signature of any such party or parties;
(ii) the Trustee may consult with counsel, financial advisers
or accountants and the advice of any such counsel, financial
advisers or accountants and any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken
or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(iii) the Trustee shall 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;
(iv) 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 so to do by Holders of Certificates evidencing not less
than 25% of the Voting Rights allocated to each Class of
Certificates;
(v) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, accountants or attorneys;
(vi) the Trustee shall not be required to risk or expend its
own funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not assured to it;
(vii) the Trustee shall not be liable for any loss on any
investment of funds pursuant to this Agreement (other than as issuer
of the investment security);
(viii) the Trustee shall not be deemed to have knowledge of an
Event of Default until a Responsible Officer of the Trustee shall
have received written notice thereof; and
(ix) the Trustee shall be under no obligation to exercise any
of the trusts, rights or powers vested in it by this Agreement or to
institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which may be incurred therein or
thereby.
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
-----------------------------------------------------
The recitals contained herein and in the Certificates shall be taken
as the statements of the Depositor or the Seller, as the case may be, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates or of any Mortgage Loan or related document other than with
respect to the Trustee's execution and counter-signature of the Certificates.
The Trustee shall not be accountable for the use or application by the
Depositor or the Master Servicer of any funds paid to the Depositor or the
Master Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Certificate Account by the Depositor or the Master Servicer.
SECTION 8.04. Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 8.05. Trustee's Fees and Expenses.
---------------------------
The Trustee, as compensation for its activities hereunder, shall be
entitled to withdraw from the Distribution Account on each Distribution Date
an amount equal to the Trustee Fee for such Distribution Date. The Trustee and
any director, officer, employee or agent of the Trustee shall be indemnified
by the Master Servicer and held harmless against any loss, liability or
expense (including reasonable attorney's fees) (i) incurred in connection with
any claim or legal action relating to (a) this Agreement, (b) the Certificates
or (c) in connection with the performance of any of the Trustee's duties
hereunder, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of any of the
Trustee's duties hereunder or incurred by reason of any action of the Trustee
taken at the direction of the Certificateholders and (ii) resulting from any
error in any tax or information return prepared by the Master Servicer. Such
indemnity shall survive the termination of this Agreement or the resignation
or removal of the Trustee hereunder. Without limiting the foregoing, the
Master Servicer covenants and agrees, except as otherwise agreed upon in
writing by the Depositor and the Trustee, and except for any such expense,
disbursement or advance as may arise from the Trustee's negligence, bad faith
or willful misconduct, to pay or reimburse the Trustee, for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Agreement with respect to: (A)
the reasonable compensation and the expenses and disbursements of its counsel
not associated with the closing of the issuance of the Certificates, (B) the
reasonable compensation, expenses and disbursements of any accountant,
engineer or appraiser that is not regularly employed by the Trustee, to the
extent that the Trustee must engage such persons to perform acts or services
hereunder and (C) printing and engraving expenses in connection with preparing
any Definitive Certificates. Except as otherwise provided herein, the Trustee
shall not be entitled to payment or reimbursement for any routine ongoing
expenses incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses.
SECTION 8.06. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the
United States of America, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by federal or state authority and with
a credit rating which would not cause either of the Rating Agencies to reduce
their respective then current ratings of the Certificates (or having provided
such security from time to time as is sufficient to avoid such reduction). If
such corporation or association 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 8.06 the
combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified
in Section 8.07 hereof. The entity serving as Trustee may have normal banking
and trust relationships with the Depositor and its affiliates or the Master
Servicer and its affiliates; provided, however, that such entity cannot be an
-------- -------
affiliate of the Master Servicer other than the Trustee in its role as
successor to the Master Servicer.
SECTION 8.07. Resignation and Removal of Trustee.
----------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor and
the Master Servicer and each Rating Agency not less than 60 days before the
date specified in such notice when, subject to Section 8.08, such resignation
is to take effect, and acceptance by a successor trustee in accordance with
Section 8.08 meeting the qualifications set forth in Section 8.06. If no
successor trustee meeting such qualifications shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice or
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request thereto by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged as 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, or a
tax is imposed with respect to the Trust Fund by any state in which the
Trustee or the Trust Fund is located and the imposition of such tax would be
avoided by the appointment of a different trustee, then the Depositor or the
Master Servicer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, one copy of which instrument shall be
delivered to the Trustee, one copy of which shall be delivered to the Master
Servicer and one copy to the successor trustee.
The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one
complete set to the Trustee so removed and one complete set to the successor
so appointed. Notice of any removal of the Trustee shall be given to each
Rating Agency by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08. Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee and the Master Servicer an instrument accepting such appointment
hereunder and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with the like effect as
if originally named as trustee herein. The Depositor, the Master Servicer and
the predecessor trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers,
duties, and obligations.
No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.06 hereof and its
appointment shall not adversely affect the then current rating of the
Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to
mail such notice within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed
at the expense of the Depositor.
SECTION 8.09. Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to the business of the Trustee, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 8.06 hereof 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 8.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Fund, and to vest in such Person or Persons, in such capacity and
for the benefit of the Certificateholders, such title to the Trust Fund or any
part thereof, whichever is applicable, and, subject to the other provisions of
this Section 8.10, such powers, duties, obligations, rights and trusts as the
Master Servicer and the Trustee may consider necessary or desirable. If the
Master Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request to do so, or in the case an Event of Default
shall have occurred and be continuing, the Trustee alone shall have the power
to make such appointment. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
8.06 and no notice to Certificateholders of the appointment of any co-trustee
or separate trustee shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
(i) To the extent necessary to effectuate the purposes of this
Section 8.10, all rights, powers, duties and obligations conferred
or imposed upon the Trustee, except for the obligation of the
Trustee under this Agreement to advance funds on behalf of the
Master Servicer, shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the 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 applicable
Trust Fund or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder and
such appointment shall not, and shall not be deemed to, constitute
any such separate trustee or co-trustee as agent of the Trustee;
(iii) The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee; and
(iv) The Master Servicer, and not the Trustee, shall be liable
for the payment of reasonable compensation, reimbursement and
indemnification to any such separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees,
when and as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VIII. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Master Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Tax Matters.
-----------
It is intended that the assets with respect to which any REMIC
election is to be made, as set forth in the Preliminary Statement, shall
constitute, and that the conduct of matters relating to such assets shall be
such as to qualify such assets as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. In furtherance of
such intention, the Trustee covenants and agrees that it shall act as agent
(and the Trustee is hereby appointed to act as agent) on behalf of any such
REMIC and that in such capacity it shall: (a) prepare and file, or cause to be
prepared and filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form 1066 or any successor form adopted by the
Internal Revenue Service) and prepare and file or cause to be prepared and
filed with the Internal Revenue Service and applicable state or local tax
authorities income tax or information returns for each taxable year with
respect to any such REMIC, containing such information and at the times and in
the manner as may be required by the Code or state or local tax laws,
regulations, or rules, and furnish or cause to be furnished to
Certificateholders the schedules, statements or information at such times and
in such manner as may be required thereby; (b) within thirty days of the
Closing Date, furnish or cause to be furnished to the Internal Revenue
Service, on Forms 8811 or as otherwise may be required by the Code, the name,
title, address, and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code; (c) make
or cause to be made elections that such assets be treated as a REMIC on the
federal tax return for its first taxable year (and, if necessary, under
applicable state law); (d) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders and to the Internal Revenue Service and,
if necessary, state tax authorities, all information returns and reports as
and when required to be provided to them in accordance with the REMIC
Provisions, including without limitation, the calculation of any original
issue discount using the Prepayment Assumption; (e) provide information
necessary for the computation of tax imposed on the transfer of a Residual
Certificate to a Person that is not a Permitted Transferee, or an agent
(including a broker, nominee or other middleman) of a Non-Permitted
Transferee, or a pass-through entity in which a Non-Permitted Transferee is
the record holder of an interest (the reasonable cost of computing and
furnishing such information may be charged to the Person liable for such tax);
(f) to the extent that they are under its control conduct matters relating to
such assets at all times that any Certificates are outstanding so as to
maintain the status as a REMIC under the REMIC Provisions; (g) not knowingly
or intentionally take any action or omit to take any action that would cause
the termination of the REMIC status; (h) pay, from the sources specified in
the last paragraph of this Section 8.11, the amount of any federal or state
tax, including prohibited transaction taxes as described below, imposed on any
such REMIC prior to its termination when and as the same shall be due and
payable (but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Trustee from withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings); (i) ensure that
federal, state or local income tax or information returns shall be signed by
the Trustee or such other person as may be required to sign such returns by
the Code or state or local laws, regulations or rules; (j) maintain records
relating to any such REMIC, including but not limited to the income, expenses,
assets and liabilities thereof and the fair market value and adjusted basis of
the assets determined at such intervals as may be required by the Code, as may
be necessary to prepare the foregoing returns, schedules, statements or
information; and (k) as and when necessary and appropriate, represent any such
REMIC in any administrative or judicial proceedings relating to an examination
or audit by any governmental taxing authority, request an administrative
adjustment as to any taxable year of any such REMIC, enter into settlement
agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of any such REMIC, and otherwise act on
behalf of any such REMIC in relation to any tax matter or controversy
involving it.
In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within ten (10) days after the Closing Date all information or data that the
Trustee requests in writing and determines to be relevant for tax purposes to
the valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows
of the Certificates and the Mortgage Loans. Thereafter, the Depositor shall
provide to the Trustee promptly upon written request therefor, any such
additional information or data that the Trustee may, from time to time,
reasonably request in order to enable the Trustee to perform its duties as set
forth herein. The Depositor hereby indemnifies the Trustee for any losses,
liabilities, damages, claims or expenses of the Trustee arising from any
errors or miscalculations of the Trustee that result from any failure of the
Depositor to provide, or to cause to be provided, accurate information or data
to the Trustee on a timely basis.
In the event that any tax is imposed on "prohibited transactions" of
the REMIC as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the REMIC as defined in Section 860G(c) of the
Code, on any contribution to the REMIC after the Startup Day pursuant to
Section 860G(d) of the Code, or any other tax is imposed, including, without
limitation, any minimum tax imposed upon the REMIC pursuant to Sections 23153
and 24874 of the California Revenue and Taxation Code, if not paid as
otherwise provided for herein, such tax shall be paid by (i) the Trustee, if
any such other tax arises out of or results from a breach by the Trustee of
any of its obligations under this Agreement, (ii) the Master Servicer, in the
case of any such minimum tax, or if such tax arises out of or results from a
breach by the Master Servicer or Seller of any of their obligations under this
Agreement, (iii) the Seller, if any such tax arises out of or results from the
Seller's obligation to repurchase a Mortgage Loan pursuant to Section 2.02 or
2.03 or (iv) in all other cases, or in the event that the Trustee, the Master
Servicer or the Seller fails to honor its obligations under the preceding
clauses (i),(ii) or (iii), any such tax will be paid with amounts otherwise to
be distributed to the Certificateholders, as provided in Section 3.08(b).
SECTION 8.12. Periodic Filings.
----------------
Pursuant to written instructions from the Depositor, the Trustee
shall prepare, execute and file all periodic reports required under the
Securities Exchange Act of 1934 in conformity with the terms of the relief
granted to the Depositor in CWMBS, Inc. (February 3, 1994), a copy of which
has been supplied to the Trustee by the Issuer. In connection with the
preparation and filing of such periodic reports, the Depositor and the Master
Servicer shall timely provide to the Trustee all material information
available to them which is required to be included in such reports and not
known to them to be in the possession of the Trustee and such other
information as the Trustee reasonably may request from either of them and
otherwise reasonably shall cooperate with the Trustee. The Trustee shall have
no liability with respect to any failure to properly prepare or file such
periodic reports resulting from or relating to the Trustee's inability or
failure to obtain any information not resulting from its own negligence or
willful misconduct.
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Purchase of all
-----------------------------------------------
Mortgage Loans.
--------------
Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
related Loan Group at the price equal to the sum of (i) 100% of the Stated
Principal Balance of each Mortgage Loan in such Loan Group (other than in
respect of REO Property) plus one month's accrued interest thereon at the
applicable Adjusted Mortgage Rate and (ii) the lesser of (x) the appraised
value of any REO Property in such Loan Group as determined by the higher of
two appraisals completed by two independent appraisers selected by the Master
Servicer at the expense of the Master Servicer and (y) the Stated Principal
Balance of each Mortgage Loan in such Loan Group related to any REO Property,
in each case plus accrued and unpaid interest thereon at the applicable
Adjusted Mortgage Rate and (b) the later of (i) the maturity or other
liquidation (or any Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all REO Property and (ii)
the distribution to Certificateholders of all amounts required to be
distributed to them pursuant to this Agreement. In no event shall the trusts
created hereby continue beyond the earlier of (i) the expiration of 21 years
from the death of the survivor of the descendants of Joseph P. Kennedy, the
late Ambassador of the United States to the Court of St. James's, living on
the date hereof and (ii) the Latest Possible Maturity Date. The right to
repurchase all Mortgage Loans and REO Properties in a Loan Group pursuant to
clause (a) above shall be conditioned upon the aggregate Stated Principal
Balance of the Mortgage Loans in such Loan Group, at the time of any such
repurchase, aggregating less than ten percent of the aggregate Cut-off Date
Principal Balance of the Mortgage Loans in such Loan Group.
SECTION 9.02. Final Distribution on the Certificates.
--------------------------------------
If on any Determination Date, the Master Servicer determines that
there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Certificate Account, the Master
Servicer shall direct the Trustee promptly to send a final distribution notice
to each Certificateholder. If the Master Servicer elects to terminate the
Trust Fund pursuant to clause (a) of Section 9.01, at least 20 days prior to
the date notice is to be mailed to the affected Certificateholders, the Master
Servicer shall notify the Depositor and the Trustee of the date the Master
Servicer intends to terminate the Trust Fund and of the applicable repurchase
price of the Mortgage Loans and REO Properties.
Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given
promptly by the Trustee by letter to Certificateholders mailed not earlier
than the 15th day and no later than the 10th day of the month next preceding
the month of such final distribution. Any such notice shall specify (a) the
Distribution Date upon which final distribution on the Certificates will be
made upon presentation and surrender of Certificates at the office therein
designated, (b) the amount of such final distribution, (c) the location of the
office or agency at which such presentation and surrender must be made, and
(d) that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of
the Certificates at the office therein specified. The Master Servicer will
give such notice to each Rating Agency at the time such notice is given to
Certificateholders.
Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Certificateholders of each Class, in the
order set forth in Section 4.02 hereof, on the final Distribution Date, in
proportion to their respective Percentage Interests, with respect to
Certificateholders of the same Class, an amount equal to (i) as to each Class
of Regular Certificates, the Certificate Balance thereof plus (a) accrued
interest thereon (or on their Notional Amount, if applicable) in the case of
an interest bearing Certificate and (b) any Class PO Deferred Amounts in the
case of the Class PO Certificates, (ii) as to each Class of Certificates, any
related Transfer Balance and accrued interest thereon and (iii) as to the
Residual Certificates, the amount, if any, which remains on deposit in the
Distribution Account (other than the amounts retained to meet claims) after
application pursuant to clause (i) above.
In the event that any affected Certificateholders shall not
surrender Certificates for cancellation within six months after the date
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 all the applicable
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets which remain a part of the Trust Fund. If within one year after the
second notice all Certificates shall not have been surrendered for
cancellation, the Class A-R Certificateholders shall be entitled to all
unclaimed funds and other assets of the Trust Fund which remain subject
hereto.
SECTION 9.03. Additional Termination Requirements.
-----------------------------------
(a) In the event the Master Servicer exercises its purchase option
with respect to the Mortgage Loans in a Loan Group as provided in Section 9.01
at such time as the Mortgage Loans in the other Loan Group are no longer part
of the Trust Fund, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect
that the failure to comply with the requirements of this Section 9.03 will not
(i) result in the imposition of taxes on "prohibited transactions" on any
REMIC as defined in section 860F of the Code, or (ii) cause any REMIC to fail
to qualify as a REMIC at any time that any Certificates are outstanding:
(1) Within 90 days prior to the final Distribution Date set
forth in the notice given by the Master Servicer under Section 9.02, the
Master Servicer shall prepare and the Trustee, at the expense of the "tax
matters person," shall adopt a plan of complete liquidation within the
meaning of Section 860F(a)(4) of the Code which, as evidenced by an
Opinion of Counsel (which opinion shall not be an expense of the Trustee,
the Tax Matters Person or the Trust Fund), meets the requirements of a
qualified liquidation; and
(2) Within 90 days after the time of adoption of such a plan of
complete liquidation, the Trustee shall sell all of the assets of the
Trust Fund to the Master Servicer for cash in accordance with Section
9.01.
(b) The Trustee as agent for any REMIC hereby agrees to adopt and
sign such a plan of complete liquidation upon the written request of the
Master Servicer, and the receipt of the Opinion of Counsel referred to in
Section 9.03(a)(1) and to take such other action in connection therewith as
may be reasonably requested by the Master Servicer.
(c) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to prepare and the Trustee to adopt and
sign a plan of complete liquidation.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
---------
This Agreement may be amended from time to time by the Depositor,
the Master Servicer and the Trustee without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to correct any
defective provision herein or to supplement any provision herein which may be
inconsistent with any other provision herein, (iii) to add to the duties of
the Depositor, the Seller or the Master Servicer, (iv) to add any other
provisions with respect to matters or questions arising hereunder or (v) to
modify, alter, amend, add to or rescind any of the terms or provisions
contained in this Agreement; provided that any action pursuant to clauses (iv)
or (v) above shall not, as evidenced by an Opinion of Counsel (which Opinion
of Counsel shall not be an expense of the Trustee or the Trust Fund),
adversely affect in any material respect the interests of any
Certificateholder; provided, however, that the amendment shall not be deemed
-------- -------
to adversely affect in any material respect the interests of the
Certificateholders if the Person requesting the amendment obtains a letter
from each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Depositor and the Master Servicer
also may at any time and from time to time amend this Agreement without the
consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of any REMIC as a REMIC under the Code, (ii) avoid or minimize
the risk of the imposition of any tax on any REMIC pursuant to the Code that
would be a claim at any time prior to the final redemption of the Certificates
or (iii) comply with any other requirements of the Code, provided that the
Trustee has been provided an Opinion of Counsel, which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee or the Trust Fund, to the effect that such action is
necessary or helpful to, as applicable, (i) maintain such qualification, (ii)
avoid or minimize the risk of the imposition of such a tax or (iii) comply
with any such requirements of the Code.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the Holders
of a Majority in Interest of each Class of Certificates affected thereby for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
-------- -------
such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, payments required to be distributed on any Certificate without the
consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates in
a manner other than as described in (i), without the consent of the Holders of
Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating 66% or (iii) reduce the aforesaid percentages of Certificates the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all such Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, which opinion shall not be an
expense of the Trustee or the Trust Fund, to the effect that such amendment
will not cause the imposition of any tax on any REMIC or the
Certificateholders or cause any REMIC to fail to qualify as a REMIC at any
time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject
to such reasonable regulations as the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Trust Fund, satisfactory to the Trustee that
(i) such amendment is permitted and is not prohibited by this Agreement and
that all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material
respect the interests of any Certificateholder or (B) the conclusion set forth
in the immediately preceding clause (A) is not required to be reached pursuant
to this Section 10.01.
SECTION 10.02. Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction by the Trustee accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially
affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one
and the same instrument.
SECTION 10.03. Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Intention of Parties.
--------------------
It is the express intent of the parties hereto that the conveyance
of the Trust Fund by the Depositor to the Trustee be, and be construed as, an
absolute sale thereof to the Trustee. It is, further, not the intention of the
parties that such conveyance be deemed a pledge thereof by the Depositor to
the Trustee. However, in the event that, notwithstanding the intent of the
parties, such assets are held to be the property of the Depositor, or if for
any other reason this Agreement is held or deemed to create a security
interest in such assets, then (i) this Agreement shall be deemed to be a
security agreement within the meaning of the Uniform Commercial Code of the
State of New York and (ii) the conveyance provided for in this Agreement shall
be deemed to be an assignment and a grant by the Depositor to the Trustee, for
the benefit of the Certificateholders, of a security interest in all of the
assets that constitute the Trust Fund, whether now owned or hereafter
acquired.
The Depositor for the benefit of the Certificateholders shall, to
the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement. The Depositor shall
arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned to the Trustee for
the benefit of the Certificateholder.
SECTION 10.05. Notices.
-------
(a) 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 the Master Servicer or the
Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans pursuant to
Section 2.03; and
5. The final payment to Certificateholders.
In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:
1. Each report to Certificateholders described in Section 4.04;
2. Each annual statement as to compliance described in Section 3.16;
3. Each annual independent public accountants' servicing report
described in Section 3.17; and
4. Any notice of a purchase of a Mortgage Loan pursuant to Section
2.02, 2.03 or 3.11.
(b) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in
the case of the Depositor, CWMBS, Inc., 4500 Park Granada, Calabasas,
California 91302, Attention: David A. Spector, (b) in the case of the Master
Servicer, Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas,
California 91302, Attention: Kevin W. Bartlett or such other address as may be
hereafter furnished to the Depositor and the Trustee by the Master Servicer in
writing, (c) in the case of the Trustee, The Bank of New York, 101 Barclay
Street, 12E, New York, New York 10286, Attention: Mortgage-Backed Securities
Group Series 1998-18, or such other address as the Trustee may hereafter
furnish to the Depositor or Master Servicer and (d) in the case of the Rating
Agencies, the address specified therefor in the definition corresponding to
the name of such Rating Agency. Notices to Certificateholders shall be deemed
given when mailed, first class postage prepaid, to their respective addresses
appearing in the Certificate Register.
SECTION 10.06. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.07. Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.
SECTION 10.08. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth or contained in the terms of the Certificates
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be
under any liability to any third party by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of an Event of Default and of the continuance thereof, as
herein provided, and unless the Holders of Certificates evidencing not less
than 25% of the Voting Rights evidenced by the Certificates shall also have
made written request to the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, and the Trustee,
for 60 days after its receipt of such notice, request and offer of indemnity
shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of
this Agreement to affect, disturb or prejudice the rights of the Holders of
any other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder or to enforce any right under this
Agreement, except in the manner herein provided and for the common benefit of
all Certificateholders. For the protection and enforcement of the provisions
of this Section 10.08, each and every Certificateholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
SECTION 10.09. Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours,
to examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by the Depositor or the Trustee and to discuss its
affairs, finances and accounts relating to the Mortgage Loans with its
officers, employees and independent public accountants (and by this provision
the Master Servicer hereby authorizes said accountants to discuss with such
representative such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any out-of-pocket expense
incident to the exercise by the Depositor or the Trustee of any right under
this Section 10.09 shall be borne by the party requesting such inspection; all
other such expenses shall be borne by the Master Servicer or the related
Subservicer.
SECTION 10.10. Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is the intention of the Depositor that Certificateholders shall
not be personally liable for obligations of the Trust Fund, that the interests
in the Trust Fund represented by the Certificates shall be nonassessable for
any reason whatsoever, and that the Certificates, upon due authentication
thereof by the Trustee pursuant to this Agreement, are and shall be deemed
fully paid.
* * * * * *
IN WITNESS WHEREOF, the Depositor, the Trustee, the Seller and the
Master Servicer have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first
above written.
CWMBS, INC.,
as Depositor
By: /s/ Celia Coulter
-------------------------------
Name: Celia Coulter
Title: Vice President
THE BANK OF NEW YORK,
as Trustee
By: /s/ Kelly A. Sheahan
-------------------------------
Name: Kelly A. Sheahan
Title: Assistant Treasurer
COUNTRYWIDE HOME LOANS, INC.,
as Seller and Master Servicer
By: /s/ Susan E. Bow
-------------------------------
Name: Susan E. Bow
Title: Executive Vice President
and Deputy General Counsel
<PAGE>
