<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
DECEMBER 19, 1997
AAMES CAPITAL CORPORATION ON BEHALF OF
AAMES MORTGAGE TRUST 1997-D
---------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CALIFORNIA 333-21219 95-4438859
- ---------------------------- ----------- ----------------
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
350 SOUTH GRAND AVENUE, 52ND FLOOR
LOS ANGELES, CALIFORNIA 90071
- ---------------------------------------- ----------
(Address of principal executive offices) (ZIP Code)
(213) 210-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
NA
-------------------------------------------------------------
(Former name or former address, if changed since last report)
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<PAGE> 2
Item 5. Other Events
Aames Capital Corporation (the "Sponsor") and an affiliate, Aames
Capital Acceptance Corp., registered up to $2,800,000,000 principal amount of
asset-backed certificates and asset-backed bonds under Rule 415 of the
Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-3, including a prospectus (Registration Statement File No.
333-21219) (the "Registration Statement"). Pursuant to the Registration
Statement, the Sponsor filed a Prospectus Supplement dated December 16, 1997,
and a Prospectus, dated December 16, 1997 (collectively, the "Prospectus"),
relating to $600,000,000 aggregate principal amount of Mortgage Pass-Through
Certificates, Series 1997-D (the "Certificates"), issued by Aames Mortgage Trust
1997-D ("Trust") on December 19, 1997 (the "Closing Date"). The Certificates
consist of the Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class A-5F, Class
A-6F, Class M-IF, Class M-2F, Class B-IF, Class A-IA and Class A-2A Certificates
(together, the "Offered Certificates"), Class R Certificates and Class C
Certificates. Only the Offered Certificates were offered by the Prospectus.
The Certificates represent the entire undivided interest in the Trust
created pursuant to the Pooling and Servicing Agreement dated as of December 1,
1997 (the "Pooling and Servicing Agreement") between the Sponsor, in the
capacity of Seller and Servicer, and Bankers Trust Company of California, N.A.,
as trustee (the "Trustee"). On the Closing Date, the corpus of the Trust
consisted primarily of (i) a pool (the "Mortgage Pool") of home equity mortgage
loans (together, the "Initial Mortgage Loans"), (ii) amounts on deposit in a
prefunding account (the "Prefunding Account") and a capitalized interest account
held by the Trustee. On the Closing Date, cash in the amount of $40,010,652.92
(the "Prefunding Account Deposit") was deposited in the Prefunding Account in
the name of the Trustee. The Prefunding Account Deposit was intended to be used
for the purchase of additional home equity mortgage loans satisfying the
criteria specified in the Pooling and Servicing Agreement (the "Subsequent
Mortgage Loans") on or before January 14, 1998. Approximately $6,381,680.00 of
the Prefunding Account Deposit was allocated for the purchase of Subsequent
Mortgage Loans bearing fixed rates of interest to be included in the Fixed Rate
Group, and approximately $33,628,972.92 of the Prefunding Account Deposit was
allocated for the purchase of Subsequent Mortgage Loans bearing adjustable rates
of interest to be included in the Adjustable Rate Group.
On December 19, 1997, the Trustee, on behalf of the Trust, and the
Sponsor entered into a Subsequent Transfer Agreement, dated as of such date (the
"Subsequent Transfer Agreement"). Pursuant to the Subsequent Transfer Agreement,
the Trust purchased $6,381,680.00 aggregate principal balance of Subsequent
Mortgage Loans to be included in the Fixed Rate Group for a purchase price equal
to such balance and $33,628,972.92 aggregate principal balance of Subsequent
Mortgage Loans to be included in the Adjustable Rate Group for a purchase price
equal to such balance.
The description of the Mortgage Pool in the Prospectus contained
information only with respect to the Initial Mortgage Loans as of the date of
the Prospectus. This Current Report on Form 8-K is being filed to update the
description of the Mortgage Pool contained in the Prospectus and to file copies
of certain final agreements executed in connection with the issuance of the
Certificates. Annex A which follows contains a description of the final Mortgage
Pool.
Capitalized terms used but not otherwise defined herein shall have the
same meaning ascribed to them in the Prospectus. The Prospectus has been filed
with the Securities and Exchange Commission pursuant to Rule 424(b)(2) under
file number 333-21219.
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<PAGE> 3
ANNEX A:
DESCRIPTION OF THE MORTGAGE POOL
The following is a brief description of certain terms of the Mortgage
Loans, including the Subsequent Mortgage Loans. Information contained herein is
presented with respect to the Initial Mortgage Loans as of the Cut-off Date (as
defined in the Pooling and Servicing Agreement) and with respect to the
Subsequent Mortgage Loans as of December 1, 1997 ("the Subsequent Cut-off
Date"). The description of the Mortgage Pool below does not reflect any payments
with respect to the Mortgage Loans after the Cut-off Date or the Subsequent
Cut-off Date. The Mortgage Pool consists of 7,761 Mortgage Loans and has an
aggregate principal balance of $605,141,869.75.
FIXED RATED GROUP
The Aggregate Principal Balance of the Mortgage Loans in the Fixed Rate
Group was $220,218,698.80. Approximately 88.03%, 7.38%, 3.69% and 0.90% of the
Mortgaged Properties (by Cut-off Date or Subsequent Cut-off Date Principal
Balance, as applicable), were single family residences, two- to four-family
residences, units in condominium developments, townhouses or modular homes, and
other, respectively, and no more than 0.50% of the Mortgage Loans in the Fixed
Rate Group by applicable Cut-off Date Principal Balance) were secured by
Mortgaged Properties located in any single postal ZIP code.
The original Combined Loan-to-Value Ratio of any Mortgage Loan in the
Fixed Rate Group did not exceed 91.07% and the original weighted average
Combined Loan-to-Value Ratio of all Mortgage Loans in the Fixed Rate Group was
approximately 70.62%. The maximum and average loan sizes of the Mortgage Loans
in the Fixed Rate Group were $439,792.54 and approximately $58,151.23,
respectively. The average appraised value of the Mortgaged Properties securing
Mortgage Loans in the Fixed Rate Group at origination of the related Mortgage
Loans was approximately $108,735.93.
The interest rates borne by the Mortgage Loans (each, a "Mortgage
Interest Rate") in the Fixed Rate Group ranged from 7.00% per annum to 17.93%
per annum. The weighted average Mortgage Interest Rate of the Mortgage Loans in
the Fixed Rate Group was approximately 10.626% per annum.
The weighted average remaining term to stated maturity of the Mortgage
Loans in the Fixed Rate Group was approximately 296 months. The weighted average
original term to maturity of the Mortgage Loans in the Fixed Rate Group was
approximately 297 months. The weighted average seasoning of the Mortgage Loans
in the Fixed Rate Group was approximately one month.
Based on the Aggregate Principal Balance of the Mortgage Loans in the
Fixed Rate Group, 95.87% of the Mortgage Loans provide for the payment of
principal and interest on a level basis to fully amortize such Mortgage Loans
over their respective stated terms. The remaining 4.13% of the Mortgage Loans in
the Fixed Rate Group are Balloon Loans which will provide for regular monthly
payments of principal and interest computed on the basis of an amortization term
of 360 months that is longer than the related term to stated maturity, with a
"balloon payment" due at stated maturity that will be significantly larger than
the monthly payments. The Mortgage Loans in the Fixed Rate Group have original
terms to maturity of up to 30 years.
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<PAGE> 4
ADJUSTABLE RATE GROUP
The Aggregate Principal Balance of the Mortgage Loans in the Adjustable
Rate Group was $384,923,170.95. Approximately 85.48%, 5.80%, 8.52% and 0.20% of
the Mortgaged Properties (by Cut-off Date or Subsequent Cut-off Date Principal
Balance) were single family residences, two- to four-family residences, units in
condominium developments, townhouses or modular homes, and other, respectively,
and no more than 0.50% of the Mortgage Loans in the Adjustable Rate Group (by
applicable Cut-off Date Principal Balance) were secured by Mortgaged Properties
located in any single postal ZIP code.
The original Combined Loan-to-Value Ratio of any Mortgage Loan in the
Adjustable Rate Group did not exceed 93.41% and the original weighted average
Combined Loan-to-Value Ratio of all Mortgage Loans in the Adjustable Rate Group
was approximately 76.69%. The maximum and average loan size of the Mortgage
Loans in the Adjustable Rate Group were $500,000.00 and $96,860.39,
respectively. The average appraised value of the Mortgaged Properties was
$129,676.25.
The Mortgage Loans in the Adjustable Rate Group bear interest rates
that, after a period of approximately six months, one year, two years, three
years or five years after the related date of origination, adjust based on
six-month LIBOR. The Mortgage Loans in the Adjustable Rate Group have
semi-annual interest rate and payment adjustment frequencies after the first
interest rate adjustment date. The weighted average Mortgage Interest Rate of
the Mortgage Loans in the Adjustable Rate Group was approximately 9.848% per
annum. The Mortgage Loans in the Adjustable Rate Group had a weighted average
gross margin of approximately 5.969%. The gross margin for the Mortgage Loans in
the Adjustable Rate Group ranged from 1.625% to 10.875%. For each Mortgage Loan
in the Adjustable Rate Group that has an initial rate adjustment date that is
(i) not more than six months from the date of origination, the related Mortgage
Note provides for a rate cap of 1.00% to 2.00% every six months; and (ii) six
months, one year, two years, three years or five years from the date of
origination, the related Mortgage Note provides for a rate cap as to its first
Adjustment Date of from 1.00% to 7.00% and a rate cap as to each subsequent
Adjustment Date of from 0.50% to 3.0%. The maximum rates at which interest may
accrue on the Mortgage Loans in the Adjustable Rate Group (the "Maximum Rates")
ranged from 11.930% per annum to 23.375% per annum. The Mortgage Loans in the
Adjustable Rate Group have a weighted average Maximum Rate of approximately
16.536% per annum. The minimum rates at which interest may accrue on the
Mortgage Loans in the Adjustable Rate Group (the "Minimum Rates") ranged from
4.930% per annum to 15.740% per annum. The weighted average Minimum Rate was
approximately 9.958% per annum.
Mortgage Loans in the Adjustable Rate Group have original terms to
maturity of up to 30 years. The weighted average remaining term to stated
maturity of the Mortgage Loans in the Adjustable Rate Group was approximately
356 months. The weighted average original term to maturity of the Mortgage Loans
in the Adjustable Rate Group was approximately 357 months. The weighted average
seasoning of the Mortgage Loans in the Adjustable Rate Group was less than one
month.
None of the Mortgage Loans in the Adjustable Rate Group are Balloon
Loans.
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<PAGE> 5
FIXED RATE GROUP
TYPE OF MORTGAGED PROPERTY
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
PROPERTY TYPE MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Single Family Residence 3,375 $ 193,862,403.44 88.03%
Condominium Unit 120 8,134,871.21 3.69
Two- to Four- Family Residence 246 16,247,646.10 7.38
Other 46 1,973,778.05 0.90
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
FIXED RATE GROUP
OCCUPANCY STATUS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
OCCUPANCY STATUS MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Owner Occupied/Primary Residence 3,603 $ 211,177,611.55 95.89%
Non-Owner Occupied/Investment Property 184 9,041,087.25 4.11
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
FIXED RATE GROUP
PRIORITY OF LIEN
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
LIEN PRIORITY MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
First Lien 3,128 $ 200,333,222.64 90.97%
Second Lien 645 19,559,706.79 8.88
Third Lien 14 325,769.37 0.15
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
FIXED RATE GROUP
TYPE OF LOAN BY AMORTIZATION METHOD
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
AMORTIZATION METHOD MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Fully Amortizing 3,654 $ 211,128,815.01 95.87%
Partially Amortizing/Balloon 133 9,089,883.79 4.13
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
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<PAGE> 6
FIXED RATE GROUP
COMBINED LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF COMBINED NUMBER OF PRINCIPAL AGGREGATE
LOAN-TO-VALUE RATIOS MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
5.001- 10.000 11 $ 174,926.44 0.08%
10.001- 15.000 28 663,373.92 0.30
15.001- 20.000 43 1,025,990.21 0.47
20.001- 25.000 63 1,742,360.54 0.79
25.001- 30.000 76 2,352,688.65 1.07
30.001- 35.000 69 2,433,607.01 1.11
35.001- 40.000 104 3,935,518.87 1.79
40.001- 45.000 115 4,731,888.98 2.15
45.001- 50.000 174 7,926,146.85 3.60
50.001- 55.000 171 7,689,493.50 3.49
55.001- 60.000 268 12,595,372.39 5.72
60.001- 65.000 444 21,759,838.57 9.88
65.001- 70.000 470 24,679,595.15 11.21
70.001- 75.000 650 37,350,587.27 16.96
75.001- 80.000 543 40,720,250.95 18.49
80.001- 85.000 216 17,644,617.30 8.01
85.001- 90.000 340 32,587,895.44 14.80
90.001- 95.000 2 204,546.76 0.09
TOTAL 3,787 $220,218,698.80 100.00%
</TABLE>
FIXED RATE GROUP
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF AGGREGATE UNPAID PERCENTAGE OF
ORIGINAL TERMS TO NUMBER OF PRINCIPAL AGGREGATE
MATURITY (MONTHS) MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
60 47 $ 912,121.02 0.41%
61- 72 4 148,117.33 0.07
73- 84 16 387,355.42 0.18
85- 96 5 69,828.12 0.03
109-120 197 5,125,232.64 2.33
121-132 3 81,486.54 0.04
133-144 8 274,635.36 0.12
145-156 1 14,800.00 0.01
169-180 1,464 62,320,326.87 28.30
181-192 24 1,439,315.11 0.65
229-240 70 4,302,803.24 1.95
289-300 9 466,646.36 0.21
313-324 1 83,343.34 0.04
349-360 1,938 144,592,687.45 65.66
TOTAL 3,787 $220,218,698.80 100.00%
</TABLE>
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<PAGE> 7
FIXED RATE GROUP
ORIGINAL TERM TO MATURITY
(BALLOON)
<TABLE>
<CAPTION>
RANGE OF AGGREGATE UNPAID PERCENTAGE OF
ORIGINAL TERMS TO NUMBER OF PRINCIPAL AGGREGATE
MATURITY (MONTHS) MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
180 1 $ 23,867.33 0.26%
193-204 1 25,665.78 0.28
229-240 2 56,873.36 0.63
325-336 1 20,919.81 0.23
349-360 128 8,962,557.51 98.60
TOTAL 133 $9,089,883.79 100.00%
</TABLE>
FIXED RATE GROUP
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF AGGREGATE UNPAID PERCENTAGE OF
REMAINING TERMS TO NUMBER OF PRINCIPAL AGGREGATE
MATURITY (MONTHS) MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
1- 12 4 $ 114,310.65 0.05%
13- 24 4 39,018.07 0.02
25- 36 8 118,778.82 0.05
37- 48 6 161,931.87 0.07
49- 60 51 937,703.86 0.43
61- 72 7 136,647.59 0.06
73- 84 18 376,498.00 0.17
85- 96 4 49,790.01 0.02
97-108 4 84,289.10 0.04
109-120 188 5,255,957.22 2.39
121-132 15 434,281.67 0.20
133-144 12 416,938.20 0.19
145-156 5 112,780.61 0.05
157-168 10 511,908.97 0.23
169-180 1,424 61,447,483.77 27.90
181-192 10 649,765.51 0.30
229-240 69 4,227,937.73 1.92
289-300 9 466,646.36 0.21
313-324 1 83,343.34 0.04
337-348 3 132,847.41 0.06
349-360 1,935 144,459,840.04 65.60
TOTAL 3,787 $220,218,698.80 100.00%
</TABLE>
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<PAGE> 8
FIXED RATE GROUP
MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF MORTGAGE NUMBER OF PRINCIPAL AGGREGATE
INTEREST RATES MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
6.501- 7.000 1 $ 80,000.00 0.04%
7.001- 7.500 4 411,548.13 0.19
7.501- 8.000 27 2,534,872.45 1.15
8.001- 8.500 132 10,854,654.57 4.93
8.501- 9.000 179 16,785,923.99 7.62
9.001- 9.500 359 23,919,192.26 10.86
9.501-10.000 403 33,950,359.09 15.42
10.001-10.500 501 27,669,995.78 12.56
10.501-11.000 588 33,770,390.03 15.33
11.001-11.500 376 18,648,529.42 8.47
11.501-12.000 329 15,299,647.61 6.95
12.001-12.500 289 12,976,383.64 5.89
12.501-13.000 221 9,205,597.84 4.18
13.001-13.500 142 5,331,200.80 2.42
13.501-14.000 106 3,861,654.25 1.75
14.001-14.500 45 1,630,555.40 0.74
14.501-15.000 41 1,683,468.18 0.76
15.001-15.500 29 1,050,896.38 0.48
15.501-16.000 9 344,076.96 0.16
16.001-16.500 4 137,006.67 0.06
16.501-17.000 1 51,345.35 0.02
17.501-18.000 1 21,400.00 0.01
TOTAL 3,787 $220,218,698.80 100.00%
</TABLE>
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<PAGE> 9
FIXED RATE GROUP
PRINCIPAL BALANCE
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF NUMBER OF PRINCIPAL AGGREGATE
PRINCIPAL BALANCE MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
0.01- 5,000.00 2 $ 7,148.46 0.00%
5,000.01- 10,000.00 51 463,646.96 0.21
10,000.01- 15,000.00 184 2,392,458.27 1.09
15,000.01- 20,000.00 264 4,764,969.81 2.16
20,000.01- 25,000.00 297 6,806,824.85 3.09
25,000.01- 30,000.00 342 9,549,623.97 4.34
30,000.01- 35,000.00 288 9,466,274.80 4.30
35,000.01- 40,000.00 275 10,395,000.70 4.72
40,000.01- 45,000.00 204 8,724,445.79 3.96
45,000.01- 50,000.00 212 10,181,804.94 4.62
50,000.01- 55,000.00 170 8,973,565.20 4.07
55,000.01- 60,000.00 173 10,014,462.65 4.55
60,000.01- 65,000.00 162 10,203,524.00 4.63
65,000.01- 70,000.00 144 9,777,041.70 4.44
70,000.01- 75,000.00 120 8,727,431.41 3.96
75,000.01- 80,000.00 99 7,710,923.08 3.50
80,000.01- 85,000.00 85 7,019,126.53 3.19
85,000.01- 90,000.00 83 7,298,623.50 3.31
90,000.01- 95,000.00 62 5,750,267.29 2.61
95,000.01-100,000.00 73 7,175,202.33 3.26
100,000.01-105,000.00 47 4,859,897.75 2.21
105,000.01-110,000.00 47 5,058,205.39 2.30
110,000.01-115,000.00 48 5,393,084.97 2.45
115,000.01-120,000.00 37 4,377,237.78 1.99
120,000.01-125,000.00 27 3,322,753.87 1.51
125,000.01-130,000.00 28 3,584,586.93 1.63
130,000.01-135,000.00 27 3,584,601.19 1.63
135,000.01-140,000.00 27 3,722,240.42 1.69
140,000.01-145,000.00 24 3,435,285.06 1.56
145,000.01-150,000.00 19 2,804,518.84 1.27
150,000.01-200,000.00 89 15,217,486.95 6.91
200,000.01-250,000.00 41 9,077,636.52 4.12
250,000.01-300,000.00 26 6,958,254.65 3.16
300,000.01-350,000.00 8 2,602,499.70 1.18
350,000.01-400,000.00 1 378,250.00 0.17
400,000.01-450,000.00 1 439,792.54 0.20
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
FIXED RATE GROUP
ORIGINATORS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
ORIGINATOR MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
Affiliated:
<S> <C> <C> <C>
Retail 2,492 $ 129,211,590.89 58.67%
Broker Network 759 47,501,643.53 21.57
Unaffiliated 536 43,505,464.38 19.76
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
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<PAGE> 10
FIXED RATE GROUP
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
STATE MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
California 665 $ 46,633,340.83 21.18%
Florida 352 22,112,664.24 10.04
New York 170 12,958,243.72 5.88
Ohio 215 10,216,183.07 4.64
Washington 155 9,833,679.36 4.47
Pennsylvania 240 8,916,554.95 4.05
Michigan 204 8,217,825.18 3.73
Illinois 164 7,727,326.73 3.51
Arizona 123 7,410,206.92 3.36
Colorado 107 7,096,190.88 3.22
Oregon 95 6,680,626.49 3.03
New Jersey 98 6,407,335.89 2.91
Tennessee 83 5,483,295.88 2.49
Utah 80 5,320,578.73 2.42
Maryland 109 5,217,427.52 2.37
Indiana 115 4,881,833.20 2.22
Missouri 137 4,771,471.37 2.17
Hawaii 28 4,648,138.35 2.11
Texas 79 4,336,228.69 1.97
Georgia 76 4,138,289.29 1.88
Virginia 64 3,817,138.59 1.73
Minnesota 42 3,076,034.21 1.40
Nevada 39 2,634,636.90 1.20
South Carolina 62 2,630,191.53 1.19
North Carolina 47 2,553,275.33 1.16
Louisiana 60 2,395,176.63 1.09
Connecticut 20 1,563,393.61 0.71
District of Columbia 21 1,479,201.10 0.67
Wisconsin 32 1,425,522.06 0.65
Kansas 19 752,595.01 0.34
Oklahoma 16 701,028.58 0.32
Massachusetts 11 669,204.38 0.30
Kentucky 15 619,354.38 0.28
Idaho 7 565,397.86 0.26
Mississippi 5 470,222.43 0.21
New Hampshire 3 350,328.76 0.16
New Mexico 4 275,111.15 0.12
West Virginia 5 212,399.82 0.10
Rhode Island 3 209,247.28 0.10
Arkansas 6 206,332.68 0.09
Nebraska 3 155,300.00 0.07
Maine 1 140,000.00 0.06
Alaska 2 121,915.22 0.06
Delaware 3 96,000.00 0.04
Iowa 2 92,250.00 0.04
TOTAL 3,787 $ 220,218,698.80 100.00%
</TABLE>
-10-
<PAGE> 11
ADJUSTABLE RATE GROUP
TYPE OF MORTGAGED PROPERTY
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
PROPERTY TYPE MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Single Family Residence 3,369 $ 329,029,507.76 85.48%
Condominium Unit 353 32,782,719.07 8.52
Two- to Four- Family Residence 244 22,337,435.07 5.80
Other 8 773,509.05 0.20
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
OCCUPANCY STATUS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
OCCUPANCY STATUS MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Owner Occupied/Primary Residence 3,762 $ 371,621,893.50 96.54%
Non-Owner Occupied/Investment Property 212 13,301,277.45 3.46
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
AMORTIZATION METHOD
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
AMORTIZATION METHOD MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Fully Amortizing 3,974 $ 384,923,170.95 100.00%
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
-11-
<PAGE> 12
ADJUSTABLE RATE GROUP
COMBINED LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF COMBINED NUMBER OF PRINCIPAL AGGREGATE
LOAN-TO-VALUE RATIOS MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
15.001- 20.000 2 $ 67,500.00 0.02%
20.001- 25.000 5 199,089.60 0.05
25.001- 30.000 19 1,055,547.24 0.27
30.001- 35.000 10 609,161.44 0.16
35.001- 40.000 21 1,116,228.44 0.29
40.001- 45.000 36 2,335,635.86 0.61
45.001- 50.000 58 4,524,571.44 1.18
50.001- 55.000 75 5,981,059.53 1.55
55.001- 60.000 141 10,904,971.63 2.83
60.001- 65.000 477 37,521,389.04 9.75
65.001- 70.000 461 35,662,714.85 9.26
70.001- 75.000 660 59,485,375.04 15.45
75.001- 80.000 1,089 115,447,303.67 29.99
80.001- 85.000 329 37,094,018.29 9.64
85.001- 90.000 587 72,120,087.96 18.74
90.001- 95.000 4 798,516.92 0.21
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
ORIGINAL TERMS TO NUMBER OF PRINCIPAL AGGREGATE
MATURITY (MONTHS) MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
180 102 $ 6,489,096.52 1.69%
349-360 3,872 378,434,074.43 98.31
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF AGGREGATE UNPAID PERCENTAGE OF
REMAINING TERMS TO NUMBER OF PRINCIPAL AGGREGATE
MATURITY (MONTHS) MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
169-180 102 $ 6,489,096.52 1.69%
325-336 1 174,494.95 0.05
337-348 12 679,466.25 0.18
349-360 3,859 377,580,113.23 98.09
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
-12-
<PAGE> 13
ADJUSTABLE RATE GROUP
MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF MORTGAGE NUMBER OF PRINCIPAL AGGREGATE
INTEREST RATES MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
4.501- 5.000 1 $ 91,559.53 0.02%
5.001- 5.500 2 125,409.62 0.03
5.501- 6.000 1 31,467.97 0.01
6.001- 6.500 5 617,453.12 0.16
6.501- 7.000 22 3,015,719.35 0.78
7.001- 7.500 48 6,051,540.50 1.57
7.501- 8.000 155 19,368,742.05 5.03
8.001- 8.500 234 29,625,305.42 7.70
8.501- 9.000 513 60,702,187.67 15.77
9.001- 9.500 464 49,510,983.53 12.86
9.501-10.000 672 68,527,292.28 17.80
10.001-10.500 530 49,015,173.24 12.73
10.501-11.000 449 36,061,434.43 9.37
11.001-11.500 248 19,037,417.18 4.95
11.501-12.000 197 14,066,179.79 3.65
12.001-12.500 113 6,648,676.91 1.73
12.501-13.000 114 7,938,584.99 2.06
13.001-13.500 94 7,027,159.62 1.83
13.501-14.000 55 3,464,954.74 0.90
14.001-14.500 34 2,383,046.17 0.62
14.501-15.000 16 1,282,438.48 0.33
15.001-15.500 6 314,194.36 0.08
15.501-16.000 1 16,250.00 0.00
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
-13-
<PAGE> 14
ADJUSTABLE RATE GROUP
PRINCIPAL BALANCE
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF NUMBER OF PRINCIPAL AGGREGATE
PRINCIPAL BALANCES MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
10,000.01- 15,000.00 3 $ 41,044.86 0.01%
15,000.01- 20,000.00 34 636,878.09 0.17
20,000.01- 25,000.00 96 2,208,423.19 0.57
25,000.01- 30,000.00 135 3,771,069.06 0.98
30,000.01- 35,000.00 166 5,468,339.02 1.42
35,000.01- 40,000.00 178 6,736,671.69 1.75
40,000.01- 45,000.00 180 7,708,077.72 2.00
45,000.01- 50,000.00 170 8,123,777.43 2.11
50,000.01- 55,000.00 189 9,930,265.96 2.58
55,000.01- 60,000.00 190 10,980,377.77 2.85
60,000.01- 65,000.00 166 10,448,298.32 2.71
65,000.01- 70,000.00 174 11,782,611.10 3.06
70,000.01- 75,000.00 162 11,804,144.07 3.07
75,000.01- 80,000.00 169 13,113,345.21 3.41
80,000.01- 85,000.00 158 13,055,071.94 3.39
85,000.01- 90,000.00 130 11,400,576.55 2.96
90,000.01- 95,000.00 142 13,157,462.65 3.42
95,000.01-100,000.00 120 11,759,399.69 3.05
100,000.01-105,000.00 110 11,275,003.98 2.93
105,000.01-110,000.00 96 10,313,958.75 2.68
110,000.01-115,000.00 102 11,477,439.43 2.98
115,000.01-120,000.00 107 12,607,312.72 3.28
120,000.01-125,000.00 86 10,574,037.46 2.75
125,000.01-130,000.00 67 8,539,226.63 2.22
130,000.01-135,000.00 64 8,504,204.25 2.21
135,000.01-140,000.00 64 8,822,972.51 2.29
140,000.01-145,000.00 49 7,002,982.58 1.82
145,000.01-150,000.00 59 8,737,499.28 2.27
150,000.01-200,000.00 289 49,749,921.31 12.92
200,000.01-250,000.00 154 34,427,171.26 8.94
250,000.01-300,000.00 89 24,354,474.04 6.33
300,000.01-350,000.00 57 18,513,343.81 4.81
350,000.01-400,000.00 10 3,749,206.24 0.97
400,000.01-450,000.00 3 1,255,684.35 0.33
450,000.01-500,000.00 6 2,892,898.03 0.75
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
-14-
<PAGE> 15
ADJUSTABLE RATE GROUP
GROSS MARGINS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF NUMBER OF PRINCIPAL AGGREGATE
GROSS MARGINS MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
1.501- 2.000 1 $ 90,846.81 0.02%
3.001- 3.500 3 308,894.98 0.08
3.501- 4.000 9 1,239,857.75 0.32
4.001- 4.500 14 2,471,467.56 0.64
4.501- 5.000 985 101,556,721.38 26.38
5.001- 5.500 756 75,414,268.25 19.59
5.501- 6.000 752 68,873,184.20 17.89
6.001- 6.500 285 34,538,846.66 8.97
6.501- 7.000 650 53,598,866.64 13.92
7.001- 7.500 173 17,618,090.42 4.58
7.501- 8.000 135 11,447,817.67 2.97
8.001- 8.500 67 5,045,520.56 1.31
8.501- 9.000 46 4,177,333.27 1.09
9.001- 9.500 40 3,535,520.32 0.92
9.501-10.000 45 3,820,419.47 0.99
10.001-10.500 11 1,090,111.21 0.28
10.501-11.000 2 95,403.80 0.02
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
MAXIMUM MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF MAXIMUM NUMBER OF PRINCIPAL AGGREGATE
MORTGAGE RATES MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
11.501-12.000 1 $ 91,559.53 0.02%
12.001-12.500 6 556,704.60 0.14
12.501-13.000 9 1,380,169.92 0.36
13.001-13.500 14 2,577,273.42 0.67
13.501-14.000 39 4,559,280.51 1.18
14.001-14.500 93 11,235,772.21 2.92
14.501-15.000 250 33,838,945.83 8.79
15.001-15.500 318 40,451,533.94 10.51
15.501-16.000 584 67,425,038.32 17.52
16.001-16.500 452 45,246,506.58 11.75
16.501-17.000 569 53,611,888.25 13.93
17.001-17.500 465 39,483,668.55 10.26
17.501-18.000 425 32,461,532.48 8.43
18.001-18.500 212 15,869,777.15 4.12
18.501-19.000 182 13,115,847.67 3.41
19.001-19.500 111 6,840,519.50 1.78
19.501-20.000 92 6,181,527.82 1.61
20.001-20.500 78 6,006,776.83 1.56
20.501-21.000 37 2,158,758.62 0.56
21.001-21.500 22 1,049,911.27 0.27
21.501-22.000 12 641,010.74 0.17
22.001-22.500 2 91,167.21 0.02
23.001-23.500 1 48,000.00 0.01
TOTAL 3,974 $ 384,923,170.95 100.00%
</TABLE>
-15-
<PAGE> 16
ADJUSTABLE RATE GROUP
MINIMUM MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
RANGE OF MINIMUM NUMBER OF PRINCIPAL AGGREGATE
MORTGAGE RATES MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
4.501- 5.000 1 $ 91,559.53 0.02%
5.001- 5.500 3 461,198.84 0.12
5.501- 6.000 1 31,467.97 0.01
6.001- 6.500 8 1,549,748.39 0.40
6.501- 7.000 21 2,630,756.74 0.68
7.001- 7.500 40 4,404,278.83 1.14
7.501- 8.000 142 18,078,233.51 4.70
8.001- 8.500 215 27,520,310.63 7.15
8.501- 9.000 478 55,786,621.59 14.49
9.001- 9.500 439 46,338,522.99 12.04
9.501-10.000 648 66,424,487.88 17.26
10.001-10.500 529 50,128,234.55 13.02
10.501-11.000 466 37,553,943.86 9.76
11.001-11.500 275 21,711,161.55 5.64
11.501-12.000 229 17,982,822.35 4.67
12.001-12.500 137 9,608,325.26 2.50
12.501-13.000 126 9,102,639.36 2.36
13.001-13.500 99 7,836,943.49 2.04
13.501-14.000 61 3,816,196.00 0.99
14.001-14.500 34 2,394,972.17 0.62
14.501-15.000 15 1,140,301.10 0.30
15.001-15.500 6 314,194.36 0.08
15.501-16.000 1 16,250.00 0.00
TOTAL 3,974 $384,923,170.95 100.00%
</TABLE>
ADJUSTABLE RATE GROUP
ORIGINATORS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
ORIGINATOR MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
Affiliated:
Retail 172 $ 19,612,582.88 5.10%
Broker Network 2,741 244,230,009.68 63.45
Unaffiliated 1,061 121,080,578.39 31.46
TOTAL 3,974 $384,923,170.95 100.00%
</TABLE>
-16-
<PAGE> 17
ADJUSTABLE RATE GROUP
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE
STATE MORTGAGE LOANS BALANCE PRINCIPAL BALANCE
<S> <C> <C> <C>
California 379 $ 57,953,382.30 15.06%
Florida 550 47,044,990.81 12.22
Washington 142 19,045,664.32 4.95
Connecticut 170 18,564,603.86 4.82
Utah 151 17,926,733.00 4.66
Hawaii 98 17,448,221.81 4.53
Maryland 230 17,090,935.15 4.44
Arizona 160 16,946,273.56 4.40
Texas 187 16,158,204.08 4.20
Oregon 146 15,792,338.69 4.10
Colorado 141 14,460,599.24 3.76
Ohio 164 11,298,700.38 2.94
Michigan 157 11,134,933.12 2.89
Georgia 91 9,591,541.60 2.49
Illinois 108 9,478,960.94 2.46
Pennsylvania 128 9,472,566.32 2.46
New Jersey 65 7,082,725.67 1.84
Indiana 121 6,762,552.00 1.76
North Carolina 77 5,582,422.73 1.45
Louisiana 71 5,059,651.61 1.31
South Carolina 84 5,046,882.64 1.31
Minnesota 52 4,977,603.47 1.29
Nebraska 65 4,513,689.77 1.17
Missouri 79 4,416,420.15 1.15
Tennessee 58 4,364,952.76 1.13
New York 24 3,256,341.95 0.85
Massachusetts 27 3,240,458.42 0.84
District of Columbia 39 3,146,027.12 0.82
New Mexico 27 2,970,354.54 0.77
Wisconsin 37 2,856,147.71 0.74
Virginia 22 2,376,520.96 0.62
Nevada 13 1,598,525.27 0.42
Kentucky 22 1,434,607.78 0.37
New Hampshire 10 1,215,729.93 0.32
Idaho 11 939,970.89 0.24
Rhode Island 12 923,777.30 0.24
Kansas 16 793,956.80 0.21
Mississippi 6 652,644.57 0.17
Delaware 4 634,317.97 0.16
Oklahoma 6 467,172.27 0.12
West Virginia 8 442,308.66 0.11
Iowa 9 433,236.29 0.11
Maine 2 98,486.08 0.03
Wyoming 2 87,917.54 0.02
Arkansas 1 53,000.00 0.01
South Dakota 1 46,150.00 0.01
Montana 1 39,968.92 0.01
TOTAL 3,974 $384,923,170.95 100.00%
</TABLE>
-17-
<PAGE> 18
Item 7. Financial Statements: Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement, dated December 8, 1997, between Aames
Capital Corporation, as Sponsor, and Lehman Brothers Inc., as Representative of
the several Underwriters named in Schedule I to the Pricing Agreement.
1.2 Pricing Agreement, dated December 8, 1997, between Aames
Capital Corporation, as Sponsor, and Lehman Brothers Inc., as Representative of
the several Underwriters named in Schedule I thereto.
4.1 Pooling and Servicing Agreement, dated as of December 1,
1997, between Aames Capital Corporation, as Seller and Servicer, and Bankers
Trust Company of California, N.A., as Trustee.
4.2 Financial Guaranty Insurance Policy issued by the Financial
Guaranty Insurer, Financial Security Assurance Inc.
5.1 Opinion of O'Melveny & Myers LLP regarding the legality of
the securities (Asset-Backed Certificates).
5.2 Opinion of O'Melveny & Myers LLP regarding the legality of
the securities (Bonds).
8.1 Opinion of O'Melveny & Myers LLP as to certain tax matters.
10.1 Subsequent Transfer Agreement, dated as of December 19,
1997, between Aames Capital Corporation, as Seller, and Bankers Trust Company of
California, N.A., as Trustee.
23.1 Consent of O'Melveny & Myers LLP (included in Exhibits 5.1,
5.2 and 8.1).
-18-
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has dully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
-------------------------------
Mark E. Elbaum
Senior Vice President - Finance
Dated: January 27, 1998
-19-
<PAGE> 20
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
1.1 Underwriting Agreement, dated December 8, 1997, between Aames
Capital Corporation, as Sponsor, and Lehman Brothers Inc., as
Representative of the several Underwriters named in Schedule I
to the Pricing Agreement.
1.2 Pricing Agreement, dated December 8, 1997, between Aames Capital
Corporation, as Sponsor, and Lehman Brothers Inc., as
Representative of the several Underwriters named in Schedule I
thereto.
4.1 Pooling and Servicing Agreement, dated as of December 1, 1997,
between Aames Capital Corporation, as Seller and Servicer, and
Bankers Trust Company of California, N.A., as Trustee.
4.2 Financial Guaranty Insurance Policy issued by the Financial
Guaranty Insurer, Financial Security Assurance Inc.
5.1 Opinion of O'Melveny & Myers LLP regarding the legality of the
securities (Asset-Backed Certificates).
5.2 Opinion of O'Melveny & Myers LLP regarding the legality of the
securities (Bonds).
8.1 Opinion of O'Melveny & Myers LLP as to certain tax matters.
10.1 Subsequent Transfer Agreement, dated as of December 19, 1997,
between Aames Capital Corporation, as Seller, and Bankers Trust
Company of California, N.A., as Trustee.
23.1 Consent of O'Melveny & Myers LLP (included in Exhibits 5.1, 5.2
and 8.1).
<PAGE> 1
Exhibit 1.1
AAMES CAPITAL CORPORATION
AND
THE UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
AAMES MORTGAGE TRUSTS
MORTGAGE PASS-THROUGH CERTIFICATES,
ISSUABLE IN SERIES
DECEMBER 8, 1997
<PAGE> 2
December 8, 1997
Lehman Brothers Inc.
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Aames Capital Corporation (the "Company") proposes, from time to time,
to enter into one or more pricing agreements (each a "Pricing Agreement") in the
form of Annex A hereto, with such additions and deletions as the parties thereto
may determine, and, subject to the terms and conditions stated herein and
therein, to issue in series (each a "Series") and to sell to the Underwriters
(as hereinafter defined), mortgage pass-through certificates, each Series of
which is to be issued pursuant to an applicable pooling and servicing agreement
(a "Pooling and Servicing Agreement") to be dated as of the applicable Cut-off
Date (as defined in the Pricing Agreement), between the Company, as seller and
servicer, and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"). Lehman Brothers Inc., will act as underwriter and as Representative
(in such capacity, the "Representative") of the several underwriters named in
Schedule I hereto (the "Underwriters"). Each Series of Certificates (as defined
below) will evidence an undivided beneficial ownership interest in a separate
Trust (as defined in the related Pooling and Servicing Agreement) consisting
primarily of a pool (the "Pool") of mortgage loans (the "Mortgage Loans") listed
in an attachment to such Pooling and Servicing Agreement. The Certificates will
be issued in one or more classes (each a "Class"), which may be divided into one
or more subclasses (each a "Subclass"). Any rights of holders of Certificates of
a particular Class or Subclass to receive certain distributions with respect to
the Mortgage Loans that are senior to such rights of holders of Certificates of
any other Class or Subclass of the same Series shall be specified in the Pricing
Agreement. The Certificates of a Series to be purchased pursuant to a Pricing
Agreement will be described more fully in the base Prospectus and the related
Prospectus Supplement (each of which terms is defined below) which the Company
will furnish to the Underwriters.
On or prior to the date of issuance of the Certificates of any Class, if
specified in the Pricing Agreement, the Company will obtain a certificate
guaranty insurance policy satisfying the description thereof in the Offering
Document.
As used herein, the term "Execution Time" shall mean the date and time
that the Pricing Agreement is executed and delivered by the parties thereto; the
term "Agreement," "this
2
<PAGE> 3
Agreement" and terms of similar import shall mean this Underwriting Agreement
including the Pricing Agreement; and the term "Closing Date" shall mean the
Closing Date specified in the Pricing Agreement. All capitalized terms used but
not otherwise defined herein have the respective meanings set forth in the form
of Pooling and Servicing Agreement heretofore delivered to the Representative.
1. Securities. Unless otherwise specified in the Pricing Agreement, the
Certificates of each Series will be issued in classes as follows: (i) a senior
class (which may include two or more subclasses) with respect to each Mortgage
Loan Group (collectively, the "Class A Certificates"), (ii) one or more
mezzanine classes (which may include two or more subclasses) with respect to the
Fixed Rate Group (collectively, the "Class M Certificates"), (iii) a subordinate
class (which may include two or more subclasses) with respect to the Fixed Rate
Group (collectively, the "Class B Certificates"), (iv) the Class C Certificates
(the "Class C Certificates"), and (v) a residual class with respect to each
REMIC election made with respect to the Trust (the "Class R Certificates). The
Class A Certificates, the Class M Certificates and the Class B Certificates
specified in the Pricing Agreement are hereinafter referred to as the "Offered
Certificates." The Offered Certificates, the Class C Certificates and the Class
R Certificates are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Company. The Company represents
and warrants to, and covenants with, each Underwriter that:
A. A registration statement on Form S-3 (Registration No.
333-21219), including a prospectus and a form of prospectus supplement
that contemplates the offering of mortgage pass-through certificates
from time to time, has been filed by the Company and Aames Capital
Acceptance Corp. ("ACAC") with the Securities and Exchange Commission
(the "Commission"), pursuant to the Securities Act of 1933, as amended
and the rules and regulations of the Commission thereunder
(collectively, the "1933 Act"), and as amended from time to time by one
or more amendments, including post-effective amendments, has been
declared effective by the Commission prior to the date of the Pricing
Agreement. The Company will cause to be filed with the Commission, after
effectiveness of such registration statement (and any such
post-effective amendments), a final prospectus in accordance with Rules
415 and 424(b)(2) under the 1933 Act, relating to the Offered
Certificates.
As used herein, the term "Effective Date" shall mean the
date that the Registration Statement (including the most recently filed
post-effective amendment, if any) became effective. "Registration
Statement" shall mean the registration statement referred to in the
preceding paragraph, including the exhibits thereto and any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the 1933 Act specifically relating to the terms of the Offered
Certificates or the Pool and filed with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
except that if the Registration Statement is amended by the filing with
the Commission of a post-effective amendment thereto, the term
"Registration Statement" shall mean collectively the Registration
Statement, as amended by the most
3
<PAGE> 4
recently filed post-effective amendment thereto, in the form in which it
was declared effective by the Commission. The prospectus dated the date
specified in the Pricing Agreement (which if not so specified shall be
the date of such Pricing Agreement), which constitutes a part of the
Registration Statement, together with the prospectus supplement dated
the date specified in the Pricing Agreement (which if not so specified
shall be the date of such Pricing Agreement) (the "Prospectus
Supplement"), relating to the offering of the Offered Certificates,
including any document incorporated therein by reference pursuant to the
Exchange Act, are hereinafter referred to collectively as the
"Prospectus," except that if the Prospectus is thereafter amended or
supplemented pursuant to Rule 424(b), the term "Prospectus" shall mean
the prospectus, as so amended or supplemented pursuant to Rule 424(b),
from and after the date on which such amended prospectus or supplement
is filed with the Commission. Any preliminary form of the Prospectus
Supplement which has heretofore been filed pursuant to Rule 402(a) or
Rule 424 is hereinafter called a "Preliminary Prospectus Supplement."
Any reference herein to the terms "amend," "amendment" or "supplement"
with respect to the Registration Statement, the Prospectus or the
Prospectus Supplement shall be deemed to refer to and include the filing
of any document under the Exchange Act after the effective date of the
Registration Statement or the issue date of the Prospectus or Prospectus
or Prospectus Supplement, as the case may be, incorporated therein by
reference.
B. As of the date hereof, and as of the dates when the
Registration Statement became effective, when the Prospectus Supplement
is first filed pursuant to Rule 424(b) under the 1933 Act, when, prior
to the Closing Date, any other amendment to the Registration Statement
becomes effective, and when any supplement to the Prospectus is filed
with the Commission, and at the Closing Date, (i) the Registration
Statement, as amended, as of any such time, and the Prospectus, as
amended or supplemented as of any such time, complied or will comply in
all material respects with the applicable requirements of the 1933 Act,
and (ii) the Registration Statement, as amended as of any such time, did
not and will not contain any untrue statement of a material fact and did
not and will not omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
the Prospectus, as amended or supplemented as of any such time, did not
and will not contain an untrue statement of a material fact and did not
and will not omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company
makes no representations or warranties as to the information contained
in or omitted from (i) the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters as set forth in this
Agreement or the Pricing Agreement specifically for use in connection
with the preparation of the Registration Statement or the Prospectus and
(ii) the Form 8-K - Computational Materials (as defined in Section 5K
below) or Form 8-K - ABS Term Sheets (as defined in Section 5L below),
or in any amendment thereof or supplement thereto, incorporated by
reference in such Registration Statement or such Prospectus (or
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<PAGE> 5
any amendment thereof or supplement thereto).
C. The Company is duly organized, validly existing and in good
standing under the laws of the State of California, has full power and
authority (corporate and other) to own its properties and conduct its
business as now conducted by it, and as described in the Prospectus, and
is duly qualified to do business in each jurisdiction in which it owns
or leases real property (to the extent such qualification is required by
applicable law) or in which the conduct of its business requires such
qualification except where the failure to be so qualified does not
involve (i) a material risk to, or a material adverse effect on, the
business, properties, financial position, operation or results of
operations of the Company or (ii) any risk whatsoever as to the
enforceability of any Mortgage Loan.
D. There are no actions, proceedings or investigations pending,
or, to the knowledge of the Company, threatened, before any court,
governmental agency or body or other tribunal (i) asserting the
invalidity of this Agreement, the Certificates or of the Pooling and
Servicing Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated
by this Agreement or the Pooling and Servicing Agreement, (iii) which
may, individually or in the aggregate, materially and adversely affect
the validity or enforceability of, this Agreement, the Certificates or
the Pooling and Servicing Agreement, or the performance by the Company
of its obligations under this Agreement or the Pooling and Servicing
Agreement or (iv) which may affect adversely the federal income tax
attributes of the Offered Certificates as described in the Prospectus.
E. The execution and delivery by the Company of this Agreement
and the Pooling and Servicing Agreement, the direction by the Company to
the Trustee to execute, countersign, authenticate and deliver the
Certificates and the transfer and delivery of the Mortgage Loans to the
Trust by the Company are within the corporate power of the Company and
have been, or will be, prior to the Closing Date duly authorized by all
necessary corporate action on the part of the Company and the execution
and delivery of such instruments, the consummation of the transactions
therein contemplated and compliance with the provisions thereof will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute or any agreement or
instrument to which the Company or any of its affiliates is a party or
by which it or any of them is bound or to which any of the property of
the Company or any of its affiliates is subject, the Company's articles
of incorporation or bylaws, or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction
over the Company, any of its affiliates or any of its or their
properties; and no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body or other tribunal
is required for the consummation of the transactions contemplated by
this Agreement or the Prospectus in connection with the sale of the
Certificates by the Company. Neither the Company nor any of its
affiliates is a party to, bound by or in breach or violation of any
indenture or other agreement or instrument, or subject to or in
violation of any statute, order, rule or
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<PAGE> 6
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Company or any of its affiliates, which
materially and adversely affects, or may in the future materially and
adversely affect, (i) the ability of the Company to perform its
obligations under the Pooling and Servicing Agreement or this Agreement
or (ii) the business, operations, results of operations, financial
position, income, properties or assets of the Company.
F. This Agreement has been duly and validly authorized, executed
and delivered by the Company. The Pooling and Servicing Agreement will
be duly executed and delivered by the Company and will constitute the
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except as enforceability may be limited by
(i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the enforcement of the
rights of creditors, and (ii) general principles of equity, whether
enforcement is sought in a proceeding at law or in equity.
G. The Offered Certificates will conform in all material
respects to the description thereof contained in the Prospectus, and the
direction by the Company to the Trustee to execute, countersign,
authenticate and deliver the Certificates will be duly and validly
authorized and, when the Offered Certificates have been duly and validly
executed, authenticated, issued and delivered in accordance with the
Pooling and Servicing Agreement and sold to the Underwriters as provided
herein and the Pricing Agreement, the Offered Certificates have been
validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement.
H. At the Closing Date, the Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus
and the representations and warranties contained in this Agreement will
be true and correct in all material respects. The representations and
warranties set out in the Pooling and Servicing Agreement are hereby
made to the Underwriters as though set out herein, and at the dates
specified in the Pooling and Servicing Agreement, such representations
and warranties were or will be true and correct in all material
respects.
I. The transfer of the Mortgage Loans to the Trust created by
the related Pooling and Servicing Agreement (the "Trust") at the Closing
Date will be treated by the Company for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to
secure debt.
J. The Company possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct the
business now operated by it and as described in the Prospectus and there
are no proceedings, pending or, to the best knowledge of the Company,
threatened, relating to the revocation or modification of any such
license, certificate, permit or other authorization which singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the
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<PAGE> 7
business, operations, results of operations, financial position, income,
property or assets of the Company.
K. Any taxes, fees and other governmental charges in connection
with the execution and delivery of this Agreement and the Pooling and
Servicing Agreement, or the execution and issuance of the Certificates
have been or will be paid at or prior to the Closing Date.
L. There has not been any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company, its parent company or its subsidiaries, taken
as a whole, from the date of the end of the most recent fiscal quarter
of the Company for which financial statements (whether audited or
unaudited) have been made publicly available (the "Date of Recent
Company Financial Statements"), to the date hereof.
M. The Pooling and Servicing Agreement will conform in all
material respects to the description thereof contained in the
Prospectus.
N. The Company is not aware of (i) any request by the Commission
for any further amendment of the Registration Statement or the
Prospectus or for any additional information with respect to the
offering of the Offered Certificates, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose or (iii) any notification with respect to
the suspension of the qualification of the Offered Certificates for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose.
O. Each assignment of Mortgage required to be prepared pursuant
to the Pooling and Servicing Agreement is based on forms recently
utilized by the Company with respect to mortgaged properties located in
the appropriate jurisdiction and used in the regular course of the
Company's business. Based on the Company's experience with such matters
it is reasonable to believe that upon execution each such assignment
will be in recordable form and will be sufficient to effect the
assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
P. Neither the Company nor the Trust will be subject to
registration as an "investment company" under the Investment Company Act
of 1940, as amended (the "Investment Company Act"). The Pooling and
Servicing Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended, and the Trust is not required to be
registered.
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<PAGE> 8
Q. In connection with the offering of the Certificates in the
State of Florida, the Company hereby certifies that it has complied with
all provisions of Section 5.17.075 of the Florida Securities and
Investor Protection Act.
Any certificate signed by any officer of the Company and delivered to
the Underwriters in connection with the sale of the Offered Certificates to such
Underwriters shall be deemed a representation and warranty as to the matters
covered thereby by the Company to each person to whom the representations and
warranties in this Section 2 are made.
3. Agreements of the Underwriters.
A. The several Underwriters agree with the Company that upon the
execution of the Pricing Agreement and authorization by the Underwriters
of the release of the Offered Certificates of the related Series, the
Underwriters shall offer such Offered Certificates for sale upon the
terms and conditions set forth in the prospectus as amended or
supplemented.
B. Each Underwriter severally represents and agrees that:
(i) it has not offered or sold and will not offer or
sell, prior to the date six months after their
date of issuance, any Offered Certificates to
persons in the United Kingdom, except to persons
whose activities involve them in acquiring,
holding, managing or disposing of investments
(as principal or agent) for the purposes of
their businesses or otherwise in circumstances
which have not resulted in and will not result
in an offer to the public in the United Kingdom
within the meaning of the Public Offers of
Securities Regulations 1995;
(ii) it has complied and will comply with all
applicable provisions of the Financial Services
Act of 1986 with respect to anything done by it
in relation to the Offered Certificates in, from
or otherwise involving the United Kingdom;
(iii) it has only issued or passed on and will only
issue or pass on to any person in the United
Kingdom any document received by it in
connection with the issuance of the Offered
Certificates only if that person is of a kind
described in Article 11(3) of the Financial
Services Act of 1986 (Investment Advertisements)
(Exceptions) Order 1997, or such person is one
to whom the document can lawfully be issued or
passed on;
(iv) no action has been or will be taken by such
Underwriter that would result in a public
offering of the Offered Certificates or
distribution of the Prospectus or Prospectus
Supplement or any
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<PAGE> 9
Computational Materials or any other offering
material in relation to the Offered Certificates
in any non-U.S. jurisdiction where action for
that purpose is required unless the Company has
agreed to such actions and such actions have
been taken; and
(v) it understands that, in connection with the
issuance, offer and sale of the Offered
Certificates and with the distribution of the
Prospectus or Prospectus Supplement or any
Computational Materials or any other offering
material in relation to the Offered Certificates
in, to or from any non-U.S. jurisdiction, the
Company has not taken and will not take any
action, and such Underwriter will not offer,
sell or deliver any Offered Certificates or
distribute the Prospectus or Prospectus
Supplement or any Computational Materials or any
other offering material relating to the Offered
Certificates in, to or from any non-U.S.
jurisdiction except under circumstances which
will result in compliance with applicable laws
and regulations and which will not impose any
liability, obligation or responsibility on the
Company or the other Underwriters.
4. Purchase, Sale and Delivery of the Offered Certificates. The Company
hereby agrees, subject to the terms and conditions hereof, to sell the Offered
Certificates specified in the Pricing Agreement to the Underwriters, who, upon
the basis of the representations and warranties herein contained, but subject to
the conditions hereinafter stated, hereby agree, severally and not jointly, to
purchase the entire aggregate principal amount of the Offered Certificates in
the amounts set forth in Schedule I to such Pricing Agreement. At the time of
issuance of the Certificates, the Mortgage Loans will be sold by the Company to
the Trust pursuant to the Pooling and Servicing Agreement. The Company will be
obligated, under the Pooling and Servicing Agreement, to service the Mortgage
Loans either directly or through subservicers.
The Offered Certificates to be purchased by the Underwriters will be
delivered by the Company to the Underwriters (which delivery shall be made
through the facilities of The Depository Trust Company ("DTC") or Cedel Bank,
societe anonyme or the Euroclear System) against payment of the purchase price
therefor, in an amount equal to the percentage of the aggregate original
principal amount thereof as specified in the Pricing Agreement, plus interest
accrued, if any, at the rate on the aggregate original principal amount thereof
from the date specified in such Pricing Agreement to, but not including, the
Closing Date, by a same day federal funds wire payable to the order of the
Company.
Settlement shall take place at the specified offices of O'Melveny &
Myers LLP at 10:00 a.m., New York City time, on the date specified in the
Pricing Agreement, or at such other place and at such other time thereafter
(such time being herein referred to as the "Closing Date"), in each case as the
Underwriters and the Company shall determine. The Offered Certificates will be
prepared in definitive form and in such authorized denominations as the
Underwriters may request, registered in the name of Cede & Co., as nominee of
DTC.
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<PAGE> 10
It is a condition to the purchase and sale of each Class of Offered
Certificates that the purchase and sale of each other Class of Offered
Certificates occurs simultaneously.
The Company agrees to have the Offered Certificates available for
inspection and review by the Underwriters in Los Angeles not later than 11:00
a.m. New York City time on the business day prior to the Closing Date.
5. Covenants of the Company. The Company covenants and agrees with each
Underwriter that:
A. The Company will promptly advise the Representative and
counsel to the Underwriters (i) when any amendment to the Registration
Statement relating to the offering of the Offered Certificates shall
have become effective, (ii) of any request by the Commission for any
amendment to the Registration Statement or the Prospectus or for any
additional information to the extent applicable to the offering of the
Offered Certificates, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the institution or threatening of any proceeding for that purpose and
(iv) or the receipt by the Company of any notification with respect to
the suspension of the qualification of the Offered Certificates for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will not file, and will use its
commercially reasonable efforts to prevent ACAC from filing, any
amendment to the Registration Statement or supplement to the Prospectus
after the date of the Pricing Agreement and prior to the related Closing
Date for the Offered Certificates unless the Company has furnished the
Representative and counsel to the Underwriters copies of such amendment
or supplement for their review prior to filing and will not file any
such proposed amendment or supplement to which the Representative
reasonably and promptly objects, unless such filing is required by law.
The Company will use its commercially reasonable efforts to prevent the
issuance of any stop order suspending the effectiveness of the
Registration Statement and, if issued, to obtain as soon as possible the
withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it shall
be necessary to amend or supplement the Prospectus to comply with the
1933 Act or the rules under the 1933 Act, the Company will promptly
prepare and file with the Commission and shall use its commercially
reasonable efforts to cause ACAC to promptly prepare and file, subject
to Paragraph A of this Section 5, an amendment or supplement that will
correct such statement or omission or an amendment that will effect such
compliance and, if such amendment or supplement is required to be
contained in a post-effective amendment to the Registration Statement,
will use its commercially reasonable efforts to cause such
post-effective amendment of the Registration Statement to become
effective as soon as possible, provided, however, that the Company will
not be required to file any such
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<PAGE> 11
amendment or supplement with respect to any Computational Materials or
ABS Term Sheets incorporated by reference in the Prospectus other than
any amendments or supplements of such Computational Materials or ABS
Term Sheets that are furnished to the Company by the Underwriters
pursuant to Section 9A hereof which the Company is required to file in
accordance with Section 5K or 5L.
C. The Company will furnish to the Underwriters, without charge,
copies of the Registration Statement (including exhibits thereto), any
documents incorporated therein by reference, and, so long as delivery of
a prospectus by the Underwriters or a dealer may be required by the 1933
Act, as many copies of the Prospectus, as amended or supplemented, and
any amendments and supplements thereto as the Underwriters may
reasonably request. The Company will pay the expenses of printing all
offering documents relating to the offering of the Offered Certificates.
D. As soon as practicable, but not later than sixteen months
after the effective date of the Registration Statement, the Company will
cause the Trust to make generally available to holders of Offered
Certificates statements of the Trust collectively covering a period of
at least 12 months beginning after the effective date of the
Registration Statement. Such statements will be filed with the
Commission pursuant to the provisions of the Exchange Act.
E. During a period of 20 calendar days from the Execution Time,
neither the Company nor any affiliate of the Company will, without the
Representative's prior written consent (which consent shall not be
unreasonably withheld), enter into any agreement to offer or sell
mortgage pass-through certificates backed by mortgage loans, except
pursuant to this Agreement.
F. So long as any of the Offered Certificates are outstanding,
the Company will cause to be delivered to the Underwriters, (i) all
documents required to be distributed to the holders of the Offered
Certificates, (ii) from time to time, any other information concerning
the Trust filed with any government or regulatory authority that is
otherwise publicly available, as the Underwriters may reasonably
request, (iii) the annual statement as to compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement, (iv) the annual
statement of a firm of independent public accountants furnished to the
Trustee pursuant to the Pooling and Servicing Agreement as soon as such
statement is filed by the Company with the Commission and (v) any
information required to be delivered by the Company or the Servicer
pursuant to Section 4.01 of the form of Pooling and Servicing Agreement
heretofore delivered to the Representative.
G. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement or the Pricing Agreement is
consummated, will pay all expenses in connection with the transactions
contemplated herein, including but not limited to (i) the expenses of
printing (or otherwise reproducing) all documents relating to the
offering and the fees and disbursements of its counsel incurred in
connection with
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<PAGE> 12
the issuance and delivery of the Offered Certificates, (ii) the
preparation of all documents specified in this Agreement, (iii) any fees
and expenses of the Trustee (including legal fees) that are not payable
by or from the Trust, (iv) any accounting fees and disbursements
relating to the offering of Offered Certificates, (v) any fees charged
by rating agencies for rating the Offered Certificates, (vi) any
reasonable fees and disbursements of counsel to the Underwriters
relating to Blue Sky undertakings (vii) any reasonable fees and
disbursements of counsel to the Underwriters in an amount not to exceed
$5,000 per Series relating to the representation of the Underwriters
with respect to the offering of the Offered Certificates of such Series
and (viii) the fees and charges related to the filing with the
Commission of such Current Reports on Form 8-K and such other materials
as are contemplated hereby, whether pursuant to EDGAR or otherwise.
Subject to the provisions of Section 7 hereof, the Company will not pay
the fees and expenses of the Underwriters or their counsel except as
specified above.
H. The Company will enter into the Pooling and Servicing
Agreement and all related agreements on or prior to the Closing Date.
I. The Company will endeavor to qualify the Offered Certificates
for sale to the extent necessary under any state securities or Blue Sky
laws in any jurisdiction as may be reasonably requested by the
Underwriters, if any, and will pay all expenses (including reasonable
fees and disbursements of counsel to the Underwriters) in connection
with such qualification and in connection with the determination of the
eligibility of the Offered Certificates for investment under the laws of
such jurisdiction as the Underwriters may reasonably designate, if any.
J. The Company will file or cause to be filed with the
Commission within fifteen days of the termination of the Commitment
Period (as such term is defined in the related Pooling and Servicing
Agreement), a Current Report on Form 8-K setting forth specific
information concerning the description of the Mortgage Pool (the "Form
8-K - Mortgage Pool"). Without limiting the generality of any other
provision hereof, such Form 8-K - Mortgage Pool shall be deemed to be a
part of the Registration Statement and Prospectus from and after the
date it is first filed with the Commission.
K. The Company will cause any Computational Materials (as
defined in Section 9A hereof) with respect to the Offered Certificates
which are delivered by any Underwriter to the Company pursuant to
Section 9A hereof to be filed with the Commission on a Current Report on
Form 8-K (the "Form 8-K - Computational Materials") at or before the
time of filing of the Prospectus pursuant to Rule 424(b) under the 1933
Act; provided, however, that the Company shall have no obligation to
file any such materials which, in the reasonable determination of the
Company after consultation with such Underwriter (i) are not, based upon
the advice of outside counsel to the Company, required to be filed
pursuant to the Kidder Letters (as defined in Section 9A hereof) or (ii)
contain any erroneous information or untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; it being
understood, however, that the
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<PAGE> 13
Company shall have no obligation to review or pass upon the accuracy or
adequacy of, or to correct, any Computational Materials provided by any
Underwriter to the Company pursuant to Section 9A hereof. The Company
will notify the Underwriters promptly in the event that the Company does
not make any such filing. The parties hereto agree that the Company
shall have no liability for any failure to file such Computational
Materials on such date if the related Underwriter has not delivered such
materials to the Company one business day prior to the date such filing
is to be made.
L. The Company will cause any ABS Term Sheets (as defined in
Section 9A hereof) with respect of the Offered Certificates which are
delivered by any Underwriter to the Company pursuant to Section 9A
hereof to be filed with the Commission on one or more Current Reports on
Form 8-K (collectively, the "Form 8-K - ABS Term Sheets") (i) at or
before the time of filing of the Prospectus pursuant to Rule 424(b)
under the 1933 Act, in the case of Structural Term Sheets (as defined in
Section 9A hereof) and (ii) within two business days of first use in the
case of Collateral Term Sheets (as defined in Section 9A hereof);
provided, however, that the Company shall have no obligation to file any
such materials which, in the reasonable determination of the Company
after consultation with such Underwriter (i) are not, based upon advice
of outside counsel to the Company, required to be filed pursuant to the
PSA Letter (as defined in Section 9A hereof), (ii) do not contain the
legends required by the PSA Letter or (iii) contain erroneous
information or contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; it being understood,
however, that the Company shall have no obligation to review or pass
upon the accuracy or adequacy of, or to correct, any ABS Term Sheets
provided by any Underwriter to the Company pursuant to Section 9A
hereof. The Company will notify the Underwriters promptly in the event
that the Company does not make any such filing. The parties hereto agree
that the Company shall have no liability for any failure to file such
ABS Term Sheets on such dates if the related Underwriter has not
delivered such materials to the Company one business day prior to the
date such filing is to be made.
6. Conditions of the Underwriters' Obligation. The obligation of the
Underwriters to purchase and pay for the Offered Certificates of a Series as
provided herein and the Pricing Agreement shall be subject to the accuracy as of
the date hereof, the Execution Time and the applicable Closing Date (as if made
at such Closing Date) of the representations and warranties of the Company
contained herein (including those representations and warranties set forth in
the Pooling and Servicing Agreement and incorporated herein), to the accuracy of
the statements of the Company made in any certificate or other document
delivered pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, and to the following additional conditions:
A. The Registration Statement shall have become effective no
later than the date hereof, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
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<PAGE> 14
threatened, and the Prospectus shall have been filed pursuant to Rule
424(b) of the 1933 Act as shall be required pursuant to such Rule.
B. The Underwriters shall have received the Pooling and
Servicing Agreement and the Offered Certificates in form and substance
satisfactory to the Underwriters, duly executed by all signatories
required pursuant to respective terms thereof.
C. (1) The Underwriters hall have received the favorable opinion
of O'Melveny & Myers LLP, special counsel to the Company, or of such
other counsel to the Company as shall be acceptable to the Underwriters,
such opinion or opinions, dated the Closing Date, in form and substance
satisfactory to the Underwriters, and collectively covering the
substantive matters referred to in Appendix A attached hereto.
(2) The Underwriters shall have received the favorable opinion
of Stroock & Stroock & Lavan LLP, special counsel to the Underwriters,
dated the Closing Date, with respect to the Pooling and Servicing
Agreement, the Certificates of such Series, the due authorization,
execution and delivery of this Agreement and the Pricing Agreement, and
such other matters as the Underwriters may reasonably request.
In rendering their opinions, the counsel described in this
Paragraph C may rely, as to matters of fact, on certificates of
responsible officers of the Company, the Trustee and public officials.
Such opinions may also assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the
parties thereto other than the Company.
D. The Underwriters shall have received a letter from Price
Waterhouse LLP, dated the date of the Prospectus Supplement, in form and
substance satisfactory to the Underwriters, to the effect that they have
performed certain specified procedures requested by the Underwriters
with respect to the information set forth in the Prospectus and certain
matters relating to the Company.
E. The Fixed Rate Group Class A Certificates shall have been
rated in the highest rating category by Moody's Investors Service, Inc.
("Moody's") and Fitch IBCA, Inc. ("Fitch"), and such ratings shall not
have been rescinded. The Class M-1F Certificates shall have been rated
"Aa2" by Moody's and "AA" by Fitch, and such ratings shall not have been
rescinded. The Class M-2F Certificates shall have been rated "A2" by
Moody's and "A" by Fitch, and such ratings shall not have been
rescinded. The Class B-1F Certificates shall have been rated "Baa2" by
Moody's and "BBB" by Fitch, and such ratings shall not have been
rescinded. The Class A-1A Certificates and the Class A-2A Certificates
shall have been rated in the highest ratings category by Moody's, Fitch
and "AAA" by Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc. ("S&P") and such ratings shall not have been
rescinded. The Underwriters and counsel for the Underwriters shall have
received copies, addressed to the Underwriters and upon which they may
rely, of any opinions of counsel supplied
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<PAGE> 15
to the rating organizations relating to any matters with respect to the
Certificates. Any such opinions shall be dated the Closing Date.
F. The Underwriters shall have received from the Company a
certificate, signed by the president, an executive vice president or a
vice president of the Company, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement (excluding Form 8-K - Computational Materials and
Form 8-K ABS Term Sheets), the Pooling and Servicing Agreement and this
Agreement and that, to the best of his or her knowledge based upon
reasonable investigation, the representations and warranties of the
Company in this Agreement, as of the Closing Date, in the Pooling and
Servicing Agreement and in all related agreements, as of the date
specified in such agreements, are true and correct, and the Company has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date and
that no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of his or her knowledge, are contemplated by
the Commission.
The Company shall attach to such certificate an incumbency
certificate and shall certify in an officer's certificate a true and
correct copy of its articles of incorporation and bylaws which are in
full force and effect as of each relevant date and on the date of such
certificate and a certified true copy of the resolutions of its Board of
Directors with respect to the transactions contemplated herein.
G. The Underwriters shall have received a favorable opinion of
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to the Underwriters and covering the substantive matters
referred to in Appendix B attached hereto.
In rendering such opinion, such counsel may rely, as to matters
of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Trustee.
H. The Underwriters shall have received from the Trustee a
certificate, signed by the president, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Trustee, signed
or signs the Certificates, the Pooling and Servicing Agreement or any
other document delivered pursuant hereto, on the Execution Time or on
the Closing Date, in connection with the transactions described in the
Pooling and Servicing Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the signatures of such
persons appearing on such documents are their genuine signatures.
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<PAGE> 16
I. The Policy relating to the Adjustable Rate Group Certificates
of such Series shall have been duly executed and issued at or prior to
the Closing Date and shall conform in all material respects to the
description thereof in the Prospectus.
J. The Underwriters shall have received a favorable opinion of
counsel to the Insurer, dated the Closing Date, in form and substance
satisfactory to the Underwriters and covering the substantive matters
referred to in Appendix C attached hereto.
In rendering such opinion, such counsel may rely, as to matters
of fact, on certificates of responsible officers of the Company, the
Trustee, the Insurer and public officials. Such opinion may assume the
due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the
Insurer.
K. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any intended or
potential downgrading or (ii) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
and originally requested by the Company relating to any previously
issued mortgage pass-through securities of the Company by any
"nationally recognized statistical rating organization" (as such term is
defined for purposes of the Exchange Act).
L. On or prior to the Closing Date there has been no
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any review or possible change in rating
the direction of which has not been indicated, in the rating accorded
the Insurer's claims paying ability by any "nationally recognized
statistical rating organization" (as such term is defined for purposes
of the Exchange Act).
M. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, in the earnings, business or operations (i) of the Company,
since the date of the Company's Recent Financial Statements, filed with
the Commission or (ii) the Insurer, that is in the Representative's
judgment material and adverse and that makes it in the Representative's
judgment impractical to market the Offered Certificates on the terms and
in the manner contemplated in the Prospectus.
N. The Underwriters and counsel for the Underwriters shall have
received copies of any separate opinions of counsel to the Company or
the Insurer supplied to the Trustee or any of S&P, Moody's or Fitch
relating to matters with respect to the Offered Certificates or the
Policy, and such opinions shall be dated the Closing Date and addressed
to the Underwriters and upon which they may rely.
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<PAGE> 17
O. The Underwriters shall have received such further
information, certificates and documents as the Underwriters may
reasonably have requested not less than one (1) full business day prior
to the Closing Date.
P. There shall have been executed and delivered by Aames
Financial Corporation, the corporate parent of the Company ("AFC"), a
letter agreement with the Underwriters, pursuant to which AFC agrees to
become jointly and severally liable with the Company for the payment of
the Joint and Several Obligations (as defined in such letter agreement).
Such letter agreement with the Underwriters is substantially in the form
of Exhibit A hereto.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects, as determined by the Representative and
counsel to the Underwriters, when and as provided in this Agreement, this
Agreement and/or Pricing Agreement and all obligations of the Underwriters
hereunder and thereunder, may be canceled on, or at any time prior to, the
Closing Date by the Representative. Notice of such cancellation shall be given
to the Company in writing, or by telephone or telegraph confirmed in writing.
The Underwriters and the Company shall receive, subsequent to the
Closing Date, a letter from Price Waterhouse LLP, dated on or before the filing
of the Form 8-K - Mortgage Pool in form and substance satisfactory to the
Underwriters, to the effect that they have performed certain specified
procedures requested by the Underwriters with respect to the information set
forth in such Form 8-K - Mortgage Pool.
7. Expenses. If the sale of the Certificates of any Series provided for
herein is not consummated by reason of a default by the Company in its
obligations hereunder (including the failure to satisfy any of the conditions
specified in Section 6), except in the case of a termination of this Agreement
in accordance with Section 12 hereof, then the Company will reimburse the
Underwriters, upon demand, for all reasonable out-of-pocket expenses (including,
but not limited to, the reasonable fees and expenses of their counsel) that
shall have been incurred by them in connection with their investigation with
regard to the Company and the Offered Certificates and the proposed purchase and
sale of the Offered Certificates.
8. Indemnification and Contribution.
A. Regardless of whether any Offered Certificates are sold, the
Company will indemnify and hold harmless each Underwriter, each of their
respective officers and directors and each person who controls any
Underwriter within the meaning of the 1933 Act or the Exchange Act,
against any and all losses, claims, damages, or liabilities (including
the cost of any investigation, legal and other expenses incurred in
connection with and amounts paid in settlement of
any action, suit, proceeding or claim asserted), joint or several, to
which they or any of them may become subject, under the 1933 Act, the
Exchange Act or other federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of
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<PAGE> 18
a material fact contained (i) in the Registration Statement or arise out
of or are based upon the omission or alleged omission (and in the case
of any Computational Materials, as to which a Mortgage Pool Error (as
defined below) occurred) to state therein a material fact necessary to
make the statements therein not misleading or (ii) in the Prospectus or
arise out of or are based upon the omission or alleged omission (and in
the case of any Computational Materials, as to which a Mortgage Pool
Error occurred) to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and will reimburse each such indemnified party for
any legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability
or action; provided, however, that (a) the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made therein (x) in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of an Underwriter, as described (and to the
extent described) in Section 9A of this Agreement, or (y) in the Form
8-K - Computational Materials or in any Form 8-K - ABS Term Sheet, or
any amendment or supplement thereof, except to the extent that any
untrue statement or alleged untrue statement therein results (or is
alleged to have resulted) directly from, in the case of the Form 8-K -
Computational Materials, any Mortgage Pool Error, or, in the case of any
Form 8-K - ABS Term Sheets, any error in Company Provided Information
that was used in the preparation of (X) any Computational Materials or
ABS Term Sheets (or amendments or supplements thereof) included in the
Form 8-K - Computational Materials or Form 8-K - ABS Term Sheets (or
amendment or supplement thereof), or (Y) any written or electronic
materials furnished to prospective investors on which the Computational
Materials or Collateral Term Sheets (or amendments or supplements) were
based, (b) such indemnity with respect to any Corrected Statement (as
defined below) in such Prospectus (or supplement thereto) shall not
inure to the benefit of such Underwriter (or any person controlling such
Underwriter) from whom the person asserting any loss, claim, damage or
liability purchased the Offered Certificates that are the subject
thereof if such person did not receive a copy of a supplement to such
Prospectus at or prior to the confirmation of the sale of such Offered
Certificates and the untrue statement or omission of a material fact
contained in such Prospectus (or supplement thereto) was corrected (a
"Corrected Statement") in such other supplement and such supplement
timely was furnished by the Company to such Underwriter within a
reasonable time prior to the delivery of such confirmation, and (c) such
indemnity with respect to any error in Company Provided Information or
any Mortgage Pool Error shall not inure to the benefit of such
Underwriter (or any person controlling such Underwriter) from whom the
person asserting any loss, claim, damage or liability received any
Computational Materials or ABS Term Sheets (or any written or electronic
materials on which the Computational Materials or any ABS Term Sheets
are based) that were prepared on the basis of such erroneous Company
Provided Information or Mortgage Pool Error, if, within a reasonable
time prior to the time of confirmation of the sale of the applicable
Offered Certificates to such person, the Company notified such
Underwriter in writing of such error or provided in written or
electronic form information superseding or correcting
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<PAGE> 19
such error (in any such case, a "Corrected Error"), and such Underwriter
failed to notify such person thereof or to actually or constructively
deliver to such person corrected Computational Materials or ABS Term
Sheets (or underlying written or electronic materials). This indemnity
agreement will be in addition to any liability which the Company may
otherwise have. "Mortgage Pool Error" shall mean any error or omission
in the information concerning the characteristics of the Mortgage Loans
furnished by or on behalf of the Company to any of the Underwriters in
writing or by electronic transmission.
B. Regardless of whether any Offered Certificates are sold, each
Underwriter will severally indemnify and hold harmless the Company, each
of its officers and directors and each person, if any, who controls the
Company within the meaning of the 1933 Act or the Exchange Act against
any losses, claims, damages or liabilities to which they or any of them
become subject under the 1933 Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, to the same extent
as the foregoing indemnity, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in (i) the Registration Statement or arise out of or are based
upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein not misleading or in (ii) the
Prospectus or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made therein (a) in reliance upon and
in conformity with written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter, as
described in Section 9A of this Agreement, specifically for use in the
preparation thereof and so acknowledged in writing, or (b) any
Computational Materials or ABS Term Sheet (or amendments or supplements
thereof) furnished to the Company by such Underwriter pursuant to
Section 9A hereof and incorporated by reference in such Registration
Statement or the related Prospectus or any amendment or supplement
thereof (except that no such indemnity shall be available for any
losses, claims, damages or liabilities, or actions in respect thereof
resulting from any error in Company Provided Information or any Mortgage
Pool Error, other than a Corrected Error), and such Underwriter or the
Underwriters, as the case may be, will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection
with investigating or defending against such loss, claim, damage,
liability or action.
C. In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Paragraphs A and B above, such
person (hereinafter called the indemnified party) shall promptly notify
the person against whom such indemnity may be sought (hereinafter called
the indemnifying party) in writing thereof; but the omission to notify
the indemnifying party shall not relieve such indemnifying party from
any liability which it may have to any indemnified party otherwise than
under such Paragraph. The
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<PAGE> 20
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent
the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or
(ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them or because different defenses are available to such parties. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to
any local counsel) for all such indemnified parties, and that all such
fees and expenses shall be reimbursed as they are incurred. Such firm
shall be designated in writing by the Representative in the case of
parties indemnified pursuant to Paragraph A and by the Company in the
case of parties indemnified pursuant to Paragraph B. The indemnifying
party shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated above, the indemnifying
party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.
D. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to herein, then each indemnifying party,
in lieu of indemnifying such indemnified party, shall:
(i) in the case of any such losses, claims, damages or
liabilities which do not arise out of or are not based upon any
untrue statement or omission of a material fact in any
Computational Materials or ABS Term Sheet (or any amendments or
supplements thereof) contribute to the amount paid or payable by
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<PAGE> 21
such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Underwriters from the sale of the Offered Certificates; and
(ii) in the case of any such losses, claims, damages or
liabilities which arise out of or are based upon any untrue
statements or omissions of a material fact in any Computational
Materials or ABS Term Sheet (or any amendments or supplements
thereof), contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect both
the relative benefits received by the Company and the
Underwriters from the sale of the Offered Certificates and the
relative fault of the Company and of the applicable Underwriter
or Underwriters in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations.
The relative benefits received by the Company and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for that portion determined by multiplying
the total amount of such losses, claims, damages or liabilities,
including legal and other expenses, by a fraction, the numerator of
which is (x) the excess of the Aggregate Resale Price of the Offered
Certificates of the related Series over the aggregate purchase price of
the Offered Certificates specified in the Pricing Agreement and the
denominator of which is (y) the Aggregate Resale Price of such Offered
Certificates, and the Company is responsible for the balance, provided,
however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of the immediately preceding sentence,
the "Aggregate Resale Price" of the Offered Certificates at the time of
any determination shall be the weighted average of the purchase prices
(in each case expressed as a percentage of the aggregate principal
amount of the Offered Certificates so purchased), determined on the
basis of such principal amounts, paid to the Underwriters by all initial
purchasers of the Offered Certificates from the Underwriters. The
relative fault of the Company and the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact of the omission or alleged omission
to state a material fact relates to information supplied by the Company
or by the applicable Underwriter or Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters'
obligations in this Paragraph D to contribute are several in proportion
to their respective underwriting obligations and are not joint.
E. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
in Paragraph D. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in
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<PAGE> 22
Paragraph D shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of Section 8D(i), no
Underwriter shall be required to contribute any amount by which the
difference between the Aggregate Resale Price and the aggregate purchase
price of the Offered Certificates specified in the Pricing Agreement
exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission.
F. The Company and the Underwriters each expressly waive, and
agree not to assert, any defense to their respective indemnification and
contribution obligations under this Section 8 which they might otherwise
assert based upon any claim that such obligations are unenforceable
under federal or state securities laws or by reasons of public policy.
G. The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if
any, who controls the Underwriters within the meaning of the 1933 Act or
the Exchange Act; and the obligations of the Underwriters under this
Section 8 shall be in addition to any liability that the Underwriters
may otherwise have and shall extend, upon the same terms and conditions,
to each director of the Company and to each person, if any, who controls
the Company within the meaning of the 1933 Act or the Exchange Act;
provided, however, that in no event shall the Company or the
Underwriters be liable for double indemnification.
9. Information Supplied by Underwriters; Representations and Warranties
of the Underwriters.
A. The Underwriters and the Company agree that the following
constitute the only information furnished by or on behalf of the
Underwriters to the Company for the purposes of Sections 2B and 8A
hereof:
(i) the statements set forth in the last paragraph on
the front cover page of the Prospectus Supplement regarding
market making, and information under the heading "Underwriting"
in the Prospectus Supplement, to the extent such information
relates to all of the Underwriters and not to any particular
Underwriter or affiliate of any particular Underwriter, have
been supplied by or on behalf of all of the Underwriters
jointly;
(ii) the information under the heading "Underwriting" in
the Prospectus Supplement, to the extent such information
relates to a particular Underwriter or affiliate of such
Underwriter, and the information contained in any Form 8-K -
Computational Materials and in any Form 8-K - ABS Term Sheets to
the extent supplied to the Company by or on behalf of such
Underwriter to be filed in the related Current Report on Form
8-K, in each case excluding any
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<PAGE> 23
Company Provided Information and only to the extent not
substantially identical in form, substance, scope, content and
context to any information set forth in the Prospectus, has been
supplied by such Underwriter and shall relate to and be the
several responsibility of such Underwriter and no other
Underwriter.
"Computational Materials" shall mean those materials delivered by an
Underwriter to the Company within the meaning of the no-action letter dated May
20, 1994 issued by the Division of Corporation Finance of the Commission to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated,
and Kidder Structured Asset Corporation and the no-action letter dated May 27,
1994 issued by the Division of Corporation Finance of the Commission to the
Public Securities Association (together, the "Kidder Letters") for which the
filing of such material is a condition of the relief granted in such letters.
"ABS Term Sheet" shall mean those materials delivered by an Underwriter to the
Company in the form of "Structural Term Sheets" or "Collateral Term Sheets", in
each case within the meaning of the no-action letter dated February 13, 1995
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association (the "PSA Letter") for which the filing of such material
is a condition of the relief granted in such letter. "Company Provided
Information" shall mean any information presented in any ABS Term Sheet (or
underlying materials) provided to the Underwriters by or on behalf of the
Company specifically for use in ABS Term Sheets in writing or through electronic
or magnetic data storage or transmission methods, in tabular, graphic or textual
form, regardless of whether or not such information is presented in any ABS Term
Sheets in the same format in which such information was provided to the
Underwriters, but shall not include (i) any such information to the extent that,
as presented in any ABS Term Sheet, such information contains, or is alleged to
contain, any untrue statement of a material fact or omits, or is alleged to
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading due to any (a) typographical or
similar error caused by any party other than the Company or (b) stylistic,
contextual or other presentational considerations with respect to such ABS Term
Sheets, including the format of tables, the phraseology of text or the placement
or juxtaposition of such information in relation to any other information
presented therein (whether or not Company Provided Information), in each case,
not present in such information (in the aggregate), or in the manner of
presentation or communication thereof to the Underwriters, when provided to the
Underwriters by the Company or (ii) any information set forth in an ABS Term
Sheet to the extent that such information, as presented in the Prospectus is not
substantially identical in form, substance, scope, content or context thereto.
Each Underwriter shall deliver to the Company (or counsel to the Company) a
complete copy of all materials (which, if reasonably requested by the Company,
shall be on computer compatible disk or such other acceptable electronic form)
provided by such Underwriter to prospective investors in such Offered
Certificates which constitute or are deemed to constitute Computational
Materials or ABS Term Sheets, at least one business day before the date or dates
on which the related Form 8-K - Computational Materials or Form 8-K - ABS Term
Sheets relating to the Offered Certificates are required to be filed by the
Company with the Commission pursuant to Section 5K or 5L hereof.
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<PAGE> 24
B. Each Underwriter severally represents and warrants to and
agrees with the Company, that, as of the date of the related Closing
Date:
(i) any Computational Materials and ABS Term Sheets
furnished by it to the Company pursuant to Section 9A hereof
constitute (either in original, aggregated or consolidated form)
all of the materials furnished by it to prospective investors
prior to the time of delivery thereof to the Company and that it
reasonably believes that such materials constitute the type of
materials contemplated by the Kidder Letters and the PSA Letter;
and
(ii) on the date of delivery of any such Computational
Materials or ABS Term Sheets to the Company pursuant to this
Section 9 and on the related Closing Date such Computational
Materials and ABS Term Sheets (or materials) did not and will
not include any untrue statement of a material fact, or, when
read in conjunction with the related Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
Notwithstanding the foregoing, the Underwriters make no representation
or warranty as to whether any Computational Materials or ABS Term Sheets (or any
written or electronic materials on which such Computational Materials or ABS
Term Sheets are based) included or will include any untrue statement resulting
directly from any Mortgage Pool Error or, in the case of an ABS Term Sheet, any
error in Company Provided Information.
Each Underwriter agrees that it will not represent to investors that any
Computational Materials or ABS Term Sheets delivered thereto were prepared by,
or disseminated on behalf of, the Company.
10. Notices. All communications hereunder shall be in writing and, if
sent to the Underwriters, shall be mailed or delivered or telecopied and
confirmed in writing to the Representative at One New York Plaza, 15th Floor,
New York, New York 10038, Attention: Asset-Backed Finance Group, and, if sent to
the Company, shall be telegraphed and confirmed in writing to the Company at 350
South Grand Avenue, Los Angeles, California 90071, Attention: Gregory J.
Witherspoon; with a copy addressed to O'Melveny & Myers LLP, 400 S. Hope Street,
Los Angeles, California, 90071, Attention: David J. Johnson, Jr.
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<PAGE> 25
11. Survival. All representations, warranties, covenants and agreements
of the Company contained herein or in agreements or certificates delivered
pursuant hereto, the agreements of the Underwriters and the Company contained in
Section 8 hereof, and the representations, warranties and agreements of the
Underwriters contained in Section 3 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters or any controlling persons, or any subsequent purchaser or the
Company or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Certificates. The provisions of Sections
5, 7 and 8 hereof shall survive the termination or cancellation of this
Agreement or any Pricing Agreement.
12. Termination. The Underwriters shall have the right to terminate this
Agreement and/or the Pricing Agreement by giving notice as hereinafter specified
at any time at or prior to the applicable Closing Date if (a) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market, the Chicago Board Options Exchange, the Chicago Board of Trade
or the London Stock Exchange Limited, (b) trading of any securities of the
Company or AFC shall have been suspended on any exchange or in any
over-the-counter market, (c) a general moratorium on commercial banking
activities shall have been declared by any of the federal, California or New
York State authorities, (d) there shall have occurred any outbreak or escalation
of hostilities or any change in the national or international financial markets
or any calamity or crisis which, in the Representative's reasonable judgment, is
material and adverse, and, in the case of any of the events specified in clauses
(a) through (d), such event singly or together with any other such event makes
it in the Representative's reasonable judgment impractical to market the Offered
Certificates. Any such termination shall be without liability of any other party
except that the provisions of Paragraph G of Section 5 (except with respect
Section 5G(vii)) and Section 8 hereof shall at all times be effective. If the
Underwriters elect to terminate this Agreement and/or the Pricing Agreement as
provided in this Section 12, the Company shall be notified promptly by the
Representative by telephone, telegram or facsimile transmission, in any case,
confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person on purchasing a
Certificate from the Underwriters), and the officers and directors and
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, and no other persons will have any right or obligations
hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
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15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
26
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16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
Very truly yours,
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
-------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President - Finance
LEHMAN BROTHERS INC.
By: /s/ William E. Lighten
-------------------------------
Name: William E. Lighten
Title: Managing Director
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
<PAGE> 28
EXHIBIT A
December 8, 1997
Lehman Brothers Inc.
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Re: Underwriting Agreement for Aames Mortgage Trust, dated December 8, 1997
the "Underwriting Agreement") between Aames Capital Corporation
("Aames") and Lehman Brothers Inc., as Representative of the several
Underwriters named in Schedule I to the Pricing Agreement dated December
8, 1997 (the "Pricing Agreement")
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and Pricing Agreement
(collectively, the "Designated Agreement"), Aames has undertaken certain
financial obligations with respect to the indemnification of the Underwriters
with respect to the Registration Statement, and the Prospectus described in the
Designated Agreement. Any financial obligations of Aames under the Designated
Agreement, whether or not specifically enumerated in this paragraph, are
hereinafter referred to as the "Joint and Several Obligations;" provided,
however, that "Joint and Several Obligations" shall mean only the financial
obligations of Aames under the Designated Agreement (including the payment of
money damages for a breach of any of Aames' obligations under the Designated
Agreement, whether financial or otherwise) but shall not include any obligations
not relating to the payment of money.
As a condition of its execution of the Designated Agreement, the
Underwriters have required the undersigned, Aames Financial Corporation ("AFC"),
the parent corporation of Aames, to acknowledge its joint and several liability
with Aames for the payment of the Joint and Several Obligations under the
Designated Agreement.
Now, therefore, the Underwriters and AFC do hereby agree that:
Exhibit A-1
<PAGE> 29
(i) AFC hereby agrees to be absolutely and unconditionally jointly and
severally liable with Aames to the Underwriters for the payment of the Joint and
Several Obligations under the Designated Agreement.
(ii) AFC may honor its obligations hereunder either by direct payment of
any Joint and Several Obligations or by causing any Joint and Several
Obligations to be paid to the Underwriters by Aames or another affiliate of AFC;
provided however that this subparagraph shall not require the Underwriters to
seek satisfaction from any party other than Aames or AFC with respect to the
Joint and Several Obligations under the Designated Agreement.
Exhibit A-2
<PAGE> 30
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Designated Agreement.
Very truly yours,
AAMES FINANCIAL CORPORATION
By:
-------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By:
-------------------------------
Name:
Title:
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
Exhibit A-3
<PAGE> 31
APPENDIX A
FORM OF OPINION OF
COUNSEL TO THE COMPANY
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California.
2. AFC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
3. The Company has full corporate power and corporate authority to own
its assets and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Pooling and Servicing
Agreement, the Underwriting Agreement and Pricing Agreement (the "Documents").
4. AFC has full corporate power and corporate authority to own its
assets and to conduct its business as now being conducted and to enter into and
perform its obligations under the Letter Agreement.
5. The Company is duly qualified as a foreign corporation and is in good
standing under the laws of each jurisdiction where it owns or leases any real
property or has any permanently located employees.
6. The Company has all material licenses, franchises and permits of and
from all public, regulatory or governmental officials or bodies, necessary to
(i) conduct its business as now being conducted and as described in the
Prospectus, and (ii) perform its obligations under the Documents.
7. The execution, acknowledgment, delivery and performance by the
Company of the Documents have been duly authorized by all requisite corporate
action.
8. The execution, acknowledgment, delivery and performance by AFC of the
Letter Agreement have been duly authorized by all requisite corporate action.
9. Neither the execution or delivery of, nor the performance by the
Company of its obligations under, the Documents, nor the offer, issuance, sale
or delivery of the Certificates (i) violates any of the provisions of the
Company's Articles of Incorporation or By-laws, (ii) violates any judgment,
decree, writ, injunction, award, determination or order known to such counsel
which is applicable to Company or any of its properties, or by which the Company
or any of its properties are bound or affected, (iii) conflicts with, or results
in a breach of, or constitutes a default under, any of the provisions of any of
the Company's material contracts, or (iv) results in the creation or imposition
of any lien on any of its properties pursuant to the terms of any of the Company
material contracts.
Appendix A-1
<PAGE> 32
10. Neither the execution or delivery of, nor the performance by AFC of
its obligations under, the Letter Agreement (i) violates any of the provisions
of AFC's Certificate of Incorporation or By-laws, (ii) violates any judgment,
decree, writ, injunction, award, determination or order known to such counsel
which is applicable to AFC or any of its properties, or by which AFC or any of
its properties are bound or affected, (iii) conflicts with, or results in a
breach of, or constitutes a default under, any of the provisions of any of AFC's
material contracts, or (iv) results in the creation or imposition of any lien on
any of its properties pursuant to the terms of any of AFC's material contracts.
11. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by the Company in connection with its authorization,
execution, delivery of, or performance of its obligations under the Documents or
in connection with the issuance, sale or delivery of the Offered Certificates.
12. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by AFC in connection with its authorization, execution,
delivery of, or performance of its obligations under the Letter Agreement.
13. Based upon such counsel's knowledge, there is no pending or
threatened action, suit, proceeding or investigation before or by any court,
administrative agency, arbitrator or governmental body against or affecting the
Company which, if decided adversely, would materially and adversely affect (i)
the ability of the Company to perform its obligations under, or the validity or
enforceability of, the Documents, (ii) any mortgaged property or title of any
mortgagor to such mortgaged property, or (iii) the Trustee's ability to
foreclose or otherwise enforce the liens of the mortgage loans.
14. The Registration Statement is effective under the 1933 Act and, to
the best of such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued, or proceeding for that purpose
instituted or threatened by the Commission.
15. The Registration Statement as of its effective date and the
Prospectus as of the date there of, other than the Computational Materials,
numerical, financial and statistical data included or incorporated by reference
in the Registration Statement and the Prospectus, as to which such counsel need
not express an opinion, appeared on its face to be appropriately responsive in
all material respects to the applicable requirements of the 1933 Act and the
rules and regulations thereunder, except that such counsel need not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus except for those as
contemplated by paragraph 20 and 21 below.
16. The execution and delivery of each of the Underwriting Agreement and
the Pricing Agreement has been duly authorized by all necessary corporate action
of the Company and each of the Underwriting Agreement and the Pricing Agreement
has been duly executed and delivered by the Company; the execution and delivery
of the Letter Agreement has been duly authorized by all necessary corporate
action of AFC and the Letter Agreement has been duly executed and delivered by
AFC.
Appendix A-2
<PAGE> 33
17. The execution and delivery of the Pooling and Servicing Agreement
has been duly authorized by the Company and the Agreement has been duly executed
and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other
similar laws relating to or affecting creditors' rights generally or (b) general
principles of equity or public policy, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
18. The Offered Certificates will, when duly executed and authenticated
as specified in the Pooling and Servicing Agreement and delivered by the Trustee
on behalf of the Trust in exchange for the Mortgage Loans in the related
Mortgage Loan Group and the other assets conveyed by the Company to the Trust
pursuant to the Pooling and Servicing Agreement, be entitled to the benefits of
the Pooling and Servicing Agreement afforded to the related Class.
19. The Offered Certificates and the Pooling and Servicing Agreement
conform in all material respects to the descriptions thereof contained in the
Prospectus.
20. The statements in the base Prospectus and the Prospectus Supplement,
as the case may be, under the headings "Risk Factors," "Certain Legal Aspects of
the Mortgage Loans," "Certain Federal Income Tax Considerations," and "ERISA
Considerations," to the extent that they constitute matters of California, New
York or federal law or legal conclusions with respect thereto, are correct in
all material respects to the extent of those consequences or aspects that are
discussed.
21. Each of the REMIC Pools as described in the Pooling and Servicing
Agreement will qualify as a "real estate mortgage investment conduit" ("REMIC")
within the meaning of Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code"), the Offered Certificates and Class C Certificates
described in the Prospectus and issued pursuant to the Pooling and Servicing
Agreement will be treated as "regular interests" in the REMIC for purposes of
Code Section 860G(a)(1) and the Class R Certificates issued pursuant to the
Pooling and Servicing Agreement will be treated as the "residual interest" in
the REMIC for purposes of Code Section 860G(a)(2), assuming: (i) an election is
made to treat each REMIC Pool as a REMIC, (ii) compliance with the Pooling and
Servicing Agreement and compliance with changes in the law, including any
amendments to the Code or applicable Treasury regulations thereunder. None of
the REMIC Pools will be subject to California income or franchise tax in effect
on the date of such opinion, as long as such REMIC Pool complies with any
changes in the statutory and regulatory requirements of California law. Such
counsel may state that a REMIC Pool may, however, be subject to California
income or franchise tax in certain circumstances where federal income tax is
also imposed, such as in the case of net income from foreclosure property; and
in addition, a REMIC Pool may be subject to the minimum tax imposed under the
California Revenue and Taxation Code Sections specified therein.
22. The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended, and the Trust created thereby
is not required to be registered,
Appendix A-3
<PAGE> 34
and neither the Company nor AFC is an "investment company" as such term is
defined, under the Investment Company Act of 1940, as amended.
23. Neither the transfer of the Mortgage Loans to the Trust, the
issuance and sale of the Offered Certificates to the Underwriters pursuant to
the Underwriting Agreement, the compliance by the Company with other provisions
of the Underwriting Agreement, the Pooling and Servicing Agreement and the
Certificates, nor the consummation of the transactions therein contemplated as
to the transfer of the Mortgage Loans and the sale of the Offered Certificates
by the Company require the consent, approval, authorization, order, registration
or qualification of or with any court or governmental authority, except such as
have been obtained or effected under the 1933 Act (and except with respect to
any consent, approval, authorization, registration or qualification which may be
required under state securities or Blue Sky laws or with respect to the purchase
and sale of the retained Certificates, as to which matters such counsel need not
express an opinion) and such other approvals as have been obtained, or conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under, the charter or bylaws of the Company, or any
statute or regulation applicable to the Company or, to the best of such
counsel's knowledge, any judgment, decree or order applicable to the Company of
any court, regulatory body, administrative agency or other governmental
authority.
24. Assuming compliance with the provisions of the Pooling and Servicing
Agreement, and subject to the limitations and conditions set forth therein, the
Trustee and the Company, acting in its capacity as Servicer under the terms of
the Pooling and Servicing Agreement, will be entitled to enforce the terms of
each Note and Mortgage in accordance with their respective terms, except to the
extent such enforcement may be limited by (a) bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other similar laws
relating to or affecting creditors' rights generally or (b) general principles
of equity or public policy, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
In addition, such counsel shall state that nothing has come to their
attention that would lead them to believe that the Registration Statement (other
than the Computational Materials, the financial, numerical, statistical and
quantitative information included or incorporated by reference therein, as to
which such counsel need not make any statement), at the Effective Time,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus (other than the Computational Materials,
the financial, numerical, statistical and quantitative information included or
incorporated by reference therein, and the information with respect to the
Certificate Insurer, as to which such counsel need not make any statement), at
its issue date or at the date of the Closing, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Appendix A-4
<PAGE> 35
APPENDIX B
FORM OF OPINION OF COUNSEL TO TRUSTEE
1. The Trustee is a national banking association with trust powers, duly
organized and validly existing in good standing under the laws of the United
States of America, and has all requisite power and authority to enter into the
Pooling and Servicing Agreement and perform the obligations of trustee
thereunder.
2. The Pooling and Servicing Agreement has been duly authorized,
executed, and delivered by the Trustee and constitutes the legal, valid, and
binding obligation of the Trustee enforceable against the Trustee in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy
and insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles.
3. The execution and delivery of the Pooling and Servicing Agreement by
the Trustee and the performance by the Trustee of its terms do not conflict with
or result in a violation (A) of any law or regulation of the United States of
America or the State of California governing the banking or trust powers of the
Trustee, or (B) the Articles of Association or By-laws of the Trustee.
4. No approval, authorization, or other action by, or filing with, any
governmental authority of the United States of America or the State of
California having jurisdiction over the banking or trust powers of the Trustee
is required in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance by the Trustee of the terms of the
Pooling and Servicing Agreement.
5. The Trustee has the power and authority to perform its duties
pursuant to Sections 8.01 and 8.02 of the Pooling and Servicing Agreement to act
as a successor servicer, including the making of advances as described in
Sections 8.01 and 8.02 of the Pooling and Servicing Agreement.
6. The Certificates have been duly executed, authenticated and delivered
by the Trustee.
Appendix B-1
<PAGE> 36
APPENDIX C
FORM OF OPINION OF COUNSEL TO INSURER
1. The Insurer is a stock insurance company duly organized, validly
existing and authorized to conduct financial guaranty insurance business under
the laws of the State of New York.
2. The Policy, the Insurance and Indemnity Agreement and the
Indemnification Agreement (the "Agreements") have been duly authorized, executed
and delivered by the Insurer.
3. The Policy and the Agreements constitute valid and binding
obligations of the Insurer, enforceable against the Insurer in accordance with
their terms subject, as to the enforcement of remedies, bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of the
bankruptcy or insolvency of the Insurer and to the application of general
principles of equity and subject, in the case of the Indemnification Agreement,
to principles of public policy limiting the right to enforce the indemnification
provision contained therein insofar as they relate to indemnification for
liabilities arising under applicable securities laws.
4. The Policy is exempt from registration under the 1933 Act.
5. Neither the execution or delivery by the Insurer of the Policy or the
Agreements, nor the performance by the Insurer of its obligations thereunder,
will conflict with any provision of the certificate of incorporation or the
by-laws of the Insurer or, to the best of such counsel's knowledge, result in a
breach of, or constitute a default under any agreement or other instrument to
which the Insurer is a party to which it or any of its property is bound, or to
the best of such counsel's knowledge, violate any consent, order to decree
applicable to the Insurer of any governmental or regulatory body, administrative
agency, court or arbitrator having jurisdiction over the Insurer (except that in
the published opinion of the Commission the indemnification provisions of the
Indemnification Agreement, insofar as they relate to indemnification or
liabilities arising under the 1933 Act, are against public policy as expressed
in the 1933 Act and are therefore unenforceable).
In addition, please be advised such counsel has reviewed the description
of the Insurer under the caption "Certificate Insurer" in the Prospectus
Supplement (the "Offering Document") of the Transferor with respect to the
securities. The information provided in the Offering Document with respect to
the Insurer is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant under the
1933 Act in connection with the public offer and sale of securities of such
registrant. Within such limited scope of disclosure, however, there has not come
to such counsel's attention any information which would cause such counsel to
believe that the description of the Insurer referred to above, as of the date of
the Offering Document or as of the date of such opinion, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they are made, not
Appendix C-1
<PAGE> 37
misleading (except that such counsel need not express an opinion with respect to
any financial statements or other financial information contained or referred to
therein).
Appendix C-2
<PAGE> 38
ANNEX A
AAMES CAPITAL CORPORATION
Mortgage Pass-Through Certificates
PRICING AGREEMENT
December 8, 1997
Lehman Brothers Inc.,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
Aames Capital Corporation (the "Company") proposes, subject to the terms
and condition stated herein and the Underwriting Agreement, dated December 8,
1997 (the "Underwriting Agreement"), between the Company and Lehman Brothers
Inc., as underwriter and as Representative (in such capacity, the
"Representative" of the several underwriters named in Schedule I hereto
(together with the Representative, the "Underwriters"), to issue and sell to the
Underwriters the series of mortgage pass-through certificates specified in
Schedule II hereto (the "Certificates"). Each of the provisions of the
Underwriting Agreement is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Pricing Agreement, except that each representation and warranty
with respect to the Prospectus in Section 1 of the Underwriting Agreement shall
be deemed to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in relation
to the Prospectus as amended or supplemented with respect to the Certificates.
Each reference to Representative contained in the Underwriting Agreement shall
be deemed to refer to the Representative named herein. Unless otherwise defined
herein, terms in the Underwriting Agreement are used herein as therein defined.
Annex A-1
<PAGE> 39
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Certificates in the form
heretofore delivered to you is now proposed to be filed or, in the case of a
supplement, mailed for filing with the Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Company, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Certificates set forth opposite the name of such Underwriter set forth in
Schedule I hereto plus, in the case of the Fixed Rate Class A, Class M-1F, Class
M-2F, and Class B-1F Certificates, accrued interest at the applicable
Pass-Through Rate from December 1, 1997.
Annex A-2
<PAGE> 40
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Company.
Very truly yours,
AAMES CAPITAL CORPORATION
By:____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
LEHMAN BROTHERS INC.
By:__________________________________
Name:
Title:
For itself and as
Representative of the several
Underwriters named in
Schedule I hereto
Annex A-3
<PAGE> 41
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of Amount of Amount of
Class A-1F Class A-2F Class A-3F Class A-4F Class A-5F Class A-6F Class M-1F
Underwriter Certificates Certificates Certificates Certificates Certificates Certificates Certificates
----------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers $18,596,000 $ 6,799,000 $ 8,810,000 $3,622,000 $3,903,000 $4,750,000 $3,300,000
Inc.
Donaldson, Lufkin $33,471,000 $12,238,000 $15,855,000 $6,517,000 $7,022,000 $8,550,000 $5,940,000
& Jenrette
Securities
Corporation
Morgan Stanley & $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000
Co. Incorporated
NationsBanc $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000
Montgomery
Securities, Inc.
Prudential $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000
Securities
Incorporated
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Amount of Amount of Amount of Amount of
Class M-2F Class B-1F Class A-1A Class A-2A
Underwriter Certificates Certificates Certificates Certificates
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Lehman Brothers $2,750,000 $2,475,000 $37,800,000 $133,200,000
Inc.
Donaldson, Lufkin $4,950,000 $4,455,000 $21,000,000 $ 74,000,000
& Jenrette
Securities
Corporation
Morgan Stanley & $1,100,000 $ 990,000 $ 8,400,000 $ 29,600,000
Co. Incorporated
NationsBanc $1,100,000 $ 990,000 $ 8,400,000 $ 29,600,000
Montgomery
Securities, Inc.
Prudential $1,100,000 $ 990,000 $ 8,400,000 $ 29,600,000
Securities
Incorporated
</TABLE>
2
<PAGE> 43
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus December 16, 1997
Prospectus Supplement dated December 16, 1997
Mortgage Pass-Through Certificates, Series 1997-D
Title of Certificates: Class A-1F
Amount of Certificates: $74,381,000
Pass-Through Rate: 6.155% for the initial Interest
Period and for each subsequent
Interest Period LIBOR +0.155%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-2F
Amount of Certificates: $27,197,000
Pass-Through Rate: 6.550%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-3F
Amount of Certificates: $35,234,000
Pass-Through Rate: 6.590%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
<PAGE> 44
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-4F
Amount of Certificates: $14,483,000
Pass-Through Rate: 6.800%
Purchase Price Percentage: 99.968750%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-5F
Amount of Certificates: $15,605,000
Pass-Through Rate: 7.210%
Purchase Price Percentage: 99.968750%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-6F
Amount of Certificates: $19,000,000
Pass-Through Rate: 6.740%
Purchase Price Percentage: 99.953125%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
2
<PAGE> 45
Title of Certificates: Class M-1F
Amount of Certificates: $13,200,000
Pass-Through Rate: 7.170%
Purchase Price Percentage: 99.968751%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class M-2F
Amount of Certificates: $11,000,000
Pass-Through Rate: 7.350%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class B-1F
Amount of Certificates: $9,900,000
Pass-Through Rate: 7.640%
Purchase Price Percentage: 99.953125%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-1A
3
<PAGE> 46
Amount of Certificates: $84,000,000
Pass-Through Rate: With respect to the first week of
the initial Interest Period and
the related Distribution Date
5.88%; thereafter Fed Funds
Average Rate +0.30%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Insurer: Financial Security
Assurance, Inc.
Title of Certificates: Class A-2A
Amount of Certificates: $296,000,000
Pass-Through Rate: With respect to the first week of
the initial Interest Period and
the related Distribution Date
6.25%; thereafter LIBOR +0.25%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Insurer: Financial Security
Assurance, Inc.
Representative with respect to the Offered Certificates: Lehman Brothers Inc.
Location of Settlement: The offices of O'Melveny & Myers LLP, 400 S. Hope
Street, Los Angeles, California
4
<PAGE> 1
Exhibit 1.2
AAMES CAPITAL CORPORATION
Mortgage Pass-Through Certificates
PRICING AGREEMENT
December 8, 1997
Lehman Brothers Inc.,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Lehman Brothers Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Ladies and Gentlemen:
Aames Capital Corporation (the "Company") proposes, subject to the terms
and condition stated herein and the Underwriting Agreement, dated December 8,
1997 (the "Underwriting Agreement"), between the Company and Lehman Brothers
Inc., as underwriter and as Representative (in such capacity, the
"Representative" of the several underwriters named in Schedule I hereto
(together with the Representative, the "Underwriters"), to issue and sell to the
Underwriters the series of mortgage pass-through certificates specified in
Schedule II hereto (the "Certificates"). Each of the provisions of the
Underwriting Agreement is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Pricing Agreement, except that each representation and warranty
with respect to the Prospectus in Section 1 of the Underwriting Agreement shall
be deemed to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in relation
to the Prospectus as amended or supplemented with respect to the Certificates.
Each reference to Representative contained in the Underwriting Agreement shall
be deemed to refer to the Representative named herein. Unless otherwise defined
herein, terms in the Underwriting Agreement are used herein as therein defined.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Certificates in the form
heretofore delivered to you is now proposed to be filed or, in the case of a
supplement, mailed for filing with the Commission.
<PAGE> 2
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Company, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Certificates set forth opposite the name of such Underwriter set forth in
Schedule I hereto plus, in the case of the Fixed Rate Class A, Class M-1F, Class
M-2F, and Class B-1F Certificates, accrued interest at the applicable
Pass-Through Rate from December 1, 1997.
-2-
<PAGE> 3
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Company.
Very truly yours,
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
-------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President - Finance
CONFIRMED AND ACCEPTED, as of the date first above written:
LEHMAN BROTHERS INC.
By: /s/ Samir Tabet
-------------------------------
Name: Samir Tabet
Title: Senior Vice President
For itself and as
Representative of the several
Underwriters named in
Schedule I hereto
-3-
<PAGE> 4
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of Amount of Amount of Amount of
Class A-1F Class A-2F Class A-3F Class A-4F Class A-5F Class A-6F Class M-1F Class M-2F
Underwriter Certificates Certificates Certificates Certificates Certificates Certificates Certificates Certificates
- ----------- ----------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers $18,596,000 $ 6,799,000 $ 8,810,000 $3,622,000 $3,903,000 $4,750,000 $3,300,000 $2,750,000
Inc.
Donaldson, Lufkin $33,471,000 $12,238,000 $15,855,000 $6,517,000 $7,022,000 $8,550,000 $5,940,000 $4,950,000
& Jenrette
Securities
Corporation
Morgan Stanley & $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000 $1,100,000
Co. Incorporated
NationsBanc $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000 $1,100,000
Montgomery
Securities, Inc.
Prudential $ 7,438,000 $ 2,720,000 $ 3,523,000 $1,448,000 $1,560,000 $1,900,000 $1,320,000 $1,100,000
Securities
Incorporated
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Principal Principal Principal
Amount of Amount of Amount of
Class B-1F Class A-1A Class A-2A
Underwriter Certificates Certificates Certificates
- ----------- ---------- ----------- ------------
<S> <C> <C> <C>
Lehman Brothers $2,475,000 $37,800,000 $133,200,000
Inc.
Donaldson, Lufkin $4,455,000 $21,000,000 $ 74,000,000
& Jenrette
Securities
Corporation
Morgan Stanley & $ 990,000 $ 8,400,000 $ 29,600,000
Co. Incorporated
NationsBanc $ 990,000 $ 8,400,000 $ 29,600,000
Montgomery
Securities, Inc.
Prudential $ 990,000 $ 8,400,000 $ 29,600,000
Securities
Incorporated
</TABLE>
2
<PAGE> 6
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus December 16, 1997
Prospectus Supplement dated December 16, 1997
Mortgage Pass-Through Certificates, Series 1997-D
Title of Certificates: Class A-1F
Amount of Certificates: $74,381,000
Pass-Through Rate: 6.155% for the initial Interest
Period and for each subsequent
Interest Period LIBOR +0.155%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-2F
Amount of Certificates: $27,197,000
Pass-Through Rate: 6.550%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-3F
Amount of Certificates: $35,234,000
Pass-Through Rate: 6.590%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
<PAGE> 7
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-4F
Amount of Certificates: $14,483,000
Pass-Through Rate: 6.800%
Purchase Price Percentage: 99.968750%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-5F
Amount of Certificates: $15,605,000
Pass-Through Rate: 7.210%
Purchase Price Percentage: 99.968750%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-6F
Amount of Certificates: $19,000,000
Pass-Through Rate: 6.740%
Purchase Price Percentage: 99.953125%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class M-1F
2
<PAGE> 8
Amount of Certificates: $13,200,000
Pass-Through Rate: 7.170%
Purchase Price Percentage: 99.968751%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class M-2F
Amount of Certificates: $11,000,000
Pass-Through Rate: 7.350%
Purchase Price Percentage: 99.984375%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class B-1F
Amount of Certificates: $9,900,000
Pass-Through Rate: 7.640%
Purchase Price Percentage: 99.953125%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $25,000.00 and integral multiples
of $1.00 in excess thereof.
Title of Certificates: Class A-1A
Amount of Certificates: $84,000,000
Pass-Through Rate: With respect to the first week of
the initial
3
<PAGE> 9
Interest Period and the related
Distribution Date 5.88%;
thereafter Fed Funds Average Rate
+0.30%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Insurer: Financial Security
Assurance, Inc.
Title of Certificates: Class A-2A
Amount of Certificates: $296,000,000
Pass-Through Rate: With respect to the first week of
the initial Interest Period and
the related Distribution Date
6.25%; thereafter LIBOR +0.25%
Purchase Price Percentage: 100%
Cut-off Date: December 1, 1997
Closing: December 19, 1997
Denominations: $1,000.00 and integral multiples
of $1.00 in excess thereof.
Insurer: Financial Security
Assurance, Inc.
Representative with respect to the Offered Certificates: Lehman Brothers Inc.
Location of Settlement: The offices of O'Melveny & Myers LLP, 400 S. Hope
Street, Los Angeles, California
4
<PAGE> 1
================================================================================
AAMES CAPITAL CORPORATION
as Seller and Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of December 1, 1997
Aames Mortgage Trust 1997-D
Mortgage Pass-Through Certificates,
Series 1997-D
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE ONE DEFINITIONS.......................................................1
Section 1.01. Definitions.................................................1
Section 1.02. Interest Calculations......................................45
ARTICLE TWO CONVEYANCE OF THE TRUST; ORIGINAL ISSUANCE OF CERTIFICATES.......46
Section 2.01. Conveyance of the Trust....................................46
Section 2.02. Conveyance of the Subsequent Mortgage Loans;
Fixed Price Contract ......................................48
Section 2.03. Acceptance by the Trustee; Repurchase or
Substitution of Mortgage Loans ............................51
Section 2.04. Representations and Warranties Regarding the
Servicer and the Seller ...................................53
Section 2.05. Representations and Warranties of the Seller
Regarding the Mortgage Loans ..............................55
Section 2.06. Execution and Authentication of Certificates...............65
Section 2.07. [Reserved].................................................65
Section 2.08. Indemnification of the Trust...............................65
ARTICLE THREE ADMINISTRATION AND SERVICING OF MORTGAGE LOANS;
CERTIFICATE ACCOUNT .........................................................65
Section 3.01. The Servicer and the Sub-Servicers.........................66
Section 3.02. Collection of Certain Mortgage Loan Payments;
Collection Account and Certificate Account.................67
Section 3.03. Additional Servicing Responsibilities for the
Adjustable Rate Mortgage Loans.............................70
Section 3.04. Hazard Insurance Policies..................................70
Section 3.05. Enforcement of Due-on-Sale Clauses;
Assumption and Modification Agreements.....................71
Section 3.06. Realization upon Liquidated Mortgage Loans.................72
Section 3.07. Trustee to Cooperate; Release of Mortgage Files............74
Section 3.08. Servicing Compensation; Payment of Certain
Expenses by the Servicer ..................................75
Section 3.09. Annual Statement as to Compliance..........................75
Section 3.10. Annual Independent Public Accountants' Servicing Report....75
Section 3.11. Access to Certain Documentation and
Information Regarding the Mortgage Loans...................76
Section 3.12. Maintenance of Fidelity Bond and Errors
and Omission Policy .......................................76
Section 3.13. Notices to the Rating Agencies and the Trustee.............76
Section 3.14. Reports of Foreclosures and Abandonment
of Mortgaged Properties ...................................76
Section 3.15. Sub-Servicers and Sub-Servicing Agreements.................77
Section 3.16. Prefunding Account.........................................77
Section 3.17. Capitalized Interest Account...............................79
Section 3.18. Supplemental Interest Reserve Fund.........................80
Section 3.19. Payments on the Financial Guaranty Insurance Policy........80
Section 3.20. Rights of the Financial Guaranty Insurer
to Exercise Rights of Adjustable
Rate Group Certificateholders..............................83
Section 3.21. Trust and Accounts Held for Benefit of the
Certificateholders and Financial Guaranty Insurer..........84
ARTICLE FOUR REMITTANCE REPORT...............................................85
Section 4.01. Servicer Remittance Report.................................85
Section 4.02. Trustee Distribution Date Statement.........................85
i
<PAGE> 3
ARTICLE FIVE PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS...................87
Section 5.01. Distributions..............................................87
Section 5.02. Monthly Advances; Servicing Advances.......................92
Section 5.03. Statements to Certificateholders...........................93
Section 5.04. Applied Realized Loss Amount...............................95
ARTICLE SIX THE CERTIFICATES.................................................96
Section 6.01. The Certificates...........................................96
Section 6.02. Registration of Transfer and Exchange of Certificates......96
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.........101
Section 6.04. Persons Deemed Owners.....................................101
Section 6.05. Actions of Certificateholders.............................102
ARTICLE SEVEN THE SERVICER AND THE SELLER...................................102
Section 7.01. Liability of the Servicer.................................102
Section 7.02. Merger or Consolidation of, or Assumption
of the Obligations of, the Servicer.......................102
Section 7.03. Limitation on Liability of the Servicer and Others........102
Section 7.04. Servicer Not to Resign....................................103
Section 7.05. Merger or Consolidation of the Seller.....................103
ARTICLE EIGHT DEFAULT.......................................................104
Section 8.01. Events of Default.........................................104
Section 8.02. Trustee to Act; Appointment of Successor..................106
Section 8.03. Notifications to Certificateholders.......................106
Section 8.04. Assumption or Termination of Sub-Servicing
Agreements by the Trustee or any Successor Servicer.......107
ARTICLE NINE THE TRUSTEE....................................................107
Section 9.01. Duties of the Trustee.....................................107
Section 9.02. Certain Matters Affecting the Trustee.....................108
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.....110
Section 9.04. Trustee May Own Certificates..............................110
Section 9.05. Payment of the Trustee's Fees and Expenses................110
Section 9.06. Eligibility Requirements for the Trustee..................111
Section 9.07. Resignation or Removal of the Trustee.....................111
Section 9.08. Successor Trustee.........................................111
Section 9.09. Merger or Consolidation of the Trustee....................112
Section 9.10. Appointment of Co-Trustee or Separate Trustee.............112
Section 9.11. Compliance with REMIC Provisions..........................113
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates ...............................114
Section 9.14. Tax Returns...............................................115
Section 9.15. Taxpayer Identification Number............................115
Section 9.16 Miscellaneous REMIC Provisions.............................115
ii
<PAGE> 4
ARTICLE TEN TERMINATION.....................................................1
Section 10.01. Termination Upon Purchase or
Liquidation of Mortgage Loans ...........................2
Section 10.02. Additional Termination Requirements......................4
ARTICLE ELEVEN MISCELLANEOUS PROVISIONS.....................................5
Section 11.01. Amendment................................................5
Section 11.02. Recordation of Agreement.................................6
Section 11.03. Limitation on Rights of Certificateholders...............6
Section 11.04. Governing Law............................................7
Section 11.05. Notices..................................................7
Section 11.06. Severability of Provisions...............................7
Section 11.07. Assignment...............................................8
Section 11.08. Certificates Nonassessable and Fully Paid................8
iii
<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule I List of Sub-Servicers
Exhibit A Forms of Certificates
Exhibit B Mortgage Loan Schedule
Exhibit C Form of Annual Statement as to Compliance
Exhibit D Form of Transfer Affidavit
Exhibit E Form of Payoff Notice
Exhibit F Form of Liquidation Report
Exhibit G Form of Officer's Certificate as to Charge-offs
Exhibit H Form of Transferor Affidavit
Exhibit I Form of Subsequent Transfer Agreement
Exhibit J Form of Financial Guaranty Insurance Policy
Exhibit K Form of Notice of Claim and Certificate
Exhibit L Form of Insurance and Indemnity Agreement
iv
<PAGE> 6
THIS POOLING AND SERVICING AGREEMENT (this "Agreement"), dated as of
December 1, 1997, between Aames Capital Corporation, as seller (in such
capacity, the "Seller") and as servicer (in such capacity, together with
permitted successors hereunder, the "Servicer"), and Bankers Trust Company of
California, N.A., as trustee (the "Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Accrued Certificate Interest: With respect to any Class and Distribution
Date, means the amount of interest due for any Class of Offered Certificates in
respect of any Interest Period at the applicable Pass-Through Rate, less the
related pro rata share of Interest Shortfalls. All calculations of interest on
the Fixed Rate Group Certificates other than the Class A-1F Certificates will be
made on the basis of a 360-day year assumed to consist of twelve 30-day months,
and all calculations of interest on the Class A-1F Certificates and the
Adjustable Rate Group Certificates will be made on the basis of the actual
number days elapsed in the related Interest Period and a year of 360 days.
Addition Notice: With respect to the transfer of Subsequent Mortgage
Loans to the Trust pursuant to Section 2.02 of this Agreement, notice of the
Seller's designation of Subsequent Mortgage Loans to be sold to the Trust
separated by Mortgage Loan Group and the aggregate Subsequent Cut-off Date
Principal Balance of such Subsequent Mortgage Loans in each Mortgage Loan Group,
which notice shall be given to the Trustee and Financial Guaranty Insurer not
later than one Business Day prior to the related Subsequent Transfer Date.
Adjustable Rate Group: The Mortgage Loan Group comprised of all Mortgage
Loans identified in the Mortgage Loan Schedule as having been assigned to the
Adjustable Rate Group, including any Qualified Replacement Mortgage Loans
delivered in replacement thereof.
Adjustable Rate Group Available Funds Cap: With respect to any
Distribution Date, the per annum rate expressed as the percentage obtained by
(A) dividing (x) the amount of interest that accrued on the Mortgage Loans in
the Adjustable Rate Group in respect of the related Collection Period at the
weighted average of the related Mortgage Loan Rates applicable to Monthly
Mortgage Payments due on such Mortgage Loans during such Collection Period,
reduced by (i) the Monthly Servicing Fee and the Financial Guaranty Insurer
Premium for the related Collection Period and (ii) after the first six
Distribution Dates, one-twelfth of 1.00% of the Adjustable Rate Group Balance as
of the first day of the related Collection Period, by (y) the product of (i) the
Adjustable Rate Group
1
<PAGE> 7
Balance as of the first day of the related Interest Period and (ii) the actual
number of days elapsed during such Interest Period divided by 360 and (B)
multiplying the result by 100.
Adjustable Rate Group Balance: With respect to any Distribution Date the
sum of the aggregate of the Principal Balances of the Mortgage Loans in the
Adjustable Rate Group as of the end of the related Collection Period plus in the
case of any Distribution Date relating to a Collection Period that includes any
part of the Funding Period, any portion of the Adjustable Rate Group Prefunding
Account Deposit remaining on deposit in the Prefunding Account or Certificate
Account as of the related Determination Date.
Adjustable Rate Group Capitalized Interest Account Deposit: The amount
deposited in the Capitalized Interest Account for the benefit of the Adjustable
Rate Group Certificateholders, which amount will be $0 if the Subsequent
Mortgage Loans are purchased on the Closing Date.
Adjustable Rate Group Certificates: The Class A-1A Certificates and the
Class A-2A Certificates.
Adjustable Rate Group Principal Distribution Amount: With respect to any
Distribution Date, generally means the sum, without duplication, of (i)
Principal Distribution Amount with respect to the Adjustable Rate Group and the
related Collection Period, (ii) any related Extra Principal Distribution Amount
as more fully described in Section 5.01(d), (iii) the principal portion of any
Insured Amount, and (iv) any optional payment by the Financial Guaranty Insurer
of Realized Losses with respect to the Adjustable Rate Group during the related
Collection Period.
Adjustable Rate Group Prefunding Account Deposit: The amount deposited
in the Prefunding Account that is allocated for the purchase of Subsequent
Mortgage Loans having adjustable Mortgage Loan Rates to be included in the
Adjustable Rate Group, which amount is $33,628,972.92 or $0 if the Subsequent
Mortgage Loans are purchased on the Closing Date.
Adjustable Rate Mortgage Loan: Any Mortgage Loan with a Mortgage Loan
Rate that is adjustable at regular periodic intervals, based on the Index plus
the related Gross Margin subject to any Minimum Rate, Maximum Rate and any
periodic limitations on adjustment from time to time, all as set forth in the
Mortgage Loan Schedule. All Adjustable Rate Mortgage Loans will be included in
the Adjustable Rate Group.
Adjustment Date: With respect to any Adjustable Rate Mortgage Loan, the
date on which a change to the Mortgage Loan Rate on a Mortgage Loan becomes
effective.
2
<PAGE> 8
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings corresponding to the foregoing.
Aggregate Certificate Principal Balance: With respect to any
Distribution Date means the sum of the Certificate Principal Balances of all
Classes of the Offered Certificates. The Aggregate Certificate Principal Balance
for a particular Mortgage Loan Group is the sum of the Certificate Principal
Balances of all Classes of the Offered Certificates relating to such Group.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Annual Statement of Compliance: The annual statement to be prepared and
delivered by the Servicer in accordance with Section 3.09.
Applied Realized Loss Amount: With respect to the Fixed Rate Group and
any Distribution Date, means the excess of the related Realized Losses over the
amount, if any by which the related Overcollateralization Amount exceeds zero
after taking into account the application of the Fixed Rate Group Principal
Distribution Amount, as appropriate, on such Distribution Date and the
application of any Monthly Excess Cashflow Amount available from the Adjustable
Rate Group to cover such Realized Losses as set forth in Section 5.01(d).
Appraised Value: The appraised value of any Mortgaged Property based
upon the appraisal made at the time of origination of the related Mortgage Loan
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the related Mortgaged Property if such sales price is less than
such appraised value.
Book-Entry Certificate: Any Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository). As of the Closing Date, only the Offered Certificates
constitute Book-Entry Certificates.
Book-Entry Nominee: As defined in Section 6.02(c).
Business Day: Any day other than (a) a Saturday or a Sunday or (b) a day
on which banking institutions in the State of California or the State of New
York are required or authorized by law, executive order or governmental decree
to be closed.
Capitalized Interest Account: The segregated account, which, if
utilized, shall be an Eligible Account, established and maintained pursuant to
Section 3.17 and entitled "Bankers Trust Company of California, N.A., as Trustee
for Aames Mortgage Trust 1997-D Mortgage Pass-
3
<PAGE> 9
Through Certificates, Series 1997-D, Capitalized Interest Account".
Capitalized Interest Account Deposit: $0 if all of the Subsequent
Mortgage Loans are purchased by the Trust on the Closing Date.
Certificate: Any Fixed Rate Group, Adjustable Rate Group, Subordinate or
Retained Certificate.
Certificate Account: The segregated account, which shall be an Eligible
Account, established and maintained pursuant to Section 3.02(e) and entitled
"Bankers Trust Company of California, N.A., as Trustee for Aames Mortgage Trust
1997-D Mortgage Pass-Through Certificates, Series 1997-D, Certificate Account".
Certificate Owner: With respect to any Book-Entry Certificate, the
Person who is the beneficial owner thereof.
Certificate Principal Balance: With respect to the Class A-1F
Certificates, the Class A-1F Certificate Principal Balance; with respect to the
Class A-2F Certificates, the Class A-2F Certificate Principal Balance; with
respect to the Class A-3F Certificates, the Class A-3F Certificate Principal
Balance; with respect to the Class A-4F Certificates, the Class A-4F Certificate
Principal Balance; with respect to the Class A-5F Certificates, the Class A-5F
Certificate Principal Balance; with respect to the Class A-6F Certificates, the
Class A-6F Certificate Principal Balance; with respect to the Class M-1F
Certificates, the Class M-1F Certificate Principal Balance; with respect to the
Class M-2F Certificates, the Class M-2F Certificate Principal Balance; with
respect to the Class B-1F Certificates, the Class B-1F Certificate Principal
Balance; with respect to the Class A-1A Certificates, the Class A-1A Certificate
Principal Balance; with respect to the Class A-2A Certificates, the Class A-2A
Certificate Principal Balance. The Class C Certificates have a Certificate
Principal Balance only the extent described in Section 9.16. The Class R
Certificates do not have a Certificate Principal Balance. With respect to any
other designation (e.g. the Fixed Rate Group Certificate Principal Balance), the
sum of the Certificate Principal Balances of each Class contemplated by such
designation, in each case excluding the Certificate Principal Balances of the
Class C Certificates and Class R Certificates.
Certificate Register: The register maintained pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
taking any action under Article Eight or giving any consent pursuant to this
Agreement, any Certificate registered in the name of the Seller or the Servicer
or any Person actually known to a Responsible Officer of the Trustee to be an
Affiliate of the Seller or the Servicer shall be deemed not to be outstanding
and the Percentage Interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite Percentage Interests necessary to
take any such action or effect any such consent have acted or consented unless
the Seller, the Servicer or any such Person is an owner of record of all of the
Certificates of any Class.
4
<PAGE> 10
Class: All of the Class A-1F Certificates, Class A-2F Certificates,
Class A-3F Certificates, Class A-4F Certificates, Class A-5F Certificates, Class
A-6F Certificates, Class M-1F Certificates, Class M-2F Certificates, Class B-1F
Certificates, Class A-1A Certificates, the Class A-2A Certificates, Class C
Certificates or the Class R Certificate, as the case may be, taken as a whole.
Class A Certificate Principal Balance: With respect to any Distribution
Date and the Fixed Rate Group Class A Certificates means the aggregate of the
Initial Certificate Principal Balances of each such Class as reduced by the sum
of all Principal Distribution Amounts and Extra Principal Distribution Amounts
actually distributed to the related A Certificateholders on all prior
Distribution Dates.
Class A Principal Distribution Amount: With respect to the Fixed Rate
Group and each Distribution Date on or after the Stepdown Date, the excess of
(x) the aggregate of the Certificate Principal Balances of the Fixed Rate Group
Class A Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) the lesser of (1) the Stepped Up Enhancement
percentage and (2) 65% and (ii) the aggregate of the principal balances of the
Mortgage Loans in the Fixed Rate Group as of the last day of the related
Collection Period (plus any portion of the Fixed Rate Group Prefunding Account
Deposit remaining on deposit in the Prefunding Account or Escrow Account as of
such date allocable to the Fixed Rate Group), and (B) the excess of the
aggregate amount described in clause (ii) over $1,100,000.
Class A-1A Certificate: Any one of the Class A-1A Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-1A Certificate Principal Balance: As to any Distribution Date,
the Class A-1A Initial Certificate Principal Balance less the sum of all Fixed
Rate Group and Adjustable Rate Group Principal Distribution Amounts and Extra
Principal Distribution Amounts actually distributed to Holders of Class A-1A
Certificates on previous Distribution Dates.
Class A-1A Coverage Deficit: As to any Distribution Date, an amount
equal to the product of (i) the Coverage Deficit with respect to such
Distribution Date and (ii) the percentage equivalent of a fraction, the
numerator of which is the Class A-1A Certificate Principal Balance and the
denominator of which is the sum of the Class A-1A Certificate Principal Balance
and the Class A-2A Certificate Principal Balance.
Class A-1A Formula Pass-Through Rate: The interest rate described in
clause (a) of the definition of Class A-1A Pass-Through Rate.
Class A-1A Pass-Through Rate: With respect to the period from December
19, 1997 through December 26, 1997, 5.88% per annum; with respect to each
subsequent week (from Saturday through Friday) during any Interest Period, a per
annum rate equal to the lesser of (a) the Fed Funds Average Rate plus 0.30% and
(b) the Adjustable Rate Group Available Funds Cap.
5
<PAGE> 11
Class A-1A Principal Percentage: With respect to any Distribution Date
to and including that in which the Class A-1A Certificate Principal Balance is
reduced to zero, 50%, and thereafter, 0%.
Class A-1A Supplemental Interest Amount: As of any Distribution Date,
the excess, if any, of (x) the sum of (i) the excess, if any, of (a) the amount
of interest that would have accrued on the Class A-1A Certificates during the
related Interest Period at the Class A-1A Formula Pass-Through Rate over (b) the
amount of interest accrued and distributed thereon at the Class A-1A
Pass-Through Rate, and (ii) the sum of the amount described in clause (i) for
each preceding Distribution Date (together with interest thereon at the related
Formula Pass-Through Rate), over (y) all Class A-1A Supplemental Interest
Payment Amounts actually funded on all prior Distribution Dates.
Class A-1A Supplemental Interest Payment Amount: With respect to the
Class A-1A Certificates and any Distribution Date, an amount equal to the lesser
of (i) the amount of any accrued and unpaid Class A-1A Supplemental Interest
Amount and (ii) the product of (x) the amount deposited in the Supplemental
Interest Reserve Fund pursuant to Section 5.01(d) (ii) and (y) a fraction, the
numerator of which is the accrued and unpaid Class A-1A Supplemental Interest
Amount, and the denominator of which is the sum of the accrued and unpaid Class
A-1A Supplemental Interest Amount plus the accrued and unpaid Class A-2A
Supplemental Interest Amount.
Class A-1F Certificate: Any one of the Class A-1F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-1F Certificate Principal Balance: As to any Distribution Date,
the Class A-1F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-1F Certificates on previous Distribution
Dates.
Class A-1F Pass-Through Rate: With respect to the Interest Period
relating to the January 1998 Distribution Date, 6.155% per annum. With respect
to each subsequent Interest Period, the per annum rate equal to the lesser of
(x) LIBOR plus 0.155% per annum and (y) the product of the Fixed Rate Net WAC
and a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the related Interest Period.
Class A-2A Certificate: Any one of the Class A-2A Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-2A Certificate Principal Balance: As to any Distribution Date,
the Class A-2A Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-2A Certificates on previous Distribution
Dates.
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<PAGE> 12
Class A-2A Coverage Deficit: As to any Distribution Date, an amount
equal to the product of (i) the Coverage Deficit with respect to such
Distribution Date and (ii) the percentage equivalent of a fraction, the
numerator of which is the Class A-2A Certificate Principal Balance and the
denominator of which is the sum of the Class A-1A Certificate Principal Balance
and the Class A-2A Certificate Principal Balance.
Class A-2A Formula Pass-Through Rate: The interests rate described in
clause (a) of the definition of Class A-2A Pass-Through Rate.
Class A-2A Pass-Through Rate: With respect to the initial Interest
Period and the January 1998 Distribution Date, 6.25% per annum; with respect to
each subsequent Interest Period, a per annum rate equal to the lesser of (a)
with respect to Distribution Dates occurring prior to the Clean-up Call Date,
LIBOR plus 0.25% and, with respect to Distribution Dates occurring on or after
the Clean-up Call Date, LIBOR plus 0.50% and (b) the Adjustable Rate Group
Available Funds Cap.
Class A-2A Principal Percentage: With respect to any Distribution Date,
100% minus the Class A-1A Percentage for such Distribution Date.
Class A-2A Supplemental Interest Amount: As of any Distribution Date,
the excess, if any, of (x) the sum of (i) the excess, if any, of (a) the amount
of interest that would have accrued on the Class A-2A Certificates during the
related Interest Period at the Class A-2A Formula Pass-Through Rate over (b) the
amount of interest accrued and distributed thereon (1) at the Class A-2A
Pass-Through, and (ii) the sum of the amount described in clause for each
preceding Distribution Date (together with interest thereon at the related
Formula Pass-Through Rate), over (y) all Class A-2A Supplemental Interest
Payment Amounts actually funded on all prior Distribution Dates.
Class A-2A Supplemental Interest Payment Amount: With respect to the
Class A-2A Certificates and any Distribution Date, an amount equal to the lesser
of (i) the amount of any accrued and unpaid Class A-2A Supplemental Interest
Amount and (ii) the product of (x) the amount deposited in the Supplemental
Interest Reserve Fund pursuant to Section 5.01(d) (ii) and (y) a fraction, the
numerator of which is the accrued and unpaid Class A-2A Supplemental Interest
Amount, and the denominator of which is the sum of the accrued and unpaid Class
A-1A Supplemental Interest Amount plus the accrued and unpaid Class A-2A
Supplemental Interest Amount.
Class A-2F Certificate: Any one of the Class A-2F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-2F Certificate Principal Balance: As to any Distribution Date,
the Class A-2F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-2F Certificates on previous Distribution
Dates.
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<PAGE> 13
Class A-2F Pass-Through Rate: With respect to any Interest Period,
6.550% per annum.
Class A-3F Certificate: Any one of the Class A-3F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-3F Certificate Principal Balance: As to any Distribution Date,
the Class A-3F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-3F Certificates on previous Distribution
Dates.
Class A-3F Pass-Through Rate: With respect to any Interest Period,
6.590% per annum.
Class A-4F Certificate: Any one of the Class A-4F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-4F Certificate Principal Balance: As to any Distribution Date,
the Class A-4F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-4F Certificates on previous Distribution
Dates.
Class A-4F Pass-Through Rate: With respect to any Interest Period,
6.800% per annum.
Class A-5F Certificate: Any one of the Class A-5F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-5F Certificate Principal Balance: As to any Distribution Date,
the Class A-5F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-5F Certificates on previous Distribution
Dates.
Class A-5F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.210% per annum and (ii) the Fixed Rate Net WAC..
Class A-6F Certificate: Any one of the Class A-6F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-6F Certificate Principal Balance: As to any Distribution Date,
the Class A-6F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-6F Certificates on previous Distribution
Dates.
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<PAGE> 14
Class A-6F Lockout Distribution Amount: With respect to any Distribution
Date means the lesser of (a) product of (i) the applicable Class A-6F Lockout
Percentage for such Distribution Date and (ii) the Class A-6F Lockout Pro Rata
Distribution Amount for such Distribution Date, not to exceed the related Class
A Principal Distribution Amount or (b) the Class A Principal Distribution
Amount.
Class A-6F Lockout Percentage: With respect to each Distribution Date
occurring during the indicated periods means the indicated percentage:
<TABLE>
<CAPTION>
Class A-6F
Period Lockout Percentage
<S> <C>
January 1998 - December 2000 0%
January 2001 - December 2002 45%
January 2003 - December 2003 80%
January 2004 - December 2004 100%
January 2005 and thereafter 300%
</TABLE>
Class A-6F Lockout Pro Rata Distribution Amount: With respect to any
Distribution Date means an amount equal to the product of (x) a fraction, the
numerator of which is the Certificate Principal Balance of the Class A-6F
Certificates immediately prior to such Distribution Date and the denominator of
which is the Aggregate Certificate Principal Balance of the Fixed Rate Group
Class A Certificates immediately prior to such Distribution Date, and (y) the
related Class A Principal Distribution Amount for such Distribution Date.
Class A-6F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 6.740% per annum and (ii) the Fixed Rate Net WAC.
Class B-1F Applied Realized Loss Amount: With respect to any
Distribution Date, the lesser of (x) the related Class B-1F Certificate
Principal Balance (after taking into account the distribution of the sum of the
related Principal Distribution Amount and Extra Principal Distribution Amount on
such Distribution Date, but prior to the application of the Class B-1F Applied
Realized Loss Amount, if any, on such Distribution Date) and (y) the related
Applied Realized Loss Amount as of such Distribution Date.
Class B-1F Certificate Principal Balance: With respect to any
Distribution Date means the Initial Class B-1F Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class B-1F
Certificateholders on all prior Distribution Dates and (y) the aggregate
cumulative amount of Class B-1F Applied Realized Loss Amounts on all prior
Distribution Dates.
Class B-1F Principal Distribution Amount: With respect to any
Distribution Date on or after the Stepdown Date, means the excess of (x) the sum
of (i) the Aggregate Certificate Principal
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<PAGE> 15
Balances of the Fixed Rate Group Class A Certificates (after application of the
related Class A Principal Distribution Amount on such Distribution Date), (ii)
the Class M-1F Certificate Principal Balance (after application of the Class
M-1F Principal Distribution Amount on such Distribution Date), (iii) the Class
M-2F Certificate Principal Balance (after application of the Class M-2F
Principal Distribution Amount on such Distribution Date) and (iv) the Class B-1F
Certificate Principal Balance immediately prior to such Distribution Date, over
(y) the lesser of (i) 96.00% of the aggregate amount of the outstanding
Principal Balances of the Mortgage Loans in the Fixed Rate Group as of the last
day of the related Collection Period (plus any portion of the Fixed Rate Group
Prefunding Account Deposit remaining on deposit in the Prefunding Account or
Escrow Account as of such date allocable to the Fixed Rate Group) and (ii) the
excess of the aggregate amount described in clause (i) over $1,100,000.
Class B-1F Realized Loss Amortization Amount With respect to any
Distribution Date, the lesser of (x) the Class B-1F Unpaid Realized Loss Amount
as of such Distribution Date and (y) the related Monthly Excess Cashflow Amount
remaining after distribution of any Class A Interest Carry Forward Amount, the
related Extra Principal Distribution Amount, the Class M-1F Realized Loss
Amortization Amount, the related Class M-2F Realized Loss Amortization Amount,
the related Class M-1F Interest Carry Forward Amount, the related Class M-2F
Interest Carry Forward Amount and the related Class B-1F Interest Carry Forward
Amount, in each case for such Distribution Date.
Class B-1F Certificates: Any one of the Class B-1F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class B-1F Pass Though Rate: With respect to any Interest Period, the
lesser of (i) 7.640% per annum and (ii) the Fixed Rate Net WAC.
Class C Certificates: Any one of the Class C Certificates executed by
the Trustee on behalf of the Trust, not in its individual capacity, but solely
as Trustee, authenticated by the Trustee and in substantially the form set forth
with respect thereto in Exhibit A.
Class C Carryforward Amount: With respect to any Distribution Date,
means the amount by which the aggregate of the amount by which the Class C
Distribution Amount for each prior Distribution Date exceeded the amount
actually distributed in respect of the Class C Distribution Amount on each such
date, reduced by the aggregate of the amounts distributed in respect of the
Class C Carryforward Amount on each such prior Distribution Dates, and reduced
by the aggregate of the amounts of Realized Losses that have resulted in the
reduction of the Overcollateralization Amount on each such prior Distribution
Date.
Class C Distribution Amount: With respect to any Distribution Date,
means the interest allocated to the Class C Certificates as separate components
in accordance with Section 9.16 with respect to such Distribution Date.
Class M Certificates: Collectively, the Class M-1F and Class M-2F
Certificates.
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<PAGE> 16
Class M-1F Applied Realized Loss Amount: With respect to any
Distribution Date, means the lesser of (x) the Class M-1F Certificate Principal
Balance (after taking into account the distribution of the related Principal
Distribution Amount on such Distribution Date, but prior to the application of
the Class M-1F Applied Realized Loss Amount, if any, on such Distribution Date),
and (y) the excess of (i) the related Applied Realized Loss Amount over (ii) the
sum of the Class M-2F Applied Realized Loss Amount and Class B-1F Applied
Realized Loss Amounts, in each case as of such Distribution Date.
Class M-1F Certificates: Any one of the Class M-1F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class M-1F Certificate Principal Balance: With respect to any date of
determination, means the Initial Class M-1F Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-1F
Certificateholders on all prior Distribution Dates and (y) the aggregate
cumulative amount of related Class M-1F Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-1F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.170% per annum and (ii) the Fixed Rate Net WAC.
Class M-1F Principal Distribution Amount: With respect to each
Distribution Date on or after the Stepdown Date, the excess of (x) the sum of
(i) the Aggregate Certificate Principal Balance of the Fixed Rate Group Class A
Certificates (after application of the related Class A Principal Distribution
Amount on such Distribution Date and (ii) the related Class M-1F Certificate
Principal Balance immediately prior to such Distribution Date over (y) the
lesser of (i) 77.00% of the aggregate amount of the outstanding Principal
Balances of the Mortgage Loans in the Fixed Rate Group as of the last day of the
related Collection Period (plus any portion of the Fixed Rate Group Prefunding
Account Deposit remaining on deposit in the Prefunding Account or Escrow Account
as of such date allocable to the Fixed Rate Group) and (ii) the excess of the
aggregate amount described in clause (i) over $1,100,000.
Class M-1F Realized Loss Amortization Amount: With respect to any
Distribution Date means the lesser of (x) the Class M-1F Unpaid Realized Loss
Amount and (y) the related Monthly Excess Cashflow Amount remaining after
distribution of the related Class A Interest Carry Forward Amount, the related
Extra Principal Distribution Amount and the related Class M-1F Interest Carry
Forward Amount.
Class M-2F Applied Realized Loss Amount: With respect to any
Distribution Date means the lesser of (x) the Class M-2F Certificate Principal
Balance (after taking into account the distribution of the related Principal
Distribution Amount, but prior to the application of the Class M-2F Applied
Realized Loss Amount, if any, on such Distribution Date) and (y) the excess of
(i) the related Applied Realized Loss Amount over (ii) the Class B-1F Applied
Realized Loss Amounts, in each case as of such Distribution Date.
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<PAGE> 17
Class M-2F Certificates: Any one of the Class M-2F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class M-2F Certificate Principal Balance: With respect to any date of
determination means, the Initial Class M-2F Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-2F
Certificateholders on all prior Distribution Dates and (y) the aggregate,
cumulative amount of related Class M-2F Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-2F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.350% per annum and the Fixed Rate Net WAC.
Class M-2F Principal Distribution Amount: With respect to any
Distribution Date on or after the related Stepdown Date means the excess of (x)
the sum of (i) the Aggregate Certificate Principal Balance of the Fixed Rate
Group Class A Certificates (after application of the related Class A Principal
Distribution Amount on such Distribution Date), (ii) the Class M-1F Certificate
Principal Balance (after application of the M-1F Principal Distribution Amount
on such Distribution Date) and (iii) the related Class M-2F Certificate
Principal Balance immediately prior to such Distribution Date over (y) the
lesser of (i) 87.00% of the aggregate amount of the outstanding Principal
Balances of the Mortgage Loans in the Fixed Rate Group as of the last day of the
related Collection Period (plus any portion of the Fixed Rate Group Prefunding
Account Deposit remaining on deposit in the Prefunding Account or Escrow Account
as of such date allocable to the Fixed Rate Group) and (ii) the excess of the
aggregate amount described in clause (i) over $1,100,000.
Class M-2F Realized Loss Amortization Amount: With respect to any
Distribution Date, means the lesser of (x) the Class M-2F Unpaid Realized Loss
Amount and (y) the related Monthly Excess Cashflow Amount remaining after
distribution of the related Class A Interest Carry Forward, the related Extra
Principal Distribution Amount, the Class M-1F Realized Loss Amortization Amount,
the Class M-1F Interest Carry Forward Amount and the Class M-2F Interest Carry
Forward Amount.
Class R Certificate: Any one of the Class R-I, Class R-II or Class R-III
Certificates.
Class R-I Certificates: That certificate representing certain residual
rights to distribution from the REMIC I in substantially the form set forth as
Exhibit A hereto.
Class R-II Certificates: That certificate representing certain residual
rights to distribution from the REMIC II in substantially the form set forth as
Exhibit A hereto.
Class R-III Certificates: That certificate representing certain residual
rights to distribution from the REMIC III in substantially the form set forth as
Exhibit A hereto.
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<PAGE> 18
Clean-up Call Date: The first Distribution Date on which the aggregate
of the Principal Balances of the Mortgage Loans is less than 10% of the sum of
the aggregate of such Principal Balances as of the close of business on the
Closing Date plus the Prefunding Account Deposit Amount.
Closing Date: December 19, 1997.
Closing Date Deposit: The aggregate amount deposited by the Seller in
the Collection Account on or prior to the Closing Date pursuant to Section 2.01,
which amount shall be the aggregate of the amounts of interest that would have
accrued (at the related Mortgage Loan Rate net of the Servicing Fee Rate) on
each Initial Mortgage Loan for each 30-day period from the Cut-off Date through
the end of the last Collection Period preceding the Collection Period in which
such Mortgage Loan has its first Monthly Payment Due.
Code: The Internal Revenue Code of 1986, as amended.
Collection Account: The segregated account, which shall at all times be
an Eligible Account, established and maintained pursuant to Section 3.02(a) and
entitled "[Servicer], in trust for the benefit of Holders of Aames Mortgage
Trust 1997-D Mortgage Pass-Through Certificates, Series 1997-D, Collection
Account". References herein to the Collection Account shall include any
Sub-Servicing Account as the context requires.
Collection Period: As to any Distribution Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Distribution Date occurs and ending on the last day of such calendar month.
Combined Loan-to-Value Ratio: With respect to a Mortgage Loan, the ratio
(expressed as a percentage) of (i) the sum of the Original Principal Amount of
such related Mortgage Loan plus the outstanding principal balance (at the time
of origination of such Mortgage Loan) of each mortgage loan secured by the
related Mortgaged Property that is senior to such Mortgage Loan to (ii) the
Appraised Value of the related Mortgaged Property determined by the Seller at
the time of origination of such Mortgage Loan.
Company: Aames Capital Corporation, a California corporation.
Compensating Interest: As to any Distribution Date and each Mortgage
Loan Group, an amount equal to the lesser of (a) the related Monthly Servicing
Fee for the related Collection Period and (b) the difference between (i) 30
days' interest (at the related Mortgage Loan Rates, net of the Servicing Fee
Rate) on the Principal Balance of each Mortgage Loan in such Mortgage Loan Group
as to which a Principal Prepayment was received and that became a Liquidated
Mortgage Loan or that was otherwise charged-off (before giving effect to any
related reduction in the Principal Balance of such Mortgage Loan) by the
Servicer during the related Collection Period and (ii) the amount of interest
actually collected by the Servicer for such Mortgage Loans in such Mortgage Loan
Group during such Collection Period.
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<PAGE> 19
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business with respect to this Agreement
shall be principally administered, which office at the date of the execution of
this Agreement is located at 3 Park Plaza, Irvine, California 92614 Attention:
Aames Mortgage Loan Pass-Through Certificates, Series 1997-D.
Coverage Deficit: With respect to the Adjustable Rate Group and any
Distribution Date, means the excess, if any, of (i) the aggregate of the Class
A-1A Certificate Principal Balance and the Class A-2A Certificate Principal
Balance (after taking into account all distributions thereto in respect of
principal on such Distribution Date other than any amounts paid by the Financial
Guaranty Insurer) over (ii) the Adjustable Rate Group Balance as of the last day
of the related Collection Period (plus, in the case of any Collection Period
during the Funding Period, the portion of the Adjustable Rate Group Prefunding
Account Deposit remaining on deposit in the Prefunding Account as of such date).
Cut-off Date: December 1, 1997 or, in the case of Initial Mortgage Loans
originated prior to the Closing Date, the related origination date of each such
Initial Mortgage Loan.
Cut-off Date Pool Balance: The aggregate of the Cut-off Date Principal
Balances of the Initial Mortgage Loans.
Cut-off Date Principal Balance: As to any Mortgage Loan, its Principal
Balance as of the open of business on the Cut-off Date.
Defective Mortgage Loan: Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to Section 2.03 or 2.05.
Definitive Certificates: As defined in Section 6.02(f).
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Qualified Replacement Mortgage Loan.
Delinquency Percentage: As to any Distribution Date and (a) the Fixed
Rate Group, the percentage equivalent of the fraction obtained by dividing (i)
the aggregate of the Principal Balances of all Mortgage Loans in such Mortgage
Loan Group, as the case may be, that were then 60 days contractually delinquent
as of the end of the related Collection Period or were either foreclosed upon or
transferred pursuant to Section 3.06 during such Collection Period, by (ii) the
Principal Balance of the Mortgage Loans included in such Mortgage Loan Group as
of the last day of such Collection Period or (b) the Adjustable Rate Group, the
percentage equivalent of the fraction obtained by dividing (i) the aggregate of
the Principal Balances of all Mortgage Loans in such Mortgage Loan Group, as the
case may be, that were then 90 days contractually delinquent as of the end of
the related Collection Period or were either foreclosed upon or transferred
pursuant to Section 3.06 during such Collection Period, by (ii) the Principal
Balance of the Mortgage Loans included in such Mortgage Loan Group as of the
last day of such Collection Period.
Deposit Date: As to any Distribution Date, the third Business Day prior
to such
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<PAGE> 20
Distribution Date.
Depository: The initial depository shall be The Depository Trust
Company, the nominee of which is Cede & Co. The Depository shall at all times be
a "clearing corporation" as defined in Section 8102(3) of the Uniform Commercial
Code of the State of California, as amended, or any successor provisions
thereto.
Depository Participant: A broker, dealer, bank or other financial
institution or other person for which, from time to time, the Depository effects
book-entry transfers and pledges of securities deposited with such Depository.
Determination Date: As to any Distribution Date, the last day of the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
Disqualified Organization: Any Person that is (i) the United States, any
state or any political subdivision thereof, any possession of the United States,
or any agency or instrumentality of any of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and, except in the case of the Federal Home Loan Mortgage Corporation a
majority of its board of directors is not selected by any such governmental
unit), (ii) a foreign government, international organization or any agency or
instrumentality of either of the foregoing (other than an instrumentality that
is a corporation if all of its activities are subject to tax and a majority of
its board of directors is not selected by any such governmental unit), (iii) an
organization (except certain farmers' cooperatives described in Code Section
521) exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by Code Section 511 on unrelated business taxable income), (iv) rural electric
and telephone cooperatives described in Code Section 1381(a)(2)(C), and (v) any
other Person so designated by the Trustee based upon an Opinion of Counsel that
the holding of an ownership interest in a Class R Certificate by such Person may
cause any REMIC Pool or any Person having an ownership interest in any Class R
Certificate, other than such Person, to incur a liability for any tax imposed
under the Code that would not otherwise be imposed but for the transfer of an
ownership interest in a Class R Certificate to such Person. The terms "United
States", "state" and "international organization" shall have the meanings set
forth in Code Section 7701 or successor provisions.
Distribution Date: The 15th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 15th day, beginning
January 15, 1998.
Eligible Account: Either (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "A" or better by
Standard & Poor's and "A2" or better by Moody's and in the highest short term
rating category by Standard & Poor's and Moody's, and that is either (i) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws and (iv) a
principal subsidiary of a bank holding
15
<PAGE> 21
company, or (B) segregated account maintained with the trust department of a
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $50,000,000, acting in its fiduciary
capacity, the unsecured and uncollateralized debt obligations of which shall be
rated "Baa3" or better by Moody's. Any Eligible Accounts maintained with the
Trustee shall conform to the preceding clause (B).
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ERISA Plan: Any Person that is an employee benefit plan within the
meaning of Section 3(3) of ERISA or any Person that is an individual retirement
account or employee benefit plan, trust or account subject to Section 4975 of
the Code.
ERISA Prohibited Holder: As defined in Section 6.02(c).
Escrow Account: The segregated account, which shall be an Eligible
Account, established and maintained pursuant to Section 3.19(d) and entitled
"Bankers Trust Company of California, N.A., as Trustee for Aames Mortgage Trust
1997-D Mortgage Pass-Through Certificates, Series 1997-D, 1997-D Reserve Fund
held on behalf of Financial Security Assurance Inc." which will constitute a
"qualified reserve fund" as defined in the REMIC Provisions.
Escrowed Amount: With respect to each Subsequent Mortgage Loan that is
an Adjustable Rate Mortgage Loan, 5.00% of the related Subsequent Purchase
Price, which amount will be withdrawn from the Prefunding Account on the related
Subsequent Transfer Date for deposit in the Escrow Account pursuant to Section
3.19(d) for the period from the related Subsequent Transfer Date until the date
released therefrom to the Company or to the Trust, as described in Section
3.19(d).
Event of Default: As defined in Section 8.01.
Excess Spread Trigger: With respect to any Distribution Date on or after
the thirteenth Distribution Date and the Adjustable Rate Group Certificates, the
related Monthly Excess Cashflow Amount is less than one-twelfth of 3.00% of the
sum of the Class A-1A Certificate Principal Balance and the Class A-2A
Certificate Principal Balance as of the close of business on such Distribution
Date (without giving effect to any Overcollateralization Release Amount on such
Distribution Date).
Extra Principal Distribution Amount: With respect to a Mortgage Loan
Group and any Distribution Date, means the lesser of (x) the amount, if any, of
Monthly Interest remaining in the Certificate Account with respect to such
Mortgage Loan Group after application with respect to the priorities set forth
in Section 5.01(a), clause First through Fifth and (y) the related
Overcollateralization Deficiency.
FDIC: The Federal Deposit Insurance Corporation and its successors in
interest.
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<PAGE> 22
FEMA: The Federal Emergency Management Agency and its successors in
interest.
Fed Funds Average Rate: (a) for the period from December 19 through
December 26, 1997, 5.58% and (b) for any subsequent week during any Interest
Period (excluding any day during such week that is not included in such Interest
Period), (i) the sum of (A) the Fed Funds Rate on each Fed Funds Interest Reset
Date during the applicable Fed Funds Calculation Period and (B) for each day
during such Fed Funds Calculation Period that is not a Fed Funds Interest Reset
Date, the Fed Funds Rate in effect on the immediately preceding Fed Funds
Interest Reset Date, divided by (ii) the number of days in such applicable Fed
Funds Calculation Period. The Trustee will determine the Fed Funds Average Rate
for each week (from Saturday through Friday) during each Interest Period after
the period from December 19 through December 26, 1997. All percentages resulting
from a calculation with respect to the Fed Funds Average Rate or the Class A-2A
Formula Pass-Through Rate based on the Fed Funds Average Rate for any Interest
Period will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation will be rounded to the
nearest cent, with one-half cent rounded upwards. The establishment of the Fed
Funds Rate on any Fed Funds Reset Date or of the Fed Funds Average Rate for any
Interest Period by the Trustee and the Trustee's calculation of the rate of
interest applicable to the Class A-1A Adjustable Rate Certificates for the
related Interest Period shall (in the absence of manifest error) be final and
binding. Each such rate of interest may be obtained by telephoning the Trustee
at (800) 735-7777.
Fed Funds Business Day: Means any day other than a Saturday or Sunday or
a day on which banking institutions in The City of New York are authorized or
required by law, regulation or executive order to close.
Fed Funds Calculation Period: With respect to any week (from Saturday
through Friday) during any Interest Period, the period commencing on the Monday
of the third preceding week, and ending on the Friday of the third preceding
week.
Fed Funds Interest Determination Date: Means each Fed Funds Interest
Reset Date and, with respect to each day during a Fed Funds Calculation Period
that is not a Fed Funds Interest Reset Date, the next succeeding Fed Funds
Interest Reset Date.
Fed Funds Interest Reset Date: Means each Fed Funds Business Day during
the relevant Fed Funds Calculation Period.
Fed Funds Rate: With respect to a Fed Funds Interest Reset Date, means
(in the following order of priority):
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<PAGE> 23
(a) the rate with respect to each Fed Funds Interest Reset Date
(expressed as a percentage per annum) that appears opposite the caption
"Federal Funds Effective" on Telerate page 120 as of 11:00 a.m., New
York City time on such Fed Funds Interest Reset Date;
(b) if such rate does not appear on Telerate Page 120 as of 11:00
a.m., New York City time, on such Fed Funds Interest Reset Date, then
the Fed Funds Rate with respect to such Fed Funds Interest Reset Date
will be the rate with respect to the related Fed Funds Interest
Determination Date (expressed as a percentage per annum) that appears on
Reuters Screen NYAA Page (as defined below) as of 11:00 a.m., New York
City time, on such Fed Funds Interest Reset Date.
(c) if such rate does not appear on Reuters Screen NYAA Page as
of 11:00 a.m., New York City time, on such Fed Funds Interest Reset
Date, then the Trustee will request three leading brokers of Federal
Funds transactions in The City of New York to provide the rate
(expressed as a percentage per annum) for the last transaction in
overnight Federal Funds arranged by such broker on the related Fed Funds
Interest Determination Date. If rates are provided by such three
brokers, then the Fed Funds Rate with respect to such Fed Funds Interest
Reset Date will be the arithmetic mean (rounded to the nearest one
hundred-thousandth of one percentage point with five one-millionths of
one percentage point rounded upwards) of such rates; and
(d) if fewer than three such rates are provided, then the Fed
Funds Rate with respect to such Fed Funds Interest Determination Date
will be the Fed Funds Rate for the preceding Fed Funds Interest Reset
Date (or, in the case of the first Fed Funds Interest Date, the
immediately preceding Fed Funds Business Day on which a rate appeared on
Telerate Page 120 as described in (a) above).
If a rate that initially appears on Telerate Page 120 or Reuters Screen
NYAA Page, as the case may be, as of 11:00 a.m., New York City Time, on the
applicable Fed Funds Interest Reset Date is superseded on Telerate Page 120 or
Reuters Screen NYAA page, as the case may be, by a corrected rate before 12:00
noon, New York City time, on such Fed Funds Interest Reset Date, such corrected
rate as so superseded on the applicable page shall be the applicable rate for
calculating the applicable Fed Funds Rate for such Fed Funds Interest
Determination Date.
FHLMC: The Federal Home Loan Mortgage Corporation and its successors in
interest.
FNMA: The Federal National Mortgage Association and its successors in
interest.
Final Scheduled Distribution Date: with respect to each Class of Offered
Certificates shall mean:
<TABLE>
<CAPTION>
Class Final Scheduled Distribution Date
----- ---------------------------------
<S> <C>
</TABLE>
18
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C>
Class A-1F Certificates February 15, 2012
Class A-2F Certificates May 15, 2017
Class A-3F Certificates June 15, 2024
Class A-4F Certificates May 15, 2026
Class A-5F Certificates February 15, 2029
Class A-6F Certificates February 15, 2029
Class M-1F Certificates February 15, 2029
Class M-2F Certificates February 15, 2029
Class B-1F Certificates February 15, 2029
Class A-1A Certificates March 15, 2021
Class A-2A Certificates December 15, 2027
</TABLE>
Financial Guaranty Insurance Policy: The Financial Guaranty Insurance
Policy (No. 50650-N), dated December 19, 1997, including any endorsements
thereto, issued by the Financial Guaranty Insurer for the benefit of the Holders
of the Adjustable Rate Group Certificates, pursuant to which the Financial
Guaranty Insurer guarantees payment of the Insured Amounts. A form of the
Financial Guaranty Insurance Policy is attached hereto as Exhibit J.
Financial Guaranty Insurer: Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
Financial Guaranty Insurer Default: The existence and continuance of any
of the following:
(a) the Financial Guaranty Insurer fails to make a payment required
under the Financial Guaranty Insurance Policy in accordance with its terms;
(b) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Financial Guaranty Insurer in an
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency, rehabilitation, reorganization or other similar
law of (ii) a decree or order adjudging the Financial Guaranty Insurer bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
rehabilitation, arrangement, adjustment or composition of or in respect of the
Financial Guaranty Insurer under any applicable United States federal or state
law, or appointing a custodian, receiver, liquidator, rehabilitator, assignee,
trustee, sequestrator or other similar official of the Financial Guaranty
Insurer or of any substantial part of its property, or ordering the winding-up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period
of 60 consecutive days; or
(c) the commencement by the Financial Guaranty Insurer of a voluntary
case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated bankrupt or insolvent, or the consent of the
Financial Guaranty Insurer to the entry of a decree or order for relief in
respect of the Financial Guaranty Insurer in an involuntary case or proceeding
under any
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<PAGE> 25
applicable United States federal or state bankruptcy, insolvency case or
proceeding against Financial Guaranty Insurer, or the filing by the Certificate
Insurer of a petition or answer or consent seeking reorganization or relief
under any applicable United States federal or state law, or the consent by the
Financial Guaranty Insurer to the filing of such petition or to the appointment
of or the taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Financial Guaranty Insurer or
of any substantial part of its property, or the failure by the Financial
Guaranty Insurer to pay debts generally as they become due, or the admission by
the Certificate Insurer in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Financial Guaranty
Insurer in furtherance of any such action.
Financial Guaranty Insurer Parties: The Financial Guaranty Insurer or
its respective agents, representatives, directors, officers or employees.
Financial Guaranty Insurer Premium: With respect to the Adjustable Rate
Group, the premium due to the Financial Guaranty Insurer on each Distribution
Date, which amount shall be equal to 1/12 of the product of the applicable
Insurer Premium Rate and the sum of the Class A-1A Certificate Principal Balance
and the Class A-2A Certificate Principal Balance immediately prior to such
Distribution Date.
Fitch: Fitch IBCA, Inc.
Fixed Rate Class A Certificates: Any or all of the Class A-2F
Certificates, Class A-3F Certificates, Class A-4F Certificates, Class A-5F
Certificates or Class A-6F Certificates, as the case may be.
Fixed Rate Group: The group of Mortgage Loans comprised of fixed rate
mortgage loans identified in the Mortgage Loan Schedule as having been assigned
to the Fixed Rate Group, including any Qualified Replacement Mortgage Loans
delivered in replacement thereof.
Fixed Rate Group Balance: As to any Distribution Date, the sum of the
aggregate of the Principal Balances of the Mortgage Loans in the Fixed Rate
Group as of the end of the related Collection Period plus in the case of any
Distribution Date relating to a Collection Period that includes any part of the
Funding Period, any portion of the Fixed Rate Group Prefunding Account Deposit
remaining on deposit in the Prefunding Account or Certificate Account as of the
last day of such Collection Period.
Fixed Rate Group Capitalized Interest Account Deposit: The amount
deposited in the Capitalized Interest Account for the benefit of the Fixed Rate
Class A Certificateholders, which amount is $0 if the Subsequent Mortgage Loans
are purchased on the Closing Date.
Fixed Rate Group Certificates: Collectively, the Fixed Rate Group Class
A Certificates and the Subordinate Certificates.
Fixed Rate Group Class A Certificates: Any or all of the Class A-1F
Certificates, Class A-
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<PAGE> 26
2F Certificates, Class A-3F Certificates, Class A-4F Certificates, Class A-5F
Certificates or Class A-6F Certificates, as the case may be.
Fixed Rate Group Principal Distribution Amount: With respect to any
Distribution Date, generally means the sum, without duplication, of (i) the
Principal Distribution Amount with respect to the Fixed Rate Group and the
related Collection Period and (ii) under certain circumstances described in
Section 5.01(c) any related Extra Principal Distribution Amount.
Fixed Rate Group Prefunding Account Deposit: The amount deposited in the
Prefunding Account that is allocated for the purchase of Subsequent Mortgage
Loans having fixed Mortgage Loan Rates to be included in the Fixed Rate Group,
which amount is $6,381,680 or $0 if the Subsequent Mortgage Loans are purchased
on the Closing Date.
Fixed Rate Group Subsequent Purchase Price: With respect to any
Subsequent Mortgage Loan to be included in the Fixed Rate Group, means an amount
equal to 100% of the Principal Balance of such Subsequent Mortgage Loan.
Fixed Rate Net WAC: With respect to any Distribution Date, means the
weighted average Mortgage Loan Rate of the Mortgage Loans in the Fixed Rate
Group as of the first day of the related Collection Period less the Servicing
Fee Rate.
Foreign Person: A Person that is not a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate that is subject to United States federal income tax regardless of the
source of its income or a trust if (a) a court within the United States is able
to exercise primary supervision of the Administration thereof and (b) one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust.
Formula Pass-Through Rate: With respect to (a) the Class A-1F
Certificates, the Class A-1F Pass-Through Rate in effect for such Class if the
Fixed Rate Net WAC is disregarded and (b) any Class of Adjustable Rate Group
Certificates, the Pass-Through Rate in effect for such Class if the Adjustable
Rate Group Available Funds Cap is disregarded.
Funding Period: The period beginning on the Closing Date and ending on
the earlier of (a) the date on which the amount on deposit in the Prefunding
Account is zero and (b) the close of business on January 14, 1998.
Gross Margin: With respect to an Adjustable Rate Mortgage Loan, the
fixed percentage amount set forth in the related Mortgage Note, which amount is
added to the Index in accordance with the terms of the related Mortgage Note to
determine the Mortgage Loan Rate.
Group Balance: As of any date of determination, the related Fixed Rate
Group Balance or Adjustable Rate Group Balance.
Group Factor: As to any Distribution Date and each Mortgage Loan Group,
the percentage
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<PAGE> 27
(carried to eight places, rounded down) obtained by dividing the
aggregate Principal Balances of the Mortgage Loans in the related Mortgage Loan
Group (after giving effect to any distribution of principal on the related
Certificates on such Distribution Date) by the sum of the aggregate Principal
Balances of the Mortgage Loans in the related Mortgage Loan Group as of the
Cut-off Date and the Fixed Rate Group Prefunding Account Deposit or Adjustable
Rate Group Prefunding Account Deposit, as applicable.
Index: With respect to any Adjustable Rate Mortgage Loan, the applicable
index for computing the Mortgage Loan Rate as specified in the Mortgage Note.
Initial Certificate Principal Balance: With respect to each Class of
Certificates that has a Certificate Principal Balance, means:
<TABLE>
<CAPTION>
Initial Certificate
Class Principal Balance
----- -----------------
<S> <C>
Class A-1F Certificates $ 74,381,000.00
Class A-2F Certificates $ 27,197,000.00
Class A-3F Certificates $ 35,234,000.00
Class A-4F Certificates $ 14,483,000.00
Class A-5F Certificates $ 15,605,000.00
Class A-6F Certificates $ 19,000,000.00
Class M-1F Certificates $ 13,200,000.00
Class M-2F Certificates $ 11,000,000.00
Class B-1F Certificates $ 9,900,000.00
Class A-1A Certificates $ 84,000,000.00
Class A-2A Certificates $ 296,000,000.00
</TABLE>
Initial Mortgage Loan: Means any Mortgage Loan in either Mortgage Loan
Group included in the assets of the Trust as of the Closing Date that is
indicated as such on the Mortgage Loan Schedule.
Insurance and Indemnity Agreement: The Insurance and Indemnity
Agreement, dated as of December 1, 1997, between the Financial Guaranty Insurer
and the Company, a copy of which is attached hereto as Exhibit L.
Insurance Proceeds: With respect to any Distribution Date, proceeds paid
by any insurer and received by the Servicer during the related Collection Period
pursuant to any insurance policy covering a Mortgage Loan or the related
Mortgaged Property (excluding the Financial Guaranty Insurance Policy),
including any deductible payable by the Servicer with respect to a blanket
insurance policy pursuant to Section 3.04 and the proceeds from any fidelity
bond or errors and omission policy pursuant to Section 3.12 (to the extent such
payments compensate for losses that would otherwise be payable to
Certificateholders pursuant to this Agreement), net of any component thereof
covering any expenses incurred by or on behalf of the Servicer and specifically
22
<PAGE> 28
reimbursable under this Agreement.
Insured Amount: With respect to the Adjustable Rate Group and any
Distribution Date, the amount to be paid by the Financial Guaranty Insurer under
the Financial Guaranty Insurance Policy (in the manner described in Section
3.19) pursuant to a Notice of Claim presented by the Trustee. The Insured Amount
as of any Distribution Date shall be equal to the sum of (i) the amount by which
the Accrued Certificate Interest with respect to each Class of Adjustable Rate
Group Certificates exceeds (a) the Monthly Interest with respect to the
Adjustable Rate Group available therefor pursuant to Section 5.01(a) and (b) the
amount of any Monthly Excess Cashflow Amount with respect to either Mortgage
Loan Group available to cover any Interest Carry Forward Amount with respect to
either Class of Adjustable Rate Group Certificates pursuant to Section 5.01(d)
clause (1) with respect to the Adjustable Rate Group, (ii) the Class A-1A
Coverage Deficit and Class A-2A Coverage Deficit with respect to such
Distribution Date, if any, after giving effect to all distributions of principal
(including any Excess Principal Distribution Amount and any Monthly Excess
Cashflow Amounts available therefor from the Fixed Rate Group), (iii) on the
Final Scheduled Distribution Date for the Class A-2A Certificates, the
outstanding Class A-2 Certificate Principal Balance (after giving effect to all
others distributions thereto) and (iv) the Preference Amount for the Adjustable
Rate Group Certificates with respect to such Distribution Date, if any, in each
case as determined by the Trustee on the date a Notice of Claim is required to
be made in respect of such Distribution Date. Pursuant to the Financial Guaranty
Insurance Policy, the Financial Guaranty Insurer also has the option, but not
the obligation, to fund any Realized Losses with respect to the Adjustable Rate
Group and the related Collection Period, which amounts will not be "Insured
Amounts" as used herein.
Insurer Premium Rate: With respect to each Collection Period, 0.18%;
provided, however, that if on any Distribution Date subsequent to the Clean-up
Call Date the Overcollateralization Amount is less than the Targeted
Overcollateralization Amount, the Insurer Premium Rate with respect to the
following Collection Period and the related Distribution Date shall be 0.68%.
Interest Carry Forward Amount: With respect to any Class of Offered
Certificates on any Distribution Date, means the amount, if any, by which (i)
the Accrued Certificate Interest on such Class as of such Distribution Date plus
any outstanding Interest Carry Forward Amount with respect to such Class from
the preceding Distribution Date (together with interest on such outstanding
Interest Carry Forward Amount at the related Pass-Through Rate for the related
Interest Period to the extent lawful) exceeds (ii) the amount of Monthly
Interest actually distributed to the holders of such Certificates on such
Distribution Date.
Interest Period: With respect to the Fixed Rate Group Certificates other
than the Class A-1F Certificates, the calendar month preceding the month in
which such Distribution Date occurs; and with respect to any Adjustable Rate
Group Certificate and any Class A-1F Certificate and the first Interest Period,
the period beginning on the Closing Date and ending on the day preceding the
Distribution Date in January 1998, and as to any subsequent Distribution Date,
the period beginning on the immediately preceding Distribution Date and ending
on the day prior to the
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<PAGE> 29
related Distribution Date.
Interest Shortfall: As to any Distribution Date, the amount of any
Prepayment Interest Shortfall and Relief Act Shortfall for the related Mortgage
Loan Group.
Investment Company Act: The Investment Company Act of 1940, as amended.
Junior Mortgage Loan: Any Mortgage Loan secured by a Mortgage with a
lien of other than first priority.
LIBOR: With respect to the January 1998 Distribution Date, 6.00% per
annum. With respect to any subsequent Distribution Date, the per annum rate
determined by the Trustee on the related LIBOR Determination Date on the basis
of the offered rates of the Reference Banks for one-month U.S. dollar deposits
as such rates appear on the Dow Jones Telerate Service Page 3750 (or any
replacement page on that service for the purpose of displaying London Interbank
offered rates of major banks) as of 11:00 a.m. (London time) on such LIBOR
Determination Date. On each LIBOR Determination Date, LIBOR will be established
by the Trustee as follows:
(i) if on such LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR shall be the arithmetic mean (rounded
upwards if necessary to the nearest whole multiple of 0.0625%) of such offered
quotations.
(ii) if on such LIBOR Determination Date, fewer than two Reference Banks
provide such offered quotations, LIBOR shall be the greater of (x) LIBOR as
determined on the previous LIBOR Determination Date and (y) the Reserve Interest
Rate.
LIBOR Determination Date: With respect to any Interest Period after the
first Interest Period, the second London Business Day immediately preceding the
first day of such Interest Period.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan
as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, during the related Collection Period that all
Liquidation Proceeds that it expects to recover from or on account of such
Mortgage Loan have been recovered.
Liquidation Expenses: Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses shall include, without
limitation, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 3.06 respecting
the related Mortgage Loan (including, without limitation, amounts voluntarily
advanced to correct defaults on each mortgage loan that is senior to such
Mortgage Loan), any other related and previously unreimbursed Servicing Advances
and any related and previously unreimbursed Property Protection Expenses.
Liquidation Proceeds: Cash (other than Insurance Proceeds) received in
connection with
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<PAGE> 30
the liquidation of any Mortgaged Property, whether through trustee's sale,
foreclosure sale, condemnation, taking by eminent domain or otherwise received
in respect of any Mortgage Loan foreclosed upon as described in Section 3.06
(including, without limitation, proceeds from the rental of the related
Mortgaged Property).
Liquidation Report: A liquidation report in the form of Exhibit F
attached hereto.
Loan-to-Value Ratio: The Original Principal Amount of a Mortgage Loan as
a percentage of the Appraised Value of the related Mortgaged Property determined
by the Seller at the time of origination of such Mortgage Loan.
London Business Day: A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
Loss Percentage: As to any Distribution Date and either Mortgage Loan
Group, the percentage equivalent of the fraction obtained by dividing (i) the
principal amount of cumulative Realized Losses on Mortgage Loans in such
Mortgage Loan Group from the Cut-off Date through the end of the related
Collection Period by (ii) the aggregate of the Principal Balances of the
Mortgage Loans in such Mortgage Loan Group as of the Cut-off Date and the amount
deposited in the Prefunding Account with respect to such Mortgage Loan Group on
the Closing Date.
Maximum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute maximum Mortgage Loan Rate set by provisions in the related Mortgage
Note.
Minimum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute minimum Mortgage Loan Rate, set by provisions in the related Mortgage
Note, subject to the initial Mortgage Loan Rate first adjusting to a level in
excess of such minimum Mortgage Loan Rate in accordance with the terms of the
Mortgage Note.
Monthly Advance: As defined in Section 5.02(a).
Monthly Excess Cashflow Amount: With respect to either Mortgage Loan
Group and any Distribution Date means the sum of (x) the amount, if any, of
Monthly Interest remaining in the Certificate Account with respect to such
Mortgage Loan Group after application with respect to the priorities set forth
in Section 5.01(a), clause First through Fifth, plus (y) the amount of any
Overcollateralization Release Amount with respect to such Mortgage Loan Group
for such Distribution Date.
Monthly Excess Interest Amount: With respect to either Mortgage Loan
Group and any Distribution Date means the excess, if any, of the interest
accrued on the related Mortgage Loans at weighted average net Mortgage Loan Rate
for the Mortgage Loans in such Mortgage Loan Group over the Accrued Certificate
Interest for the related Offered Certificates during the related Interest
Period.
Monthly Interest: With respect to either Mortgage Loan Group and any
Distribution Date,
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<PAGE> 31
means the aggregate of the following amounts in respect of interest and such
Mortgage Loan Group:
(i) all payments in respect of or allocable to interest received or
deemed to have been received during the related Collection Period, net of
amounts representing interest accrued in respect of any period prior to the
Cut-off Date or related Subsequent Cut-off Date;
(ii) all Trust Insurance Proceeds received during the related Collection
Period;
(iii) all Net Liquidation Proceeds received during the related
Collection Period (excluding any amount distributed to the Holders of the Class
C Certificates pursuant to Section 3.06)
(iv) the aggregate of the amounts deposited in the Certificate Account
on the related Deposit Date by the Seller or the Servicer, as applicable, in
connection with any purchase, repurchase, shortage or substitution pursuant to
Section 2.03, 2.05, 3.01, 3.03 or 3.06;
(v) the aggregate of the amounts deposited in the Certificate Account by
the Servicer in connection with a purchase pursuant to Section 10.01;
(vi) the amount of Monthly Advances made by the Servicer in respect of
such Distribution Date pursuant to Section 5.02(a);
(vii) the amount of any Compensating Interest paid by the Servicer in
respect of such Distribution Date;
(viii) the amount deposited in the Certificate Account from the
Capitalized Interest Account on the January 1998 Distribution Date in respect of
the Fixed Rate Group Capitalized Interest Account Deposit or Adjustable Rate
Group Capitalized Interest Account Deposit, as the case may be; and
(ix) in the case of the January 1998 Distribution Date, the amount
deposited in the Certificate Account in respect of the Closing Date Deposit, and
in the case of the February 1998 Distribution Date, the amount deposited in the
Certificate Account in respect of any Subsequent Closing Date Deposit;
reduced by the sum of:
(X) the Monthly Servicing Fee and any other compensation payable to the
Servicer pursuant to Section 3.08 for the related Collection Period (without
regard to any Compensating Interest payable therefrom) to the extent not
previously paid to the Servicer;
(Y) the aggregate amount of Monthly Advances and Servicing Advances
(other than those included in the Liquidation Expenses for any Liquidated
Mortgage Loan and reimbursed from the related Liquidation Proceeds) reimbursable
to the Servicer on such Distribution Date
26
<PAGE> 32
pursuant to the provisions of this Agreement; and
(Z) the aggregate amounts (i) deposited into the Collection Account or
Certificate Account that may not be withdrawn therefrom pursuant to a final and
nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been included in Monthly Interest
on such Distribution Date and (ii) received by the Trustee that are recoverable
and sought to be recovered from the Trustee as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent
jurisdiction.
Monthly Mortgage Payment: With respect to any Mortgage Note, the amount
of each monthly payment (other than any final balloon payment) payable under
such Mortgage Note in accordance with its terms, including one month's accrued
interest on the related Principal Balance at then applicable Mortgage Loan Rate
but net of any portion of such monthly payment that represents late payment
charges, prepayment or extension fees or collections allocable to payments to be
made by Mortgagors for payment of insurance premiums or similar items.
Monthly Servicing Fee: With respect to any Collection Period and each
Mortgage Loan Group, 1/12 of the product of the Servicing Fee Rate and the
aggregate Principal Balances of the Mortgage Loans in such Mortgage Loan Group
as of the close of business on the Determination Date occurring in the preceding
month (or, in the case of the first Collection Period, the Principal Balance of
the related Mortgage Loans as of the Closing Date. The Monthly Servicing Fee
shall be payable on the following Deposit Date to the Servicer as servicing
compensation hereunder pursuant to Section 3.08.
Moody's: Moody's Investors Service, Inc. and its successors in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple in real property securing
a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
to a particular Mortgage Loan and any additional documents required to be added
to such Mortgage File pursuant to this Agreement.
Mortgage Loan: Each of the Mortgage Loans transferred and assigned to
the Trustee pursuant to Section 2.01 or 2.02 that from time to time comprise
part of the Trust, the Mortgage Loans originally so held being identified in the
Mortgage Loan Schedule attached hereto as Exhibit B.
Mortgage Loan Group: Either the Fixed Rate Group or the Adjustable Rate
Group. References herein to any Class or Classes of Certificates being related
to a Mortgage Loan Group, shall mean (A) in the case of the Fixed Rate Group,
the Fixed Rate Group Class A Certificates, the Subordinate Certificates, the
Class C Certificates and the Class R-III Certificates and (B) in the case of the
Adjustable Rate Group, the Class A-1A and Class A-2A Certificates, the Class C
Certificates
27
<PAGE> 33
and the Class R-III Certificates.
Mortgage Loan Rate: With respect to any Adjustable Rate Mortgage Loan,
the per annum rate of interest computed in accordance with the provisions of the
related Mortgage Note as the sum of the Index and the Gross Margin, subject to
any Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such
rate applicable from time to time to the calculation of interest thereon. As to
any other Mortgage Loan, the fixed per annum rate of interest applicable to the
calculation of interest thereon specified in the related Mortgage Note.
Mortgage Loan Schedule: As of any date, the schedule of Mortgage Loans
separated by Mortgage Loan Group. The initial schedule of Mortgage Loans as of
the Cut-off Date is attached hereto as Exhibit B and sets forth as to each such
Mortgage Loan, among other things, (a) its identifying number and the name of
the related Mortgagor; (b) the street address of the related Mortgaged Property
including the state, county and zip code; (c) its date of origination; (d) the
original number of months to stated maturity; (e) its original stated maturity;
(f) its Original Principal Amount; (g) its Cut-off Date Principal Balance; (h)
the related Mortgage Loan Rate as of the Cut-off Date and, with respect to any
Adjustable Rate Mortgage Loan, the related Index, Gross Margin, Minimum Rate,
Maximum Rate and any periodic limitations on adjustment; (i) the scheduled
Monthly Mortgage Payment; (j) the date in each month on which the related
Monthly Mortgage Payments are due; (k) its Combined Loan-to-Value Ratio or the
ratio, expressed as a percentage, of the Original Principal Amount of such
Mortgage Loan to the Appraised Value of the related Mortgaged Property, as
applicable; (l) the lien status of the related Mortgage and, with respect to any
Junior Mortgage Loan, the principal amount (as of the date of origination) of
all related Senior Liens; (m) whether the related Mortgaged Property is
owner-occupied or non-owner-occupied; (n) whether the related Mortgaged Property
is a single-family residence, a two- to four-family residence or a unit in a
condominium or planned unit development; (o) whether the Mortgage Loan has been
originated by an Affiliate of the Company; and (p) whether the Mortgage Loan is
being serviced by a Sub-Servicer and, if so, the identity of such Sub-Servicer.
Mortgage Note: The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
Mortgaged Property: The underlying property securing a Mortgage Loan.
Mortgagor: The obligor under a Mortgage Note.
Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds
net of Liquidation Expenses. For all purposes of this Agreement, Net Liquidation
Proceeds shall be allocated first to accrued and unpaid interest on the related
Mortgage Loan and then to the Principal Balance thereof.
Non-permitted Foreign Holder: As defined in Section 6.02(c).
Nonrecoverable Advance: Any Servicing Advance that, in the Servicer's
reasonable judgment, would not be ultimately recoverable by the Servicer from
late collections, Insurance
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Proceeds or Liquidation Proceeds on the related Mortgage Loan or otherwise, as
evidenced by an Officer's Certificate delivered to the Trustee no later than the
Business Day following the Servicer's determination thereof.
Notice of Claim: The notice required to be furnished by the Trustee to
the Financial Guaranty Insurer in the event an Insured Amount is required to be
paid under the Financial Guaranty Insurance Policy with respect to any
Distribution Date, in the form set forth as Exhibit K hereto.
Offered Certificates: The Certificates other than the Retained
Certificates.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a Vice President of the
Seller or the Servicer, as the case may be, and delivered to the Trustee or each
Rating Agency, as the case may be.
Opinion of Counsel: A written opinion of counsel reasonably acceptable
to the Trustee (and the Financial Guaranty Insurer, if such opinion is to be
delivered thereto), who may be in-house counsel for the Seller or the Servicer
(except with respect to any opinion with respect to or concerning the REMIC
status of any REMIC Pool). Any expense related to obtaining an Opinion of
Counsel for an action requested by a party shall be borne by the party required
to obtain such opinion or seeking to effect the action that requires the
delivery of such Opinion of Counsel.
Original Adjustable Rate Group Balance: $351,294,198.03
Original Fixed Rate Group Balance: $213,837,018.80
Original Pool Balance: $565,131,216.83
Original Principal Amount: With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
Overcollateralization Amount: With respect to a Mortgage Loan Group and
as of any Distribution Date means the excess of (x) the aggregate of the
outstanding principal balances of the Mortgage Loans in such Mortgage Loan Group
as of the last day of the immediately preceding Collection Period (plus, in the
case of Collection Periods during the Funding Period, the portion, if any, of
the Prefunding Account Deposit relating to such Mortgage Loan Group remaining on
deposit in the Prefunding Account of such date) over (y) the Aggregate
Certificate Principal Balance of the related Offered Certificates (after taking
into account all distributions in respect of principal collections and all
amounts paid by the Financial Guaranty Insurer in respect of principal on such
Distribution Date).
Overcollateralization Deficiency: With respect to either Mortgage Loan
Group and any Distribution Date, means the excess, if any, of (x) the related
Targeted Overcollateralization Amount over (y) the related Overcollateralization
Amount, calculated for this purpose after taking into account the reduction on
such Distribution Date of the Certificate Principal Balances of all
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<PAGE> 35
related Classes of Offered Certificates resulting from principal distributions
(other than reductions resulting from the distribution of any related Extra
Principal Distribution Amount), but before taking into account any related
Applied Realized Loss Amount or amount paid by the Financial Guaranty Insurer in
respect of principal for such Distribution Date.
Overcollateralization Release Amount: With respect to either Mortgage
Loan Group and any Distribution Date, means, the lesser of (x) the related Fixed
Rate Group or Adjustable Rate Group Principal Distribution Amount (other than
any related Extra Principal Distribution Amount), ignoring clause (Z) of the
definition thereof in the case of the Fixed Rate Group, and (y) the excess of
(i) the related Overcollateralization Amount, assuming that 100% of such related
Principal Distribution Amount (excluding the application of any Extra Principal
Distribution Amount) is applied to the payment of principal on the related
Offered Certificates on such Distribution Date over (ii) the related Targeted
Overcollateralization Amount.
Pass-Through Rate: As indicated by the context, the Class A-1F
Pass-Through Rate, Class A-2F Pass-Through Rate, Class A-3F Pass-Through Rate,
Class A-4F Pass-Through Rate, Class A-5F Pass-Through Rate, Class A-6F
Pass-Through Rate, Class M-1F Pass-Through Rate, Class M-2F Pass-Through Rate,
Class B-1F Pass-Through Rate, Class A-1A Pass-Through Rate or Class A-2A
Pass-Through Rate.
Payment Ahead: Any payment of one or more Monthly Mortgage Payments
remitted by a Mortgagor with respect to a Mortgage Note in excess of the Monthly
Mortgage Payment due during such Collection Period with respect to such Mortgage
Note, which sums the related Mortgagor has instructed the Servicer to apply to
Monthly Mortgage Payments due in one or more subsequent Collection Periods. A
Monthly Mortgage Payment that was a Payment Ahead shall, for purposes of
computing certain amounts under this Agreement, be deemed to have been received
by the Servicer on the date in the related Collection Period on which such
Monthly Mortgage Payment would have been due if such Monthly Mortgage Payment
was not a Payment Ahead.
Payoff Notice: The certification delivered by the Servicer in connection
with any payment in full of the outstanding principal balance of a Mortgage Loan
pursuant to Section 3.07, to be substantially in the form of Exhibit E.
Percentage Interest: With respect to any Certificate, the undivided
percentage interest (carried to eight places, rounded down) obtained by dividing
the original principal balance of such Certificate by the Initial Certificate
Principal Balance of the related Class, as applicable, and multiplying the
result by 100; provided that with respect to a Class C Certificate or Class R
Certificate, Percentage Interest means the undivided percentage interest set
forth on the face of such Class R Certificate, which in the aggregate shall not
exceed 100%.
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Permitted Investments: One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(b) Federal Housing Administration debentures, FHLMC senior debt
obligations and FNMA senior debt obligations, but excluding any of such
securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption or that are not rated in one
of the two highest long-term rating categories by each Rating Agency;
(c) federal funds, certificates of deposit, time and demand
deposits and banker's acceptances (in each case having original
maturities of not more than 365 days) of any bank or trust company
incorporated under the laws of the United States or any state thereof,
provided that the short-term debt obligations of such bank or trust
company at the date of acquisition thereof have been rated "A-1" or
better by Standard & Poor's and Prime-1 by Moody's;
(d) deposits of any bank or savings and loan association that has
combined capital, surplus and undivided profits of at least $100,000,000
which deposits are held up to the applicable limits insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC;
(e) commercial paper (having original maturities of not more than
180 days) that has the highest short term rating of each of Standard &
Poor's and Moody's;
(f) investments in money market funds rated "AAAm" or "AAAm-G" by
Standard & Poor's and Aaa by Moody's; and
(g) investments approved in writing by each of the Rating
Agencies;
provided that no investment described hereunder shall evidence either the right
to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity of the underlying obligations; and provided, further, that no
instrument described hereunder may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments, or in the case of Permitted Investments held in the Prefunding
Account, shall be available on the Business Day next succeeding the date the
Trustee receives the Addition Notice that such monies will be needed.
Notwithstanding the foregoing, with respect to investment of amounts in any
account, any of the foregoing obligations, instruments or securities will not be
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<PAGE> 37
Permitted Investments to the extent that an investment therein will cause then
outstanding principal amount thereof in which such funds are then invested to
exceed $25,000,000 (such investments being valued at par).
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Policy Payments Account: The segregated account, which shall be an
Eligible Account, established and maintained pursuant to Section 3.19(a) and
entitled "Bankers Trust Company of California, N.A., as Trustee for Aames
Mortgage Trust 1997-D Mortgage Pass-Through Certificates, Series 1997-D, Policy
Payments Account".
Pool Balance: As to any Distribution Date, the sum of the Fixed Rate
Group Balance and the Adjustable Rate Group Balance.
Preference Amount: With respect to any Distribution Date and any Class
of Certificates, any amounts included in previous distributions that are
recovered from the related Certificateholders as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction and that have not therefore been repaid to such Certificateholders,
provided such Certificateholders have complied with the provisions of Section
3.19(b).
Prefunding Account: The segregated account, which, if utilized shall be
an Eligible Account, established and maintained pursuant to Section 3.16 and
entitled "Bankers Trust Company of California, N.A., as Trustee for Aames
Mortgage Trust 1997-D Mortgage Pass-Through Certificates, Series 1997-D,
Prefunding Account".
Prefunding Account Deposit: $40,010,652.92 or, if all of the Subsequent
Mortgage Loans are purchased by the Trust on the Closing Date, $0.
Prefunding Account Release: Means the amount to be released from the
Prefunding Account (or, if the Subsequent Mortgage Loans are purchased by the
Trust on the Closing Date, from the Certificate Account) on the Distribution
Date in January 1998, equal to the portion of the Prefunding Account Deposit not
used to purchase Subsequent Mortgage Loans on the Closing Date.
Prepayment Interest Shortfall: As to any Distribution Date and either
Mortgage Loan Group, the amount, if any, by which the amount described in clause
(b) of the definition of Compensating Interest for such Distribution Date
exceeds the Monthly Servicing Fee for such Mortgage Loan Group and the related
Collection Period.
Principal Balance: As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Determination Date, as of the Cut-off Date) less (i) any
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<PAGE> 38
Principal Payments received in respect of such Mortgage Loan during the related
Collection Period, (ii) Net Liquidation Proceeds and Trust Insurance Proceeds
allocable to principal recovered or collected in respect of such Mortgage Loan
during the related Collection Period, (iii) the portion of the Purchase Price
allocable to principal to be remitted by the Seller or the Servicer to the
Trustee on the next succeeding Deposit Date in connection with a purchase or
repurchase of such Mortgage Loan pursuant to Section 2.03, 2.05, 3.01, 3.06 or
10.01, to the extent such amount is actually received by the Trustee on such
Deposit Date, (iv) the amount to be remitted by the Seller to the Trustee on the
next succeeding Deposit Date in connection with a substitution of a Qualified
Replacement Mortgage Loan for such Mortgage Loan pursuant to Section 2.03 or
2.05, to the extent such amount is actually received by the Trustee on such
Deposit Date and (v) the amount to be remitted to the Trustee on the next
succeeding Deposit Date in connection with a purchase of such Mortgage Loan
pursuant to Section 10.01; provided, however that a Mortgage Loan that has
become a Liquidated Mortgage Loan since the preceding Determination Date (or, in
the case of the first Determination Date, since the Cut-off Date) will be deemed
to have a Principal Balance of zero on the current Determination Date.
Principal Distribution Amount: With respect to either Mortgage Loan
Group and any Distribution Date, means the aggregate of the following amounts in
respect of principal and such Mortgage Loan Group:
(i) Principal Payments received or deemed to have been received during
the related Collection Period;
(ii) all Trust Insurance Proceeds received during the related Collection
Period;
(iii) all Net Liquidation Proceeds received during the related
Collection Period (excluding any amount distributed to the Holders of the Class
C Certificates pursuant to Section 3.06)
(iv) the aggregate of the amounts deposited in the Certificate Account
on the related Deposit Date by the Seller or the Servicer, as applicable, in
connection with any purchase, repurchase, shortage or substitution pursuant to
Section 2.03, 2.05, 3.01, 3.03 or 3.06;
(v) the aggregate of the amounts deposited in the Certificate Account by
the Servicer in connection with a purchase pursuant to Section 10.01;
(vi) the amount of Monthly Advances made by the Servicer in respect of
such Distribution Date pursuant to Section 5.02(a); and
(vii) in the case of the January 1998 Distribution Date, the amount, if
any, remaining on deposit in the Prefunding Account (net of any investment
income with respect thereto) or the Escrow Account;
reduced by the sum of:
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(X) the aggregate amount of Servicing Advances (other than those
included in the Liquidation Expenses for any Liquidated Mortgage Loan and
reimbursed from the related Liquidation Proceeds) reimbursable to the Servicer
on such Distribution Date pursuant to the provisions of this Agreement;
(Y) the aggregate amounts (i) deposited into the Collection Account or
Certificate Account that may not be withdrawn therefrom pursuant to a final and
nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been included in Monthly Interest
on such Distribution Date and (ii) received by the Trustee that are recoverable
and sought to be recovered from the Trustee as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of competent
jurisdiction; and
(Z) in the case of the Fixed Rate Group, the related
Overcollateralization Release Amount.
Principal Payment: As to any Mortgage Loan and Collection Period, all
amounts received or, in the case of the principal portion of any Payment Ahead,
deemed to have been received by the Servicer from or on behalf of the related
Mortgagor during such Collection Period (including Principal Prepayments) that,
at the time of receipt or, in the case of any Payment Ahead, at the time such
Payment Ahead is deemed to have been received, were applied or were required to
be applied by the Servicer in reduction of the Principal Balance of such
Mortgage Loan.
Principal Prepayment: As to any Mortgage Loan and Collection Period, any
payment by a Mortgagor or other recovery in respect of principal on a Mortgage
Loan (including Net Liquidation Proceeds) that, in the case of a payment by a
Mortgagor, is received in advance of its scheduled due date and is not a Payment
Ahead.
Property Protection Expenses: Expenses (exclusive of overhead expenses)
reasonably paid or incurred by or for the account of the Servicer in connection
with the preservation or protection of a Mortgaged Property or the security of a
Mortgaged Property, including (a) hazard insurance policy premiums, (b) real
estate taxes and property repair, replacement, protection and preservation
expenses, (c) amounts expended to cure or prevent any default with respect to
any mortgage loan senior to the related Mortgage Loan and (d) similar expenses
reasonably paid or incurred to preserve or protect the value of such Mortgaged
Property or security (including but not limited to reasonable legal fees and
expenses).
Purchase Price: With respect to (a) any Defective Mortgage Loan or (b)
any Mortgage Loan to be purchased by the Servicer pursuant to Section 3.01 or
Section 3.06, an amount equal to (i) the sum of (A) the Principal Balance of
such Mortgage Loan or Defective Mortgage Loan, as the case may be, as of the
beginning of the Collection Period next preceding the Deposit Date on which such
repurchase or purchase is required to occur, (B) interest computed at the
applicable Mortgage Loan Rate on such Principal Balance from the date to which
interest was last paid by the Mortgagor
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to the last day of the Collection Period immediately preceding the Deposit Date
on which such repurchase or purchase occurs and (C) any previously unreimbursed
Servicing Advances made on or in respect of such Defective Mortgage Loan or
Mortgage Loan, as the case may be, less (ii) any payments of principal and
interest in respect of such Defective Mortgage Loan or Mortgage Loan, as the
case may be, made by or on behalf of the related Mortgagor during such
Collection Period; provided that the Purchase Price with respect to any
Restricted Mortgage Loan to be purchased by the Servicer pursuant to Section
3.06 will be the fair market value of the related Mortgaged Property as
described in such Section 3.06.
Qualified Replacement Mortgage Loan: A Mortgage Loan that is substituted
for a Deleted Mortgage Loan pursuant to Section 2.03 or Section 2.05 that must,
at the end of the Collection Period preceding the date of such substitution, (i)
have an outstanding principal balance (when taken together with any other
Qualified Replacement Mortgage Loan being substituted for such Deleted Mortgage
Loan), not in excess of and not substantially less than the unpaid principal
balance of the Deleted Mortgage Loan at the end of the Collection Period
preceding the date of substitution, (ii) if the Deleted Mortgage Loan is an
Adjustable Rate Mortgage Loan, have the Mortgage Loan Rate computed on the same
basis as the Mortgage Loan Rate on the related Mortgage Loan, utilizing the same
Index and having a Gross Margin or Minimum Rate not less than (and not more than
one percentage point in excess of) the Gross Margin and Minimum Rate applicable
to the Deleted Mortgage Loan and if the Deleted Mortgage Loan is not an
Adjustable Rate Mortgage Loan, have a Mortgage Loan Rate not less than (and not
more than one percentage point in excess of) the Mortgage Loan Rate of the
Deleted Mortgage Loan, (iii) have a remaining term to maturity not greater than
(and not more than one year less than) that of the Deleted Mortgage Loan, (iv)
have a Combined Loan-to-Value Ratio equal to or lower than the Combined
Loan-to-Value Ratio of the Deleted Mortgage Loan, (v) satisfy the criteria set
forth from time to time in the definition "qualified replacement mortgage" at
Section 860G(a)(4) of the Code, (vi) have the same or a superior lien priority
as the Deleted Mortgage Loan, (vii) comply as of the date of substitution with
each representation and warranty set forth in Section 2.05, (viii) have the same
or better property type as the Deleted Mortgage Loan and (ix) have the same or
better occupancy status. In the event that one or more mortgage loans are
proposed to be substituted for one or more Deleted Mortgage Loans, the foregoing
tests may be met on a weighted average basis or other aggregate basis (which, in
the case of the Adjustable Rate Mortgage Loans, must be acceptable to the
Financial Guaranty Insurer), except that the requirements of clauses (iv)
through (ix) hereof must be satisfied as to each Qualified Replacement Mortgage
Loan.
Rating Agencies: Moody's, Fitch and, with respect to the Adjustable Rate
Group Certificates, S&P (each, a "Rating Agency"). If either such agency or a
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical credit rating agency, or other comparable Person,
designated by the Servicer, notice of which designation shall be given to the
Trustee.
Realized Loss: With respect to any Liquidated Mortgage Loan, the amount,
if any, by which the Principal Balance of such Mortgage Loan and accrued and
unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such
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Mortgage Loan, which amount shall in no event exceed the Principal Balance of
such Mortgage Loan (determined as of the Determination Date immediately prior to
such Mortgage Loan becoming a Liquidated Mortgage Loan).
Record Date: As to any Distribution Date, the close of business, if
applicable, on the last Business Day of the calendar month immediately preceding
such Distribution Date.
Reference Banks: Bankers Trust Company, Barclay's Bank PLC and National
Westminster Bank PLC; provided that, if any of the foregoing banks are deemed by
the Servicer (as indicated in writing to the Trustee) not suitable to serve as a
Reference Bank, then any leading banks selected by the Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) whose quotations appear on
the Dow Jones Telerate Service Page 3750 on the LIBOR Determination Date in
question, (iii) that have been designated as such by the Trustee and (iv) not
controlling, controlled by, or under common control with the Company or any
originator.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Relief Act Shortfall: As to any Distribution Date and either Mortgage
Loan Group, the amount of any reduction of interest collectible on any Mortgage
Loan in either Mortgage Loan Group for the related Collection Period due to the
application of the Relief Act.
REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D, and in particular, any of the REMIC I, REMIC II and REMIC III as
indicated by the context.
REMIC Pool: With respect to the REMIC I, the REMIC I Pool which shall be
the assets of the Trust attributable to the Fixed Rate Group and Adjustable Rate
Group, other than the Prefunding Account, Capitalized Interest Account, Escrow
Account and Supplemental Interest Reserve Fund, the REMIC I Regular Interests
and the REMIC II Regular Interests; with respect to the REMIC II, the REMIC II
Pool which shall be the REMIC I Regular Interests; and with respect to REMIC
III, the REMIC III Pool which shall be the REMIC II Regular Interests.
REMIC Provisions: Provisions of the federal income tax law relating to
REMICs that appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury proposed, temporary or final regulations and rulings promulgated
thereunder, as the foregoing may be in effect from time to time.
REO Property: As defined in Section 5.02(a).
Reserve Interest Rate: With respect to any LIBOR Determination Date, the
rate per annum that the Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 0.0625%) of the
one-month U.S. dollar lending rates that New York City banks selected by the
Trustee are quoting on the relevant LIBOR Determination Date to the principal
London offices of leading banks in the London interbank market or (ii) in the
event that
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the Trustee can determine no such arithmetic mean, the lowest one-month U.S.
dollar lending rate that New York City banks selected by the Trustee are quoting
on such LIBOR Determination Dates to leading European banks.
Responsible Officer: When used with respect to the Trustee, any Vice
President or Assistant Vice President, any Assistant Secretary, any Assistant
Treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and 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 Mortgage Loan: A Mortgage Loan that as of the Closing Date
was 90 or more days contractually delinquent.
Restricted Mortgaged Property: With respect to any Restricted Mortgage
Loan, means the Mortgaged Property securing such Restricted Mortgage Loan.
Retained Certificates: Collectively, each of the Class C Certificates
and Class R Certificates.
Reuters Screen NYAA Page: The display designated as page "Reuters Screen
NYAA Page" on the Reuters Monitor Money Rates Service (or such other page
selected by the Trustee as may replace the NYAA page on that service for the
purpose of displaying Federal Funds rates).
Rolling Delinquency Percentage: For any Distribution Date and either
Mortgage Loan Group, the average of the Delinquency Percentages for such
Mortgage Loan Group as of the last day of each of the three (or one or two in
the case of the first three Distribution Dates, as applicable) most recently
ended Collection Periods.
Rolling Loss Percentage: With respect to either Mortgage Loan Group and
any Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Realized Losses incurred with respect to such
Mortgage Loan Group during the preceding twelve Collection Periods, and the
denominator of which is the related Group Balance as of the first day of such
twelfth preceding Collection Period.
Securities Act: The Securities Act of 1933, as amended.
S&P: Standard and Poor's Corporation.
Seller: The Company.
Senior Enhancement Percentage: With respect to the Fixed Rate Group and
any Distribution Date means the percentage obtained by dividing (x) the sum of
(i) the Aggregate Certificate Principal Balance of the Fixed Rate Group
Certificates (or, after the Certificate Principal Balance of each Class of Fixed
Rate Group Class A Certificates has been reduced to zero, the
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Aggregate Certificate Principal Balance of the Subordinate Certificates other
than the most senior Class of such Subordinate Certificates then outstanding)
and (ii) the related Overcollateralization Amount, in each case after taking
into account distributions in respect of the Fixed Rate Group Principal
Distribution Amount to the related Offered Certificateholders on such
Distribution Date by (y) the aggregate of the outstanding Principal Balances of
the Mortgage Loans in the Fixed Rate Group as of the last day of the related
Collection Period (plus, in the case of Collection Periods during the Funding
Period, the portion, if any, of the Fixed Rate Group Prefunding Account Deposit
remaining on deposit in the Prefunding Account or escrow Account).
Senior Lien: With respect to any Junior Mortgage Loan, any liens on the
related Mortgaged Property of higher priority.
Servicer: The Company or any successor servicer appointed as provided
pursuant to this Agreement.
Servicer Cumulative Loss Rate Event: With respect to the Adjustable Rate
Group and any Distribution Date occurring during the periods indicated in the
following table, the Loss Percentage exceeds the percentage indicated
percentage:
<TABLE>
<CAPTION>
from and including: to but excluding Loss Percentage
- ------------------- ---------------- ---------------
<S> <C> <C>
January 1998 January 1999 1.00%
January 1999 January 2000 1.50%
January 2000 January 2001 2.25%
January 2001 January 2002 3.00%
</TABLE>
and, with respect to any Distribution Date in January 2002 or thereafter, the
Loss Percentage exceeds 3.75%.
Servicer Delinquency Rate Event: With respect to the Adjustable Rate
Group, on any Distribution Date the Rolling Delinquency Percentage for such
Mortgage Loan Group equals or exceeds 15%.
Servicer Remittance Report: The monthly report prepared by the Servicer
and delivered to the Trustee and Financial Guaranty Insurer pursuant to Section
4.01.
Servicer Rolling Loss Rate Event: With respect to the Adjustable Rate
Group, on any Distribution Date on or after January 15, 1999 the Rolling Loss
Percentage for such Mortgage Loan Group exceeds 1.50%.
Servicing Advances: All reasonable and customary "out-of-pocket" costs
and expenses incurred in the performance by the Servicer of its servicing
obligation, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
(ii) any enforcement or judicial
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proceedings, including foreclosures, (iii) the management and liquidation of any
REO Property, (iv) compliance with the obligations under Section 3.04 and (v)
expenditures relating to the correction of a default on any Senior Lien pursuant
to Section 3.06 in connection with the liquidation of a Mortgage Loan.
Servicing Fee Rate: With respect to each Mortgage Loan Group and each
Collection Period, 0.50%.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Trustee by the Servicer, as such list may
from time to time be amended.
Specified Senior Enhancement Percentage: With respect to any date of
determination, 35.00%.
Startup Day: As defined in Section 2.07.
Statement to Certificateholders: As defined in Section 5.03.
Stepdown Date: The later to occur of (x) the Distribution Date in
January 2001 or (y) the first Distribution Date on which the Senior Enhancement
Percentage (after taking into account distributions on such Distribution Date in
respect of principal collections) is greater than or equal to the Specified
Senior Enhancement Percentage.
Step Down Cumulative Loss Test: With respect to any Distribution Date
and the Adjustable Rate Group, a determination as to whether: (i) for the
Distribution Dates occurring in January 2000 through and including December
2000, the Loss Percentage for such Mortgage Loan Group and Distribution Date is
1.00% or less, (ii) for the Distribution Dates occurring in January 2001 through
and including December 2001, the Loss Percentage for such Mortgage Loan Group
and such Distribution Date is 1.50% or less, (iii) for the Distribution Dates
occurring in January 2002 through and including December 2002, the Loss
Percentage for such Mortgage Loan Group and such Distribution Date is 2.00% or
less, (iv) for any Distribution Date occurring in or January 2003 through and
including December 2003, the Loss Percentage for such Mortgage Loan Group and
such Distribution Date is 2.50% or less and (v) for any Distribution Date
occurring in or after January 2004, the Loss Percentage for such Mortgage Loan
Group and such Distribution Date is 2.75% or less.
Step Down Rolling Delinquency Test: On any relevant Distribution Date
and with respect to the Adjustable Rate Group, the related Rolling Delinquency
Percentage is less than 10.50%.
Step Down Rolling Loss Test: On any relevant Distribution Date and with
respect to the Adjustable Rate Group, the related Rolling Loss Percentage is
less than 0.75%.
Stepped Down Targeted Overcollateralization Amount: With respect to the
Adjustable
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<PAGE> 45
Rate Group and any Distribution Date, the product of the Adjustable Rate Group
Balance and the Stepped Down Targeted Overcollateralization Percentage (or, if
an Excess Spread Trigger has occurred, the Stepped Down Targeted
Overcollateralization Percentage (Excess Spread Trigger)).
Stepped Down Targeted Overcollateralization Percentage: With respect to
the Adjustable Rate Group and any Distribution Date on or after the twenty-fifth
Distribution Date on which the related Step Down Trigger has occurred a
percentage equal to the difference, if positive, of (i) the percentage
equivalent of a fraction, the numerator of which is 5% of the Original
Adjustable Rate Group Balance plus the Adjustable Rate Group Prefunding Account
Deposit and the denominator of which is the Adjustable Rate Group Balance as of
such Distribution Date, minus (ii) the percentage equivalent of a fraction, the
numerator of which is the product of (A) the percentage calculated under clause
(i) above minus 12.5%, multiplied by (B) the number of consecutive Distribution
Dates through and including the Distribution Date for which such calculation is
made, up to a maximum of twelve, from and including the twenty-fifth
Distribution Date, and the denominator of which is twelve.
Stepped Down Targeted Overcollateralization Percentage (Excess Spread
Trigger): With respect to the Adjustable Rate Group and any Distribution Date on
or after the twenty-fifth Distribution Date on which the related Step Down
Trigger has occurred a percentage equal to the difference, if positive, of (i)
the percentage equivalent of a fraction, the numerator of which is 8.5% of the
Original Adjustable Rate Group Balance plus the Adjustable Rate Group Prefunding
Account Deposit and the denominator of which is the Adjustable Rate Group
Balance as of such Distribution Date, minus (ii) the percentage equivalent of a
fraction, the numerator of which is the product of (A) the percentage calculated
under clause (i) above minus 21.25%, multiplied by (B) the number of consecutive
Distribution Dates through and including the Distribution Date for which such
calculation is made, up to a maximum of twelve, from and including the
twenty-fifth Distribution Date, and the denominator of which is twelve.
Step Down Trigger: With respect to any Distribution Date and the
Adjustable Rate Group, the Step Down Trigger will have occurred if each of the
Step Down Rolling Delinquency Test, Step Down Rolling Loss Test and Step Down
Cumulative Loss Test is satisfied.
Step Up Cumulative Loss Test: With respect to the Adjustable Rate Group
and any Distribution Date, a determination as to whether: (i) for any
Distribution Date occurring prior to December 1998, the Loss Percentage for such
Mortgage Loan Group and Distribution Date is greater than 1.00%; (ii) for any
Distribution Date occurring in or after December 1998 but prior to December
1999, the Loss Percentage for such Mortgage Loan Group and Distribution Date is
greater than 1.25%; (iii) for any Distribution Date occurring in or after
December 1999 but prior to December 2000, the Loss Percentage for such Mortgage
Loan Group and Distribution Date is greater than 2.00%; (iv) for any
Distribution Date occurring in or after December 2000 but prior to December
2001, the Loss Percentage for such Mortgage Loan Group and Distribution Date is
greater than 2.50%; and (v) for any Distribution Date occurring in or after
December 2001, the Loss Percentage for such Mortgage Loan Group and Distribution
Date is greater than 3.00%.
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<PAGE> 46
Stepped Up Enhancement Percentage: With respect to the Fixed Rate Group
on any Distribution Date, a percentage equal to (x) 100% minus (y) 2.0 times the
Rolling Delinquency Percentage.
Step Up Rolling Delinquency Test: With respect to the Adjustable Rate
Group and any Distribution Date, a determination that the Rolling Delinquency
Percentage is more than 12.75%.
Step Up Rolling Loss Test: With respect to the Adjustable Rate Group and
any Distribution Date, a determination that the Rolling Loss Percentage is equal
to or greater than 1.25%.
Subordinate Certificates: The Class M-1F, Class M-2F and Class B-1F
Certificates.
Sub-Servicer: Any Person, including an Affiliate of the Servicer, with
whom the Servicer has entered into a Sub-Servicing Agreement and who satisfies
the requirements set forth in Section 3.15 hereof in respect of the
qualification of a Sub-Servicer. The Sub-Servicers with respect to any of the
Mortgage Loans as of the Cut-off Date are listed on Schedule I attached to this
Agreement.
Sub-Servicing Account: Any segregated account, which shall at all times
be an Eligible Account, established and maintained pursuant to Section 3.02(b)
and entitled "[Sub-Servicer], in trust for the benefit of Holders of Aames
Mortgage Trust 1997-D Mortgage Pass-Through Certificates, Series 1997-D,
Collection Account". References herein to the Collection Account shall include
any Sub-Servicing Account as the context requires.
Sub-Servicing Agreement: A written contract between the Servicer and any
Sub-Servicer relating to the servicing and/or administration of certain Mortgage
Loans.
Supplemental Interest Amount: With respect to either Class of Adjustable
Rate Group Certificates on any Distribution Date, the positive excess, if any,
of the amount of interest that would have accrued thereon during the related
Interest Period at the related Formula Pass-Through Rate over the amount of
interest that did accrue thereon at the Adjustable Rate Group Available Funds
Cap (and in the case of any such excess remaining unpaid from a prior
Distribution Date, interest thereon at the related Formula Pass-Through Rate, to
the extent lawful).
Supplemental Interest Reserve Fund: The Supplemental Interest Reserve
Fund established and maintained as described in Sections 3.18 and 9.16(x).
Subsequent Cut-off Date: With respect to any Subsequent Mortgage Loan,
the date specified as such in the related Subsequent Mortgage Loan Schedule.
Subsequent Cut-off Date Principal Balance: As to any Subsequent Mortgage
Loan, the actual outstanding principal balance due thereunder from the Mortgagor
in the related Addition Notice.
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<PAGE> 47
Subsequent Mortgage Loan: A Mortgage Loan sold to the Trust pursuant to
Section 2.02 of this Agreement, which shall be listed on the Subsequent Mortgage
Loan Schedule attached to a Subsequent Transfer Agreement.
Subsequent Mortgage Loan Schedule: As of any Subsequent Transfer Date,
the schedule of Subsequent Mortgage Loans separated by Mortgage Loan Group as of
the related Subsequent Cut-off Date being transferred to the Trust on such
Subsequent Transfer Date pursuant to a Subsequent Transfer Agreement. Each
Subsequent Mortgage Loan Schedule shall contain information regarding the
related Subsequent Mortgage Loans of the type included in, and shall be
substantially in the form of, the Mortgage Loan Schedule attached hereto as
Exhibit B.
Subsequent Purchase Price: As of any Subsequent Transfer Date, with
respect to the Subsequent Mortgage Loans to be included in either Mortgage Loan
Group, an amount equal to the Principal Balances as of the Subsequent Cut-off
Date of such Subsequent Mortgage Loans listed in the related Subsequent Transfer
Agreement.
Subsequent Transfer Agreement: With respect to any Subsequent Mortgage
Loan, the agreement pursuant to which such Subsequent Mortgage Loan is
transferred to the Trust, in substantially the form attached hereto as Exhibit
I.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement, but no later than January 14, 1998.
Subsequent Transfer Deposit: The amount deposited by the Seller in the
Collection Account in connection with each conveyance of Subsequent Mortgage
Loans pursuant to Section 2.02, which amount shall be the aggregate of the
amounts of interest that would have accrued (at the related Mortgage Loan Rates
net of the Servicing Fee Rate) on each such Subsequent Mortgage Loan for each
30-day period from the related Subsequent Transfer Date through the end of the
last Collection Period preceding the Collection Period in which such Mortgage
Loan has its first Monthly Payment Due. Each Subsequent Transfer Deposit shall
be allocated to the Fixed Rate Group or the Adjustable Rate Group, as
appropriate.
Targeted Overcollateralization Amount: (a) With respect to the Fixed
Rate Group (i) prior to the Stepdown Date, 2.00% of the aggregate of the
Certificate Principal Balances of the Fixed Rate Group Certificates as of the
Cut-off Date, and (ii) on and after the Stepdown Date, the greater of (A) 4.00%
of Fixed Rate Group Balance as of the last day of the related Collection Period
and (B) $1,100,000; and
(b) With respect to the Adjustable Rate Group on any Distribution Date
on which an Excess Spread Trigger has not occurred, (i) 5.00% of the sum of the
Original Adjustable Rate Group Balance and the Adjustable Rate Group Prefunding
Account Deposit, and (ii) on each Distribution Date as to which the Step Down
Trigger has occurred, an amount equal to the greater of (A) $1,924,616 and (B)
the lesser of (x) 5.00% of the sum of the Original Adjustable Rate Group Balance
and the Adjustable Rate Group Prefunding Account Deposit and (y) the product of
the Stepped Down Targeted Overcollateralization Percentage and the Adjustable
Rate Group
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<PAGE> 48
Balance as of the last day of the related Collection Period, except that on any
Distribution Date in or after January 2000 as to which any of the Step Up
Cumulative Loss Test, Step Up Rolling Delinquency Test or Step Up Rolling Loss
Test is satisfied, and through the Distribution Date on which each such test is
no longer met, the Targeted Overcollateralization Amount for the Adjustable Rate
Group will be the sum of (i) the product of 12.50% and the Adjustable Rate Group
Balance and (ii) the product of 0.50 and the aggregate of the Principal Balances
of all Adjustable Rate Mortgage Loans that are 90 or more days contractually
delinquent (including Mortgage Loans as to which the related Mortgagor is in
bankruptcy proceedings or the related Mortgaged Property is an REO Property);
and
(c) With respect to the Adjustable Rate Group on any Distribution Date
on which an Excess Spread Trigger has occurred, (i) 8.5% of the sum of the
Original Adjustable Rate Group Balance and the Adjustable Rate Group Prefunding
Account Deposit, and (ii) on each Distribution Date as to which the Step Down
Trigger has occurred, an amount equal to the greater of (A) $1,924,616 and (B)
the lesser of (x) 8.50% of the sum of the Original Adjustable Rate Group Balance
and the Adjustable Rate Group Prefunding Account Deposit and (y) the product of
the Stepped Down Targeted Overcollateralization Percentage and the Adjustable
Rate Group Balance as of the last day of the related Collection Period, except
that on any Distribution Date in or after January 2000 as to which the Step Up
Cumulative Loss test, Step Up Rolling Delinquency Test or Step Up Rolling Loss
Test is satisfied, and through the Distribution Date on which each such test is
no longer met, the Targeted Overcollateralization Amount for the Adjustable Rate
Group will be the sum of (i) the product of 21.25% and the Adjustable Rate Group
Balance and (ii) the product of 0.50 and the aggregate of the Principal Balances
of all Adjustable Rate Mortgage Loans that are 90 or more days contractually
delinquent (including Mortgage Loans as to which the related Mortgagor is in
bankruptcy proceedings or the related Mortgaged Property is an REO Property);
provided, however, that if a Trigger Event has occurred and is continuing for
either Mortgage Loan Group, the applicable Targeted Overcollateralization Amount
for such Mortgage Loan Group will not be reduced to less than the applicable
Targeted Overcollateralization Amount in effect on the Distribution Date
preceding the occurrence of such Trigger Event.
Targeted Overcollateralization Loss Event: With respect to any
Distribution Date during the indicated period and the Fixed Rate Group, means
that the related Loss Percentage equals or exceeds the indicated Loss
Percentage.
<TABLE>
<CAPTION>
Period Loss Percentage
------ ---------------
<S> <C>
Through December 2000 1.60%
January 2001 - December 2001 2.60%
January 2002 - December 2002 3.30%
January 2003 - December 2003 3.70%
January 2004 - December 2004 4.00%
January 2005 and thereafter 4.30%
</TABLE>
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<PAGE> 49
Telerate Page 120: The display designated as "Page 120" on the Dow Jones
Telerate Service (or such other page selected by the Servicer as may replace
Page 120 on that service for the purpose of displaying daily Federal Funds
rates).
Transfer Affidavit: The affidavit to be delivered by any transferee of
an interest in a Class R Certificate pursuant to Section 6.02(b), to be
substantially in the form attached hereto as Exhibit D.
Transferor Affidavit: The affidavit to be delivered by any transferor of
an interest in a Class R Certificate pursuant to Section 6.02(c), to be
substantially in the form attached hereto as Exhibit H.
Trigger Event: With respect to the Fixed Rate Group and any Distribution
Date, means (a) on such Distribution Date the Rolling Delinquency Percentage
equals or exceeds 50% of the Senior Enhancement Percentage or (b) the occurrence
and continuance of a Targeted Overcollateralization Loss Event with respect to
the Fixed Rate Group; provided that, notwithstanding the foregoing, with respect
to clause (a), a Trigger Event will not be in effect on any Distribution Date as
to which the percentage equivalent of a fraction, the numerator of which is the
aggregate Certificate Principal Balance of the Fixed Rate Group Class A
Certificates and the denominator of which is the Fixed Rate Group Balance as of
the last day of the related Collection Period is less than or equal to the
related Stepped Up Enhancement Percentage after all distributions thereon in
respect of principal. With respect to the Adjustable Rate Group and any
Distribution Date, means that any of the Step Down Rolling Loss Test, the Step
Down Rolling Delinquency Test or the Step Down Cumulative Loss Test is not
satisfied.
Trust: The trust created by this Agreement and the corpus thereof, which
consists of, to the extent described herein, the Mortgage Loans, such assets as
shall from time to time be identified or shall be required by this Agreement to
be deposited in the Collection Account, the Certificate Account, the Prefunding
Account or the Capitalized Interest Account or invested in Permitted Investments
in accordance with this Agreement, all rights under any insurance policy
covering a Mortgage Loan or the related Mortgaged Property and property and any
proceeds thereof that secured a Mortgage Loan and that has been acquired by
foreclosure, deed in lieu of foreclosure or by a comparable conversion.
Trust Insurance Proceeds: Insurance Proceeds that (a) are applied by the
Servicer to reduce the Principal Balance of the related Mortgage Loan and (b)
not applied to the restoration or repair of the related Mortgaged Property or
released to the related Mortgagor in accordance with the Servicer's normal
servicing procedures or the terms of the related Mortgage Loan.
Trust Parties: As defined in Section 5.04.
Trustee: Bankers Trust Company of California, N.A., a national banking
association, and its successors in interest or any successor trustee appointed
as provided pursuant to this Agreement.
Trustee Fee: The annual fee of the Trustee, which shall be $5,000, and
any annual file
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access fees or other fees and expenses, payable by the Servicer pursuant to
Section 9.05.
Unpaid Realized Loss Amount: With respect to any Class of the
Subordinate Certificates and as to any Distribution Date means, the excess of
(x) the aggregate cumulative amount of related Applied Realized Loss Amounts
with respect to such Class for all prior Distribution Dates over (y) the
aggregate cumulative amount of related Realized Loss Amortization Amounts with
respect to such Class for all prior Distribution Dates.
Vice President: Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
Voting Interest: With respect to any provisions hereof providing for the
action, consent or approval of the Holders of all Certificates evidencing
specified Voting Interests in the Trust, the Holders of the Offered Certificates
will collectively be entitled to 100% of the aggregate Voting Interests
represented by all Certificates. Voting Interests will be allocated to the
Certificateholders of each Class pro rata, based on the respective Certificate
Principal Balances thereof. Each Certificateholder of a Class will have a Voting
Interest equal to the product of the Voting Interest to which such Class is
collectively entitled and the Percentage Interest in such Class represented by
such Holder's Certificates. With respect to any provision hereof providing for
action, consent or approval of each Class of Certificates or specified Classes
of Certificates, each Certificateholder of a Class will have a Voting Interest
in such Class equal to such Holder's Percentage Interest in such Class.
Section 1.02. Interest Calculations. All calculations of interest at the
Mortgage Loan Rate that are made in respect of the Principal Balance of a
Mortgage Loan, shall be made on a daily basis using a 360-day year of twelve
30-day months. All calculations of interest on the Fixed Rate Group Certificates
other than the Class A-1F Certificate will be computed on the basis of a 360-day
year of twelve 30-day months. All calculations of interest on the Adjustable
Rate Group Certificates and the Class A-1F Certificates will be computed on the
basis of the actual number of days elapsed in the related Interest Period and a
year of 360 days.
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<PAGE> 51
ARTICLE TWO
CONVEYANCE OF THE TRUST;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Trust. The Seller, concurrently with the
execution and delivery of this Agreement, does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders, without recourse (except as otherwise
explicitly provided for herein), all of its right, title and interest in and to
the Trust, including specifically, without limitation, the Mortgage Loans, the
Mortgages, the Mortgage Files and the Mortgage Notes, including all interest and
principal (whether in the form of payments by Mortgagors or other proceeds)
received or deemed to be received by the Seller on or with respect to the
Mortgage Loans on or after the Cut-off Date net of amounts in respect of
interest accrued on the Mortgage Loans in periods prior to the Cut-off Date
(whether in the nature of amounts held by the Seller for application on behalf
of the related Mortgagor as a Monthly Mortgage Payment that is due on any date
on or after the Cut-off Date or otherwise), together with all of its right,
title and interest in and to the proceeds received on or after the Cut-off Date
of any related insurance policies. In addition, on or prior to the Closing Date
the Seller shall (i) cause the Financial Guaranty Insurance Policy to be
delivered to the Trustee and (ii) deposit the Closing Date Deposit in the
Collection Account.
In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Trust by the Seller to the Trustee, such
sale and assignment is deemed to constitute a pledge of security for a loan, it
is the intent of this Agreement that the Seller shall be deemed to have granted
to the Trustee for the benefit of the Certificateholders a first priority
perfected security interest in all of the Seller's right, title and interest in
and to the Mortgage Loans, the Mortgages, the Mortgage Files and the Mortgage
Notes, all payments of principal or interest on the Mortgage Loans received on
or after the Cut-off Date net of amounts in respect of interest accrued on the
Mortgage Loans in periods prior to the Cut-off Date, all other payments
(exclusive of assumption fees, late payment charges, charges for checks returned
for insufficient funds, prepayment fees, if any, and extension and other
administrative charges) made in respect of such Mortgage Loans on or after the
Cut-off Date and all proceeds of any thereof, including all amounts on deposit
in the Certificate Account, the Collection Account, the Prefunding Account and
the Capitalized Interest Account and amounts invested in Permitted Investments
(but excluding all investment income with respect to the Prefunding Account and
Capitalized Interest Account), and that this Agreement shall constitute a
security agreement under applicable law.
The Company confirms to the Trustee that it has caused its computer
records relating to the Mortgage Loans to indicate by a code that the Mortgage
Loans have been sold to the Trustee on behalf of the Trust and constitute part
of the Trust in accordance with the terms of the Trust and that the Company will
treat the transaction contemplated by such sale and assignment as a sale in
accordance with generally accepted accounting principles and will reflect such
sale on its primary accounting records.
In connection with such sale and assignment, the Company, in its
capacity as Seller hereunder, does hereby deliver to, and deposit with, the
Trustee the originals of the following
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<PAGE> 52
documents or instruments with respect to each Mortgage Loan so assigned:
(a) The original Mortgage Note, with all intervening endorsements
sufficient to show a complete chain of endorsement to the Seller,
endorsed (which endorsement may be by manual or facsimile signature) by
the Seller without recourse to the order of the Trustee in the following
form: "Pay to the order of Bankers Trust Company of California, N.A., in
trust for the benefit of holders of Aames Mortgage Trust 1997-D Mortgage
Pass-Through Certificates, Series 1997-D, without recourse"; except that
with respect to 3 Mortgage Loans identified to the Trustee by loan
number, an original lost note affidavit has been supplied in lieu of the
original Mortgage Note;
(b) The original Mortgage with evidence of recording indicated
thereon;
(c) The original executed assignment of the Mortgage in
recordable form;
(d) Originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed;
(e) Originals of all intervening mortgage assignments with
evidence of recording indicated thereon sufficient to show a complete
chain of assignment from the originator of the Mortgage Loan to the
Seller or one of its Affiliates; and
(f) Original lender's title insurance policy issued on the date
of the origination of such Mortgage Loan.
As promptly as practicable subsequent to the Closing Date, and in any
event, within 30 days thereafter, the Company, in its capacity as Servicer 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 Servicer has not received
the information required to prepare such assignment in recordable form, the
Servicer shall be obligated to prepare and to deliver such assignment for such
recording as soon as practicable after receipt of such information and in any
event within 30 days after receipt thereof (and in no event more than one year
after the Closing Date) and that the Servicer need not cause to be recorded any
assignment that relates to a Mortgage Loan in any jurisdiction under the laws of
which, as evidenced by an Opinion of Counsel delivered or advice of counsel
satisfactory to the Trustee rendered to the Trustee by independent counsel (in
each case at the Seller's expense), to the effect that the recordation of such
assignment is not necessary to protect the Trustee's and the Certificateholders'
interest in the related Mortgage Loan.
If the Company cannot deliver the original Mortgage or any intervening
mortgage assignment to the benefit of the Seller or one of its affiliates with
evidence of recording thereon concurrently with the execution and delivery of
this Agreement solely because of a delay caused by
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<PAGE> 53
the public recording office where such original Mortgage or mortgage assignment
has been delivered for recordation, the Company shall deliver to the Trustee an
Officer's Certificate, with a photocopy of such Mortgage or mortgage assignment,
as the case may be, attached thereto, stating that such original Mortgage or
mortgage assignment has been delivered to the appropriate public recording
official for recordation. The Company shall promptly deliver to the Trustee any
such original Mortgage or intervening mortgage assignment with evidence of
recording indicated thereon upon receipt thereof from the public recording
official. If the Company within six months from the Closing Date shall not have
received such original Mortgage or intervening mortgage assignment from the
public recording official, it shall obtain, and deliver to the Trustee within
eight months from the Closing Date, a copy of such original Mortgage or mortgage
assignment certified by such public recording official to be a true and complete
copy of such original Mortgage or mortgage assignment as recorded by such public
recording office.
The costs relating to the delivery of the documents specified in this
Section shall be borne by the Seller.
Section 2.02. Conveyance of the Subsequent Mortgage Loans; Fixed Price
Contract. Subject to the conditions set forth in the paragraphs below, in
consideration of the Trustee's delivery on the Closing Date or related
Subsequent Transfer Dates to or upon the order of the Seller of the Subsequent
Purchase Price of the related Subsequent Mortgage Loans from amounts on deposit
in the Prefunding Account (or other amounts payable to the Company if such
purchases of all Subsequent Mortgage Loans occur on the Closing Date) with
respect to the related Mortgage Loan Group, the Seller shall, from time to time,
on any Subsequent Transfer Date sell, transfer, assign, set over and otherwise
convey without recourse, to the Trustee, all right, title and interest of the
Seller in and to each Subsequent Mortgage Loan identified on the Subsequent
Mortgage Loan Schedule attached to the related Subsequent Transfer Agreement
delivered by the Seller on the Closing Date or such Subsequent Transfer Date,
including all of its right, title and interest in and to principal and interest
(whether in the form of payments by Mortgagors or other proceeds) received or
deemed to be received by the Seller on each such Subsequent Mortgage Loan on and
after the related Subsequent Cut-off Date, net of amounts in respect of interest
accrued on such Subsequent Mortgage Loans in periods prior to the related
Subsequent Cut-off Date (whether in the nature of amounts held by the Seller for
application on behalf of the related Mortgagor as a Monthly Mortgage Payment
that is due on any date on or after the related Subsequent Cut-off Date or
otherwise), plus any Subsequent Transfer Deposit relating to such Subsequent
Mortgage Loan and all items with respect to such Subsequent Mortgage Loan to be
delivered pursuant to Section 2.01 and other items in the related Mortgage File;
provided, however, that the Seller reserves and retains all of its right, title
and interest in and to principal (including prepayments) and interest collected
on each such Subsequent Mortgage Loan prior to the related Subsequent Cut-off
Date (except for amounts held by the Seller for application on or after the
related Subsequent Cut-off Date). The transfer by the Seller of the Subsequent
Mortgage Loans set forth on the Subsequent Mortgage Loan Schedule to the Trustee
shall be absolute and shall be intended by the parties hereto to be treated as a
sale by the Seller. On or before the last day of the Funding Period, the Seller
shall convey to the Trustee pursuant to this Section 2.02 the lesser of: (i) all
Mortgage Loans then in its possession that satisfy the requirements of this
Section 2.02 or (ii) the maximum principal balance of Mortgage Loans as
determined by Seller that satisfy the requirements of this Section 2.02 whose
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<PAGE> 54
aggregate Subsequent Purchase Price does not exceed the Prefunding Account
Deposit. Subsequent Mortgage Loans to be conveyed on a given Subsequent Transfer
Date must have an aggregate Subsequent Cut-off Date Principal Balance of not
less than $500,000; provided, however, that the Subsequent Mortgage Loans to be
conveyed on the final Subsequent Transfer Date may have an aggregate Subsequent
Cut-off Date Principal Balance of less than $500,000. In connection with each
conveyance of Subsequent Mortgage Loans, the Seller shall deposit any applicable
Subsequent Transfer Deposit in the Collection Account on the related Subsequent
Transfer Date.
In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Subsequent Mortgage Loans on the related
Subsequent Transfer Date by the Seller to the Trustee, such sale and assignment
will be deemed to constitute a pledge of security for a loan, it is the intent
of this Agreement that the Seller shall be deemed to have granted to the Trustee
for the benefit of the Certificateholders a first priority perfected security
interest in all of the Seller's right, title and interest in and to the
Subsequent Mortgage Loans, the Mortgages, the Mortgage Files and the Mortgage
Notes, all payments of principal and interest on the Subsequent Mortgage Loans
received on or after their respective Subsequent Cut-off Dates, net of amounts
in respect of interest accrued on such Subsequent Mortgage Loans in periods
prior to the related Subsequent Cut-off Date, all other payments (exclusive of
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, and extension and other
administrative charges) made in respect of such Subsequent Mortgage Loans on or
after the related Subsequent Cut-off Date, plus any Subsequent Transfer Deposit
relating to such Subsequent Mortgage Loan and all proceeds of any thereof, and
that this Agreement and the related Subsequent Transfer Agreement shall each
constitute a security agreement with respect to the related Subsequent Mortgage
Loans under applicable law.
The amount released to the Seller from the Prefunding Account on any
Subsequent Transfer Date (or from other amounts payable to the Company on the
Closing Date) in connection with any conveyance of Subsequent Mortgage Loans to
be included in the Fixed Rate Group shall be equal to the aggregate of the
Subsequent Purchase Prices for such Subsequent Mortgage Loans, which amounts, in
the aggregate, shall not exceed the Fixed Rate Group Prefunding Account Deposit.
The amount released to the Seller from the Prefunding Account on any Subsequent
Transfer Date (or from other amounts payable to the Company on the Closing Date)
in connection with any conveyance of Subsequent Mortgage Loans to be included in
the Adjustable Rate Group shall be equal to the aggregate of the Subsequent
Purchase Prices for such Subsequent Mortgage Loans, which amounts, in the
aggregate, shall not exceed the Adjustable Rate Group Prefunding Account
Deposit. The amounts so released to the Seller in connection with any conveyance
of Subsequent Mortgage Loans shall, for federal income tax purposes, be
considered cash contributed to the related REMIC I Pool by the Seller and used
by the Trustee to acquire the related Subsequent Mortgage Loans pursuant to a
fixed price contract established pursuant to this Section 2.02.
On the Closing Date or other related Subsequent Transfer Date, the
Seller shall transfer to the Trustee the Subsequent Mortgage Loans and the other
property and rights related thereto described in the first paragraph in this
section only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
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<PAGE> 55
(a) the Seller shall provide the Trustee and Financial Guaranty
Insurer with an Addition Notice and shall provide any information reasonably
requested by the Trustee with respect to the Subsequent Mortgage Loans;
(b) the Seller shall deliver to the Trustee, the Financial
Guaranty Insurer and the Rating Agencies a duly executed Subsequent Transfer
Agreement and any other related documentation in the forms of the exhibits
listed thereon;
(c) the Seller shall deposit in the Collection Account all
collections in respect of the Subsequent Mortgage Loans received or deemed
received by the Seller on or after the related Subsequent Cut-off Date (whether
in the nature of amounts held by the Seller for later application on behalf of
the related Mortgagor in respect of a Monthly Payment due after the related
Subsequent Cut-off Date or otherwise);
(d) the Seller shall certify that, as of such date, the Seller
was not insolvent, was not made insolvent by such transfer and is not aware of
any pending insolvency;
(e) the Seller shall certify that such addition of Subsequent
Mortgage Loans will not result in a material adverse tax consequence to the
Trust or the Certificateholders;
(f) the Funding Period shall not have expired;
(g) the Seller shall make the representations and warranties set
forth in Section (A) of Schedule II to this Agreement with respect to such
Subsequent Mortgage Loans; and
(h) on such date, the Seller shall deposit any applicable
Subsequent Transfer Deposit in the Collection Account.
In addition, the Seller will provide the Trustee and Moody's with data
regarding all Subsequent Mortgage Loans to be transferred to the Trust on any
Subsequent Transfer Date at least 10 Business Days prior to the end of the
Funding Period or, if such Subsequent Transfer Data is the Closing Date, on the
Closing Date. No later than the end of the Funding Period, the following
conditions shall have been satisfied with respect to all Subsequent Mortgage
Loans to be transferred to the Trust on any Subsequent Transfer Date:
(a) the Seller shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each condition precedent specified in
this Section 2.02 and in the related Subsequent Transfer Agreements;
(b) the Seller shall have delivered to the Trustee Opinions of
Counsel with respect to the transfer of all of the Subsequent Mortgage Loans to
the Trust on any Subsequent Transfer Date substantially in the form of the
Opinions of Counsel delivered to the Trustee on the Closing Date regarding
bankruptcy, corporate and tax matters;
(c) the Trustee shall deliver to the Rating Agencies and the
Seller an Opinion of
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Counsel with respect to each of the Subsequent Transfer Agreements substantially
in the form of the Opinion of Counsel delivered to the Seller on the Closing
Date;
(d) the Seller shall make the representations and warranties set
forth in Section B of Schedule II to this Agreement; and
(e) the Financial Guaranty Insurer shall deliver to the Seller,
the Trustee and the Rating Agencies a written notice confirming the Financial
Guaranty Insurer's consent and approval to the addition of all Subsequent
Mortgage Loans purchased by the Trust for inclusion in the Adjustable Rate Group
on any Subsequent Transfer Date.
The Seller shall certify that the Subsequent Mortgage Loans will be
transferred to the Trust in accordance with the foregoing and that all mortgage
loans identified in the Subsequent Mortgage Loan Schedule satisfy the
requirements of Subsequent Mortgage Loans as set forth in this Section 2.02 as
of the related Subsequent Transfer Date. On or before the last day of the
Funding Period, the Seller will also cause to be delivered to the Trustee (with
copies to the Certificate Insurer and each Rating Agency) a letter from
independent accountants confirming certain characteristics of the Subsequent
Mortgage Loans.
Subject to Section 3.16(d), if all of the Subsequent Mortgage Loans are
transferred to the Trust on the Closing Date, then the remaining portion of each
of the Fixed Rate Group Prefunding Account Deposit and the Adjustable Rate Group
Prefunding Account Deposit will be deposited into the Certificate Account and
held there, without investment thereof, until the first Distribution Date. On
such first Distribution Date, such amounts will be deemed to comprise a portion
of the Fixed Rate Group Principal Distribution Amount or Adjustable Rate Group
Principal Distribution Amount, as appropriate, and will be distributable to the
Certificateholders.
Section 2.03. Acceptance by the Trustee; Repurchase or Substitution of
Mortgage Loans. The Trustee acknowledges the sale and assignment to the Trust
and receipt by it of the original Mortgage Notes, Assignments and Mortgages
pursuant to this Agreement and the delivery to it, subject to (i) the provisions
of the penultimate paragraph of Section 2.01, (ii) the review provided for in
this Section of the documents referred to in clauses (a) through (f) of Section
2.01 and (iii) delivery of the Officer's Certificates pursuant to Section 2.01,
declares that it will hold the Trust in trust upon the terms herein set forth
for the use and benefit of all present and future Certificateholders. The
Trustee agrees, for the benefit of Certificateholders, to review each Mortgage
File within 45 days after the Closing Date (or, 45 days after the Subsequent
Transfer Date, with respect to the Subsequent Mortgage Loans) to determine
whether the documents described in Section 2.01(a)-(c), (e) and (f) have been
executed and received, and whether such documents relate to the Mortgage Loans
identified in the Mortgage Loan Schedule, or the Subsequent Mortgage Loan
Schedule, as applicable, and in so doing the Trustee may rely on the purported
due execution and genuineness of any such document and on the purported
genuineness of any signature thereon. If within such 45-day period the Trustee
finds any document constituting a part of a Mortgage File not to have been
executed or received or to be unrelated to the Mortgage Loans identified in the
Mortgage Loan Schedule, or the Subsequent Mortgage Loan Schedule, as applicable,
the Trustee shall promptly notify the Seller of such findings with notification
with respect to any particular defect being in all events within 30 days of
discovery of such defect. The Seller shall have a
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period of 60 days from the date of such notice to correct or cure any such
defect. Notwithstanding the second paragraph of Section 9.01, the Trustee shall
be under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they have
actually been recorded or that they are other than what they purport to be on
their face.
If the Trustee has notified the Seller of a defect in a Mortgage File
that materially and adversely affects the interests of the Certificateholders in
the related Mortgage Loan, and such defect remains uncured after such 60-day
period, the Seller shall, (i) in the case of a defect consisting solely of the
failure of the Company to deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon for reasons set forth in
Section 2.01, on the first Deposit Date occurring after the expiration of eight
months from the Closing Date, and (ii) in the case of all other defects (and in
any case that the Servicer at any time becomes aware or the Trustee has actual
knowledge that a lost note affidavit is fraudulent or will not be enforceable),
on the Deposit Date occurring not later than 60 days after receipt of notice of
such defect (or the Servicer becomes aware of or the Trustee comes to have
actual knowledge of such defect and gives notice thereof to the Servicer) as the
case may be, either (I) repurchase the related Mortgage Loan (including any
property acquired in respect thereof and any insurance policy or current or
future insurance proceeds with respect thereto) from the Trust at a price equal
to the Purchase Price, which shall be accomplished by deposit of monies by the
Seller in the Certificate Account on such Deposit Date, or (II) substitute one
or more Qualified Replacement Mortgage Loan for the related Mortgage Loan.
Upon receipt by the Trustee of an Officer's Certificate of the Servicer
to the effect that the Purchase Price for a Defective Mortgage Loan (other than
a Defective Mortgage Loan that is a Deleted Mortgage Loan) has been deposited in
the Certificate Account, and upon confirmation by the Trustee that such Purchase
Price has been received by it, the Trustee shall execute and deliver such
instrument of transfer or assignment presented to it by the Seller, in each case
without recourse, as shall be necessary to vest in the Seller legal and
beneficial ownership of such repurchased Defective Mortgage Loan (including any
property acquired in respect thereof or insurance policy or current or future
insurance proceeds with respect thereto).
Payments received with respect to Qualified Replacement Mortgage Loans
in the Collection Period prior to the Deposit Date on which such substitution
occurs will not be part of the Trust and will be retained by the Seller. For the
Distribution Date following the Deposit Date on which such substitution occurs,
distributions to Certificateholders will reflect the payments received on such
Deleted Mortgage Loan in the related Collection Period representing amounts due
or accrued thereon prior to such Deposit Date, and the Seller shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. In the case of a Qualified Replacement Mortgage Loan, the
Mortgage File relating thereto shall be delivered to the Trustee and the amount,
if any, by which the Principal Balance of the related Deleted Mortgage Loan as
of the related Deposit Date exceeds the Principal Balance of the Qualified
Replacement Mortgage Loan as of the first day of the related Collection Period
shall be remitted by the Seller to the Trustee for deposit in the Certificate
Account on the Deposit Date on which the substitution occurs. For purposes of
this Agreement, any such amount so deposited in the Certificate Account shall be
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deemed a prepayment of the related Deleted Mortgage Loan received by the
Servicer as of the prior Determination Date. Upon receipt by the Trustee of an
Officer's Certificate certifying that the Qualified Replacement Mortgage Loan
conforms to the requirements of this Agreement and (a) written notification of
such deposit signed by a Servicing Officer and (b) the new Mortgage File
(containing all of the documents referred to in clauses (a), (b), (c), (d), (e)
and (f) of Section 2.01), the Trustee shall release or cause to be released to
the Seller the Mortgage File related to the Deleted Mortgage Loan or property
and shall execute and deliver or cause to be executed and delivered such
instrument of transfer or assignment presented to it by the Seller, without
recourse, as shall be necessary to vest in the Seller all of the legal and
beneficial ownership of such Deleted Mortgage Loan or property and the Trustee
shall have no further responsibility with respect to said Mortgage File. It is
understood and agreed that the obligation of the Seller to substitute a
Qualified Replacement Mortgage Loan for or repurchase any Defective Mortgage
Loan (or any property acquired in respect thereof or insurance policy or current
or future insurance proceeds with respect thereto) shall constitute the sole
remedy against it respecting such defect available to the Certificateholders or
the Trustee, and such obligation on the part of the Seller shall survive any
resignation or termination of the Company as Servicer under this Agreement.
Notwithstanding the foregoing, a substitution by the Seller for a defect in a
constituent document will not be made unless the Trustee receives an Officer's
Certificate certifying that the Qualified Replacement Mortgage Loan conforms to
the requirements of this Agreement and an Opinion of Counsel that such
substitution will not be a "prohibited transaction" as defined in Section
860F(a)(2) of the Code. Any substitution must be effected not later than two
years after the Closing Date, or within such longer period of time as may be
permitted under the REMIC Provisions for substitution of mortgage loans.
On or prior to March 31, 1998 (April 31, 1998 in the case of the
Subsequent Mortgage Loans), the Trustee shall certify to the Servicer that it
has received all of the documents referred to in clauses (a) (b), (c), (e) and
(f) of Section 2.01 and that all corrections or curative actions required to be
taken by the Seller within the 60-day period referred to in the first paragraph
of this Section have been completed or effected, or the related Mortgage Loans
have been repurchased or substituted, in accordance with the provisions of this
Section or, if any deficiencies in the Mortgage Files or other omissions of the
Seller with respect to the Mortgage Files are known to the Trustee at the time
of such certification, the Trustee shall make such certification only with
respect to those Mortgage Loans as to which no such defects or omissions are
known, and shall qualify such certification with respect to the remaining
Mortgage Loans, identifying the related defects or omissions. Thereafter, the
Trustee shall provide the Seller and the Servicer with monthly exception reports
indicating the status of any exceptions until all such exceptions have been
eliminated. Such monthly exception reports shall be distributed by the Trustee
on the related Distribution Date with the Statement to Certificateholders.
Section 2.04. Representations and Warranties Regarding the Servicer and
the Seller. The Company, as Seller and Servicer hereby represents and warrants
to the Trustee and the Certificateholders that, as of the Closing Date:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
The Company is in compliance with the
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laws of each state in which it is acting as Servicer with respect to a
Mortgage Loan to the extent necessary to perform all servicing
obligations with respect to the related Mortgaged Property hereunder.
Each Sub-Servicer is in compliance with the laws of each state where the
Mortgaged Properties under the applicable Sub-Servicing Agreement are
located to the extent necessary to perform the servicing obligations
hereunder; the Company has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance
herewith; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Company and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity; and
the consummation of the transactions contemplated hereby will not result
in the breach of any terms or provisions of the articles of
incorporation or by-laws of the Company or result in the breach of any
term or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material
instrument to which the Company or its property is subject, or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Company or its property is subject. Each Sub-Servicer has all
requisite corporate power and authority to conduct its business and
perform the obligations under the Sub-Servicing Agreement to which such
Sub-Servicer is a party;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency,
that are necessary in connection with the execution and delivery by the
Company of this Agreement, have been duly taken, given or obtained, as
the case may be, are in full force and effect, are not subject to any
pending proceedings or appeals (administrative, judicial or otherwise)
and either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement on the
part of the Company and the performance by the Company of its
obligations as Servicer under this Agreement;
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against
the Company that, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Company or in any
material impairment of the right or ability of the Company to carry on
its business substantially as now conducted, or in any material
liability on the part of the Company or that would draw into question
the validity of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of the Company,
in its capacity as Servicer, contemplated herein, or that would be
likely to impair the ability of the Company to perform under the
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terms of this Agreement;
(iv) The Company is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Company or its properties or
might have consequences that would adversely affect its performance as
Servicer hereunder;
(v) The transfer, assignment and conveyance of the Mortgage
Loans by the Company, as Seller, pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction;
(vi) The collection practices used by the Company and any
Sub-Servicer are in all material respects legal, proper, prudent and
customary in the home equity mortgage loan servicing business; and
(vii) Each Sub-Servicer engaged by the Servicer has obtained all
licenses and approvals required under state or federal law to service
the Mortgage Loans specified in the Sub-Servicing Agreement to which the
Sub-Servicer is a party.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust and the issuance, sale
and delivery of the Certificates. Upon discovery of a breach of any of the
foregoing representations and warranties that materially and adversely affects
the interests of the Certificateholders, the party discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of breach, the Company shall cure such breach in all
material respects.
Section 2.05. Representations and Warranties of the Seller Regarding the
Mortgage Loans. The Seller represents and warrants to the Trustee and the
Certificateholders as of the Closing Date and, with respect to any Subsequent
Mortgage Loan, as of the Subsequent Transfer Date (in either case except as
otherwise expressly stated), that as to each Mortgage Loan conveyed to the Trust
by it:
(i) The information with respect to each Mortgage Loan set
forth in the Mortgage Loan Schedule or Subsequent Mortgage Loan Schedule
is true and correct as of the Cut-off Date or related Subsequent
Transfer Date;
(ii) All of the original or certified documentation set forth in
Section 2.01 (including all material documents related thereto), with
respect to each Mortgage Loan has been or will be delivered to the
Trustee on the Closing Date or as otherwise provided in Section 2.01 or
Section 2.02, as applicable;
(iii) Except with respect to one Mortgaged Property comprised of
vacant land securing a Mortgage Loan with a Principal Balance as of the
Cut-off Date of not more than $20,000, each related Mortgaged Property
is improved by a one- to four-family residential
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dwelling owned by the related Mortgagor in fee simple, which may include
condominiums, townhouses and manufactured housing or modular homes that
are permanently affixed to the land and constitute real property under
the laws of the state in which the Mortgaged Property is located but
shall not include co-operatives or mobile homes;
(iv) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate, no Mortgage Loan included in the Fixed Rate Group has a
Combined Loan-to-Value Ratio in excess of 90% and no Mortgage Loan
included in the Adjustable Rate Group has a Loan-to-Value Ratio in
excess of 90%, except that two Mortgage Loans representing not more than
0.09% of the initial Fixed Rate Group Balance have Combined
Loan-to-Value Ratios of up to 95%, and four Mortgage Loans representing
not more than 0.23%, of the Original Adjustable Rate Group Balance have
Combined Loan-to-Value Ratios of up to 95%;
(v) Each Mortgage Loan was originated by an Affiliate of the
Company or by an originator not affiliated with the Company authorized
to originate such Mortgage Loan and is being serviced by the Company;
(vi) Each Mortgage Loan included in the Fixed Rate Group as of
the Cut-off Date bears a fixed Mortgage Loan Rate of at least 6.50% per
annum and each Mortgage Loan included in the Adjustable Rate Group as of
the Cut-off Date is an Adjustable Rate Mortgage Loan that has a Minimum
Rate of not less than 1.50% per annum and a Mortgage Loan Rate as of the
Cut-off Date of not less than 4.50% per annum; the terms of each
Mortgage Loan included in the Adjustable Rate Group require that
adjustments in the related Mortgage Loan Rate be made employing the
related Index measured as of a date not more than three months prior to
the related adjustment date;
(vii) Each Mortgage Note provides for a schedule of substantially
level and equal Monthly Mortgage Payments (subject, in the case of an
Adjustable Rate Mortgage Loan, to periodic adjustments relating to
changes in the Mortgage Loan Rate) that are sufficient to amortize fully
the principal balance of such Mortgage Note on or before its maturity
date, except that, Mortgage Notes with respect to Mortgage Loans in the
Fixed Rate Group representing not more than 4.35% of the initial Fixed
Rate Group Balance, provide for level and equal Monthly Mortgage
Payments that are sufficient to amortize fully the principal balances of
such Notes over a period not exceeding 30 years, with "balloon" payments
at stated maturity that are substantially in excess of the Monthly
Mortgage Payments;
(viii) Each Mortgage is a valid and subsisting lien of record on
the Mortgaged Property having the priority indicated on the Mortgage
Loan Schedule, subject, in the case of any Junior Mortgage Loan, only to
any Senior Lien or Senior Liens on such Mortgaged Property and subject
in all cases to the exceptions to title set forth in the title insurance
policy with respect to the related Mortgage Loan, which exceptions are
generally acceptable to home equity mortgage lending institutions, and
such other exceptions to which similar properties are commonly subject
and that do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be provided by
such Mortgage;
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(ix) Immediately prior to the sale, transfer and assignment
herein contemplated, the Company held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan conveyed by the Company
subject to no liens, charges, mortgages, encumbrances or rights of
others, except with respect to liens that will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold
good and indefeasible title to, and be the sole owner of, each Mortgage
Loan subject to no liens, charges, mortgages, encumbrances or rights of
others;
(x) The Mortgage Loan Rate for each Adjustable Rate Mortgage
Loan will be adjustable on each related Adjustment Date and will equal
the sum, rounded upward to the nearest three decimal places, of the
Index plus the related Gross Margin, subject to any related Minimum
Rates, Maximum Rates or any limitations or periodic adjustments, in each
case as specified in the related Mortgage Loan Schedule. No Mortgage
Loan is subject to negative amortization. The Mortgage Notes relating to
not more than 80% of the Mortgage Loans in the Adjustable Rate Group, by
Original Adjustable Rate Group Balance or by the Adjustable Rate Group
Balance as of the Closing Date, provide for initial Adjustment Dates
that are more than one year and less than three years from the Cut-off
Date;
(xi) With respect to any Adjustable Rate Mortgage Loan, no
mortgage document in the Mortgage File contains any provision permitting
or requiring conversion of the Mortgage Loan to a fixed interest rate
nor is the Mortgage Loan Rate conditioned upon Mortgagor maintaining
accounts with Seller;
(xii) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate (a) no Mortgage Loan had two or more Monthly Mortgage
Payments past due and not more than 0.97% of the Mortgage Loans (by
Cut-off Date Principal Balance) had one Monthly Payments past due, (b)
no Mortgage Loan has been 60 or more days contractually delinquent more
than once during the 12-month period immediately preceding the Cut-off
Date and (c) no Mortgage Loan has been 90 or more days delinquent in the
12 months preceding the Cut-off Date;
(xiii) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate, there is no delinquent tax or assessment lien on any
Mortgaged Property, and, to the best knowledge of the Company, each
Mortgaged Property is free of damage and is in good repair and is not
affected by hazardous or toxic wastes or substances;
(xiv) There is no offset, right of rescission, counterclaim or
defense, including the defense of usury, with respect to any Mortgage
Note or Mortgage, nor will the operation of any of the terms of the
Mortgage Note or the Mortgage, or the exercise of any right thereunder,
render either the Mortgage Note or the Mortgage unenforceable in whole
or in part, or subject to any right to rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted with
respect thereto;
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(xv) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate, there is no mechanic's lien or claim for work, labor or
material affecting any Mortgaged Property that is or may be a lien prior
to, or equal to or on a parity with, the lien of the related Mortgage
except those that are insured against by any title insurance policy
referred to in paragraph (xvii) below;
(xvi) To the best of the Seller's knowledge, each Mortgage Loan
at the time it was made complied in all material respects with
applicable local, state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
(xvii) With respect to each Mortgage Loan, a lender's title
insurance policy (issued in standard form by a title insurance company
authorized to transact business in the state where the related Mortgaged
Property is located), in an amount at least equal to the Original
Principal Amount of such Mortgage Loan insuring the mortgagee's interest
under the related Mortgage Loan as the holder of a valid lien of record
on the real property described in the related Mortgage (subject only to
exceptions of the character referred to in paragraph (viii) above), was
effective on the date of the origination of such Mortgage Loan, and, as
of the Closing Date, such policy is in full force and effect and
thereafter such policy shall continue in full force and effect and shall
inure to the benefit of the Certificateholders upon consummation of the
transactions contemplated by this Agreement;
(xviii) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate, either (a) the improvements upon each Mortgaged Property
are covered by a valid and existing hazard insurance policy (which may
be a blanket policy) with a generally acceptable carrier that provides
for fire and extended coverage representing coverage not less than the
least of (a) the outstanding principal balance of the related Mortgage
Loan (together, in the case of a Junior Mortgage Loan, with the
outstanding principal balance of the Senior Lien), (b) the minimum
amount required to compensate for damage or loss on a replacement cost
basis or (c) the full insurable value of the Mortgaged Property or (b)
in the case of a Junior Mortgage Loan, a policy has been issued by a
generally acceptable carrier that will cover the full Principal Balance
of such Junior Mortgage Loan in the event of a loss covered by a hazard
typically insured against by the type of policy referred to in clause
(xviii)(a);
(xix) If any Mortgaged Property is in an area identified in the
Federal Register by FEMA as having special flood hazards, a flood
insurance policy in a form meeting the requirements of the current
guidelines of the Federal Insurance Administration, if obtainable with
respect to such Mortgaged Property, is in effect with respect to such
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in the case of
a Junior Mortgage Loan, with the outstanding principal balance of the
Senior Lien), (B) the minimum amount required to compensate for damage
or loss on a replacement cost basis or (C) the maximum amount of
insurance that is available under the Flood Disaster Protection Act of
1973;
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(xx) Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance
with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law), and all parties to each Mortgage Loan had full legal
capacity to execute all documents relating to such Mortgage Loan and
convey the estate therein purported to be conveyed; with respect to each
Mortgage Loan, only one original Mortgage Note exists;
(xxi) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Trustee in any insurance policies applicable to each
Mortgage Loan, including any necessary notifications of insurers,
assignments of policies or interests therein, and establishment of
co-insured, joint loss payee and mortgagee rights in favor of the
Trustee;
(xxii) As of the Cut-off Date no more than 0.32% of the Original
Fixed Rate Group Balance is secured by Mortgaged Properties located
within any single zip code area and no more than 0.45% of the Original
Adjustable Rate Group Balance is secured by Mortgaged Properties located
within any single zip code area;
(xxiii) Each original Mortgage has been recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage (other than the assignment from the Seller to the
Trustee and any assignment to the Seller or an affiliate thereof) have
been recorded in the appropriate jurisdictions as to which no Opinion of
Counsel was delivered pursuant to Section 2.01 or 2.02, as applicable,
or such Mortgages and assignments are in the process of being recorded);
(xxiv) The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument that has been recorded, if necessary, to protect the interest
of the Certificateholders and that has been delivered to the Trustee.
The substance of any such alteration or modification is reflected on the
Mortgage Loan Schedule and has been approved by the primary mortgage
guaranty insurer, if any;
(xxv) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor either have been complied
with or are not yet required to be complied with but will be complied
with as and when required. All costs, fees and expenses incurred in
making or closing or recording such Mortgage Loans were paid;
(xxvi) No Mortgage Note is or has been secured by any collateral,
pledged account or other security other than the lien of the
corresponding Mortgage;
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(xxvii) No Mortgage Loan was originated under a buydown plan;
(xxviii) No Mortgage Loan has a shared appreciation feature or other
contingent interest feature;
(xxix) Each Mortgaged Property consists of one or more contiguous
parcels of real property with a residential dwelling erected thereon
(except as described in (iii) above);
(xxx) Each Mortgage Loan contains a provision for the
acceleration of the payment of the unpaid principal balance of such
Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder;
(xxxi) Any advances made to the Mortgagor after the date of
origination of a Mortgage Loan but prior to the Cut-off Date or
Subsequent Cut-off Date, as appropriate have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the Mortgage Loan Schedule. The
consolidated principal amount as of the Cut-off Date or Subsequent
Cut-off Date, as appropriate, does not exceed the original principal
amount of the related Mortgage Loan and is reflected as the current
principal amount of such Mortgage Loan on the Mortgage Loan Schedule;
(xxxii) To the best knowledge of the Seller, there is no proceeding
pending or threatened for the total or partial condemnation of any
Mortgaged Property, nor is such a proceeding currently occurring;
(xxxiii) To the best knowledge of the Seller, all of the
improvements that were included for the purposes of determining the
Appraised Value of any Mortgaged Property lie wholly within the
boundaries and building restriction lines of such Mortgaged Property,
and no improvements on adjoining properties encroach upon such Mortgaged
Property except those that are identified in the related title insurance
policy and affirmatively insured;
(xxxiv) To the best knowledge of the Seller, no improvement located
on or being part of any Mortgaged Property is in violation of any
applicable zoning law or regulation, all inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and such Mortgaged Property is lawfully
occupied under applicable law;
(xxxv) With respect to each Mortgage that is a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the
Certificateholders or the Trust to any trustee under any deed of trust,
except in connection with a trustee's sale after default by the related
Mortgagor;
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(xxxvi) With respect to each Junior Mortgage Loan, either (A) no
consent for such Mortgage Loan was required by the holder of the related
Senior Lien prior to the making of such Mortgage Loan or (B) such
consent has been obtained and is contained in the related Mortgage File;
(xxxvii) Each Mortgage contains customary and enforceable provisions
that render the rights and remedies of the holder thereof adequate for
the realization against the related Mortgaged Property of the benefits
of the security, including by trustee's sale and by judicial foreclosure
and there is no homestead or other exemption available to the related
Mortgagor that would materially interfere with the right to sell the
related Mortgaged Property at a trustee's sale or the right to foreclose
upon the related Mortgaged Property;
(xxxviii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no
event that, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach,
violation or event of acceleration; and the Seller has not waived any
default, breach violation or event of acceleration;
(xil) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
that has been approved by the primary mortgage guaranty insurer, if any,
and the Financial Guaranty Insurer, and that has been delivered to the
Trustee;
(xl) The maturity date of each Junior Mortgage Loan is at least
12 months prior to the maturity date of the related Senior Lien if such
Senior Lien provides for a balloon payment;
(xli) At least 96.37% of the Mortgage Loans in the Fixed Rate
Group (by Original Fixed Rate Group Balance) and at least 96.72% of the
Mortgage Loans in the Adjustable Rate Group (by Original Adjustable Rate
Group Balance) are secured by Mortgaged Properties that are maintained
by the related Mortgagors as primary residences;
(xlii) There are no defaults (other than delinquencies) in
complying with the terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents that previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item that remains unpaid; the Company
has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required by the Mortgage,
other than interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage proceeds, whichever is greater, to the
date that precedes by one month the due date of the first installment of
principal and interest;
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(xliii) To the best of the Seller's knowledge, all parties that
have had any interest in the Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise during the period in which they held and
disposed of such interest, were and either are now or, in the case of
subclause (1) of this clause (xliii), will be within 30 days of the
Closing Date or Subsequent Cut-off Date, as appropriate, (1) in
compliance with any and all applicable licensing requirements of the
laws of the state wherein the Mortgaged Property is located, and (2) (A)
organized under the laws of such state, or (B) qualified to do business
in such state, or (C) federal savings and loan associations or national
banks having principal offices in such state, or (D) not doing business
in such state so as to require qualification or licensing;
(xliv) No Mortgage Loan was selected by the Seller for inclusion
in the Trust on any basis intended to adversely affect the Trust;
(xlv) A full appraisal of each Mortgaged Property was performed
in connection with the origination of the related Mortgage Loan, and
such appraisal is the appraisal referred to in determining the Appraised
Value of such Mortgaged Property;
(xlvi) With respect to each Junior Mortgage Loan, the related
Senior Lien requires equal monthly payments or, if such Senior Lien
bears an adjustable interest rate, the monthly payments for such Senior
Lien may be adjusted no more frequently than monthly;
(xlvii) With respect to any Junior Mortgage Loan with a related
Senior Lien that provides for negative amortization or an open-end
feature that permits additional borrowings, the balance of such Senior
Lien reflected on the Mortgage Loan Schedule and used to calculate the
Combined Loan-to-Value Ratio for such Junior Mortgage Loan is based on
the maximum amount of negative amortization, deferred interest or
maximum amount of borrowings permitted under such Senior Lien;
(xlviii) The Seller has not required the Mortgagor to sign a letter
in connection with the origination of any Mortgage Loan in which such
Mortgagor indicates its inability to repay such Mortgage Loan in
accordance with the terms of the related Mortgage Note;
(xlix) Each Adjustable Rate Mortgage Loan that (i) has a first
Adjustment Date within six months of its origination date was
underwritten or re-underwritten as though such Mortgage Loan would bear
a rate of interest equal to related Index plus the related Gross Margin
and (ii) has a first Adjustment Date more than six months after its
origination date was underwritten or re-underwritten as though such
Mortgage Loan would bear a rate of interest equal to its specified
initial interest rate;
(l) As of the Cut-off Date or Subsequent Cut-off Date, as
appropriate, no Mortgage Loan in the Fixed Rate Group or the Adjustable
Rate Group was secured by more than one Mortgaged Property;
(li) With respect to each Adjustable Rate Mortgage Loan, all of
the terms of the
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Mortgage pertaining to interest rate adjustments, payment adjustments
and adjustments of the outstanding principal balance are enforceable;
such adjustments will not affect the priority of the Mortgage lien and
all of the adjustments have been properly calculated, recorded, reported
and applied in accordance with the Mortgage and applicable law;
(lii) All insurance policies are the valid and binding obligation
of the insurer and contain a standard mortgagee clause naming the
originator, its successors and assigns, as mortgagee. Such insurance
policies require prior notice to the insured of termination or
cancellation and no such notice has been received, each Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(liii) None of the Mortgage Loans is subject to a plan of
bankruptcy and no Mortgagor has sought protection or relief under any
state or federal bankruptcy or insolvency law during the term of the
related Mortgage;
(liv) Each Mortgage Loan has a Monthly Mortgage Payment due
during the first Collection Period commencing after the calendar month
during which such Mortgage Loan is included in the Trust;
(lv) All Mortgage Loans were underwritten or re-underwritten in
accordance with the underwriting guidelines of the Seller;
(lvi) To the knowledge of the Seller, no misrepresentation,
negligence, fraud or similar occurrence with respect to a Mortgage Loan
has taken place on the part of the Mortgagor, any appraiser, any builder
or developer, or any other party having statutory or common law
liabilities with respect to the origination of the Mortgage Loan or in
any related application for insurance in relation to such Mortgage Loan;
(lvii) To the knowledge of the Seller, certain Mortgage Loans are
secured by Mortgaged Properties upon which are affixed manufactured
housing or modular homes, provided that it is the intent and agreement
of the parties hereto that this representation shall be deemed breached
if any Mortgage Loan is determined to be secured by a Mortgaged Property
upon which is affixed manufactured housing or a modular home and such
Mortgage Loan is subject to a foreclosure which results in a Realized
Loss; and
(lviii) Mortgage Loans in the Fixed Rate Group representing not
less than 63.8% of the aggregate Principal Balance thereof were assigned
a credit grade of "A-" by the Seller at the time such Mortgage Loans
were originated or acquired, as applicable, by the Seller; Mortgage
Loans in the Fixed Rate Group representing not less than 21.4% of the
aggregate Principal Balance thereof were assigned a credit grade of "B"
by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; Mortgage Loans
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in the Fixed Rate Group representing not less than 6.7% of the aggregate
Principal Balance thereof were assigned a credit grade of "C" by the
Seller at the time such Mortgage Loans were originated or acquired, as
applicable, by the Seller; Mortgage Loans in the Fixed Rate Group
representing not more than 2.9% of the aggregate Principal Balance
thereof were assigned a credit grade of "C-" by the Seller at the time
such Mortgage Loans were originated or acquired, as applicable, by the
Seller; and Mortgage Loans in the Fixed Rate Group representing not more
than 5.0% of the aggregate Principal Balance thereof were assigned a
credit grade of "D" by the Seller at the time such Mortgage Loans were
originated or acquired, as applicable, by the Seller. Mortgage Loans in
the Adjustable Rate Group representing not less than 62.7% of the
aggregate Principal Balance thereof were assigned a credit grade of "A-"
by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; Mortgage Loans in the Adjustable
Rate Group representing not less than 22.3% of the aggregate Principal
Balance thereof were assigned a credit grade of "B" by the Seller at the
time such Mortgage Loans were originated or acquired, as applicable, by
the Seller; Mortgage Loans in the Adjustable Rate Group representing not
less than 6.6% of the aggregate Principal Balance thereof were assigned
a credit grade of "C" by the Seller at the time such Mortgage Loans were
originated or acquired, as applicable, by the Seller; Mortgage Loans in
the Adjustable Rate Group representing not more than 1.8% of the
aggregate Principal Balance thereof were assigned a credit grade of "C-"
by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; and Mortgage Loans in the
Adjustable Rate Group representing not more than 6.4% of the aggregate
Principal Balance thereof were assigned a credit grade of "D" by the
Seller at the time such Mortgage Loans were originated or acquired, as
applicable, by the Seller. Each credit grade so assigned to any Mortgage
Loan has been determined in accordance with the Seller's internal credit
grading system and not pursuant to any other scale or objective
standard.
It is understood and agreed that the representations and warranties set
forth in this Section shall survive the sale and assignment of the Mortgage
Loans to the Trust and the issuance, sale and delivery of the Certificates. Upon
discovery by the Seller, the Servicer or a Responsible Officer of the Trustee of
a breach of any of the foregoing representations and warranties, without regard
to any limitation set forth in such representation or warranty concerning the
knowledge of the Seller as to the facts stated therein, which breach materially
and adversely affects the interests of the Certificateholders in the related
Mortgage Loan or Mortgage Loans, the party discovering such breach shall give
prompt written notice to the other parties hereto and to each of the Rating
Agencies.
Within 60 days of its discovery or its receipt of notice of such breach,
the Seller shall use all reasonable efforts to cure such breach in all material
respects. Unless, prior to the expiration of such 60-day period, such breach has
been cured in all material respects or otherwise does not exist or continue to
exist, the Seller shall, not later than the Deposit Date in the month following
the related Collection Period in which any such cure period expired, but in all
events within 90 days of the earlier of its discovery or receipt of notice of
breach (or at the election of the Seller, an earlier Collection Period), either
(I) repurchase such Mortgage Loan (or, in the case of any representation and
warranty stated above in terms of minimum or maximum aggregate percentage
amounts,
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repurchase Mortgage Loans such that, after giving effect to such repurchase, the
related representation and warranty would be complied with) (including any
property acquired in respect thereof and any insurance policy or insurance
proceeds with respect thereto) from the Trust in the same manner and subject to
the same conditions as set forth in Section 2.03 or (II) remove such Mortgage
Loan and substitute in its place a Qualified Replacement Mortgage Loan (or, in
the case of any representation and warranty stated above in terms of minimum or
maximum aggregate percentage amounts, remove such Mortgage Loans and substitute
in their place Qualified Replacement Mortgage Loans such that, after giving
effect to such substitution, the related representation and warranty would be
complied with) in the same manner and subject to the same conditions as set
forth in Section 2.03. Upon making any such repurchase or substitution, the
Seller shall be entitled to receive an instrument of assignment or transfer from
the Trustee, without recourse to the Trustee, to the same extent as set forth in
Section 2.03 with respect to the repurchase of or substitution for Defective
Mortgage Loans under that Section. It is understood and agreed that the
obligation of the Seller to repurchase or substitute any such Defective Mortgage
Loan (or property acquired in respect thereof or insurance policy or current or
future insurance proceeds with respect thereto) shall constitute the sole remedy
against it respecting such breach of the foregoing representations or warranties
available to the Certificateholders or the Trustee, as the case may be, and such
obligation shall survive any resignation or termination of the Company as
Servicer under this Agreement.
Notwithstanding the foregoing, a substitution of a Mortgage Loan by the
Seller for a breach will not be made unless the Trustee receives an Officer's
Certificate certifying that the Qualified Replacement Mortgage Loan conforms to
the requirements of this Agreement and an Opinion of Counsel that such
substitution will not be a "prohibited transaction" as defined in Section
860F(a)(2) of the Code. Any substitution must be effected not later than two
years after the Closing Date, or within such longer period of time as may be
permitted under the REMIC Provisions for substitution of mortgage loans.
Section 2.06. Execution and Authentication of Certificates. The Trustee
shall deliver to or upon the order of the Seller, in exchange for the Mortgage
Loans and the other assets comprising the Trust, simultaneously with the sale,
assignment and transfer to the Trustee of the Mortgage Loans, Certificates duly
executed by the Trustee, on behalf of the Trust, not in its individual capacity
but solely as Trustee, and authenticated by the Trustee, pursuant to Section
6.01, in authorized denominations, equaling, 100% of the Percentage Interests in
each Class, and collectively evidencing the entire ownership of the Trust.
Section 2.07. [Reserved].
Section 2.08. Indemnification of the Trust. The Seller shall indemnify
the Trust for any liability incurred thereby as a result of a breach of the
representation and warranty set forth in clause (xvi) of Section 2.05. This
indemnity obligation shall be in addition to any other obligation the Seller may
have in connection with any such breach.
ARTICLE THREE
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS;
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CERTIFICATE ACCOUNT
Section 3.01. The Servicer and the Sub-Servicers. (a) Acting directly or
through one or more Sub-Servicers as provided in Section 3.15, the Servicer, as
servicer, shall administer the Mortgage Loans with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable home equity mortgage loans that it services for itself or others. The
duties of the Servicer shall include collecting and posting of all payments,
responding to inquiries of Mortgagors or by federal, state or local government
authorities with respect to the Mortgage Loans, investigating delinquencies,
reporting tax information to Mortgagors in accordance with its customary
practices and accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions and making Monthly
Advances and Servicing Advances pursuant to Section 5.02. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer, to the extent not in conflict with the provisions of this
Agreement. Notwithstanding the appointment of any Sub-Servicer, the Servicer
shall remain liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary to perform the servicing obligations hereunder in
the jurisdictions in which it services Mortgage Loans. If the Servicer commences
directly to service a material number or principal amount of Mortgage Loans with
related Mortgaged Properties located in any other state, the Servicer will use
its reasonable efforts promptly to obtain, and thereafter to maintain, all
licenses and qualifications necessary to perform its servicing obligations
hereunder in each such state. Each Sub-Servicer shall maintain all licenses and
qualifications necessary to perform its servicing obligations in the states
where the Mortgaged Properties to which the applicable Sub-Servicing Agreement
relates are located. The Servicer shall cooperate with the Trustee and furnish
to the Trustee such information in its possession as may be necessary or
appropriate to enable the Trustee to perform its tax reporting duties hereunder.
The Trustee shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
Without limiting the generality of the foregoing, the Servicer (i) shall
continue, and is hereby authorized and empowered by the Trustee, to execute and
deliver, on behalf of itself, the Certificateholders and the Trustee or any of
them, any and all instruments of satisfaction or cancellation, or of partial or
full release or discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the related Mortgaged Properties (ii) may
consent to any modification of the terms of any Mortgage Note not expressly
prohibited hereby if the effect of any such modification will not be to
materially and adversely affect the security afforded by the related Mortgaged
Property or to decrease or slow (other than as permitted by Section 3.02(a)(ii))
the timing of receipt of any payments required thereunder and (iii) shall not
consent to the placing of a lien senior to or on parity with that of the
Mortgage on the related Mortgaged Property. In the event that notwithstanding
the provisions of clause (iii) above the Servicer shall consent to the placing
of a lien senior to or on a parity with that of the Mortgage on a Mortgaged
Property, the Servicer shall purchase on the next Deposit Date such Mortgage
Loan (including any property acquired in respect thereof and any insurance
policy or insurance proceeds with respect thereto) from the Trust at a price
equal to the Purchase Price and deposit such amount in the Certificate Account
on such Deposit Date pursuant to Section 3.02. For purposes of this
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Agreement, any such purchase shall be deemed to be a prepayment of such Mortgage
Loan. It is understood and agreed that the obligation of the Servicer to
purchase any Mortgage Loan (or property acquired in respect thereof or insurance
policy or insurance proceeds with respect thereto) pursuant to the second
immediately preceding sentence shall constitute the sole remedy against it
respecting such breach available to the Certificateholders or the Trustee and
such obligation shall survive any resignation or termination of the consenting
Servicer under this Agreement.
The Servicer may sue to enforce or collect on any of the Mortgage Loans
or any insurance policy covering a Mortgage Loan, in its own name if possible,
or on behalf of the Trust. If the Servicer commences a legal proceeding to
enforce a Mortgage Loan or any such insurance policy, the Trustee shall
thereupon be deemed to have automatically assigned the Mortgage Loan or the
rights under such insurance policy to the Servicer for purposes of collection
only. If, however, in any suit or legal proceeding for enforcement, it is held
that the Servicer may not enforce or collect on a Mortgage Loan or any insurance
policy covering a Mortgage Loan on the ground that it is not a real party in
interest or a holder entitled to enforce such Mortgage Loan or such insurance
policy, as the case may be, then the Trustee shall, upon the written request of
a Servicing Officer, furnish the Servicer with such powers of attorney and other
documents as are necessary or appropriate to enable the Servicer to enforce such
Mortgage Loan or insurance policy, as the case may be.
The relationship of the Servicer to the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
(b) The parties intend that each REMIC Pool shall constitute a REMIC,
and that the affairs of each REMIC Pool shall be conducted so as to qualify it
as a REMIC. In furtherance of such intention, the Servicer covenants and agrees
that it shall act as agent (and the Servicer is hereby appointed to act as
agent) on behalf of each REMIC Pool, and that in such capacity it shall: (a) use
its best efforts to conduct the affairs of such REMIC Pool at all times that any
Certificates are outstanding so as to maintain the status thereof as a REMIC
under the REMIC Provisions; (b) not knowingly or intentionally take any action
or omit to take any action that would cause the termination of the REMIC status
of any REMIC Pool or that would subject such REMIC Pool to tax, including the
modification of a qualified mortgage that would subject such REMIC Pool to tax;
(c) exercise reasonable care not to allow such REMIC Pool to receive income from
the performance of services or from assets not permitted under the REMIC
Provisions to be held by a REMIC; (d) pay the amount of any federal income tax,
including, without limitation, prohibited transaction taxes, taxes on net income
from foreclosure property, and taxes on certain contributions to a REMIC after
the Startup Day, imposed on any REMIC Pool when and as the same shall be due and
payable (but such obligation shall not prevent the Servicer or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Servicer from withholding or depositing payment of such
tax, if permitted by law, pending the outcome of such proceedings); and (e) pay
the amount of any and all taxes imposed on any REMIC Pool pursuant to Section
24874 of the California Revenue and Taxation Code. The Servicer shall not be
entitled to reimbursement for any taxes paid pursuant to this Section.
Section 3.02. Collection of Certain Mortgage Loan Payments; Collection
Account and Certificate Account. (a) The Servicer shall, to the extent such
procedures shall be consistent with
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this Agreement, follow such collection procedures as it follows from time to
time with respect to home equity mortgage loans in its servicing portfolio that
are comparable to the Mortgage Loans; provided that the Servicer shall always at
least follow collection procedures that are consistent with or better than
standard industry practices. Consistent with the foregoing, the Servicer may in
its discretion (i) waive any assumption fees, late payment charges, charges for
checks returned for insufficient funds, prepayment fees, if any, or other fees
that may be collected in the ordinary course of servicing the Mortgage Loans,
(ii) if a Mortgagor is in default or about to be in default because of a
Mortgagor's financial condition, arrange with the Mortgagor a schedule for the
payment of delinquent payments due on the related Mortgage Loan, or (iii) modify
payments of monthly principal and interest on any Mortgage Loan becoming subject
to the terms of the Relief Act in accordance with the Servicer's general
policies for comparable home equity mortgage loans subject to such Act.
(b) The Servicer shall establish and maintain, or cause to be
established and maintained, one or more Eligible Accounts that in the aggregate
are the Collection Account. All amounts held in the Collection Account shall be
invested by the depository institution or trust company then maintaining the
account at the written direction of the Servicer in Permitted Investments that
mature not later than the Deposit Date next succeeding the date of investment.
No Permitted Investment shall be sold or disposed of at a gain prior to maturity
unless the Servicer has obtained an Opinion of Counsel that such sale or
disposition will not cause any REMIC Pool to be subject to the tax on income
from prohibited transactions imposed by Code Section 860F(a)(1), or otherwise
subject any REMIC Pool to tax or cause any REMIC Pool to fail to qualify as a
REMIC. The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be considered
transferred to Certificate Account on a first-in, first-out basis. All net
income and gain realized from any such investment shall be for the benefit of
the Servicer as additional servicing compensation and shall be subject to its
withdrawal or order from time to time. Any losses realized in connection with
any such investment shall be for the account of the Servicer and the Servicer
shall deposit or cause to be deposited the amount of such loss (to the extent
not offset by income from other investments) in the Collection Account
immediately upon the realization of such loss.
(c) Subject to Section 3.02(d), the Servicer shall deposit in the
Collection Account each of the following payments on and collections in respect
of the Mortgage Loans as soon as practicable, but in no event later than the
close of business on the second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on the
Mortgage Loans (including any net income from REO Properties);
(ii) all Principal Payments;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
(v) all Trust Insurance Proceeds (including, for this purpose,
any amounts
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required to be credited by the Servicer pursuant to the last sentence
of Section 3.04).
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 5.02(a) or towards the payment of a Servicing
Advance pursuant to Section 5.02(b) by depositing into the Collection Account on
or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
The foregoing requirements respecting deposits to the Collection Account
are exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges paid by Mortgagors or amounts received by the Servicer
for the account of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. The amounts deposited in the
Collection Account are subject to withdrawal, from time to time, to make
deposits into the Certificate Account pursuant to Section 3.02(e), to pay itself
the Monthly Servicing Fee pursuant to Section 3.08 and to make Servicing
Advances or to reimburse itself for Servicing Advances, as applicable, in either
case in accordance with Section 5.02(b), to make Monthly Advances in accordance
with Section 5.02(a) or to reimburse itself for payments of Monthly Advances to
the extent of recoveries of interest relating to the Mortgage Loans that were
the subject of such Monthly Advances. In addition, if the Servicer deposits in
the Collection Account any amount not required to be so deposited or any amount
in respect of payments by Mortgagors made by checks subsequently returned for
insufficient funds or other reason for non-payment, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.
(d) Upon such terms as the Rating Agencies may approve, the Servicer may
make the deposits to the Collection Account referred to in Section 3.02(c) on a
later day than the second Business Day after receipt of the amounts required to
be so deposited, which terms and later day shall be specified by the Rating
Agencies and confirmed to the Trustee and the Servicer in writing.
(e) The Trustee shall establish and maintain the Certificate Account.
The Certificate Account shall be an Eligible Account segregated on the books of
the Trustee and held by the Trustee in trust, and the Certificate Account and
the amounts deposited therein shall not be subject to any claim, liens or
encumbrances of any creditors or depositors of the Trustee or the Company
(whether made directly or indirectly through a liquidator, receiver or trustee
in bankruptcy of the Trustee or the Company). At or before 11:00 a.m. Los
Angeles time on each Deposit Date, the Servicer shall withdraw from the
Collection Account all amounts on deposit therein that constitute any portion of
Available Funds for a Mortgage Loan Group and the related Distribution Date
(including any amounts therein that are being held for distribution on a
subsequent Distribution Date and are applied toward the Monthly Advance for the
related Distribution Date pursuant to Section 5.02(a)) and remit such amounts to
the Trustee for deposit in the Certificate Account. In addition, any
Compensating Interest and Monthly Advances required to be made by the Servicer
for the related Mortgage Loan Group in respect of the related Distribution Date
and any amounts
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required to be deposited into the Certificate Account in connection with a
purchase or repurchase of any Mortgage Loans or any shortage on Mortgage Loans
in such Mortgage Loan Group by the Seller or the Servicer pursuant to Section
2.03, 2.05, 3.01, 3.03, 3.06 or 10.01 or a substitution of a Qualified
Replacement Mortgage Loan pursuant to Section 2.03 or 2.05, shall be remitted to
the Trustee for deposit in the Certificate Account on the applicable Deposit
Date. Any amounts held in the Certificate Account may be invested at the written
direction of the Servicer in Permitted Investments upon the same terms and
conditions as those specified in clause (b) above with respect to the Collection
Account except that such investments shall mature not later than the Business
Day preceding the Distribution Date next succeeding the date of investment, and
in the absence of such direction the Trustee shall invest in Permitted
Investments described in clause (f) of the definition of Permitted Investments.
All net income and gain realized from any such investment shall be for the
benefit of the Servicer as additional servicing compensation and shall be
subject to its withdrawal or order from time to time. Any losses realized in
connection with any such investment shall be for the account of the Servicer and
the Servicer shall deposit or cause to be deposited the amount of such loss (to
the extent not offset by income from other investments) in the Certificate
Account immediately upon the realization of such loss.
Section 3.03. Additional Servicing Responsibilities for the Adjustable
Rate Mortgage Loans. The Servicer shall enforce each Adjustable Rate Mortgage
Loan and shall timely calculate, record, report and apply all Mortgage Loan Rate
adjustments in accordance with the related Mortgage Note. The Servicer's record
shall, at all times, reflect then-current Mortgage Loan Rate and Monthly
Mortgage Payment and the Servicer shall timely notify the Mortgagor of any
changes to the Mortgage Loan Rate and the Monthly Mortgage Payment. If the
Servicer fails to adjust the Mortgage Loan Rate or the Monthly Mortgage Payment
in accordance with the terms of the Mortgage Note for the related Adjustable
Rate Mortgage Loan, or if the Servicer fails to notify the related Mortgagor of
any such adjustment as required under the terms of such Mortgage Note, or if any
liability, claim or defense arises with respect to any Adjustable Rate Mortgage
Loan solely as a result of any such failure, the Servicer shall pay, from its
own funds and without right of reimbursement therefor, any shortage in amounts
collected or collectible on the related Adjustable Rate Mortgage Loan that
results. The Servicer shall deposit any amounts in respect of such shortage in
the Certificate Account on the Deposit Date with respect to the related
Collection Period.
Section 3.04. Hazard Insurance Policies. The Servicer shall cause to be
maintained for each Mortgage Loan (including Mortgage Loans as to which the
related Mortgaged Property has been acquired by the Trust upon foreclosure, by
deed in lieu of foreclosure or comparable conversion), hazard insurance
(including flood insurance coverage, if obtainable, to the extent such property
is located in a federally designated flood area in such amount as is required
under applicable FEMA guidelines) with extended coverage in an amount that is
not less than the least of (i) the maximum insurable value from time to time of
the improvements that are a part of such property, or (ii) the combined
principal balance of such Mortgage Loan and the principal balance of each
mortgage loan senior to such Mortgage Loan at the time of such foreclosure plus
accrued interest and the good-faith estimate of the Servicer of related
Liquidation Expenses to be incurred in connection therewith; provided, further
that such hazard insurance shall be in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained in the
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related hazard insurance policy. Each such hazard insurance policy shall contain
a standard mortgagee clause naming the originator, its successors and assigns,
as mortgagee and shall require prior notice to the insured of termination or
cancellation. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake or other additional insurance and shall be under
no obligation itself to maintain any such additional insurance on property
acquired in respect of a Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. Amounts collected by the Servicer under any such policies
shall be deposited in the Collection Account or Certificate Account, as the case
may be, in accordance with Section 3.02 to the extent that they constitute Net
Liquidation Proceeds or Trust Insurance Proceeds. If the Servicer shall obtain
and maintain a blanket policy, issued by an insurer acceptable to each Rating
Agency, insuring against such hazard losses, 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 that is in form and substance consistent with standard
industry practice, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section, and there shall have been a
loss that would have been covered by such policy, deposit in the Collection
Account in accordance with Section 3.02 the amount not otherwise payable under
the blanket policy because of such deductible clause.
Section 3.05. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements. In any case in which property subject to a Mortgage is
conveyed by the Mortgagor, the Servicer shall enforce any due-on-sale clause
contained in the related Mortgage Note or Mortgage, to the extent permitted by
such Mortgage Note or Mortgage, applicable law and governmental regulations, but
only to the extent that such enforcement will not adversely affect or jeopardize
coverage under any related insurance policy or result in legal action by the
Mortgagor. The Servicer may take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
related Mortgage Note and the Mortgagor remains liable thereon or, if the Person
to whom such Mortgaged Property has been or is about to be conveyed satisfies
the Servicer's then-current underwriting standards for home equity mortgage
loans similar to the Mortgage Loans, and the Servicer in its reasonable judgment
finds it appropriate, is released from liability thereon. If the Trustee is
holding the Mortgage Files, the Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section and the Servicer shall forward to the Trustee the original of
such assumption and modification agreement. Such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the Mortgage Loan Rate
shall not be reduced (but may be increased), the Principal Balance of such
Mortgage Loan shall not be changed and the term of such Mortgage Loan will not
be extended beyond the existing term of such Mortgage Loan. Any fee collected by
the Servicer for entering into any such agreement shall be retained by the
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph of this Section 3.05 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its
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obligations hereunder by reasons of any assumption of a Mortgage Loan, or
transfer of any Mortgaged Property without the assumption thereof, by operation
of law or any assumption or transfer that the Servicer reasonably believes it
may be restricted by law from preventing, for any reason whatsoever.
Section 3.06. Realization upon Liquidated Mortgage Loans. Subject to the
limitations set forth in this Section 3.06 with respect to Restricted Mortgage
Properties, the Servicer, on behalf of the Trust, shall foreclose upon or
otherwise comparably convert to ownership Mortgaged Properties securing such of
the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.02(a); provided that if the Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances, then the Servicer shall not cause the Trust to
acquire title to such Mortgaged Property in a foreclosure or similar proceeding.
In connection with such foreclosure or other conversion, the Servicer shall
follow such practices (including, in the case of any default on a related Senior
Lien, the advancing of funds to correct such default) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
first, second and third lien one- to four-family mortgage loan servicing
activities. The foregoing is subject to the proviso that neither the Servicer
nor the Trustee shall be required to expend its own funds in connection with any
foreclosure or towards the correction of any default on a related Senior Lien or
restoration of any Mortgaged Property unless, in the reasonable judgment of the
Servicer, such foreclosure, correction or restoration will increase Net
Liquidation Proceeds (taking into account any unreimbursed Monthly Advances made
or expected to be made with respect to such Mortgage Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the unpaid Principal Balance of the related
Mortgage Loan and accrued interest thereon at the applicable Mortgage Loan Rate
to the related due date during the Collection Period in which such foreclosure
or conversion occurs (net of any related Monthly Advances or Servicing Advances
that were unreimbursed prior to the receipt of such Net Liquidation Proceeds),
such excess shall be paid to the Holder of the Class R Certificate.
Neither the Trust nor the Trustee on behalf of the Trust shall complete
foreclosure proceedings with respect to any Restricted Mortgage Loan that has
not, at any time after the Cut-off Date, been brought current, or take title to
any Mortgaged Property securing a Restricted Mortgage Loan (each, a "Restricted
Mortgaged Property"), if, as a result of such foreclosure or taking of title,
the aggregate value of the Restricted Mortgaged Properties (computed on the
basis of the outstanding Principal Balance of such Restricted Mortgage Loan
immediately prior to such foreclosure or taking of title) then owned by the
Trust or the Trustee on behalf of the Trust would exceed 0.80% of the aggregate
of the Principal Balances of the Mortgage Loans as of the preceding
Determination Date.
If at any time the Trust or the Trustee on behalf of the Trust holds
title to Restricted Mortgaged Properties that have an aggregate value (computed
on the basis of the outstanding Principal Balance of each related Restricted
Mortgage Loan immediately prior to the time the Trust or the Trustee on behalf
of the Trust acquired title to the related Restricted Mortgaged Property)
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that exceeds 0.95% of the aggregate of the Principal Balance of the Mortgage
Loans as of the preceding Determination Date, then the Seller shall, on or prior
to the next succeeding Deposit Date, purchase one or more of such Restricted
Mortgaged Properties at a price equal to the fair market value of the related
Restricted Mortgaged Property (calculated by the Servicer in a manner consistent
with the Servicer's customary practice of making valuation determinations in
foreclosure proceedings relating to residential mortgage loans in its servicing
portfolio at the time of such purchase) so that the aggregate value of such
Restricted Mortgaged Properties (calculated as specified above) then owned by
the Trust or the Trustee on behalf of the Trust after such purchase or purchases
does not exceed 0.90% of the then aggregate of the Principal Balance of the
Mortgage Loans.
Such purchase price shall be deposited in the Certificate Account on the
date of such purchase in the manner described in Section 2.03. For purposes of
this Agreement, any purchase effected in accordance with this paragraph shall be
deemed to be a prepayment of the related Restricted Mortgage Loan. Upon receipt
of the related purchase price and written notification of such deposit signed by
a Servicing Officer, the Trustee shall release or cause to be released to the
Seller the related Mortgage File and other property (including any insurance
policy or related present or future insurance proceeds with respect thereto) and
shall execute and deliver or cause to be executed and delivered such instruments
of transfer or assignment presented to it by the Seller, without recourse, as
shall be necessary to vest in the Seller, all of the legal and beneficial
ownership of each such Restricted Mortgaged Property and the Trustee shall have
no further responsibility with respect to said Mortgage File.
Notwithstanding the foregoing, the Servicer, with the consent of the
Financial Guaranty Insurer, may purchase from the Trust on any Deposit Date any
Mortgage Loan as to which the related Mortgagor has failed to make full Monthly
Mortgage Payments as required under the related Mortgage Note for three
consecutive months at any time following the Cut-off Date and prior to such
Deposit Date at a price equal to the Purchase Price by depositing such amount in
the Certificate Account on such Deposit Date pursuant to Section 3.02; provided,
however, that the aggregate Principal Balances of the Mortgage Loans purchased
by the Servicer pursuant to the exercise of the option granted in this sentence
shall not exceed 5% of the sum of the Original Pool Balance and the Prefunding
Account Deposit. In addition, the Servicer, with the consent of the Financial
Guaranty Insurer, may purchase from the Trust on any Deposit Date occurring
during the 90-day period following the Closing Date any Mortgage Loan as to
which a Monthly Mortgage Payment becomes 60 or more days contractually
delinquent at any time following the Cut-off Date and prior to such Deposit Date
at a price equal to the Purchase Price by depositing such amount in the
Certificate Account on such Deposit Date pursuant to Section 3.02; provided,
however, that the aggregate Principal Balances of the Mortgage Loans purchased
by the Servicer pursuant to the exercise of the option granted in this sentence
shall not exceed 5% of the sum of the Original Pool Balance and the Prefunding
Account Deposit. For purposes of this Agreement, any purchase effected in
accordance with this paragraph shall be deemed to be a prepayment of each
Mortgage Loan so purchased.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee, on
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behalf of the Certificateholders, and the Servicer shall manage, conserve,
protect and operate each such Mortgaged Property for the Certificateholders
solely for the purpose of its prompt disposition and sale. The Servicer shall
use its best efforts to dispose of each such Mortgaged Property as expeditiously
as possible consistent with the goal of maximizing Net Liquidation Proceeds
(taking into account any unreimbursed Monthly Advances made or expected to be
made with respect to such Mortgage Loan). Neither the Trustee nor the Servicer,
acting on behalf of the Trust, shall provide financing from the Trust to any
purchaser of any such Mortgaged Property.
In the event that the Trust acquires any Mortgaged Property as aforesaid
or otherwise in connection with a default or imminent default on a Mortgage
Loan, such Mortgaged Property shall be disposed of by the Servicer on behalf of
the Trust before the last day of the third calendar year following the year in
which the foreclosure occurred (the "grace period") unless (i) the Servicer on
behalf of the REMIC Pool has applied for and received an extension of such grace
period pursuant to Code Sections 856(e)(3) and 860G(a)(8)(A), in which case the
Servicer shall sell such Mortgaged Property within the applicable extension
period or (ii) the Trustee shall have received an Opinion of Counsel to the
effect that the holding by the Trust of such Mortgaged Property subsequent to
the expiration of the grace period will not result in a tax on prohibited
transactions imposed by Code Section 860F(a)(1), or otherwise subject the REMIC
Pool to tax or cause the REMIC Pool to fail to qualify as a REMIC at any time
that any Certificates are outstanding. The Servicer shall further ensure that
the Mortgaged Property is administered so that it constitutes "foreclosure
property" within the meaning of Code Section 860G(a)(8) at all times, that the
sale of such property does not result in the receipt by the REMIC Pool of any
income from non-permitted assets as described in Code Section 860F(a)(2)(B), and
that the REMIC Pool does not derive any "net income from foreclosure property"
within the meaning of Code Section 860G(c)(2) with respect to such property.
Section 3.07. Trustee to Cooperate; Release of Mortgage Files. Upon the
payment in full of the principal balance of any Mortgage Loan, if the Trustee is
holding the Mortgage Files, the Servicer shall notify the Trustee by a
certification in the form of Exhibit E hereto (which certification shall include
a statement to the effect that all amounts received in connection with such
payment which are required to be deposited to the Collection Account pursuant to
Section 3.02 have been so deposited) of a Servicing Officer. Such notification
shall be made each month at the time that the Servicer delivers its Servicer
Remittance Report to the Trustee pursuant to Section 4.01. Upon any such payment
in full, the Servicer is authorized to procure from such trustee under the
Mortgage that secured the related Mortgage Note a deed of full reconveyance
covering the related Mortgaged Property encumbered by such Mortgage, which deed,
except as otherwise provided in Section 2941(c) of the California Civil Code or
other applicable law, shall be recorded by such trustee in the office of the
County Recorder in which the Mortgage is recorded, or, as the case may be, to
procure from such trustee an instrument of satisfaction or, if the related
Mortgagor so requests, an assignment without recourse, in each case prepared by
the Servicer at its expense and executed by the Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection or Certificate Account. From time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Trustee
shall, upon written request of the Servicer and delivery to the Trustee of a
trust
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receipt signed by a Servicing Officer, release the related Mortgage File to the
Servicer and shall execute such documents prepared by the Servicer as shall be
necessary to the prosecution of any such proceedings. Such trust receipt shall
obligate the Servicer to return the Mortgage File to the Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to that herein above specified, the trust receipt shall be released by
the Trustee to the Servicer.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by the
Servicer. On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans in the related Mortgage Loan Group for the
related Collection Period, as servicing compensation for such Collection Period,
the Monthly Servicing Fee for such Mortgage Loan Group. Additional servicing
compensation shall be assumption fees, late payment charges, charges for checks
returned for insufficient funds, prepayment fees, if any, or extension and other
administrative charges received by the Servicer and any earnings on investment
by the Servicer of amounts held in escrow accounts established thereby on behalf
of Mortgagors (any such investment to be made in compliance with applicable
law). The Servicer is obligated to pay Compensating Interest for the related
Mortgage Loan Group out of the related Monthly Servicing Fee on each Deposit
Date, to the extent of the amount of the Monthly Servicing Fee, and shall not be
entitled to reimbursement therefor. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder (including
payment of the fees and expenses relating to the Annual Independent Public
Accountant's Servicing Report described in Section 3.10, and all other fees and
expenses not otherwise expressly stated hereunder for the account of the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
Section 3.09. Annual Statement as to Compliance. (a) The Servicer will
deliver to the Trustee, the Financial Guaranty Insurer and each Rating Agency,
on or before September 30 of each year, beginning with September 30, 1998, an
Officer's Certificate of the Servicer substantially in the form set forth in
Exhibit C hereto stating that (a) a review of the activities of the Servicer
during the preceding calendar year (or since the Closing Date in the case of the
first such statement) and of its performance under this Agreement has been made
under such officer's supervision and (b) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its material
obligations under this Agreement throughout such year (or since the Closing Date
in the case of the first such statement), 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.
(b) The Servicer shall deliver to the Trustee, with a copy to each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice by means of an
Officer's Certificate of any event that with the giving of notice or the lapse
of time, or both, would become an Event of Default.
Section 3.10. Annual Independent Public Accountants' Servicing Report.
On or before September 30 of each year, beginning with September 30, 1998, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Trustee, the Financial Guaranty Insurer and each
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Rating Agency to the effect that such firm has examined certain documents and
records (including the Servicer Remittance Reports delivered by the Servicer
during the period covered by such reports) relating to the servicing activities
of the Servicer (which would include servicing of Mortgage Loans under this
Agreement) for the period covered by such report, and that such examination
(which will have been conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers to the extent that the
procedures in such audit guide are applicable to the servicing obligations set
forth in this Agreement), has disclosed no exceptions or errors in records
relating to the servicing activities of the Servicer, including servicing of
Mortgage Loans subject to this Agreement, that, in the opinion of such firm, are
material, except for such exceptions as shall be set forth in such report.
Section 3.11. Access to Certain Documentation and Information Regarding
the Mortgage Loans. (a) The Servicer shall provide to Certificateholders that
are federally insured savings associations and the FDIC and its supervisory
agents and examiners access to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision, and to
the Trustee all documentation relating to the Mortgage Loans that is in the
possession of the Servicer, such access being afforded without charge but only
upon reasonable request and during normal business hours at the offices of the
Servicer. Nothing in this Section shall derogate from the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of the Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.
(b) The Servicer shall supply information to the Trustee in such form as
the Trustee shall reasonably request, by the start of the third Business Day
preceding each Distribution Date, as is required in the Trustee's reasonable
judgment to enable the Trustee to make required distributions and to furnish the
certificates, statements and reports to Certificateholders required pursuant to
this Agreement.
Section 3.12. Maintenance of Fidelity Bond and Errors and Omission
Policy. The Servicer shall during the term of its service as Servicer maintain
in force a (a) policy or policies of insurance covering errors and omissions in
the performance of its obligations as Servicer hereunder and (b) fidelity bond
in respect of its officers, employees and agents, in each case having coverage
amounts that satisfy FNMA or FHLMC requirements for mortgage loan originators
and sellers.
Section 3.13. Notices to the Rating Agencies and the Trustee. In
addition to the other notices required to be given to the Rating Agencies and
the Trustee by the provisions of this Agreement, the Servicer shall give notice
to each Rating Agency, the Financial Guaranty Insurer and the Trustee of (a) any
amendment to this Agreement, (b) the final distribution on the Offered
Certificates, (c) the occurrence of an Event of Default and (d) the repurchase,
purchase or substitution, as applicable, of any Mortgage Loan pursuant to
Section 2.03, 2.05, 3.01 or 3.06 by the Seller or Servicer, as the case may be.
Section 3.14. Reports of Foreclosures and Abandonment of Mortgaged
Properties. Each calendar year beginning in 1998 the Servicer shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Code Section 6050J. In order to facilitate
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this reporting process, the Servicer, on or before February 28th of each year,
shall provide to the Internal Revenue Service and the Trustee reports relating
to each instance occurring during the previous calendar year in which the
Servicer (i) on behalf of the Trustee acquired an interest in a Mortgaged
Property through foreclosure or other comparable conversion in full or partial
satisfaction of a Mortgage Loan, or (ii) knows or has reason to know that a
Mortgaged Property has been abandoned. The reports from the Servicer shall be in
form and substance sufficient to meet the reporting requirements imposed by such
Section 6050J.
Section 3.15. Sub-Servicers and Sub-Servicing Agreements. (a) The
Servicer may enter into Sub-Servicing Agreements for any servicing and
administration of Mortgage Loans with any institution that is in compliance with
the laws of each state necessary to enable it to perform its obligations under
such Sub-Servicing Agreement. The Servicer shall not enter into any
Sub-Servicing Agreement that does not provide for the servicing of the Mortgage
Loans specified therein on a basis consistent with the terms of this Agreement
or that otherwise violates the provisions of this Agreement. The Servicer may
enter into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.
(b) For purposes of this Agreement the Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 3.01 to make
deposits in the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Trustee shall not be
deemed party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer, except that the Trustee shall have
such claims or rights that arise as a result of any funds held by a Sub-Servicer
in trust for or on behalf of the Trust. Notwithstanding the execution of any
Sub-Servicing Agreement, the Servicer shall not be relieved of any liability
hereunder and shall remain obligated and liable for the servicing and
administration of the Mortgage Loans.
Section 3.16. Prefunding Account. (a) The Trustee will establish and
maintain the Prefunding Account. No later than the Closing Date, the Trustee
will deposit in the Prefunding Account: (i) the Fixed Rate Group Prefunding
Account Deposit from the proceeds of the sale of the Fixed Rate Group
Certificates and (ii) the Adjustable Rate Group Prefunding Account Deposit from
the proceeds of the sale of the Adjustable Rate Group Certificates. Subject to
Section 3.16(d), upon the conveyance of Subsequent Mortgage Loans to the Trust
on any Subsequent Transfer Date, the Seller shall instruct the Trustee to
withdraw from the Prefunding Account (i) an amount equal to the Fixed Rate Group
Subsequent Purchase Price for the Subsequent Mortgage Loans bearing fixed
Mortgage Loan Rates to be included in the Fixed Rate Group and make a
corresponding reduction in the amount of the Fixed Rate Group Prefunding Account
Deposit and (ii) an amount equal to the Adjustable Rate Group Subsequent
Purchase Price for the Subsequent Mortgage Loans bearing
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adjustable Mortgage Loan Rates to be included in the Adjustable Rate Group and
make a corresponding reduction in the amount of the Adjustable Rate Group
Prefunding Account Deposit, and to pay such amount to or upon the order of the
Seller upon satisfaction of the conditions set forth in Section 2.02 of this
Agreement with respect to such transfer.
(b) The Prefunding Account will be part of the Trust but not part of any
REMIC Pool. Amounts held in the Prefunding Account shall be invested in
Permitted Investments of the type specified in clause (f) of the definition of
Permitted Investments. The Trustee shall not be liable for any losses on amounts
invested in accordance with the provisions hereof. Any losses realized in
connection with any such investment shall be for the account of the Seller and
the Seller shall deposit the amount of such loss (to the extent not offset by
income from other investments) in the Prefunding Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in the Prefunding Account shall be taxed to the Seller and for
federal and state income tax purposes the Seller shall be deemed to be the owner
of the Prefunding Account. All interest and any other investment earnings on
amounts held in the Prefunding Account shall be paid by the Trustee to the
Seller on the January 1998 Distribution Date.
(c) On the Distribution Date in January 1998, any amounts remaining in
the Prefunding Account (i) in respect of the Fixed Rate Group Prefunding Account
Deposit at such time (net of reinvestment earnings payable to the Seller) shall
be deposited at such time into the Certificate Account for distribution as part
of the Fixed Rate Group Principal Distribution Amount on the January 1998
Distribution Date and (ii) in respect of the Adjustable Rate Group Prefunding
Account Deposit at such time (net of reinvestment earnings payable to the
Seller) shall be deposited at such time into the Certificate Account for
distribution as part of the Adjustable Rate Group Principal Distribution Amount
on the January 1998 Distribution Date.
(d) The Trustee will establish and maintain the Escrow Account as an
Eligible Account for the benefit of the Adjustable Rate Group Certificateholders
and the Financial Guaranty Insurer. The Trustee shall deposit or cause to be
deposited any Escrowed Amounts withdrawn from the Prefunding Account in respect
of the Mortgage Loans on the related Subsequent Transfer Date. Thereafter, (a)
100% of the Escrowed Amounts with respect to the Fixed Rate Mortgage Loans will
be released to the Company upon completion of the Trustee of its review of the
related Subsequent Mortgage Loans and Mortgage Loan Documents and its
determination that the conditions set forth in Section 2.02 for inclusion of
such Mortgage Loans in the Trust have been satisfied as therein described, (b)
95% of the Escrowed Amounts with respect to the Adjustable Rate Mortgage Loans
will be released to the Company upon (i) completion of the Trustee of its review
of the related Subsequent Mortgage Loan and Mortgage Loan Documents and its
determination that the conditions set forth in Section 2.02 for inclusion of
such Mortgage Loans in the Trust have been satisfied as therein described, (ii)
each of S&P and Moody's shall have issued an investment grade "shadow rating" of
the Adjustable Rate Group Certificates (i.e., a rating thereof that does not
consider the delivery or effect of the Financial Guaranty Insurance Policy) and
(iii) the Financial Guaranty Insurer shall have received original copies of all
documents and instruments executed by the parties hereto in form and substance
reasonably satisfactory to the Financial Guaranty Insurer that it has requested
of the Seller and (b) the remaining 5% of the Escrowed Amounts with respect to
such Adjustable Rate
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Group Mortgage Loans will be released to the Company upon receipt by the Trustee
from the Financial Guaranty Insurer of notice that the Financial Guaranty
Insurer has completed its review of the related Subsequent Mortgage Loans and
Mortgage Loan Documents and is satisfied that such Subsequent Mortgage Loan
satisfies the conditions established by the Financial Guaranty Insurer for
inclusion in the Adjustable Rate Group; provided, however, that any amount not
released to the Company as described above will be deposited into the
Certificate Account on January 14, 1998, for distribution to the Adjustable Rate
Group Certificateholders as a portion of the Adjustable Rate Group Principal
Distribution Amount on January 15, 1998. The Escrow Account will be an asset of
the Trust but not of any REMIC. Amounts held in the Escrow Account will not be
invested in Permitted Investments or otherwise.
Section 3.17. Capitalized Interest Account. (a) Unless all Subsequent
Mortgage Loans are purchased by the Trust on the Closing Date, the Trustee shall
establish and maintain the Capitalized Interest Account. On the Closing Date,
the Trustee will deposit the Capitalized Interest Account Deposit in the
Capitalized Interest Account or, if all Subsequent Mortgage Loans are purchased
on the Closing Date, in the Certificate Account. The Trustee shall hold the
Fixed Rate Group Capitalized Interest Account Deposit for the benefit of the
Fixed Rate Group Certificateholders and the Adjustable Rate Group Capitalized
Interest Account Deposit for the benefit of the Adjustable Rate Group
Certificateholders. If none or less than all of the Subsequent Mortgage Loans
are transferred to the Trust on the Closing Date, then on the July 1997 Deposit
Date, amounts equal to (i) the Fixed Rate Group Capitalized Interest Account
Deposit and (ii) the Adjustable Rate Group Capitalized Interest Account Deposit
shall be withdrawn from the Capitalized Interest Account and deposited into the
Certificate Account in respect of the related Monthly Interest for the Fixed
Rate Group and the Adjustable Rate Group, respectively, for such Distribution
Date. If all of the Subsequent Mortgage Loans are transferred to the Trust on
the Closing Date, then the sum of the Fixed Rate Group Capitalized Interest
Account Deposit and the Adjustable Rate Group Capitalized Interest Account
Deposit will be deposited into the Certificate Account on the Closing Date and
held there until the Distribution Date in July 1998. On such first Distribution
Date, such amounts will be deemed to be available in respect of Monthly Interest
for the Fixed Rate Group or Adjustable Rate Group, as appropriate, and will be
distributable to the Certificateholders. Any amounts so deposited in the
Certificate Account shall not be invested in Permitted Investments or otherwise.
(b) The Capitalized Interest Account will be part of the Trust but not
part of any REMIC Pool. Amounts held in the Capitalized Interest Account prior
to the first Deposit Date shall be invested in Permitted Investments of the type
specified in clause (e) of the definition of Permitted Investments, which
Permitted Investments shall mature no later than the Deposit Date in January
1998. The Trustee shall not be liable for any losses on amounts invested in
accordance with the provisions hereof. All interest and other investment
earnings on amounts held in the Capitalized Interest Account (and any other
amounts remaining on deposit therein in excess of the amounts to be so withdrawn
and deposited into the Certificate Account) shall be paid or released by the
Trustee to the Seller on the January 1998 Distribution Date and for federal and
state income tax purposes the Seller shall be deemed to be the owner of the
Capitalized Interest Account. Any losses realized in connection with any such
investment shall be for the account of the Seller and the Seller shall deposit
the amount of such loss (to the extent not offset by income from other
investments) in the
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Capitalized Interest Account immediately upon the realization of such loss. All
amounts earned on deposit in the Capitalized Interest Account shall be taxed to
the Seller.
Section 3.18. Supplemental Interest Reserve Fund. The Trustee will
establish the Supplemental Interest Reserve Fund on the Closing Date. On the
Closing Date, the Class C Certificateholders will deposit, or cause to be
deposited, into the Supplemental Interest Reserve Fund $10,000. On each
Distribution Date as to which there is a Class A-1A Supplemental Interest Amount
or a Class A-2A Supplemental Interest Amount, the Trustee has been directed by
the Class C Certificateholders to, and therefor will, deposit into the
Supplemental Interest Reserve Fund the amounts described in Section 5.01(d)
clause (11) with respect to the Fixed Rate Group and clause (7) with respect to
the Adjustable Rate Group, rather than distributing such amounts to the Class C
Certificateholders. On each such Distribution Date, the Trustee shall hold all
such amounts for the benefit of the Adjustable Rate Group Certificateholders,
and will distribute such amounts to the Adjustable Rate Group Certificateholders
pursuant to subclause (ii) of clause Second of Section 5.01(a). For federal and
state income tax purposes, the Class C Certificateholders will be deemed to be
the owners of the Supplemental Interest Reserve Fund except that, to the extent
distributions are to be made therefrom to the Adjustable Rate Group
Certificateholders, such Certificateholders will be deemed to be the owners
thereof. Amounts held in the Supplemental Interest Reserve Fund and not
distributable to the Adjustable Rate Group Certificateholders on any
Distribution Date will be invested by the Trustee in investments designated by
the Class C Certificateholders having maturities on or prior to the next
succeeding Distribution Date on which such amounts will be distributable to the
Adjustable Rate Group Certificateholders. Upon the termination of the Trust, or
the payment in full of each Class of Adjustable Rate Group Certificates, all
amounts remaining on deposit in the Supplemental Interest Reserve Fund will be
released from the lien of the Trust and distributed to the Class C
Certificateholders or their designee. The Supplemental Interest Reserve Fund
will be part of the Trust but not part of any REMIC Pool.
Section 3.19. Payments on the Financial Guaranty Insurance Policy. (a)
The Trustee will establish and maintain the Policy Payments Account, a separate
special purpose trust account for the benefit of the Adjustable Rate Group
Certificateholders and the Financial Guaranty Insurer. The Trustee shall deposit
or cause to be deposited any Insured Amounts paid under the Financial Guaranty
Insurance Policy in the Policy Payments Accounts and distribute such amounts
only for the purpose of payment to the related Adjustable Rate Group
Certificateholders of the related Insured Amounts and such amounts may not be
used to satisfy any costs, expenses or liabilities of the Servicer, the Trustee
or the Trust. Insured Amounts deposited in the Policy Payments Account shall not
be invested in Permitted Investments or otherwise, and shall be transferred to
the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the related Adjustable Rate Group Certificateholders in accordance
with Section 5.01.
As soon as possible, and in no event later than 9:00 a.m. (Los Angeles
time) on the third Business Day immediately preceding the related Distribution
Date, the Trustee shall determine whether an Insured Amount is required to be
paid under the Financial Guaranty Insurance Policy with respect to such
Distribution Date and, if so, shall immediately notify the Servicer by
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telephone, which notice shall be confirmed in writing by facsimile transmission,
of the Trustee's intention so to file the applicable Notice of Claim. If by the
close of business in Los Angeles on such date an Insured Amount is still
required to be paid under the Financial Guaranty Insurance Policy with respect
to such Distribution Date, the Trustee shall furnish the Financial Guaranty
Insurer with a completed Notice of Claim in respect of such Insured Amount by
12:00 noon New York City time on the next succeeding Business Day and shall
provide a copy thereof to the Servicer at or prior to the time such Notice of
Claim is received by the Financial Guaranty Insurer. The Notice of Claim shall
constitute a claim therefor pursuant to the Financial Guaranty Insurance Policy.
In the event any funds are received by the Trustee from the Servicer prior to
the close of business in Los Angeles on the Business Day following the
transmission of a Notice of Claim to the Financial Guaranty Insurer, and such
funds reduce the amount of the Insured Amount to which such Notice of Claim
relates, the Insured Amount to which such Notice of Claim relates shall be
reduced by a corresponding amount, and the Notice of Claim shall be deemed to
have been rescinded to the extent of the reduction of the Insured Amount.
Notification of any such reduction in the Insured Amount shall be given to the
Financial Guaranty Insurer by the Trustee by no later than 8:00 A.M., Los
Angeles time, on the related Distribution Date. The Financial Guaranty Insurer
shall, pursuant to the Financial Guaranty Insurance Policy, pay to the Trustee
the Insured Amount by 2:00 P.M., New York City time, on the later of (i) the
Business Day following receipt of such Notice of Claim and (ii) such
Distribution Date. The Trustee shall deposit or cause to be deposited such
Insured Amount in the Certificate Account.
(b) Each Adjustable Rate Group Certificateholder shall promptly notify
the Trustee in writing upon the receipt of a court order as described in the
definition of Preference Amount and shall enclose a copy of such order with such
notice to the Trustee. The Trustee shall promptly notify the Financial Guaranty
Insurer upon its receipt of any such court order. If the payment of any portion
of Insured Amount distributable to an Adjustable Rate Group Certificateholder on
any Distribution Date is avoided as a preference pursuant to a final,
nonappealable order under the Bankruptcy Code (the "Order"), the Financial
Guaranty Insurer shall cause such payment to be made on the later of (a) the
date when due to be paid pursuant to the Order or (b) the first to occur of (i)
the fourth Business Day following receipt by the Financial Guaranty Insurer from
the Trustee of (A) a copy of the final nonappealable order of the court pursuant
to the United States Bankruptcy Code to the effect that the related
Certificateholder is required to return distributions paid on a Certificate held
thereby during the term of the Financial Guaranty Insurance Policy because such
payments were avoidable as preference payments pursuant to an Order, (B) a
certificate of such Certificateholder that the Order has been entered and is not
subject to any stay and (C) an assignment duly executed and delivered by such
Certificateholder in such form as is reasonably required by the Financial
Guaranty Insurer and provided thereto by the Financial Guaranty Insurer,
irrevocably assigning to the Financial Guaranty Insurer all rights and claims of
(i) such Certificateholder relating to or arising under the Certificate held
thereby against the debtor that made such preference payment or otherwise with
respect to such preference payment or (ii) the date of receipt by the Financial
Guaranty Insurer from the Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of receipt, the
Financial Guaranty Insurer shall have received written notice from the Trustee
that such items were to be delivered on such date and such date was specified in
the notice. Such payment
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shall be disbursed to the receiver, conservator, debtor-in-possession or trustee
in named in the Order and not to the Trustee or any Adjustable Rate Group
Certificateholder directly (unless an Adjustable Rate Group Certificateholder
has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such
Certificateholder upon proof of such payment reasonably satisfactory to the
Financial Guaranty Insurer).
(c) The Trustee shall receive, as attorney-in-fact for each Adjustable
Rate Group Certificateholder, any Insured Amount allocable to the Class A-1A or
Class A-2A Certificate held thereby, from the Financial Guaranty Insurer and
disburse the same in accordance with the provisions of Section 5.01. Any portion
of the distributions made by the Trustee in respect of any Accrued Certificate
Interest, Class A-1A Coverage Deficit or Class A-2A Coverage Deficit, Class A-2A
Certificate Principal Balance as of the Class A-2A Financial Scheduled
Distribution Date or other voluntary payment of Realized Losses by the Financial
Guaranty Insurer from proceeds of the Financial Guaranty Insurance Policy shall
not be considered payment by the Trust, nor shall such payments discharge the
obligation of the Trust with respect to such Certificateholders, and the
Financial Guaranty Insurer shall become the owner of such unpaid amounts in
respect of the Adjustable Rate Group Certificates with respect to which they are
made. The Trustee hereby agrees on behalf of each Adjustable Rate Group
Certificateholder for the benefit of the Financial Guaranty Insurer that it
recognizes that: (i) to the extent the Financial Guaranty Insurer pays any
Insured Amounts in respect of the Class A-1A Certificates, either directly or
indirectly (as by paying through the Trustee), to the Class A-1A
Certificateholders, the Financial Guaranty Insurer will be subrogated to the
rights of the Class A-1A Certificateholders with respect to such Insured Amounts
paid in respect of such Certificateholders, shall be deemed to the extent of the
Insured Amounts so paid in respect of such Certificateholders, to be a
registered Class A-1A Certificateholder and shall be entitled to receive all
future distributions on the Class A-1A Certificates until all such Insured
Amounts (together with interest thereon at the Class A-1A Pass-Through Rate from
the date paid until the date of reimbursement thereof) have been fully
reimbursed; and (ii) to the extent the Certificate Insurer pays any Insured
Amounts in respect of the Class A-2A Certificates, either directly or indirectly
(as by paying through the Trustee), to the Class A-2A Certificateholders, the
Financial Guaranty Insurer will be subrogated to the rights of the Class A-2A
Certificateholders with respect to such Insured Amounts paid in respect of such
Certificateholders, shall be deemed to the extent of the Insured Amounts so paid
in respect of such Certificateholders, to be a registered Class A-2A
Certificateholder and shall be entitled to receive all future distributions on
the Class A-2A Certificates until all such Insured Amounts (together with
interest thereon at the Class A-2A Pass-Through Rate from the date paid until
the date of reimbursement thereof) have been fully reimbursed, in each case
subject to the following paragraph. To evidence such subrogation, the Trustee
shall note the Financial Guaranty Insurer's rights as subrogee on the
registration books maintained by the Trustee. Except as otherwise described
herein, the Financial Guaranty Insurer shall not acquire any voting rights
hereunder as a result of such subrogation. The effect of the foregoing
provisions is that, to the extent of any Insured Amount made by it on each
Distribution Date, the Financial Guaranty Insurer shall be paid before any other
distributions are made to the related Adjustable Rate Group Certificateholders,
in each case subject to the following paragraph.
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Notwithstanding the provisions of the preceding paragraph, it is
understood and agreed that the intention of the parties is that the Financial
Guaranty Insurer shall not be entitled to reimbursement on any Distribution Date
for amounts previously paid by it (i) in respect of the Class A-1A Certificates
unless on such Distribution Date the Class A-1A Certificateholders shall also
have received the full amount of the Class A-1A Monthly Interest and the amount
of any Extra Principal Distribution Amount or Realized Losses sufficient to fund
any related Overcollateralization Deficit allocated for distribution to such
Class A-2A Certificateholders for such Distribution Date and (ii) in respect of
the Class A-2A Certificates unless on such Distribution Date the Class A-2A
Certificateholders shall also have received the full amount of the Class A-2A
Monthly Interest and the amount of any Extra Principal Distribution Amount or
Realized Losses sufficient to fund any related Overcollateralization Deficit
allocated for distribution to such Class A-2A Certificateholders for such
Distribution Date, as applicable.
(d) The Trustee shall be entitled to enforce on behalf of the Adjustable
Rate Group Certificateholders the obligations of the Financial Guaranty Insurer
under the Financial Guaranty Insurance Policy. The Class A Certificateholders
are not entitled to institute proceedings directly against the Financial
Guaranty Insurer. Each Adjustable Rate Group Certificateholder, by its purchase
of a Class A-1A or Class A-2 Certificate, the Servicer and the Trustee hereby
agree that the Financial Guaranty Insurer may at any time during the
continuation of any proceeding relating to a preference claim direct all matters
relating to such preference claim, including, without limitation, the direction
of any appeal of any order relating to such preference claim and the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Financial Guaranty Insurer shall be
subrogated to the rights of the Servicer, the Trustee and each Adjustable rate
Group Certificateholder in the conduct of any such preference claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such preference
claim.
(e) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Class A-1A or Class A-2A
Certificate from monies received under the Financial Guaranty Insurance Policy.
The Financial Guaranty Insurer shall have the right to inspect such records at
reasonable times during normal business hours upon one Business Day's notice to
the Trustee.
Section 3.20. Rights of the Financial Guaranty Insurer to Exercise
Rights of Adjustable Rate Group Certificateholders. By accepting its
Certificate, each Adjustable Rate Group Certificateholder agrees that unless a
Financial Guaranty Insurer Default exists, the Financial Guaranty Insurer shall
have the right to exercise all rights of the Adjustable Rate Group
Certificateholders under this Agreement without any further consent of the
Adjustable Rate Group Certificateholders, including, without limitation:
(i) the right to direct foreclosures upon Mortgage Loans upon failure of
the Servicer to do so;
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(ii) the right to require the Seller to repurchase or substitute for, or
to require the Servicer to purchase, Mortgage Loans pursuant to Sections 2.03
and 2.05; and
(iii) the right to direct the actions of the Trustee during the
continuance of an Event of Default.
In addition, each Adjustable Rate Group Certificateholder agrees that, unless a
Certificate Insurer Default exists, the rights specifically set forth above may
be exercised by the Adjustable Rate Group Certificateholders only with the prior
written consent of the Financial Guaranty Insurer.
Moreover, by accepting its Certificate, each Fixed rate Group
Certificateholder agrees that unless a Financial Guaranty Insurer Default
exists, (i) the Fixed Rate Group Certificateholders may not exercise their
rights under this Agreement to give notices of any breach or to terminate the
rights and obligations of the Servicer with respect to the Fixed Rate Group in
the event of a Servicer Event of Default without the prior consent of the
Financial Guaranty Insurer, (ii) the Financial Guaranty Insurer, rather than
such Certificateholders, will have the right to direct the actions of the
Trustee during the continuance of any Servicer Event of Default, (iii) the
consent of the Financial Guaranty Insurer will be required in order for the
appointment of any successor Servicer to become effective and (iv) the consent
of the Financial Guaranty Insurer will be required in connection with any
amendment of this Agreement.
Section 3.21. Trust and Accounts Held for Benefit of the
Certificateholders and Financial Guaranty Insurer. Provided there does not exist
a Financial Guaranty Insurer Default, the Trustee shall hold the Trust and the
Mortgage Files for the benefit of the Certificateholders and the Financial
Guaranty Insurer and all references in this Agreement (including, without
limitation, in Sections 2.01, 2.02 and 2.03) and in the Certificates to the
benefit of Holders of the Certificates shall be deemed to include the Financial
Guaranty Insurer. Provided there does not exist a Financial Guaranty Insurer
Default, the Servicer hereby acknowledges and agrees that it shall service and
administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account for the benefit of the Certificateholders and for the benefit
of the Financial Guaranty Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Financial Guaranty Insurer. All notices, statements, reports,
certificates or opinions required by this Agreement to be sent to any other
party hereto or to the Certificateholders shall also be sent to the Financial
Guaranty Insurer.
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ARTICLE FOUR
REMITTANCE REPORT
Section 4.01. Servicer Remittance Report. With respect to each
Distribution Date, not later than the fifth Business Day prior to the related
Deposit Date the Servicer shall deliver to the Trustee a computer-readable
magnetic tape containing the Servicer Remittance Report relating to the Fixed
Rate Group and the Servicer Remittance Report relating to the Adjustable Rate
Group detailing the payments and collections received in respect of the Mortgage
Loans in the related Mortgage Loan Group during the immediately preceding
Collection Period. The computer-readable magnetic tape shall include
loan-by-loan information that specifies account number, borrower name,
outstanding principal balance and activity since the last Distribution Date.
Such tape shall be in the form and have the specifications as may be agreed to
between the Servicer and the Trustee from time to time.
In addition to the foregoing, the Servicer shall provide the Trustee at
the time the tape is delivered to the Trustee a Liquidation Report for the Fixed
Rate Group, with respect to each Mortgage Loan in the Fixed Rate Group that
became a Liquidated Mortgage Loan during the related Collection Period and a
Liquidation Report for the Adjustable Rate Group, with respect to each Mortgage
Loan in the Adjustable Rate Group that became a Liquidated Mortgage Loan during
the related Collection Period, in either case substantially in the form of
Exhibit F hereto.
Section 4.02. Trustee Distribution Date Statement. The Trustee shall,
not later than the Business Day prior to each Deposit Date, furnish by telecopy
to the Servicer, Financial Guaranty Insurer and each Rating Agency a statement
derived from information on the Servicer Remittance Report for each Mortgage
Loan Group and the related Offered Certificates, relating to the next succeeding
Distribution Date:
(a) the total amount of payments in respect of or allocable to
interest on the Mortgage Loans received or deemed to have been received
from the related Mortgagors by the Servicer during such Collection
Period (including any net income from REO Properties received during the
related Collection Period);
(b) the aggregate amount of all Principal Prepayments received
from the related Mortgagors by the Servicer during such Collection
Period;
(c) the aggregate amount of all Principal Payments received or
deemed to have been received from the related Mortgagors by the Servicer
during such Collection Period;
(d) the total amount of Payments Ahead received during the
related Collection Period;
(e) the aggregate of any Trust Insurance Proceeds received by the
Servicer during such Collection Period;
(f) the aggregate of any Net Liquidation Proceeds received by the
Servicer during
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such Collection Period;
(g) the total amount of Compensating Interest payments to be paid
by the Servicer pursuant to Section 3.08;
(h) the aggregate Purchase Prices for (i) any Defective Mortgage
Loans that the Seller is required to repurchase on the related Deposit
Date pursuant to Section 2.03 or 2.05 and (ii) any Mortgage Loan that
the Servicer is required to purchase on the related Deposit Date
pursuant to Section 3.01 or 3.06;
(i) any amounts required to be deposited by the Seller on the
related Deposit Date in connection with the substitution of a Qualified
Replacement Mortgage Loan pursuant to Section 2.03 or 2.05;
(j) the amount of Monthly Advances to be made by the Servicer
pursuant to Section 5.02(a);
(k) the related Monthly Servicing Fee attributable to the
Mortgage Loans in the related Mortgage Loan Group;
(l) the amount of Monthly Advances reimbursable to the Servicer
in such Collection Period pursuant to Section 5.02(a) and not previously
reimbursed;
(m) the amount of any Servicing Advance made by the Servicer
pursuant to Section 5.02(b) and not previously reimbursed;
(n) the amount of any Interest Shortfall for the related
Distribution Date; and
(o) the number and Principal Balance of Mortgage Loans in each
Mortgage Loan Group that, as of the related Determination Date were (i)
30 or more days contractually delinquent, (ii) 60 or more days
contractually delinquent, (iii) 90 or more days contractually
delinquent, (iv) in foreclosure, (v) as to which the Mortgages has in
bankruptcy proceedings to the knowledge of the Servicer, or (vi) as to
which the relate Mortgaged Property was an REO Property.
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ARTICLE FIVE
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS
Section 5.01. Distributions. On each Distribution Date, the Trustee
shall distribute to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution to
Certificateholders if the termination of the Trust is in connection with a
purchase of the assets of the Trust by the Servicer pursuant to Section 10.01)
by check or money order mailed to such Certificateholder at the address
appearing in the Certificate Register, or upon written request by a Holder of a
Certificate, by wire transfer (in the event such Certificateholder owns of
record one or more Certificates that have principal denominations aggregating at
least $5,000,000 and has given the Trustee, at least five Business Days prior to
the related Record Date, written instruction for making such wire transfer to a
bank account maintained in the United States), or by such other means of payment
as such Certificateholder and the Trustee shall agree, such Certificateholder's
Percentage Interest of the following amounts (to the extent applicable to the
Class of such Holder's Certificate) and in the following orders of priority with
respect to each Mortgage Loan Group. Notwithstanding such priorities, the
aggregate of amounts distributed on all Distribution Dates in reduction of the
Certificate Principal Balance of any Class shall not exceed the Certificate
Principal Balance of such Class as of the Closing Date.
(a) On each Distribution Date interest distributions will be made in the
following order of priority:
First, with respect to the Adjustable Rate Group and related collections
only, if no Financial Guaranty Insurer Default has occurred or is continuing, to
the Financial Guaranty Insurer the amount of any unreimbursed payments of the
Insured Amounts (together with interest thereon at the Class A-1A Pass-Through
Rate or Class A-2A Pass-Through Rate, as specified in Section 3.19(c) if such
amounts remain unpaid from any prior Distribution Date) and any accrued and
unpaid Financial Guaranty Insurer Premium;
Second, (i) to the Fixed Rate Group Class A Certificateholders and
Adjustable Rate Group Certificateholders, Monthly Interest with respect to the
related Mortgage Loan Group on a pro rata basis based on the aggregate amount of
Accrued Certificate Interest to the holders of the Certificate of each such
Class, up to the amount of Accrued Certificate Interest with respect to such
Class plus any outstanding Interest Carry Forward Amount with respect to such
Class, and then (ii) with respect only to the Adjustable Rate Group
Certificates, from amounts deposited in the Supplemental Interest Reserve Fund
on such Distribution Date pursuant to Section 5.01(d), any related Class A-1A
Supplemental Interest Payment Amount and any related Class A-2A Supplemental
Interest Payment Amount on a pro rata basis, based on the amount of any Class
A-1A Supplemental Interest Payment Amount and Class A-2A Supplemental Interest
Payment Amount;
Third, to the Class M-1F Certificateholders, Monthly Interest with
respect to the Fixed Rate Group then remaining, up to the amount of Accrued
Certificate Interest with respect to such Class;
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Fourth, to the Class M-2F Certificateholders, Monthly Interest with
respect to the Fixed Rate Group then remaining, up to the amount of Accrued
Certificate Interest with respect to such Class;
Fifth, to the Class B-1F Certificateholders, Monthly Interest with
respect to the Fixed Rate Group then remaining, up to the amount of Accrued
Certificate Interest with respect to such Class; and
Sixth, any Monthly Excess Cash Flow Amount will be applied as set forth
in Section 5.01(d).
(b) With respect to the Fixed Rate Group and any Distribution Date
before the Stepdown Date, the Fixed Rate Group Certificateholders will be
entitled to receive 100% of the Fixed Rate Group Principal Distribution Amount
for such Distribution Date as follows: first, to the Class A-6F
Certificateholders, the Class A-6F Lockout Distribution Amount, and then to all
Fixed Rate Group Certificateholders, by Class in sequential order until the
Certificate Principal Balance of each such Class has been reduced to zero.
With respect to the Fixed Rate Group and each Distribution Date on or
after the Stepdown Date, the related Certificateholders will be entitled to
receive payments of principal in the order of priority and amounts set forth
below up to the Fixed Rate Group Principal Distribution Amount:
First, the Fixed Rate Group Principal Distribution Amount, not to exceed
the Class A Principal Distribution Amount, shall be distributed to the Class
A-6F Certificateholders up to the Class A-6F Lockout Distribution Amount, and
any remaining amount thereof shall be distributed to the Fixed Rate Class A
Certificateholders, in sequential order by Class, until the Certificate
Principal Balance of each such Class has been reduced to zero;
Second, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the Class M-1F Principal Distribution Amount, shall be distributed
to the Class M-1F Certificateholders, until the Certificate Principal Balance
thereof has been reduced to zero;
Third, any remaining Fixed Rate Group Principal Distribution Amount, not
to exceed the related Class M-2F Principal Distribution Amount, shall be
distributed to the Class M-2F Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
Fourth, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the related Class B-1F Principal Distribution Amount, shall be
distributed to the Class B-1F Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero; and
Fifth, any remaining Fixed Rate Group Principal Distribution Amount
shall be distributed as part of the Monthly Excess Cashflow Amount with respect
to such Mortgage Loan Group as set forth in Section 5.01(d).
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On any Distribution Date on which the sum of the Certificate Principal
Balances of the Subordinate Certificates and the related Overcollateralization
Amount is zero, any amounts of principal payable to the Fixed Rate Group Class A
Certificateholders on such Distribution Date shall instead be distributed pro
rata based on the outstanding Certificate Principal Balances of each such Class.
(c) with respect to the Adjustable Rate Group and any Distribution Date,
the Adjustable Rate group Certificateholders will be entitled to receive
payments of principal in the order of priority and amounts set forth below up to
the Adjustable Rate Group Principal Distribution Amount:
First, the Adjustable Rate Group Principal Distribution Amount shall be
distributed to the Class A-1A Certificateholders and Class A-2A
Certificateholders on a pro rata basis, based on the Class A-1A Principal
Percentage and Class A-2A Principal Percentage, respectively until the
Certificate Principal Balances thereof have been reduced to zero;
Second, any remaining Adjustable Rate Group Principal Distribution
Amount shall be distributed as part of the Monthly Excess Cashflow Amount with
respect to such Mortgage Loan Group as set forth in Section 5.01(d).
(d) The Monthly Excess Cashflow Amount with respect to each Mortgage
Loan Group shall be applied in the following order of priority on any
Distribution Date:
Any Monthly Excess Cash Flow Amount with respect to the Fixed
Rate Group shall be applied in the following order of priority on any
Distribution Date:
(1) to fund any Interest Carry Forward Amount for the Fixed Rate
Class A Certificates;
(2) to fund the related Extra Principal Distribution Amount for
such Distribution Date;
(3) to fund any Interest Carry Forward Amount for the Class M-1F
Certificates;
(4) to fund any Class M-1F Realized Loss Amortization Amount;
(5) to fund any Interest Carry Forward Amount for the Class M-2F
Certificates;
(6) to fund any Class M-2F Realized Loss Amortization Amount;
(7) to fund any Interest Carry Forward Amount for the Class B-1F
Certificates;
(8) to fund any Class B-1F Realized Loss Amortization;
(9) if a Trigger Event has occurred and is continuing, an amount
equal to the
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excess of the Fixed Rate Group Principal Distribution Amount over the sum of the
Class A Principal Distribution Amount, the Class M-1F Principal Distribution
Amount, the Class M-2F Principal Distribution Amount and the Class B-1F
Principal Distribution Amount will be distributed to the Class B-1F
Certificateholders, Class M-2F Certificateholders and Class M-1F
Certificateholders, in that order, until the Certificate Principal Balance of
the related Class of Certificates has been reduced to zero;
(10) to the Servicer to the extent of any unreimbursed Monthly
Advances or Servicing Advances;
(11) to fund the amounts, if any, described in clauses (1)
through (5) below with respect to the Adjustable Rate Group, to the extent that
such amounts have not been funded in full through the application of any Monthly
Excess Cashflow Amount with respect to the Adjustable Rate Group on such
Distribution Date;
(12) to fund a distribution to Class C Certificateholders of the
Class C Distribution Amount plus any Class C Carryforward Amount; provided that,
pursuant to Section 5.01(e) hereof, on any Distribution Date as to which there
is any unpaid Class A-1A Supplemental Interest Amount or Class A-2A Supplemental
Interest Amount, the Trustee will deposit all such amounts that would otherwise
be distributable to the Class C Certificateholders into the Supplemental
Interest Reserve Fund for application pursuant to clause (ii) of Clause Second
of Section 5.01(a), and such deposit will constitute payment in full of and
satisfaction of all obligations hereunder to distribute such amounts to the
Class C Certificateholders, including for purposes of Section 9.16, and the
Trustee, Servicer and Class C Certificateholders agree hereby appropriately to
report any such deposit as if a corresponding distribution to the Class C
Certificateholders for federal income tax and accounting purposes; and
(13) to fund a distribution to the Class R-III Certificates.
Any Monthly Excess Cash Flow Amount with respect to the Adjustable Rate
Group shall be applied in the following order of priority on any Distribution
Date:
(1) to fund any Interest Carry Forward Amount for the Adjustable
Rate Group Certificates;
(2) If no Financial Guaranty Insurer Default has occurred or is
continuing, to reimburse the Financial Guaranty Insurer for any unreimbursed
Insured Amounts (together with interest thereon at the Class A-1A Pass-Through
Rate or Class A-2A Pass-Through Rate, as
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specified in Section 3.19(c) if such amounts remain unpaid from any prior
Distribution Date) and any accrued and unpaid Financial Guaranty Insurer
Premium;
(3) to fund the related Extra Principal Distribution for such
Distribution Date;
(4) to reimburse the Financial Guaranty Insurer for any other
amounts due and owing under the Financial Guaranty Insurance Agreement;
(5) to the Servicer to the extent of any unreimbursed Monthly
Advances or Servicing Advances with respect to the Adjustable Rate Group;
(6) to fund any amounts described in clauses (2), (4), (6) and
(8) above for such Distribution Date and the Fixed Rate Group, to the extent
such amounts have not been funded in full through the application of any Monthly
Excess Cashflow Amount with respect to the Fixed Rate Group on such Distribution
Date; provided that any portion of Monthly Excess Cashflow Amount with respect
to the Adjustable Rate Group Certificates that consists of amounts paid by the
Financial Guaranty Insurer will be excluded from such funding;
(7) to fund a distribution to Class C Certificateholders of the
Class C Distribution Amount plus any Class C Carryforward Amount; provided that,
pursuant to Section 5.01(e) hereof, on any Distribution Date as to which there
is any unpaid Class A-1A Supplemental Interest Payment Amount or Class A-2A
Supplemental Interest Payment Amount, the Trustee will deposit all such amounts
that would otherwise be distributable to the Class C Certificateholders into the
Supplemental Interest Reserve Fund for application pursuant to clause (ii) of
clause Second of Section 5.01(a), and such deposit will constitute payment in
full of and satisfaction of all obligations hereunder to distribute such amounts
to the Class C Certificateholders, including for purposes of Section 9.16, and
the Trustee, Servicer and Class C Certificateholders agree hereby appropriately
to report any such deposit as if a corresponding distribution to the Class C
Certificateholders for federal income tax and accounting purposes; and
(8) to fund a distribution of one or more of the Class R-III
Certificateholders.
(e) By accepting a Class C Certificate, each Class C Certificateholder
hereby agrees to direct the Trustee, and the Trustee hereby is directed, to
deposit into the Supplemental Interest Reserve Fund the amounts described in
Section 5.01(d) clause (12) with respect to the Fixed Rate Group and clause (7)
with respect to the Adjustable Rate Group for the benefit of the Adjustable Rate
Group Certificates on each Distribution Date as to which there is any Class A-1A
Supplemental Interest Amount or Class A-2A Supplemental Interest Payment Amount
rather than distributing such amounts to the Class C Certificateholders. By
accepting a Class C Certificate, each Class C Certificateholder further agrees
that such direction is given for good and valuable consideration, the receipt
and sufficiency of which is acknowledged by such acceptance.
(f) In addition to the foregoing, on each Distribution Date the Trustee
shall include in the distribution (i) to each Class A-1A and Class A-2A
Certificateholder, such Certificateholder's Percentage Interest of any Insured
Amount allocable to Class A-1A or Class A-2A Certificates, as the case may be,
received from the Financial Guaranty Insurer in respect of
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such Distribution Date, first to cover any shortfalls in the Monthly Interest
available to cover distributions in respect of Accrued Certificate Interest with
respect thereto for such Distribution Date and then to reduce the Certificate
Principal Balances of the Adjustable Rate Group Certificates on a pro rata basis
(based on their respective outstanding Certificate Principal Balances) by an
amount equal to the Coverage Deficit with respect to such Distribution Date.
Notwithstanding any of the foregoing, the aggregate of amounts
distributed on all Distribution Dates in reduction of the Certificate Principal
Balance of any Class of Certificates shall not exceed the Certificate Principal
Balance of such Class as of the Closing Date.
Amounts to be paid to the Financial Guaranty Insurer by the Trustee
under this Agreement will be paid by wire transfer of same day funds.
Section 5.02. Monthly Advances; Servicing Advances. (a) On or before
each Deposit Date, the Servicer will deposit in the Certificate Account in
respect of the Fixed Rate Group and the Adjustable Rate Group, in same day
funds, an amount, if any (a "Monthly Advance"), equal to the sum of (i) with
respect to all Mortgage Loans that are delinquent as of the close of business on
the related Determination Date, the aggregate of the interest portions of each
Monthly Mortgage Payment in respect of the related Mortgage Loan Group due
during the related Collection Period (net of the aggregate of the Monthly
Servicing Fees for each Mortgage Loan Group attributable to such Mortgage
Loans), inclusive of those amounts representing the interest portions of Monthly
Mortgage Payments due during the first Collection Period, plus (ii) with respect
to all Mortgage Loans that are not delinquent Mortgage Loans as of the close of
business on the last day of such Collection Period, an amount equal to the
amount of interest that would accrue yon each such Mortgage Loan at the related
Mortgage Loan Rate (net of the aggregate of the Monthly Servicing Fees for each
Mortgage Loan Group attributable to such Mortgage Loans) in a period of 30 days
minus the number of days from the first day of such Collection Period to the
related due date for such Mortgage Loan during such Collection Period, plus
(iii) with respect to each Mortgaged Property that was acquired in foreclosure
or similar action (each, an "REO Property") during or prior to the related
Collection Period and as to which a final sale did not occur during the related
Collection Period, an amount equal to the excess, if any, of interest on the
Principal Balance of such REO Property at the related Mortgage Interest Rate
(net of the Monthly Servicing Fee attributable to such REO Property) over the
net income from such REO Property transferred to the Collection Account or the
Certificate Account, as the case may be, for such Distribution Date; provided,
however, that in no case will the Servicer be required to make advances with
respect to any period or portion of any Collection Period following the final
due date with respect to any Mortgage Loan. All or a portion of any Monthly
Advance required to be made on a Deposit Date may be paid out of amounts on
deposit in the Collection Account in respect of the related Mortgage Loan Group
that are not required to be deposited on such Deposit Date in the Certificate
Account as any portion of Monthly Interest for such Mortgage Loan Group and the
related Distribution Date; provided, however, that the Servicer shall be
required to replace any such amounts by deposit to the Collection Account on or
before the next Deposit Date and the amount of such deposit shall thereafter be
considered a Monthly Advance for purposes of reimbursement under this Agreement.
The Servicer may recover Monthly Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Monthly Advance was made, from collections on the
related Mortgage Loan,
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including Liquidation Proceeds, Insurance Proceeds and such other amounts as may
be collected by the Servicer from the Mortgagor or otherwise relating to the
Mortgage Loan or, as provided in clause (10) of Section 5.01(d), from amounts in
respect of the related Mortgage Loan Group that would otherwise be distributed
to the Class C Certificateholder on such Distribution Date.
(b) The Servicer shall from time to time during the term of this
Agreement make such Servicing Advances as the Servicer shall deem appropriate or
advisable under the circumstances and are required pursuant to the terms of this
Agreement. Servicing Advances may be paid by the Servicer out of amounts on
deposit in the Collection Account in respect of the related Mortgage Loan Group
from time to time; provided, however, that the Servicer shall be required to
replace any such amounts by deposit to the Collection Account in respect of the
related Mortgage Loan Group on or before the first Deposit Date occurring after
the payment of a Servicing Advance with such amounts, and the amount of such
deposit shall thereafter be considered a Servicing Advance for purposes of
reimbursement under this Agreement. All Servicing Advances made by the Servicer
shall be reimbursable from collections or recoveries relating to the Mortgage
Loans in respect of which such Servicing Advances have been made or, as provided
in clause (10) of Section 5.01(d) with respect to the Adjustable Rate Group
Mortgage Loans, from amounts that would otherwise be distributed to the Class C
Certificateholder on a Distribution Date. Notwithstanding anything herein to the
contrary, no Servicing Advances need by made hereunder if such Servicing Advance
would, if made, constitute a Nonrecoverable Advance.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution charged to the Certificate Account on a Distribution Date the
Trustee shall forward to the Financial Guaranty Insurer and each Rating Agency
and shall mail to each Holder of a Certificate, a written statement setting
forth the following information with respect to the applicable Class of Offered
Certificates to which such statement (a "Statement to Certificateholders")
relates:
(a) the amount of the distribution with respect to each Class of
Certificates;
(b) the amount of such distributions allocable to principal on
the related Mortgage Loans in each Mortgage Loan Group, separately
identifying the aggregate amount of any Prepayments or other recoveries
of principal included therein;
(c) the amount of such distributions allocable to interest;
(d) the Interest Carry Forward Amount for each Class;
(e) the outstanding Certificate Principal Balance of each Class
of Offered Certificates which will be outstanding after giving effect to
any payment of principal on such Distribution Date;
(f) the aggregate of the Principal Balances of all Mortgage Loans
after giving effect to any payments of principal on such Distribution
Date by Mortgage Loan Group and for the entire Trust, and each Group
Factor;
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(g) based upon information furnished by the Sponsor, such
information as may be required by Section 6049(d)(7)(C) of the Code and
the regulations promulgated thereunder to assist the Certificateholders
in computing their market discount;
(h) the total of all amounts paid by the Sponsor and the Servicer
during the related Collection Period in connection with purchases or
repurchases from the Trust of Mortgage Loans and substitutions for
Mortgage Loans of Qualified Replacement Mortgage Loans with respect to
each Mortgage Loan Group and by reason for such purchase;
(i) the weighted average Mortgage Loan Rate of the Mortgage Loans
with respect to each Mortgage Loan Group;
(j) whether a Trigger Event has occurred and, if so, what event;
(k) the Senior Enhancement Percentage;
(l) the amount of any Extra Principal Distribution Amount
included in such distribution;
(m) the related Overcollateralization Amount and Targeted
Overcollateralization Amount for each Mortgage Loan Group and all
delinquency and loss information necessary to calculate the Targeted
Overcollateralization Amount for each Mortgage Loan Group;
(n) the amount, if any, of Insured Amounts distributable to each
Class of Adjustable Rate Group Certificates on such Distribution Date,
the Financial Guaranty Insurer Premium paid on such Distribution Date,
and the aggregate amount of Insured Amounts, interest thereon and
previously unpaid Financial Guaranty Insurer Premiums paid on Such
Distribution date and remaining to be paid on such Distribution date or
any future Distribution Date;
(o) the amount of any Applied Realized Loss Amount, Realized Loss
Amortization Amount and Unpaid Realized Loss Amount for each Class of
Fixed Rate Group Certificates as of the close of such Distribution Date;
and
(p) such other information as the Certificate Insurer may
reasonably request to the extent such information is available to the
Trustee from the Servicer and is produced by the Servicer in the
ordinary course of the Servicer's business.
In the case of information furnished pursuant to subclauses (a),
(b) and (c) above, the amounts shall be expressed as a dollar amount per
Certificate with a $1,000 principal denomination.
Within 90 days after the end of each calendar year, the Trustee
shall mail such report to Lehman Brothers Inc., 3 World Financial
Center, 200 Vesey Street, New York 10285, Attention: Samir Tabet (which
report shall include, in addition to the information
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contained in reports to others hereunder, the total amount of interest
on the Mortgage Loans for the period covered by such report), and to
each Person who at any time during the calendar year was an Offered
Certificateholder, a statement for each Certificateholder containing the
information set forth in subclauses (a) through (c) above, aggregated
for such calendar year or, in the case of each Person who was an Offered
Certificateholder for a portion of such calendar year, setting forth
such information for each month thereof for the portion of the year
during which such Person was a Certificateholder. The Servicer shall
provide any other information necessary in order to report income in
respect of the Certificateholders for federal income tax purposes.
Section 5.04. Applied Realized Loss Amount. On each Distribution Date,
based on the information furnished by the Servicer, the Trustee shall determine
the total Applied Realized Loss Amounts for the Fixed Rate Group for such
Distribution Date. Such Applied Realized Loss Amounts shall be applied by
reducing the Certificate Principal Balance of each Class of Subordinate
Certificates beginning with the Class B-1F Certificates, and then the Class M
Certificates then outstanding with the highest numerical Class designation, in
each case until the respective Certificate Principal Balance thereof is reduced
to zero. Any Applied Realized Loss Amount allocated to a Class of Certificates
shall be allocated among the Certificates of such Class in proportion to their
respective Percentage Interests.
Section 5.05. Financial Guaranty Insurer's Use of Information. The
Company and the Trustee on behalf of Certificateholders and the Trust (the
"Trust Parties") hereby authorize the Financial Guaranty Insurer to include the
information contained in reports provided to the Certificate Insurer hereunder
(the "Information") on Bloomberg, or in other electronic or print information
services. The Trust Parties agree not to commence any actions or proceedings, or
otherwise assert any claims, against the Financial Guaranty Insurer or its
Affiliates or any of the Financial Guaranty Insurer Parties, arising out of, or
related to or in connection with the dissemination and/or use of any information
by the Certificate Insurer as contemplated in this Section, including, but not
limited to, claims based on allegations of inaccurate, incomplete or erroneous
transfer of information by the Financial Guaranty Insurer to Bloomberg or
otherwise (other than in connection with the Financial Guaranty Insurer's gross
negligence or willful misconduct). The Trust Parties waive their rights to
assert any such claims against the Financial Guaranty Insurer Parties and fully
and finally release the Financial Guaranty Insurer Parties from any and all such
claims, demands, obligations, actions and liabilities (other than in connection
with the Financial Guaranty Insurer's gross negligence or willful misconduct).
The Financial Guaranty Insurer makes no representations or warranties, expressed
or implied, of any kind whatsoever with respect to the accuracy, adequacy,
timeliness, completeness, merchantability or fitness for any particular purpose
of any Information in any form or manner. The Financial Guaranty Insurer
reserves the right at any time to withdraw or suspend the dissemination of the
Information by the Financial Guaranty Insurer. The authorizations, covenants and
obligations of the Trust Parties under this section shall be irrevocable and
shall survive the termination of this Agreement.
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ARTICLE SIX
THE CERTIFICATES
Section 6.01. The Certificates. (a) The Certificates of each Class shall
be substantially in the forms set forth with respect thereto in Exhibit A
hereto, respectively, and shall, on original issue, be executed and delivered
by the Trustee on behalf of the Trust, not individually but solely as Trustee
to or upon the order of the Seller concurrently with the sale and assignment to
the Trustee of the Trust.
(b) The Book-Entry Certificates will be evidenced by one or more
certificates, beneficial ownership of which will be held (i) in the case of the
Fixed Rate Group Class A Certificates and the Adjustable Rate Group
Certificates, in minimum dollar denominations of $1,000 and integral multiples
of $1 in excess thereof; and (ii) in the case of the Subordinate Certificates,
in minimum dollar denominations of $25,000 and integral multiples of $1 in
excess thereof. Each of the Class C Certificates shall be issuable with a face
amount expressed as a Percentage Interest not less than 1.00%. Each of the
Class R Certificates shall be issuable solely as a single Class R Certificate
evidencing the entire Percentage Interest of such Class R Certificates.
(c) The Certificates shall be executed by manual or facsimile
signature by the Trustee on behalf of the Trust (not in its individual capacity
but solely as Trustee) by an authorized officer of the Trustee. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trustee
shall bind the Trust, notwithstanding that such individuals or any of them have
ceased to be so authorized prior to the countersigning and delivery of such
Certificates or did not hold such offices at the date of such Certificate. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate shall have been manually authenticated
by the Trustee substantially in the form provided for herein, and such
signature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 6.02. Registration of Transfer and Exchange of Certificates. (a)
The Trustee shall cause to be kept at the Corporate Trust Office a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the 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 at any
office or agency of the Trustee maintained for such purpose pursuant to the
foregoing paragraph and upon satisfaction of the conditions set forth in Section
6.02(b) and (c), the Trustee shall execute, authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of the same Class and of a like aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized denominations of the same Class and of a
like aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any
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Certificates are so surrendered for exchange the Trustee shall execute,
authenticate and deliver the Certificates that the Certificateholder making the
exchange is entitled to receive.
Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Company or the Trustee) be duly endorsed by, or 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 shall be made to a Certificateholder for any transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of certificates.
All Certificates surrendered for transfer or exchange shall be canceled
by the Trustee in accordance with its standard procedures.
(b) No transfer of a Class R Certificate shall be made unless, as
evidenced by an Opinion of Counsel and Transfer Affidavit delivered to the
Trustee, each in form and substance satisfactory to the Trustee, such transfer
is not subject to registration under the Securities Act or any applicable state
securities laws. Any such Opinion of Counsel and Transfer Affidavit shall not be
obtained at the expense of the Trustee, the Trust, the Seller or the Servicer.
The Holder of a Class R Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Trustee, the Seller and the Servicer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with the Securities Act and such state laws. Neither the Seller, the
Servicer nor the Trustee or the Trust is under an obligation to register the
Class R Certificates under the Securities Act or any state securities law.
The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of such Class R Certificate to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfers of restricted securities
generally.
No legal or beneficial interest in all or any of the Class R
Certificates may be transferred directly or indirectly to: (i) a Disqualified
Organization or an agent of a Disqualified Organization (including a broker,
nominee or middleman), (ii) to an entity that holds REMIC residual securities as
nominee to facilitate the clearance and settlement of such securities through
electronic book-entry changes in accounts of participating organizations (a
"Book-Entry Nominee"), (iii) an individual, corporation, partnership or other
Person unless such transferee (A) is not a Foreign Person or (B) is a Foreign
Person that will hold such Class R Certificate in connection with the conduct of
a trade or business within the United States and has furnished the transferor
and the Trustee with, and agrees to periodically furnish in accordance with
Treasury regulations, an effective Internal Revenue Service Form 4224 (or any
applicable successor form) or (C) is a Foreign Person that has delivered (at the
expense of the Transferee) to both the transferor and the Trustee an opinion of
a nationally recognized tax counsel to the effect that the transfer of the Class
R Certificate to it is in accordance with the requirements of the Code and the
regulations promulgated thereunder and that
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such transfer of the Class R Certificate will not be disregarded for federal
income tax purposes (any such Person who is not covered by clause (A), (B) or
(C) above being referred to herein as a "Non-permitted Foreign Holder") or (iv)
to an ERISA Plan or an entity, including an insurance company separate account
or general account, whose underlying assets include ERISA Plan assets by reason
of an ERISA Plan's investment in the entity or a Person investing the assets of
an ERISA Plan or such an entity, whether as nominee, trustee, agent or otherwise
(such plan, entity or Person, an "ERISA Prohibited Holder"), and any such
purported transfer shall be void and have no effect.
The Trustee shall not execute, and shall not authenticate and deliver, a
new Class R Certificate in connection with any registration of transfer to a
Person known to a Responsible Officer of the Trustee to be a Disqualified
Organization or agent thereof (including a broker, nominee or middleman), to a
Book-Entry Nominee, a Non-permitted Foreign Holder or an ERISA Prohibited
Holder, and the Trustee shall not accept a surrender for the registration of
transfer or register the transfer of, any Class R Certificate, unless the
transferor shall have provided to the Trustee a Transfer Affidavit substantially
in the form attached as Exhibit D hereto, signed by the transferee, to the
effect that the transferee is not a Disqualified Organization and is not a
nominee for a beneficial owner of the Class R Certificate from which the
transferee has not received a substantially similar affidavit, a Book-Entry
Nominee, a Non-permitted Foreign Holder or an ERISA Prohibited Holder. Such
Transferor Affidavit shall contain (i) the consent of the transferee to any such
amendments of this Agreement as may be required to further effectuate the
foregoing restrictions on transfer of the Class R Certificates to Disqualified
Organizations, Book-Entry Nominees, Non-permitted Foreign Holders or ERISA
Prohibited Holders and (ii) a representation from the transferee that such
transferee does not have the intent or purpose to impede the assessment or
collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificates. Such Transferor Affidavit, if not
executed in connection with the initial issuance of the Class R Certificates,
also shall be accompanied by a Transferor Affidavit, substantially in the form
attached hereto as Exhibit H, signed by the transferor to the effect that as of
the time of the transfer, the transferor has no actual knowledge that such
affidavit is false and that the transferor does not have the intent or purpose
to impede the assessment or collection of any federal, state or local income
taxes legally required to be paid with respect to the Class R Certificate.
Each Class R Certificate shall bear a legend referring to the foregoing
restrictions. Any Person acquiring the Class R Certificate, or beneficial
ownership thereof, agrees to give the Servicer written notice that it is a
"pass-through interest holder" within the meaning of Treasury Regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring the Class R Certificate, or
beneficial ownership thereof, if it is, or is acquiring the Class R Certificate
on behalf of, a "pass-through interest holder."
Upon notice to the Servicer that any legal or beneficial interest in any
Class R Certificate has been transferred, directly or indirectly, to a
Disqualified Organization in contravention of the foregoing restrictions or to a
pass-through entity as defined in the REMIC Provisions an interest of which is
held by a Disqualified Organization, the Servicer agrees to furnish to any
transferor of the Class R Certificate or such agent or such pass-through entity
such as may be required to be
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delivered thereto by the Code as necessary to the application of Code Section
860E(e) including, but not limited to, the present value of the total
anticipated excess inclusions with respect to the Class R Certificate (or
portion thereof) for periods after such transfer. At the election of the
Servicer, the cost to the Servicer of computing and furnishing such information
may be charged to the transferor or such agent referred to above; provided,
however, that the Servicer shall in no event be excused from furnishing such
information.
(d) No transfer of a Subordinate Certificate or Class C Certificate, or
beneficial interest therein, shall be made unless the Trustee shall have
received a representation from the transferee thereof to the effect that:
(i) such transferee (A) is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section
4975 of the Code (a "Plan"), nor a person acting on behalf of a Plan nor
using the assets of a Plan to effect such transfer, or (B) is an
insurance company purchasing a Class B Certificate or Class C
Certificate with funds contained in an "insurance company general
account" (as defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) satisfying Section III of PTCE 95-60; or
(ii) such transferee is a Plan or a person acting on behalf of a
Plan or using the assets of a Plan to effect such transfer, or is an
insurance company purchasing such Certificate with funds contained in an
insurance company general account, having attached thereto an opinion of
counsel satisfactory to the Trustee, which opinion shall not be an
expense of either the Trustee or the Trust, addressed to the Trustee,
the Seller and the Servicer, to the effect that the purchase or holding
of such Certificate will not result in the assets of the Trust being
deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the
Seller or the Servicer 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 a Subordinate
Certificate that is a Book-Entry Certificate, the representations contained in
clause (i) above shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of such Certificate.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Subordinate Certificate or Class C Certificate, or a beneficial interest
therein, to or on behalf of an employee benefit plan subject to ERISA or to the
Code or a person acting on behalf of a Plan or using the assets of a Plan to
effect such transfer or to an insurance company purchasing with funds from a
general account not exempt pursuant to PTCE 95-60 without the delivery to the
Trustee of an opinion of counsel described in clause (ii) 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 Subordinate Certificate or Class C Certificate
that is in fact not permitted by Section 6.02(d) or for making any payments due
on such Certificate to the Holder thereof or taking any other action with
respect to
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such Holder under the provisions of the Pooling and Servicing Agreement so long
as the transfer was registered by the Trustee in accordance with the foregoing
requirements.
The Subordinate Certificates and Class C Certificates, this Agreement
and related documents may be amended or supplemented from time to time to modify
restrictions on and procedures for resale and other transfer of such Subordinate
Certificates and Class C Certificates to reflect any change in applicable law or
regulation (or the interpretation thereof) or practices relating to the resale
or transfers of restricted securities generally.
(e) The Book-Entry Certificates shall, subject to Section 6.02(e), at
all times remain registered in the name of the Depository or its nominee and at
all times: (i) registration thereof may not be transferred by the Trustee except
to another Depository; (ii) the Depository shall maintain book-entry records
with respect to the Certificate Owners and with respect to ownership and
transfers of such Certificates; (iii) ownership and transfers of registration of
the Certificates issued in book-entry form on the books of the Depository shall
be governed by applicable rules established by the Depository and the rights of
Certificate Owners with respect to Book-Entry Certificates shall be governed by
applicable law and agreements between such Certificate Owners and the
Depository, Depository Participants, and indirect participating firms; (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 as
the authorized representative of the Certificate Owners of the Book-Entry
Certificates for all purposes including the making of payments due on the
Book-Entry Certificates and exercising the rights of Holders of Book-Entry
Certificates under this Agreement; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository; (vii)
Certificate Owners shall not be entitled to certificates for the Book-Entry
Certificates and (viii) the Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by holders of
Book-Entry Certificates and give notice to the Depository of such record date.
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.
(f) If (x)(i) the Company or the Depository advises the Trustee in
writing that the Depository is no longer willing, qualified or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Company is unable to locate a qualified successor, (y) the Company 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 not less than 51% of the aggregate Class A
Certificate Principal Balance of the Book-Entry Certificates together advise the
Trustee and the Depository 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 ("Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the
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Trustee of such Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall issue the
Definitive Certificates and the expense of any such issuance shall be reimbursed
by the Trust pursuant to Section 9.05. Neither the Company nor the Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed applicable with
respect to such Definitive Certificates and the Certificates as
Certificateholders hereunder.
(g) On or prior to the Closing Date, there shall be delivered to the
Depository one certificate for each Class of Book-Entry Certificates registered
in the name of the Depository's nominee, Cede & Co. The face amount of each
such Certificate shall be equal to the Principal Balance thereof. Each
Certificate issued in book-entry form shall bear the following legend:
"Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee, the Servicer, the Seller
and, in the case of the Adjustable Rate Group Certificates, the Financial
Guaranty Insurer, 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, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class and Percentage Interest. Upon the issuance of any new Certificate under
this Section, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership of the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Servicer, the Seller, the Trustee,
the Financial Guaranty Insurer and any of their respective agents may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 5.01
and for all other purposes whatsoever, and neither the Servicer, the Seller, the
Trustee or the Financial Guaranty Insurer, nor any of their respective agents
shall be affected by notice to the contrary.
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Section 6.05. Actions of Certificateholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in person or by agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee, in
the case of the Adjustable Rate Group Certificates, also to the Financial
Guaranty Insurer, and, when required, to the Seller or the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Financial guaranty Insurer, the Seller and the Servicer, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner that the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee, the Seller, the Servicer or the Financial Guaranty Insurer in
reliance thereon, whether or not notation of such action is made upon such
Certificate.
ARTICLE SEVEN
THE SERVICER AND THE SELLER
Section 7.01. Liability of the Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Servicer herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. Any corporation or other entity (i) into which the
Servicer may be merged or consolidated, (ii) that may result from any merger,
conversion or consolidation to which the Servicer shall be a party, or (iii)
that may succeed to all or substantially all of the business of the Servicer,
which corporation or other entity shall, in any case where an assumption shall
not be effected by operation of law, execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement;
except that if the Servicer is not the surviving entity, then the surviving
entity shall execute and deliver to the Trustee an agreement of assumption to
perform every obligation of the Servicer hereunder.
Section 7.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of its directors, officers, employees or agents
shall be under any liability to the Trustee, the Trust or the Certificateholders
for any action taken or for refraining from the taking of any action by the
Servicer pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such person
against any liability that
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would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the duties of the Servicer or by reason of
reckless disregard of the obligations and duties of the Servicer hereunder. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
Section 7.04. Servicer Not to Resign. Subject to the provisions of
Section 7.02 regarding the merger or consolidation of the Servicer into or with
another entity, the Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that the performance of its
duties or obligations hereunder is no longer permissible under applicable law or
regulation or are in material conflict by reason of applicable law or regulation
with any other activities carried on by it at the date of this Agreement. Any
such determination permitting the resignation of the Servicer pursuant to this
Section shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No resignation pursuant to this Section 7.04 (a) shall become
effective until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.
Section 7.05. Merger or Consolidation of the Seller. Any corporation or
other entity (i) into which the Seller may be merged or consolidated, (ii) that
may result from any merger, conversion or consolidation to which the Seller
shall be a party, or (iii) that may succeed to all or substantially all of the
business of the Seller, which corporation or other entity shall, in any case
where an assumption shall not be effected by operation of law, execute an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement, except that if the Seller in any of the foregoing cases is not the
surviving entity, then the surviving entity shall execute and deliver to the
Trustee an agreement of assumption to perform every obligation of the Seller
hereunder.
Section 7.06. Term To Term Servicing. (a) Upon the occurrence and
continuance of any Event of Default, if the Servicer is not removed as provided
in Section 8.01, the Servicer shall act as servicer under this Agreement,
subject to the continuing right of removal set forth in Section 8.01, in the
case of the Adjustable Rate Group for (a) an initial period commencing on the
date of such Event of Default through the end of the quarter that includes such
date and ends on March 31, June 30, September 30 or December 31, as the case may
be, and (b) if the Servicer receives from the Financial Guaranty Insurer (or
Trustee if their shall exist any Financial Guaranty Insurer Default) at least
fifteen days prior to the end of such term or any subsequent term notice of
renewal of its right to act as Servicer, such term shall be extended for one or
more succeeding quarterly periods thereafter commencing on the last day of the
preceding quarterly period as specified in such notice, but any such extension
shall be revocable at any time by the Financial
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Guaranty Insurer (or Trustee if their shall exist any Financial Guaranty Insurer
Default), but absent delivery of such notice, the Servicer will be removed at
the end of such quarterly term pursuant to Section 8.01.
(b) The Financial Guaranty Insurer agrees to use its best efforts o
inform the Trustee of any materially adverse information regarding the
Servicer's servicing activities that comes to the attention of the Financial
Guaranty Insurer from time to time.
ARTICLE EIGHT
DEFAULT
Section 8.01. Events of Default. If any one of the following events
(each an "Event of Default") shall occur and be continuing:
(a) Any failure by the Servicer to (i) make a Monthly Advance on
any Deposit Date or (ii) deposit in the Collection Account or the
Certificate Account any other amount required to be deposited therein
under this Agreement or failure to pay the Trustee Fee, which failure,
in the case of only clause (ii) hereof, continues unremedied for a
period of five Business Days after the date upon which written notice of
such failure shall have been given to the Servicer by the Trustee or the
Financial Guaranty Insurer or to the Servicer and the Trustee by Holders
of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%;
(b) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in the Certificates or in this Agreement, which
failure (i) materially and adversely affects the Certificateholders and
(ii) continues unremedied for a period of 30 days after the date on
which written notice of such failure (which notice shall refer
specifically to this Section), requiring the same to be remedied, shall
have been given to the Servicer by the Trustee or the Financial Guaranty
Insurer, or to the Servicer and the Trustee by the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%;
(c) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days;
(d) The consent by the Servicer to the appointment of a trustee,
conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to
substantially all of its property; or the Servicer shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for the benefit
of its
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creditors, or voluntarily suspend payment of its obligations;
(e) For so long as the Seller is the Servicer, failure on the
part of the Seller duly to observe or perform in any material respect
any covenants or agreements of the Seller set forth in the Certificates
or in this Agreement, which failure (i) materially and adversely affects
the Certificateholders and (ii) continues unremedied for a period of 30
days after the date on which written notice of such failure (which
notice shall refer specifically to this Section), requiring the same to
be remedied, shall have been given to the Servicer by the Trustee or the
Financial Guaranty Insurer, or to the Servicer and the Trustee by the
Holders of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%;
(f) The occurrence of a material default of the Servicer under
this Agreement or the Insurance and Indemnity Agreement or the
occurrence of a Servicer Delinquency Rate Event, a Servicer Cumulative
Loss Rate Event or a Servicer Rolling Loss Rate Event; or
(g) the Financial Guaranty Insurer shall be obligated to pay any
Insured Amount.
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either (1) Trustee or (2) with the prior
written consent of the Financial Guaranty Insurer, the Holders of Certificates
evidencing Voting Interests Fixed Rate Group Certificate or Adjustable Rate
Group Certificates aggregating not less than 51%, by notice then given in
writing to the Servicer with a copy to the Trustee, may terminate all of the
rights, responsibilities and obligations of the Servicer as servicer under this
Agreement with respect to the related Mortgage Loan Group, provided that if a
Financial Guaranty Insurer Default has not occurred or is not continuing, any
such termination will not be effective without the prior written consent of the
Financial Guaranty Insurer. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the affected Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section and, without limitation, the Trustee is hereby authorized and empowered
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Mortgage Loans and related documents, or otherwise. The Servicer agrees to
cooperate with the Trustee in effecting the termination of its responsibilities
and rights as Servicer hereunder with respect to either or both Mortgage Loan
Groups, including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Servicer that have been deposited by the Servicer in the Collection Account or
the Certificate Account with respect thereto or thereafter received by the
Servicer with respect to the affected Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Mortgage Files to a successor Servicer,
amending this Agreement to reflect the appointment of a successor as Servicer
pursuant to this Section 8.01 or otherwise in connection with the assumption by
a successor Servicer of the duties of the predecessor Servicer hereunder
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shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses.
Section 8.02. Trustee to Act; Appointment of Successor. On and after the
time the Servicer receives a notice of full or partial termination pursuant to
Section 8.01, the Trustee shall be the successor in all respects to the Servicer
in its capacity as servicer under this Agreement with respect to the whole Trust
or the affected Mortgage Loan Group, as appropriate and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, including without limitation, the obligation to make Monthly
Advances and to pay Compensating Interest. As compensation therefor, the Trustee
shall be entitled to such compensation as the Servicer would have been entitled
to hereunder if no such notice of termination had been given. Notwithstanding
the foregoing, the Trustee may, if it shall be unwilling so to act, or shall, if
it is legally unable so to act, promptly appoint, or petition a court of
competent jurisdiction to appoint, any established housing and home finance
institution or any institution that regularly services home equity loans that is
then servicing a home equity loan portfolio and having all licenses, permits and
approvals required by applicable law, and having a net worth of not less than
$10,000,000 as the successor to the Servicer hereunder with respect to the whole
Trust or the affected Mortgage Loan Group, as appropriate, in the assumption of
all or any part of the responsibilities, duties or liabilities of the Servicer
hereunder; provided that any such successor Servicer shall be acceptable to the
Financial Guaranty Insurer, which acceptance shall not be unreasonably withheld
and provided further that the appointment of any such successor Servicer will
not result in the qualification, reduction or withdrawal of the rating assigned
to any Class of related Offered Certificates by any Rating Agency. Pending
appointment of a successor to the Servicer hereunder, unless the Trustee is
prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer that may have arisen under this Agreement
prior to its termination as Servicer (including without limitation, any amount
for a deductible amount pursuant to the last sentence of Section 3.04), nor
shall any successor Servicer be liable for any acts or omissions of the
predecessor Servicer or for any breach by such Servicer or the Seller of any of
its representations or warranties contained herein or in any related document or
agreement. Each of the Rating Agencies shall be given written notice of the
appointment of a successor Servicer pursuant to this Section.
Section 8.03. Notifications to Certificateholders. Upon any termination
or appointment of a successor to the Servicer pursuant to this Article Eight,
the Trustee shall give prompt written notice thereof to the Financial Guaranty
Insurer and to the Certificateholders at their respective addresses appearing in
the Certificate Register and to each Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Trustee shall transmit by mail to all
Certificateholders and the Financial
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Guaranty Insurer notice of such Event of Default.
Section 8.04. Assumption or Termination of Sub-Servicing Agreements by
the Trustee or any Successor Servicer. Upon the termination of the Servicer as
servicer under this Agreement, the Trustee as successor to the Servicer
hereunder or any other successor to the Servicer hereunder may, subject to the
terms of any related Sub-Servicing Agreement, in its sole and absolute
discretion elect to assume or terminate any Sub-Servicing Agreement then in
force and effect between the Servicer and the Sub-Servicer. Notwithstanding the
foregoing, any termination fee due to a Sub-Servicer because of its termination
by the Trustee hereunder shall be the responsibility of the terminated Servicer
and not the Trustee. Upon the assumption of any Sub-Servicing Agreement, the
Servicer agrees to deliver to the assuming party any and all documents and
records relating to the applicable Sub-Servicing Agreement and an accounting of
amounts collected and held by it and otherwise use its best reasonable efforts
to effectuate the orderly transfer of the Sub-Servicing Agreement.
ARTICLE NINE
THE TRUSTEE
Section 9.01. Duties of the 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, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default of which
a Responsible Officer of the Trustee shall have actual knowledge shall have
occurred (which has not been cured) and subject to the provisions of Section
9.13, the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
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 substantially
conform to the requirements of this Agreement. If any such document or
instrument is found not to conform to the requirements of this Agreement in a
material manner, the Trustee shall, subject to the provisions of Section 9.13,
take such action as it deems appropriate to have the document or instrument
corrected, and if it is not corrected to the Trustee's reasonable satisfaction,
the Trustee will provide notice thereof to the Certificateholders.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own misconduct; provided, however, that:
(a) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
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Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates, filings or opinions
furnished to the Trustee and conforming to the requirements of this Agreement;
(b) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(c) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Certificates evidencing Voting
Interests represented by all Certificates (or all affected Certificates, as
appropriate) aggregating not less than 51% relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Agreement;
and
(d) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer referred
to in clauses (a) and (b) of Section 8.01 unless a Responsible Officer obtains
actual knowledge of such failure or the Trustee receives written notice of such
failure from the Servicer, the Holders of Certificates evidencing Voting
Interests represented by all Certificates aggregating not less than 51% or he
Financial Guaranty Insurer, as the case may be.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 9.01:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, certificate of auditors
or any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) The Trustee may consult with counsel and any advice obtained from
counsel or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or
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Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Certificateholders or the Financial Guaranty Insurer,
pursuant to the provisions of this Agreement, unless the Person so requesting,
ordering or directing same shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of any such act; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence of an Event of
Default known to a Responsible Officer of the Trustee (which has not been
cured), to exercise such of the rights and powers vested in it by this
Agreement, subject to the provisions of Section 9.13, and to use the same degree
of care and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith in accordance with the direction of
Holders of Certificates evidencing Voting Interests representing all
Certificates (or all affected Certificates, as appropriate) aggregating not less
than 51% provided that such action has been approved by the Financial Guaranty
Insurer;
(e) Prior to the occurrence of an Event of Default and after the curing
of all Events of Default that may have occurred, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or documents, unless requested in writing
to do so by the Financial Guaranty Insurer or Holders of Certificates evidencing
Voting Interests represented by all Certificates (or all affected Certificates,
as appropriate) aggregating not less than 51% with the consent of the Financial
Guaranty Insurer; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against such cost,
expense or liability as a condition to such proceeding; the reasonable expense
of every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be reimbursed by the Servicer upon demand; and nothing in this
clause (e) shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors;
and
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian. The Trustee shall not be liable or responsible for the
misconduct of the custodian of the Mortgage Files appointed with due care by the
Trustee hereunder.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the signature and
authentication of the
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Trustee on the Certificates) shall be taken as the statements of the Servicer,
and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the signature and authentication of
the Trustee on the Certificates and the signature of the Trustee on this
Agreement) or of any Mortgage, Mortgage Loan or related document. The Trustee
shall not be accountable for the use or application by the Servicer of any of
the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Servicer in respect of the Mortgage Loans
or deposited in or withdrawn from the Collection Account by the Servicer.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee.
Section 9.05. Payment of the Trustee's Fees and Expenses. (a) On or
before each Distribution Date occurring in January, beginning with the January
1998 Distribution Date, the Servicer shall pay to the Trustee without any right
of reimbursement from the Trust or otherwise, an amount equal to the Trustee
Fee, any reasonable expenses as agreed to by the Servicer and Trustee (including
any fees and expenses of a co-trustee or separate trustee appointed under
Section 9.10) and, with respect to the January 1998 Distribution Date, all loan
file review fees, as compensation for all services rendered by the Trustee (and
any such co-trustee or separate trustee) in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee (and any such co-trustee or separate trustee). The
Trustee Fee and such expenses and loan file review fees (including any fees and
expenses of a co-trustee or separate trustee appointed under Section 9.10) are
an obligation solely of the Servicer and neither the Trustee nor any co-trustee
or separate trustee appointed hereunder has or will have any lien on the Trust
for payment of any such fees or expenses. It is anticipated that the Servicer
will utilize a portion of the Monthly Servicing Fee for payment of such fees and
expenses.
(b) The Trust shall pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith or that is
otherwise reimbursable to the Trustee by the Servicer pursuant to Section
9.05(a) above; provided, however, that the Trustee shall not refuse to perform
any of its duties hereunder solely as a result of the failure of the Trust to
pay or reimburse such expenses, disbursements or advances. The right of the
Trustee to recover such amounts from the Trust shall be subordinate to the
rights of the Financial Guaranty Insurer and the Holders of the Offered
Certificates under this Agreement including, without limitation, to the prior
payment in full of all amounts payable as of any Distribution Date.
(c) The Servicer agrees to indemnify the Trustee and its employees,
officers, directors and agents from, and hold it harmless against, any and all
losses and liabilities, damages, claims or expenses (including reasonable
attorneys' fees) arising in respect of its acts or omissions in connection with
this Agreement or the Certificates except to the extent the negligence, bad
faith or intentional misconduct of the Trustee contributes to the loss,
liability, damage, claim or expense.
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(d) This Section 9.05 shall survive the termination of this Agreement or
the resignation or removal of the Trustee as regards rights accrued prior to
such resignation or removal.
Section 9.06. Eligibility Requirements for the Trustee. The Trustee
hereunder shall at all times be a bank or other depository institution doing
business under the laws of the United States or any state thereof, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $100,000,000 and subject to supervision or examination
by federal or state authority and rated at least BBB by Standard & Poor's and
Baa2 by Moody's. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 9.07.
Section 9.07. Resignation or Removal of the Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer and each Rating Agency. Upon receiving
such notice of resignation, the Servicer shall promptly appoint a successor
trustee satisfying the criteria set forth in Section 9.06 (approved by the
Financial Guaranty Insurer, which approval shall not be unreasonably withheld)
by written instrument original copies of which instrument shall be delivered to
the Financial Guaranty Insurer, the resigning Trustee, the successor trustee and
the Servicer. If no successor trustee shall have been so appointed and having
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Servicer or Financial Guaranty Insurer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, or the Trustee shall fail to perform its obligations under this
Agreement, then the Servicer shall remove the Trustee and appoint a successor
trustee satisfying the criteria set forth in Section 9.06 (approved by the
Financial Guaranty Insurer, which approval shall not be unreasonably withheld)
by written instrument, original copies of which instrument shall be delivered to
the Financial Guaranty Insurer, the Trustee so removed and 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 shall not become
effective until acceptance of appointment by the successor trustee as provided
in Section 9.08. The provisions of Section 9.05 shall survive any such
resignation or removal.
Section 9.08. Successor Trustee. Any successor trustee appointed as
provided in Section
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9.07 shall execute, acknowledge and deliver to the Servicer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Seller, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance it shall be eligible under the
provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Servicer shall mail notice of the succession of such trustee
hereunder to the Financial Guaranty Insurer and to all Holders of Certificates
at their addresses as shown in the Certificate Register and to each Rating
Agency. If the Servicer fails to mail such notice within 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 Servicer.
Section 9.09. Merger or Consolidation of the 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 or substantially all of the Trustee's
trust business, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 9.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Servicer
and the Trustee acting jointly, with the prior written consent of the Financial
Guaranty Insurer, shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights, indemnities and trusts
as the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone and with the prior consent of
the Financial Guaranty Insurer shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 9.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 9.08. The Financial Guaranty Insurer and each of
the Rating Agencies shall be given written notice of the appointment of a
co-trustee or a separate trustee pursuant to this Section.
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<PAGE> 118
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(b) No trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(c) The Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee,
except that following the occurrence of an Event of Default that has not
been cured, the Trustee, acting alone may accept the resignation of or
remove any separate or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. 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 copies thereof given to the
Servicer and the Financial Guaranty Insurer.
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.
No appointment of any separate trustee or co-trustee shall absolve the
Trustee of its duties and obligations under this Agreement.
Section 9.11. Compliance with REMIC Provisions. The Trustee shall at all
times act in
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such a manner in the performance of its duties hereunder as shall be necessary
to prevent any REMIC Pool from failing to qualify as a REMIC and to prevent the
imposition of a tax on the REMIC Pool. The Trustee shall: (a) prepare and file,
or cause to be prepared and filed, such federal, state and local income tax and
information returns or reports using the calendar year as the taxable year for
the REMIC Pool when and as required by the REMIC Provisions and other applicable
federal, state and local income tax laws, which returns or reports shall be
signed by the Trustee or such other person as may be required thereby; (b) make
an election, on behalf of each REMIC Pool, to be treated as a REMIC and make the
appropriate designations, if applicable, in accordance with Section 9.16 on the
federal income tax return of each REMIC Pool for its first taxable year, in
accordance with the REMIC Provisions; (c) prepare and forward, or cause to be
prepared and forwarded, to the Certificateholders all information reports, or
furnish or cause to be furnished by telephone, mail, publication or other
appropriate method such information, as and when required to be provided to them
in accordance with the Code; (d) exercise reasonable care not to allow the
creation of any "interests" in any REMIC Pool within the meaning of Code Section
860D(a)(2) other than the interests represented by the REMIC III Certificates in
the case of the REMIC III Pool, the REMIC II Interests in the case of the REMIC
II Pool or the REMIC I Interests in the case of the REMIC I Pool; and (e) within
30 days of the Startup Day, furnish or cause to be furnished to the Internal
Revenue Service, on Form 8811 or as may otherwise be required by the Code, the
name, title, address, and telephone number of the person that Certificateholders
may contact for tax information relating to their Certificates (and the Trustee
shall act as the representative of each REMIC Pool for this purpose), together
with such additional information as may be required by such Form, and shall
update such information at the time and in the manner required by the Code. Each
Class R Certificateholder shall designate the Servicer, if permitted by the Code
and applicable law, to act as "tax matters person" for the related REMIC Pool
within the meaning of Treasury regulations Section 1.860F-4(d), and the Servicer
is hereby designated as agent of each Class R Certificateholder for such purpose
(or if the Servicer is not so permitted, the Holder of the related Class R
Certificate shall be the tax matters person in accordance with the REMIC
Provisions).
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceedings relating thereto(including in respect of the Financial Guaranty
Insurer's rights of subrogation), and any such proceeding instituted by the
Trustee shall be brought in its own name or in its capacity as Trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Certificateholders in respect of
which such judgment has been recovered (or the Financial Guaranty Insurer in
respect of any right or interest as to which the Financial Guaranty Insurer is
subrogated) in accordance with the terms of this Agreement.
Section 9.13. Exercise of Trustee Powers by Financial Guaranty Insurer
and Certificateholders. The Financial Guaranty Insurer, in the case of the
Adjustable Rate Group Certificate or the Holders of Certificates evidencing
Voting Interests represented by all Certificates aggregating not less than 51%
of the Voting Interests with respect to the Fixed Rate Group Certificates or
Adjustable Rate Group Certificates, as the case may be, in each case with
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<PAGE> 120
the consent of the Financial Guaranty Insurer (which consent may not be
unreasonably withheld) may direct the time, method and place of conducting any
proceeding relating to the related Mortgage Loan Group or the Trust, as
appropriate, or the Fixed Rate Group Certificates or Adjustable Rate Group
Certificates, as the case may be, or for any remedy available to the Trustee
with respect to the Fixed Rate Group Certificates or Adjustable Rate Group
Certificates, as the case may be, or exercising any trust or power conferred on
the Trustee with respect to the Fixed Rate Group Certificates or Adjustable Rate
Group Certificates, as the case may be, of the Trust provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Agreement;
(ii) the Trustee shall have been provided with indemnity
satisfactory to it; and
(iii) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; provided, however, that
the Trustee need not take any action that it determines might involve it in
liability or may be unjustly prejudicial to the Holders not so directing.
Section 9.14. Tax Returns. The Trustee shall maintain all information in
its possession as may be required in connection with the preparation of all
federal and, if applicable, state and local income tax and information returns
of each REMIC Pool (including, but not limited to, tax reporting under the REMIC
Provisions for each REMIC Pool, exclusive of the Prefunding Account and the
Capitalized Interest Account), and pursuant to Section 24874 of the California
Revenue and Taxation Code and its successors, and shall prepare, execute and
file as required all such returns. The Trustee shall include in the first
federal income tax return the information required to be included therein under
the REMIC Provisions, including, but not limited to, Treas. Reg.
Section1.860D-1(d)(2) and Treas. Reg. Section1.860F-4(b)(2). The Servicer shall
report all required tax information to Mortgagors in accordance with applicable
law.
The Prepayment Assumption (as such term is defined in the Prospectus,
dated as of December 16, 1997) for the Certificates shall be 24% HEP with
respect to the Fixed Rate Group Certificates and 27% HEP with respect to the
Adjustable Rate Group Certificates, as described in the Prospectus Supplement
dated December 16, 1997 relating to the Offered Certificates.
Section 9.15. Taxpayer Identification Number. The Trustee shall prepare
and file with the Internal Revenue Service, on behalf of each REMIC Pool within
the time period prescribed therefor, an application on IRS Form SS-4 for such
REMIC Pool. The Trustee, upon receipt from the Internal Revenue Service of the
Notice of Taxpayer Identification Number assigned to each REMIC Pool, shall
promptly forward a copy of such notice to the Servicer.
Section 9.16 Miscellaneous REMIC Provisions.
(i) The Trustee shall elect that REMIC I, REMIC II, and REMIC III shall
be treated as REMICs under Section 860D of the Code, as described in Section
9.11. Any inconsistencies or
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<PAGE> 121
ambiguities in this Agreement or in the administration of the Trust shall be
resolved in a manner that preserves the validity of such REMIC elections.
(ii) REMIC I will be evidenced by (y)(A) the Class LT-FM, Class LT-A1F,
Class LT-A2F, Class LT-A3F, Class LT-A4F, Class LT-A5F, Class LT-A6F, Class
LT-M1F, Class LT-M2F, and Class LT-B1F (the "LTF Regular Interests"), and (B)
the Class LT-A1A, Class LT-A2A and Class LT-AM (the "LTA Regular Interests",
and, together with the LTF Regular Interests, the "REMIC I Regular Interests"),
which will be uncertificated and non-transferable and are hereby designated at
the "regular interests" in REMIC I, and (2) the Class R-1 Certificate, which is
hereby designated as the single "residual interest" in REMIC I (the "REMIC I
Regular Interests" and, together with the Class R-1 Certificate, the "REMIC I
Interests"). The REMIC I Regular Interests shall be recorded on the records of
REMIC I as being issued to and held by the Trustee on behalf of REMIC II.
(iii) REMIC II will be evidenced by (y)(A) the Class MT-FM, Class
MT-A1F, Class MT-A2F, Class MT-A3F, Class MT-A4F, Class MT-A5F, Class MT-A6F,
Class MT-M1F, Class MT-M2F, Class MT-B1F and Class MT-FI0 (the "MTF Regular
Interests") and (ii) the Class MT-AM, Class MT-A1A, Class MT-A2A and Class
MT-AIO Certificates (the "MTA Regular Interests" and together with the MTF
Regular Interests, the "REMIC II Regular Interests"), which will be
uncertificated and non-transferable and are hereby designated as the "regular
interests" in REMIC II, and (2) the Class R-2 Certificate, which is hereby
designated as the single "residual interest" in REMIC II (the "REMIC II Regular
Interests and, together with the Class R-2 Certificate, the "REMIC II
Interests"). The REMIC II Regular Interests shall be recorded on the records of
REMIC II as being issued to and held by the Trustee on behalf of REMIC III.
(iv) The Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class A-5F,
Class A-6F, Class M-1F, Class M-2F, Class B-1F, Class A-1A, Class A-2A and Class
C Certificates, consisting of two components (the Class C-F Component and the
Class C-A Component as defined in clause (vii) below), are hereby designated as
"regular interests" with respect to the REMIC III and the Class R-III
Certificate is hereby designated as the single "residual interest" with respect
to the REMIC III. The Class R-III Certificate shall have no pass-through rate
and shall have no principal balance.
(v) REMIC I Interests. The REMIC I Interests will have the following
designations and pass-through rates, and distributions of principal and interest
thereon shall be allocated to the Certificates in the following manner:
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<PAGE> 122
<TABLE>
<CAPTION>
LTF Regular Interests
Corollary REMIC III
LTF Regular Interest Initial Balance Pass-Through Rate Certificate
- -------------------- --------------- ----------------- -------------------
<S> <C> <C> <C>
LT-FM $218,018,698.78 (1) None
LT-A1F $ 743,810.00 (1) A-1F
LT-A2F $ 271,970.00 (1) A-2F
LT-A3F $ 352,340.00 (1) A-3F
LT-A4F $ 144,830.00 (1) A-4F
LT-A5F $ 156,050.00 (1) A-5F
LT-A6F $ 190,000.00 (1) A-6F
LT-M1F $ 132,000.00 (1) M-1F
LT-M2F $ 110,000.00 (1) M-2F
LT-B1F $ 99,000.00 (1) B-1F
Total $220,218,698.78
===============
</TABLE>
(1) The pass-through rate ("Pass-Through Rate") on each of the LTF
Regular Interests shall at any time of determination equal the
weighted average Mortgage Loan Rate in the Fixed Rate Group. If
there are any prepayment interest shortfalls with respect to the
Fixed Rate Group not covered by Compensating Interest for the
Fixed Rate Group, such shortfall will proportionally reduce the
interest accrual on these Certificates.
Except as provided below with respect to the "Fixed Rate Turbo Amount,"
payments of interest from the Fixed Rate Group on any Distribution Date shall be
allocated to the LTF Regular Interests in proportion to their respective
principal balances.
The "Fixed Rate Turbo Amount" means, with respect to any Distribution
Date, the amount of the Extra Principal Distribution Amount for the Fixed Rate
Group for such Distribution Date. On each Distribution Date, an amount of
interest received on the Fixed Rate Group equal to one percent (1%) of the Fixed
Rate Turbo Amount for such Distribution Date shall not be paid as described
above, but instead will be payable as a reduction of the principal balances of
the LT-A1F, LT-A2F, LT-A3F, LT-A4F, LT-A5F, LT-A6F, LT-M1F, LT-M2F, and LT-B1F
Regular Interests in the same manner in which the Fixed Rate Turbo Amount is
allocated to the Corollary REMIC III Certificate for each such REMIC I Regular
Interest. Amounts not paid to the LT-FM Regular Interest as a result of the
preceding sentence shall be accrued and added to the principal of the LT-FM
Regular Interest.
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Principal payments on the Fixed Rate Group shall be allocated (i) 99% to
the Class LT-FM, and (ii) 1% to the other LTF Regular Interests, apportioned
among such Classes in the same manner in which principal is payable with respect
to the Corollary REMIC III Certificate for each such Class; provided, however,
that any principal payments on the Fixed Rate Group that are attributable to an
Overcollateralization Release Amount with respect to the Fixed Rate Group (other
than any such amount distributed pursuant to clause (9) of Section 5.01(d))
shall be allocated exclusively to the Class LT-FM Regular Interest.
Realized Losses on the Fixed Rate Group shall be applied such that after
all distributions have been made on such Distribution Date each LTF Regular
Interest other than the LT-FM Regular Interest shall have an principal balance
equal to one percent (1%) of the Certificate Principal Balance of its Corollary
REMIC III Certificate, and the LT-FM Regular Interest shall have a principal
balance equal to the excess of the principal balance of the Fixed Rate Group
less the sum of the principal balance of the other LTF Regular Interests.
<TABLE>
<CAPTION>
LTA Regular Interests
Corollary REMIC III
LTA Regular Interest Initial Balance Pass-Through Rate Certificate
- -------------------- --------------- ----------------- -------------------
<S> <C> <C> <C>
LT-AM $381,123,170.95 (1) None
LT-A1A $ 840,000.00 (1) A-1A
LT-A2A $ 2,960,000.00 (1) A-2A
---------------
Total $384,923,170.95
===============
</TABLE>
(1) The pass-through rate ("Pass-Through Rate") on each of the LTA
Regular Interests shall at any time of determination equal the
weighted average Mortgage Loan Rate in the Adjustable Rate Group.
If there are any prepayment interest shortfalls with respect to
the Adjustable Rate Group not covered by Compensating Interest
for the Adjustable Rate Group, such shortfall will proportionally
reduce the interest accrual on these Certificates.
Except as provided below with respect to the"Adjustable Rate Turbo
Amount," payments of interest from the Fixed Rate Group on any Distribution Date
shall be allocated to the LTA Regular Interests in proportion to their
respective principal balances.
The "Adjustable Rate Turbo Amount" means, with respect to any
Distribution Date, the amount of the Extra Principal Distribution Amount for the
Adjustable Rate Group for such Distribution Date. On each Distribution Date, an
amount of interest received on the Adjustable Rate Group equal to one percent
(1%) of the Adjustable Rate Turbo Amount for such Distribution Date shall not be
paid as described above, but instead will be payable as a reduction of the
principal
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balances of the LT-A1A and LT-A2A Regular Interests in the same manner in which
the Adjustable Rate Turbo Amount is allocated to the Corollary REMIC III
Certificate for each such REMIC I Regular Interest. Amounts not paid to the
LT-AM Regular Interest as a result of the preceding sentence shall be accrued
and added to the principal of the LT-AM Regular Interest.
Principal payments on the Adjustable Rate Group shall be allocated (i)
99% to the Class LT-AM, and (ii) 1% to the other LTA Regular Interests,
apportioned among such Classes in the same manner in which principal is payable
with respect to the Corollary REMIC III Certificate for each such Class;
provided, however, that any principal payments on the Adjustable Rate Group that
are attributable to an Overcollateralization Release Amount with respect to the
Adjustable Rate Group shall be allocated exclusively to the Class LT-AM Regular
Interest.
Realized Losses on the Adjustable Rate Group shall be applied such that
after all distributions have been made on such Distribution Date each LTA
Regular Interest other than the LT-AM Regular Interest shall have an principal
balance equal to one percent (1%) of the Certificate Principal Balance of its
Corollary REMIC III Certificate, and the LT-AM Regular Interest shall have a
principal balance equal to the excess of the principal balance of the Adjustable
Rate Group less the sum of the principal balance of the other LTA Regular
Interests.
On each Distribution Date, available funds, if any, remaining in REMIC I
after payments of interest and principal, as designated above, will be
distributed to the Class R-1 Certificate.
(vi) REMIC II Interests. The REMIC II Interests will have the following
designations and pass-through rates, and distributions of principal and interest
thereon shall be allocated to the REMIC II Interests in the following manner:
MTF Regular Interests
Each MTF Regular Interest shall be considered to have a Corollary REMIC
I Regular Interest and a Corollary REMIC III Certificate as follows:
<TABLE>
<CAPTION>
Corollary REMIC I Corollary REMIC III
MTF Regular Interest Regular Interest Certificate
- -------------------- ------------------ ---------------------
<S> <C> <C>
MT-FM LT-FM None
MT-A1F LT-A1F A-1F
MT-A2F LT-A2F A-2F
MT-A3F LT-A3F A-3F
MT-A4F LT-A4F A-4F
MT-A5F LT-A5F A-5F
MT-A6F LT-A6F A-6F
MT-M1F LT-M1F M-1F
</TABLE>
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<PAGE> 125
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MT-A2F LT-M2F M-2F
MT-B1F LT-B1F B-1F
MT-FIO None None
</TABLE>
The Initial Balance of each MTF Regular Interest other than the MT-FIO
Regular Interest shall equal the Initial Balance of the Corollary REMIC I
Regular Interest for such MTF Regular Interest. The Initial Balance of the
MT-FIO Regular Interest shall equal zero.
The Pass-through Rate on each MTF Regular Interest other than the MT-FM
Regular Interest and the MT-FIO Regular Interest shall equal weighted average
rate payable on the LT-A1F, LT-A2F, LT-A3F, LT-A4F, LT-A5F, LT-A6F, LT-M1F,
LT-M2F and LT-B1F Regular Interests; provided, however, that prior to
calculating such weighted average rate each such LTF Regular Interest shall be
subject to a cap equal to the Pass-Through Rate on the Corollary REMIC III
Certificate with respect to such LTF Regular Interest. The Pass-Through Rate on
the MT-FM Regular Interest shall equal the Pass-Through Rate on the LT-FM
Regular Interest.
The MT-FIO Regular Interest shall be entitled to interest accruing on
each of the LT-A1F, LT-A2F, LT-A3F, LT-A4F, LT-A5F, LT-A6F, LT-M1F, LT-M2F and
LT-B1F Regular Interests in excess of the Pass-Through Rates of the MT-A1F,
MT-A2F, MT-A3F, MT-A4F, MT-A5F, MT-A6F, MT-M1F, MT-M2F and MT-B1F Regular
Interests, respectively.
Each MTF Regular Interest other than the MT-FIO shall be allocated the
principal payments received on its Corollary REMIC I Regular Interest. Except as
described in the preceding paragraph, each MTF Regular Interest shall be
allocated the interest payments received on its Corollary REMIC I Regular
Interest.
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MTA Regular Interests
Each MTA Regular Interest shall be considered to have a Corollary REMIC
I Regular Interest and a Corollary REMIC III Certificate as follows:
<TABLE>
<CAPTION>
Corollary REMIC I Corollary REMIC III
MTA Regular Interest Regular Interest Certificate
-------------------- ----------------- -------------------
<S> <C> <C>
MT-AM LT-AM None
MT-A1A LT-A1A A-1A
MT-A2A LT-A2A A-2A
MT-AIO None None
</TABLE>
The Initial Balance of each MTA Regular Interest other than the MT-AIO
Regular Interest shall equal the Initial Balance of the Corollary REMIC I
Certificate for such MTA Regular Interest. The Initial Balance of the MT-AIO
Regular Interest shall equal zero.
The Pass-through Rate on each MTA Regular Interest other than the MT-AM
Regular Interest and the MT-AIO Regular Interest shall equal the weighted
average rate payable on the LT-A1A and LT-A2A Regular Interests; provided,
however, that prior to calculating such weighted average rate each such LTA
Regular Interest shall be subject to a cap equal to the Pass-Through Rate on the
Corollary REMIC III Certificate with respect to such LTA Regular Interest. The
Pass-Through Rate on the MT-AM Regular Interest shall equal the Pass-Through
Rate on the LT-AM Regular Interest.
The MT-AIO shall be entitled to interest accruing on each of the LT-A1A
and LT-A2A Regular Interests in excess of the Pass-Through Rates of the MT-A1A
and MT-A2A Regular Interests, respectively.
Each MTA Regular Interest other than the MT-AIO Regular Interest shall
be allocated the principal payments received on its Corollary REMIC I Regular
Interest. Except as described in the preceding paragraph, each MTA Regular
Interest shall be allocated the interest payments received on its Corollary
REMIC I Regular Interest.
On each Distribution Date, available funds, if any, remaining in REMIC
II after payments of interest and principal, as designated above, will be
distributed to the Class R-2 Certificate.
(vii) REMIC III Interests. The REMIC III Interests will have the
following designations and pass-through rates, and distributions of principal
and interest thereon shall be allocated to the Certificates as follows:
Except as described below with respect to the Class C Certificates,
interest on the MTF Regular Interests shall be allocated among the Class A-1F,
Class A-2F, Class A-3F, Class A-4F,
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Class A-5F, Class A-6F, Class M-1F, Class M-2F and Class B-1F Certificates in
the same proportion as interest is payable on such Certificates pursuant to
Section 5.01(a). Similarly, except as described below with respect to the Class
C Certificates, interest on the MTA Regular Interests shall be allocated among
the Class A-1A and Class A-2A Certificates in the same proportion as interest is
payable on such Certificates pursuant to Section 5.01(a).
Principal on the MTF Regular Interests will be allocated to and
apportioned among the Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class
A-5F, Class A-6F, Class M-1F, Class M-2F and Class B-1F Certificates in the same
proportion as principal is payable with respect to such Certificates pursuant to
Section 5.01, except that a portion of such principal in an amount equal to the
Overcollateralization Release Amount related to the Fixed Rate Group shall be
allocated to the Class C Certificates until the balance thereof is zero and then
to the Class R-3 Certificate and all principal will be allocated to the Class C
Certificates after the Certificate Principal Balance of the Fixed Rate
Certificates has been reduced to zero until its Certificate Principal Balance is
reduced to zero, and then to the Class R-3 Certificate. Similarly, principal on
the MTA Regular Interests will be allocated to and apportioned among the Class
A-1A and Class A-2A Certificates in the same proportion as principal is payable
with respect to such Certificates pursuant to Section 5.01, except that a
portion of such principal in an amount equal to the Overcollateralization
Release Amount related to the Adjustable Rate Group shall be allocated to the
Class C Certificates until the balance thereof is zero and then to the Class R-3
Certificate and all principal will be allocated to the Class C Certificates
after the Certificate Principal Balance of the Adjustable Rate Certificates has
been reduced to zero until its Certificate Principal Balance is reduced to zero,
and then to the Class R-3 Certificate.
The Class C Certificates will consist of two components, the Class C-F
Component and the Class C-A Component, determined as follows:
(A) The "Class C-F Component" shall equal the sum of (1) amounts
payable on the MT-FIO Regular Interest, and (2) with respect to each of the
MT-FM, MT-A1F, MT-A2F, MT-A3F, MT-A4F, MT-A5F, MT-A6F, MT-M1F, MT-M2F AND MT-B1F
Regular Interests, interest payable on such REMIC II Regular Interest in excess
of the product of (i) one hundred (100) times the weighted average coupon of the
MT-FM, MT-A1F, MT-A2F, MT-A3F, MT-A4F, MT-A5F MT-6F, MT-M1F, MT-M2F and MT-B1F
Regular Interests, where the MT-MF Regular Interest is first subject to a cap
equal to 0%, and (ii) the principal balance of such REMIC II Regular Interest.
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(B) The "Class C-A Component" shall equal the sum of (1) amounts
payable on the MT-AIO Regular Interest, and (2) with respect to each of the
MT-AM, MT-A1A and MT-A2A Regular Interests, interest payable on such REMIC II
Regular Interest in excess of the product of (i) one hundred (100) times the
weighted average coupon of the MT-MA, MT-A1A and MT-A2A Regular Interests, where
the MT-AM Certificate is subject to a cap equal to 0%, and (ii) the principal
balance of such REMIC II Regular Interest.
On each Distribution Date, to the extent that any Monthly Excess
Interest Amount with respect to a Mortgage Loan Group is applied to cover Carry
Forward Shortfalls on any Certificates and the interest allocable to the related
Class C Component is not otherwise reduced for such amount due to an allocation
of Realized Losses, the related Class C Component shall be reduced.
On each Distribution Date, available funds, if any, remaining in REMIC
III after payments of interest and principal, as designated above, will be
distributed to the Class R-3 Certificate.
(viii) The Startup Day is hereby designated as the "startup day" of each
of REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of
the Code. The "latest possible maturity date" for purposes of Treasury
Regulation Section 1.860G-1(a)(4)(iii) for the regular interests are as follows:
with respect to each of the REMIC III Regular Interests, the Final Scheduled
Distribution Date of such Certificates, and with respect to each of the REMIC I
Regular Interests and the REMIC II Regular Interests, February 15, 2029.
(ix) The Supplemental Interest Reserve Fund will be part of the Trust
Fund but not part of any REMIC. For federal and state income tax purposes the
Class C Certificateholders shall be deemed to be the owners of the Supplemental
Interest Reserve Fund. Any amounts transferred by a REMIC to the Supplemental
Interest Reserve Fund shall be treated as amounts distributed by such REMIC to
the Class C Certificateholders. Any amounts remaining in the Supplemental
Interest Reserve Fund upon termination of the Trust shall be paid to the Class
A-1A Certificateholders and the Class A-2A Certificateholders on a pro rata
basis, based on the amount of any outstanding Class A-1A Supplemental Interest
Amount or Class A-2A Supplemental Interest Amount, and thereafter to the Class C
Certificateholders.
ARTICLE TEN
TERMINATION
<PAGE> 129
Section 10.01. Termination Upon Purchase or Liquidation of Mortgage
Loans. Subject to Section 10.02, the respective obligations and responsibilities
hereunder of the Servicer, the Seller and the Trustee (other than the obligation
of the Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Seller to send certain notices as
hereinafter set forth) and the Trust created hereby shall terminate with respect
to all Certificates upon the last action required to be taken by the Trustee on
the final Distribution Date pursuant to this Article following the earlier of
(a) the purchase by the Servicer of all Mortgage Loans then remaining in the
Trust and all property acquired in respect of any such Mortgage Loan at a price
equal to the sum of (x) 100% of the Principal Balance of each such Mortgage Loan
(other than any Mortgage Loan as to which title to the underlying Mortgaged
Property has been acquired and whose fair market value is included pursuant to
clause (y) below) as of the final Distribution Date, and (y) the fair market
value of such acquired Mortgaged Property (determined as described below), plus
accrued and unpaid interest at the applicable Mortgage Loan Rate on the
Principal Balance of each such Mortgage Loan (including any Mortgage Loan as to
which title to the underlying Mortgaged Property has been acquired) through the
end of the Collection Period preceding the date of repurchase and the aggregate
amount of unreimbursed Servicing Advances made in respect of any such Mortgage
Loan, less any payments of principal and interest received during such
Collection Period in respect of each such Mortgage Loan, or (b) the final
payment or other liquidation of the Principal Balance of the last Mortgage Loan
remaining in the Trust or the disposition of all property remaining in the Trust
acquired upon foreclosure or deed in lieu of foreclosure of any such Mortgage
Loan; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, who are living on the Closing Date. The fair
market value of Mortgaged Properties pursuant to the foregoing clause (y) shall
be determined by the Servicer as of the close of business on the third Business
Day next preceding the date upon which notice of any such termination is
furnished to Certificateholders pursuant to the third paragraph of this Section
10.01. Such determination shall not be effective unless consented to in writing
by the Financial Guaranty Insurer, which consent shall not be unreasonably
withheld. In the event that the Certificate Insurer does not consent to the fair
market value determined by the Servicer within three business days of receiving
notice of such determination, the Financial Guaranty Insurer and the Servicer
shall appoint a mutually agreed appraiser to make a determination as to such
fair market value whose determination shall be final and binding on the
Financial Guaranty Insurer and the Servicer, the expense of such appraisal being
borne equally by the Servicer and the Certificate Insurer and not being an
expense of the Trust.
The right of the Servicer to purchase all outstanding Mortgage Loans
pursuant to clause (a) above is exercisable only on or after the related
Clean-up Call Date. If such right is exercised, the Servicer shall remit the
purchase price specified in this Section to the Trustee for deposit in the
Certificate Account pursuant to Section 3.02 (e) on or before the related
Deposit Date and the Trustee, if it has received the Mortgage Files pursuant to
Section 2.01, shall, promptly following remittance of such purchase price,
release to the Servicer the Mortgage Files pertaining to the Mortgage Loans
being purchased and all other documents furnished by the Servicer as are
necessary to transfer the Trustee's interest in the Mortgage Loans to the
Servicer.
Notice of any termination, specifying the Distribution Date (which shall
be a date that
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would otherwise be a Distribution Date) upon which the related
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation shall be given promptly by the
Trustee (upon receipt of written directions from the Servicer, if the Servicer
is exercising its right to purchase such assets of the Trust as provided above,
given not later than the 15th day of the month preceding the month of such final
distribution) by letter to the Certificateholders mailed not earlier than the
first day and not later than the 10th day of the month of such final
distribution specifying (a) the Distribution Date upon which final distribution
of the related Certificates will be made upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein designated, (b) the
amount of any the final distribution and (c) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of such Certificates at the office or
agency of the Trustee therein specified. In the event written directions are
delivered by the Servicer to the Trustee as described in the preceding sentence,
the Servicer shall deposit in the Certificate Account on or before the related
Deposit Date for such final distribution in immediately available funds an
amount equal to the purchase price for such assets of the Trust computed as
above provided. Any such deposit by the Servicer shall be in lieu of the deposit
otherwise required to be made in respect of such Distribution Date pursuant to
Section 3.02 and the related distribution thereof to the Certificateholders.
In connection with a termination of the Trust under this Section, the
Trustee shall cause to be distributed to Certificateholders on the final
Distribution Date an amount equal to (i) as to the Fixed Rate Group
Certificates, and upon presentation and surrender of the related Certificates,
in proportion to their respective Percentage Interests the related Aggregate
Certificate Principal Balance, and the Monthly Interest, and/or (ii) as to the
Adjustable Rate Group Certificates, and upon presentation and surrender of the
related Certificates, in proportion to their respective Percentage Interests,
the related Aggregate Certificate Principal Balance and Monthly Interest, (iii)
as to the Financial Guaranty Insurer, any amounts necessary to reimburse the
Financial Guaranty Insurer for any unreimbursed Insured Amounts, together with
interest thereon, and any accrued and unpaid Financial Guaranty Insurer Premium
after application pursuant to clauses (i) and (ii) above and (iv) as to the
Servicer, any additional servicing compensation with respect to such
Distribution Date (other than amounts retained to meet claims) after application
pursuant to the clauses (i) and (ii) above and payment to the Servicer of any
amounts to which it is entitled as reimbursement hereunder and (iv) as to the
Class C Certificateholders and upon presentation and surrender of the Class C
Certificate, any amounts remaining after application pursuant to the preceding
clauses (i) through (iii); provided, however, that if the fair market value of
any acquired property referred to in, or covered by, clause (a)(y) of the first
paragraph of this Section is less than the Principal Balance of the related
Mortgage Loan, then the excess of such Principal Balance over such fair market
value shall be allocated in reduction of the amounts otherwise distributable on
the final Distribution Date in the following order of priority: first, to the
Holders of the Class R Certificates, second to the Holders of the Class C
Certificate and third to the Holders of the related Offered Certificates, pro
rata based on the Certificate Principal Balances thereof on such Distribution
Date. The distribution on the final Distribution Date in connection with the
purchase by the Servicer of the assets in the Trust shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class of Certificates. The Servicer shall provide in writing to the
Trustee and the Financial Guaranty Insurer the information with respect to the
amounts so to be paid.
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In the event that all of the relevant Certificateholders shall not
surrender their Certificates for final payment and cancellation on or before the
fifth day following such final Distribution Date, the Trustee shall on such date
cause all funds in the Certificate Account not distributed in the final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining Certificateholders by holding such funds uninvested in a separate
escrow account for the benefit of such Certificateholders and the Servicer (if
the Servicer exercised its right to purchase the assets of the Trust as provided
above) or the Trustee (in any other case) shall give a second written notice to
the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, any funds deposited in such escrow account and
remaining unclaimed shall be paid by the Trustee to the Servicer and thereafter
Certificateholders shall look only to the Servicer with respect to any claims in
respect of such funds.
Section 10.02. Additional Termination Requirements. In the event the
Servicer exercises its purchase option as provided in Section 10.01, each
relevant REMIC Pool shall be terminated in accordance with the following
additional requirements, and the Trustee shall receive an Opinion of Counsel to
the effect that the termination of such REMIC Pool (i) will constitute a
"qualified liquidation" of such REMIC Pool within the meaning of Code Section
860F(a)(4)(A), and (ii) will not subject such REMIC Pool to tax or cause such
REMIC Pool to fail to qualify as a REMIC at any time that any Certificates are
outstanding.
(i) Within 90 days prior to the final Distribution Date set
forth in the notice of intention to purchase the Mortgage Loans of a
Mortgage Loan given by the Servicer under Section 10.01, the Trustee, at
the direction of the Servicer, shall adopt a plan of complete
liquidation of each REMIC Pool being liquidated on behalf of the related
REMIC within the meaning of Code Section 860F(a)(4)(A)(8), which shall
be evidenced by such notice; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell all of the assets of each REMIC Pool being liquidated to the
Servicer for cash at the purchase price specified in Section 10.01 and
shall distribute such cash in the manner specified in Section 10.01.
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ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Servicer, the Seller and the Trustee, without the consent of any of
the Certificateholders but with the prior written consent of the Financial
Guaranty Insurer (which consent shall not be unreasonably withheld), (a) to cure
any error or any ambiguity or to correct or supplement any provisions herein
which may be inconsistent with any other provisions herein; (b) to add to the
duties or obligations of the Servicer hereunder; (c) to maintain or improve any
rating then assigned by any Rating Agency to any of the Certificates; or (d) to
add any other provisions with respect to matters or questions arising under this
Agreement or the Financial Guaranty Insurance Policy, as the case may be
(including specifically amendments or supplements pursuant to the second
paragraph of Section 6.02(b)); (e) to modify, eliminate or add to any of its
provisions to such extent as shall be necessary to maintain the qualification of
any REMIC Pool as a REMIC at all times that any Certificates are outstanding or
to avoid or minimize the risk of the imposition of any tax on any REMIC Pool
pursuant to the Code that would be a claim against such REMIC Pool, provided
that in the case of this clause (e) the Trustee has received an Opinion of
Counsel to the effect that such action is necessary or desirable to maintain
such qualification or to avoid or minimize the risk of the imposition of any
such tax; or (f) to modify, eliminate or add to the provisions of Section
6.02(c) or any other provisions hereof restricting transfer of Class R
Certificates; provided that in all such cases the Trustee has obtained written
confirmation from each Rating Agency that any such modifications to this
Agreement will not result in a qualification, reduction or withdrawal of the
rating assigned to any Class of Offered Certificates by such Rating Agency and
has received an Opinion of Counsel to the effect that any such modifications to
this Agreement do not give rise to a risk that any REMIC Pool or any of the
Certificateholders will be subject to a tax caused by a transfer to a
Disqualified Organization; provided, further, that in all such cases such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder or the Financial
Guaranty Insurer.
This Agreement may also be amended from time to time by the Servicer,
the Seller and the Trustee, with the consent of the Financial Guaranty Insurer
(which consent shall not be unreasonably withheld) and the Holders of
Certificates evidencing Voting Interests of each Class affected thereby
aggregating not less than 51%, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Holders of Certificates of such
Class; provided, however, that no such amendment shall (a) reduce in any manner
the amount of, or delay the timing of, collections of payments on Mortgage Loans
or distributions which are required to be made on any Certificate without the
consent of the Holder of such Certificate or (b) reduce the aforesaid percentage
of each Class the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Certificates of such Class
then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the next preceding paragraph, the Trustee shall furnish written notification
of the substance of such amendment to each affected Certificateholder and each
Rating Agency.
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It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Financial Guaranty Insurer and
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
Prior to the execution of any amendment to this Agreement the Trustee
and the Financial Guaranty Insurer shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Trustee may, but shall not be obligated to,
enter into any such amendment that affects the Trustee's own rights, duties or
immunities under this Agreement.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer, at its
expense but only upon, determination of the Servicer accompanied by an Opinion
of Counsel to the effect that such recordation is legally required to protect
the Trustee's interest in the Mortgage Loans.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement, the Trust or any REMIC established pursuant to Section 3.01, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust or any REMIC established pursuant to
Section 3.01, nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them.
Except as otherwise expressly provided herein, no Certificateholder,
solely by virtue of its status as a Certificateholder, shall have any right to
vote or in any manner otherwise control the operation and management of the
Trust or any REMIC established pursuant to Section 3.01, or the obligations of
the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
No Certificateholder, solely by virtue of its status as a
Certificateholder, shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates
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<PAGE> 134
evidencing Voting Interests represented by all Certificates (or all affected
Certificates, as appropriate) aggregating not less than 51% shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provision of this Agreement
to affect, disturb or prejudice the rights of the Holders of any other
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 11.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California (without regard to conflict
of laws principles and the application of the laws of any other jurisdiction),
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (a) in the case of the Seller and the Servicer, at 350 South Grand
Avenue, Los Angeles, California 90071, Attention: David J. Sklar; (b) in the
case of the Trustee, at the Corporate Trust Office at 3 Park Plaza, 16th Floor,
Irvine, California 92614, Attention: Aames Capital Corporation, Series 1997-D;
(c) in the case of Fitch, to Fitch IBCA, Inc., One State Street Plaza, New York,
New York 10004, Attention: Mortgage Surveillance Group; (d) in the case of
Moody's, to Moody's Investors Service Inc., 99 Church Street, New York, New York
10007, Attention: Residential Mortgage Pass-Through Monitoring; (e) in the case
of S&P, to Standard & Poor's, 25 Broadway, 12th Floor, New York, New York 10004,
Attention: Mortgage Surveillance Group; and (f) in the case of the Financial
Guaranty Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York,
New York 10022, Attention: Senior Vice President, Surveillance Department; or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party. Any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at its address shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
Any notice or other document required to be delivered or mailed by the Trustee
to any Rating Agency shall be given on a best efforts basis and only as a matter
of courtesy and accommodation and the Trustee shall have no liability for
failure to deliver such notice or document to any such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way
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affect the validity or enforceability of the other provisions of this Agreement
or of the Certificates or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02, 7.04 and 7.05, this
Agreement may not be assigned by the Seller or the Servicer without the prior
written consent of the Financial Guaranty Insurer and Holders of Certificates
evidencing not less than 66% of the Voting Interests of all Certificates.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for obligations
of the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that Certificates upon execution, authentication
and delivery thereof by the Trustee pursuant to Section 2.06 are and shall be
deemed fully paid.
Section 11.09. Third Party Beneficiary; Rating. (a) The Financial
Guaranty Insurer is an intended third-party beneficiary of this Agreement. This
Agreement shall be binding upon and inure to the benefit of the Financial
Guaranty Insurer; provided that, notwithstanding the foregoing, for so long as a
Financial Guaranty Insurer Default is continuing under its obligations under the
Financial Guaranty Insurance Policy, the Adjustable Rate Group
Certificateholders shall succeed to the Financial Guaranty Insurer's rights
hereunder. Without limiting the generality of the foregoing, all covenants and
agreements in this Agreement that expressly confer rights upon the Financial
Guaranty Insurer shall be for the benefit of and run directly to the Financial
Guaranty Insurer, and the Financial Guaranty Insurer shall be entitled to rely
on and enforce such covenants to the same extent as if it were a party to this
Agreement.
(b) In the event the rating of the Financial Guaranty Insurer by any of
the Rating Agencies is reduced to a rating that is below "investment grade" (as
that term is then commonly used), the Servicer shall, at its own expense, seek
to obtain ratings of each Class of Adjustable Rate Group Certificates (apart
from the rating related to the Financial Guaranty Insurance Policy) from such
Rating Agency.
[Signatures follow.]
<PAGE> 136
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
AAMES CAPITAL CORPORATION,
as Seller and Servicer
By: /s/ MARK ELBAUM
-----------------------------------------
Name: Mark Elbaum
Title: Senior Vice President -- Finance
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Trustee and not in its
individual capacity
By: /s/ WHITNEY IGER
-----------------------------------------
Name: Whitney Iger
Title: Assistant Secretary
<PAGE> 137
State of California )
) ss.:
County of Los Angeles )
On the 19 day of December 1997, before me, a notary public in and for of
the State of California, personally appeared Mark Elbaum, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in the capacity or capacities indicated in the within
instrument, and that by his signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
MICHELLE L. ADAMS
----------------------------------
Notary Public
[Notary Seal]
Schedule I
<PAGE> 138
State of California )
) ss.:
County of Los Angeles )
On the 19 day of December 1997, before me, a notary public in and for of
the State of California, personally appeared Whitney Iger, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
she executed the same in the capacity or capacities indicated in the within
instrument, and that by her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ CATHY EMMETT
------------------------------------
Notary Public
[Notary Seal]
Schedule I
<PAGE> 139
Schedule I
List of Sub-Servicers
Advanta Mortgage Corp. USA
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Schedule II
Representations and Warranties With Respect
to Subsequent Mortgage Loans
A. The Seller represents and warrants to the Trustee, the Financial Guaranty
Insurer and the Certificateholders as of any Subsequent Transfer Date (except as
otherwise expressly stated) that as to each Subsequent Mortgage Loan conveyed to
the Trust by it:
(i) no Subsequent Mortgage Loan provides for negative amortization;
(ii) with respect to the Adjustable Rate Group and each Subsequent Mortgage (a)
if such Mortgage Loan has an initial Adjustment Date not more than six months
from the date of origination, then the related Mortgage Note provides for a rate
cap of 0.50% to 3% every six months, (b) if such Mortgage Loan has an initial
Adjustment Date of six months, one year, two years, three years, five years or
seven years from the date of origination, then the related Mortgage Note
provides for a rate cap as to its first Adjustment Date of from 0.5% to 7.0% and
a rate cap as to each subsequent Adjustment Date of from 0.5% to 3.0%;
(iii) no Subsequent Mortgage Loan has a Gross Margin less than 3.00%;
(iv) each Subsequent Mortgage Loan will have been serviced by the Servicer or a
Sub-Servicer since origination or purchase by the Servicer;
(v) no Subsequent Mortgage Loan has been originated for the purpose of
facilitating the purchase of real estate owned by the originator; and
(vi) no Subsequent Mortgage Loan will have a Cut-off Date of later than January
1, 1998.
B. The Seller represents and warrants to the Trustee, the Financial Guaranty
Insurer and the Certificateholders, that following the purchase of all
Subsequent Mortgage Loans by the Trust and the assignment of such Subsequent
Mortgage Loans to the appropriate Mortgage Loan Group, as of the end of the
Funding Period:
(i) the Mortgage Loans in the Fixed Rate Group (including the Subsequent
Mortgage Loans):
(a) will have a weighted average Mortgage Loan Rate of at least 9.630%;
(b) will have a weighted average original term to stated maturity of not more
than 297 months;
(c) will have a weighted average Combined Loan-to-Value Ratio of not more than
71.00% and a weighted average second loan-to-value ratio of not more than
70.00%;
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(d) will have no Mortgage Loan with a Principal Balance less than $7,500 or
greater than $500,000;
(e) will not have in excess of 10% by Aggregate Principal Balance of Mortgage
Loans secured by non-owner occupied Mortgaged Properties;
(f) will not have a concentration in a single ZIP code in excess of 0.50% by
Aggregate Principal Balance;
(g) will not have an aggregate concentration in excess of 0.50% by Aggregate
Principal Balance in ZIP codes beginning with the following three digits:
900-919, 922-925, 930-931 and 935;
(h) will not have a concentration in a single State, other than California,
Florida or New York in excess of 5% by Aggregate Principal Balance;
(i) will not have a concentration in California in excess of 21.50%, in Florida
in excess of 10.05%, in New York in excess of 6.50% by Aggregate Principal
Balance;
(j) will not have in excess of 8.00% or 3.75% by Aggregate Principal Balance of
Mortgage Loans secured by Mortgaged Properties that are two family properties or
condominiums (less than four stories), three and four family properties or
condominiums (greater than four stories), respectively, and will have none
secured by mobile homes treated as real estate under applicable state law;
(k) will have at least 87.00% by Aggregate Principal Balance of Mortgage Loans
secured by fee simple interests in detached single family dwelling units
(including units in de minimis planned unit developments);
(l) will have no more than 4.50% by Aggregate Principal Balance Mortgage Loans
that are based on a 360-month amortization schedule with balloon payments prior
to month 60;
(m) will have no more than 0.10% by Aggregate Principal Balance of Mortgage
Loans that are based on a 360-month amortization schedule and have a balloon
payment between month 121-150;
(n) will have no more than 12.50% by Aggregate Principal Balance of Mortgage
Loans that are based on a 360-month amortization schedule and have a balloon
payment between month 151-180; and
(o) will have no more than 0.75% by Aggregate Principal Balance of Mortgage
Loans that are based on a 360-month amortization schedule and have a balloon
payment between month 181-240;
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(p) will have no less than 95.00% by Aggregate Principal Balance of Mortgage
Loans that provide for the payment of principal and interest on a level basis to
fully amortize such Mortgage Loan over its stated maturity; and
(q) will have a weighted average term since origination not in excess of six
months.
(ii) the Mortgage Loans in The Adjustable Rate Group (including the Subsequent
Mortgage Loans):
(a) will have a weighted average Mortgage Loan Rate of at least 8.87%;
(b) will have a weighted average original term to stated maturity of not more
than 357 months;
(c) will have a weighted average Loan-to-Value Ratio of not more than 77.00%;
(d) will have no Mortgage Loan with a Principal Balance less than $9,000 or
more than $500,000;
(e) will have not in excess of 10% by Aggregate Principal Balance of Mortgage
Loans secured by non-owner occupied Mortgage Properties;
(f) will not have a concentration in a single ZIP code in excess of 0.50% by
Aggregate Principal Balance;
(g) will not have an aggregate concentration in excess of 0.50% in ZIP codes
beginning with the following three digits: 900-919, 922-925, 930, 931, 935;
(h) will not have a concentration in a single State, other than California,
Florida or Washington in excess of 5% by Aggregate Principal Balance;
(i) will not have a concentration in California in excess of 15.50%, in Florida
in excess of 12.50%, or in Washington in excess of 5.75% by Aggregate Principal
Balance;
(j) will not have in excess of 6.50% or 8.55% by Aggregate Principal Balance
Mortgage Loans secured by Mortgaged Properties that are two family properties or
condominiums (less than four stories) and three and four family properties or
condominiums (greater than four stories), respectively, and none will be secured
by mobile homes or manufactured housing treated as real estate under applicable
state law;
(k) will have at least 85.00% by Aggregate Principal Balance Mortgage Loans
secured by fee
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simple interests in detached single family dwelling units (including units in de
minimis planned unit developments);
(l) will have a weighted average margin of at least 5.00%;
(m) will contain no Mortgage Loans that are not based on a 360-month
amortization schedule of level payments;
(n) will have a weighted average term since origination not in excess of three
months.
For purposes of this Schedule II, "Aggregate Principal Balance" means the
aggregate of the Principal Balances of the Mortgage Loans (determined as of the
Cut-off Date for the Initial Mortgage Loans and as of the Subsequent Cut-off
Date for the Subsequent Mortgage Loans) in the related Mortgage Loan
Group.
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<PAGE> 144
Schedule III
Schedule of Restricted Mortgage Loans
6
<PAGE> 145
EXHIBIT A
FORMS OF CERTIFICATES
OMITTED
B-1
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EXHIBIT B
MORTGAGE LOAN SCHEDULE
C-1
<PAGE> 147
EXHIBIT C
FORM OF ANNUAL STATEMENT AS TO COMPLIANCE
The undersigned, __________________________________, __________________
of Aames Capital Corporation (the "Servicer"), in its capacity as Servicer under
that certain Pooling and Servicing Agreement dated as of December 1, 1997 (the
"Pooling and Servicing Agreement") between Aames Capital Corporation, as Seller
and Servicer, and Bankers Trust Company of California, N.A., as Trustee, does
hereby certify pursuant to Section 3.09 of the Pooling and Servicing Agreement
that as of the ___ day of ____________, 199_:
(a) a review of the activities of the Servicer for the year ended
December 31, 199_ and of its performance under the Pooling and
Servicing Agreement has been made under my supervision, and
(b) to the best of my knowledge, based on such review, the
Servicer has fulfilled all of its material obligations under the
Pooling and Servicing Agreement throughout such year.
IN WITNESS WHEREOF, I have hereunto signed my name as of this ____day of
___________, 199_.
-----------------------------------------
Name:
Title:
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<PAGE> 148
EXHIBIT D
FORM OF AFFIDAVIT PURSUANT TO SECTION 860E(e)(4)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
STATE OF______________________ )
) ss.:
COUNTY OF ____________________ )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the "Investor"),
a [savings institution] [corporation] duly organized and existing under the laws
of [the State of _________________] [the United States], on behalf of which he
makes this affidavit. Capitalized terms used but not defined herein shall have
the meanings ascribed to such terms in the Agreement as defined in the Class
[R-IA] [R-IF] [R-II] [R-III] (the "Class R Certificate").
2. That the Investor's Taxpayer Identification Number is [ ].
3. That the Investor is not a "Disqualified Organization" within the
meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), or an agent of a Disqualified Organization (including a broker,
nominee or middleman) and will not be a "Disqualified Organization" as of [date
of transfer], and that the Investor is not acquiring a Class R Certificate of
the Aames Mortgage Trust 1997-D Mortgage Loan Pass-Through Certificates, (the
"Class R Certificate") for the account of, or as an agent (including a broker,
nominee or middleman) of any entity as to which the Investor has not received an
affidavit substantially in the form of this affidavit. For these purposes, a
"Disqualified Organization" means the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing (other than an instrumentality
if all of its activities are subject to tax and a majority of its board of
directors is not selected by such governmental entity), any cooperative
organization furnishing electrical energy or providing telephone service to
persons in rural areas as described in Code Section 1381(a)(2)(c), or any
organization (other than a farmers' cooperative described in Code Section 521)
that is exempt from federal income tax unless such organization is subject to
the tax on unrelated business income imposed by Code Section 511.
4. That the Investor is not (i) an entity that holds Class R
Certificates as nominee to facilitate the clearance and settlement of such Class
R Certificates through electronic book-entry changes in accounts of
participating organizations (a "Book-Entry Nominee"), (ii) an individual,
corporation, partnership or other person unless such transferee (A) is not a
Foreign Person or (B) is a Foreign Person that will hold such Class R
Certificate in connection with the conduct of a trade or business within the
United States and has furnished the transferor and the Trustee with an effective
Internal Revenue Service Form 4224 or (C) is a Foreign Person that has delivered
to both the transferor and the Trustee an opinion of a nationally recognized tax
counsel to the effect
E-1
<PAGE> 149
that the transfer of a Class R Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of a Class R Certificate will not be disregarded for federal
income tax purposes (any such person who is not covered by clause (A), (B) or
(C) above being referred to herein as a "Non-permitted Foreign Holder") or (iii)
a Person that is an employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, or any Person
that is an individual retirement account or employee benefit plan, trust or
account subject to Section 4975 of the Code (an "ERISA Plan") or an entity,
including an insurance company separate account or general account, whose
underlying assets include ERISA Plan assets by reason of an ERISA Plan's
investment in the entity or a Person investing the assets of an ERISA Plan or
such an entity, whether as nominee, trustee, agent or otherwise (an "ERISA
Prohibited Holder").
5. That the Investor agrees to any such amendments of the Pooling and
Servicing Agreement as may be required to further effectuate the restrictions on
transfer of the Class R Certificate to such a Disqualified Organization or a
Book-Entry Nominee or a Non-permitted Foreign Holder or an ERISA Prohibited
Holder.
6. That the Investor has no intent or purpose to impede the assessment
or collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificate and will not transfer the Class R
Certificate to any Person that it has reason to believe has the intention to
impede the assessment or collection of such taxes.
7. The Investor has been advised of, understands and acknowledges that
under the Code, a substantial tax would be imposed on a "pass-through entity"
holding a Class R Certificate if at any time during the taxable year of the
pass-through entity a Person that is a Disqualified Organization is the record
holder of an interest in such entity. (For this purpose, a "pass-through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain cooperatives and,
except as may be provided in Treasury Regulations, persons holding interests in
pass through entities as a nominee for another Person). A pass-through entity
shall be relieved of liability for the tax if it had received from such Person
an affidavit (in substantially the same form as this affidavit) that such Person
is not a Disqualified Organization and the entity had no actual knowledge that
the affidavit was false. The Investor will advise the Trustee and the Servicer
if it becomes a pass-through entity or if it is a pass-through entity, if any of
the interest holders are or become Disqualified Persons.
8. The Investor has reviewed the provisions of Section 6.02 of the
Agreement and understands the legal consequences of the acquisition of a Class R
Certificate including, without limitation, the restrictions on subsequent
transfers. The Investor expressly agrees to be bound by and to abide by the
provisions of Section 6.02 of the Agreement, as such Section may be amended from
time to time.
9. The Investor agrees to require an affidavit substantially similar to
this affidavit from any Person to whom the Investor attempts to transfer its
Class R Certificate including any Person with respect to which the Investor is
then acting as nominee, trustee or agent, and in connection with any transfer by
a Person for whom the Investor is acting as nominee, trustee or agent, and the
Investor will not transfer its Class R Certificate to be transferred to any
Person that the
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<PAGE> 150
Investor knows is a Disqualified Organization.
10. The Investor is acquiring the Class R Certificate either (i) for its
own account or (ii) as nominee, trustee or agent for another Person and has
attached hereto an affidavit from such Person in substantially the same form as
this affidavit. If clause (ii) of the preceding sentence is applicable, such
Person is not a Disqualified Organization and the Investor has no knowledge that
any such affidavit from such Person is false.
E-3
<PAGE> 151
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this ____ day of _________, 199_.
[NAME OF INVESTOR]
By:
_________________________________________
Name:
Title:
Personally appears before me the above-named [Name of Officer], known or
proved to me to be the same person who executed the foregoing instrument and to
be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.
Subscribed and sworn before me this _____day of ___________, 199_.
__________________________
NOTARY PUBLIC
COUNTY OF _____________
STATE OF ______________
My Commission expires the _________ day of ____________________, 19___.
E-4
<PAGE> 152
EXHIBIT E
FORM OF NOTICE REGARDING PAYMENT IN FULL
OF PRINCIPAL BALANCE OF MORTGAGE LOAN
Bankers Trust Company of California, N.A.,
as Trustee
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: Corporate Trust Administration
Re: Mortgage Loan Pass-Through Certificates, Series 1997-D
Ladies and Gentlemen:
Reference is made to Section 3.07 of the Pooling and Servicing Agreement
dated as of December 1, 1997 (the "Pooling and Servicing Agreement") between
Aames Capital Corporation, as Seller and Servicer, and Bankers Trust Company of
California, N.A., as Trustee. All capitalized terms used but not defined herein
shall have the meanings given to such terms in the Pooling and Servicing
Agreement.
The undersigned hereby certifies that the Principal Balance of the
Mortgage Loan(s) listed on Schedule A annexed hereto has been paid in full and
that all amounts received in connection with the payment of such Mortgage
Loan(s) that were required to be deposited or credited in the Certificate
Account pursuant to Section 3.02 of the Pooling and Servicing Agreement have
been so deposited or credited.
The undersigned further certifies that he is a Servicing Officer of the
Servicer holding the office set forth beneath his signature and that he is duly
authorized to execute this certificate on behalf of the Servicer.
AAMES CAPITAL CORPORATION
Date:______________ By:
--------------------------
Name:
Title:
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<PAGE> 153
EXHIBIT F
FORM OF LIQUIDATION REPORT
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
o Date Last Paid
o Date of Foreclosure
o Date of REO
o Date of REO Disposition
o Property Sale Price; Estimated Market Value at Disposition
2. Liquidation Proceeds
o Principal Prepayment $
---------------
o Property Sale Proceeds
---------------
o Insurance Proceeds
---------------
o Other (itemize)
---------------
TOTAL $
===============
3. Liquidation Expenses
o Servicing Advances $
---------------
o Monthly Advances
---------------
o Contingency Fees
---------------
o Servicing Fees
---------------
o Annual Expense Escrow Amount
---------------
o Supplemental Fee (if any)
---------------
o Additional Interest (if any)
---------------
o Monthly Sponsor Fee (if any)
---------------
TOTAL $
===============
4. Net Liquidation Proceeds* $
(Total of Item 2 minus total of Item 3) ---------------
5. Accrued and Unpaid Interest on Mortgage Loan $
---------------
6. Principal Balance of Mortgage Loan $
---------------
7. Realized Loss on Mortgage Loan $
(Item 5 plus Item 6 minus Item 4, with ---------------
a Realized Loss resulting only if the total
of this calculation is a positive number)
*Applied first to Item 5 and then to Item 6.
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<PAGE> 154
EXHIBIT G
OFFICER'S CERTIFICATE
I, _____________________, hereby certify that I am the duly elected
_____________________ of Aames Capital Corporation (the "Company") acting as
servicer pursuant to a Pooling and Servicing Agreement dated as of December 1,
1997 by and among the Company and Bankers Trust Company of California, N.A., as
Trustee, and further certify, to the best of my knowledge and after due inquiry
that the following is a summary of the facts and circumstances surrounding the
"charge-off" of any Mortgage Loans during the Collection Period from _____ 1
through _____ 30/31, 199_;
[Insert the following information for each "charged-off" Mortgage Loan]
Loan #
Borrower Name
Property Address
Date of "charge-off"
Original Principal Balance
Outstanding Principal Balance
Mortgage Loan Rate
Accrued Interest at time of "charge off"
Unreimbursed Servicing Advances at time of "charge off"
Unreimbursed Delinquency Advances at time of "charge off"
# of days in default at time of "charge off"
Original Appraised Value
Current appraised value based upon "drive by"
Amount of outstanding first lien
Estimate of Foreclosure Costs
Broker Fees
Legal Fees
Repair and Miscellaneous Expenses
Projected Marketing Period
Estimate of Loss on Foreclosure and Liquidation
Capitalized terms not otherwise defined herein have the meanings set forth in
the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto signed by name and affixed the seal
of the Servicer.
Dated: _________________ ________________________
Name:
Title:
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<PAGE> 155
EXHIBIT H
FORM OF TRANSFEROR AFFIDAVIT
[LETTERHEAD OF TRANSFEROR]
________________, 199_
Bankers Trust Company of California, N.A.,
as Trustee
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: Corporate Trust Administration
Re: Aames Mortgage Trust 1997-D
Mortgage Pass-Through Certificates, Series 1997-D
Ladies and Gentlemen:
We have reviewed the attached affidavit of [NAME OF TRANSFEREE] and have
no actual knowledge that such affidavit is not true and has no reason to believe
that the requirements set forth in paragraph 3, paragraph 4(i) or paragraph
4(ii) are not satisfied and have no reason to believe that the transferee has
the intention to impede the assessment or collection of any federal, state or
local taxes legally required to be paid with respect to a Class R Certificate.
In addition, we have conducted a reasonable investigation at the time of the
transfer and found that the transferee had historically paid its debts as they
came due and found no significant evidence to indicate that the transferee will
not continue to pay its debts as they become due.
Very truly yours,
____________________________________
By: ________________________________
Name:
Title:
I-1
<PAGE> 156
EXHIBIT I
FORM OF SUBSEQUENT TRANSFER AGREEMENT
Pursuant to this Subsequent Transfer Agreement, dated as of [ , 1997] by
and between Aames Capital Corporation (the "Seller") and Bankers Trust Company
of California, N.A., in its capacity as trustee for Aames Mortgage Trust 1997-D
(the "Trustee"), and pursuant to that certain Pooling and Servicing Agreement,
dated as of December 1, 1997 (the "Pooling and Servicing Agreement"), by and
between the Seller, as seller and servicer, and the Trustee, as trustee, the
Seller and the Trustee agree to the sale by the Seller and the purchase by the
Trustee of additional mortgage loans (the "Subsequent Mortgage Loans") to be
included in the Fixed Rate Group or the Adjustable Rate Group as listed on the
Mortgage Loan Schedule attached hereto as Schedule A.
Capitalized terms used and not defined herein shall have their
respective meanings as set forth in the Pooling and Servicing Agreement.
Section 1. Purchase and Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and convey
to the Trustee:
(i) all right, title and interest of such Seller in and to the
Subsequent Mortgage Loans owned by it and listed on Schedule A hereto, including
without limitation, the related Mortgages, Mortgage Files and Mortgage Notes,
and all payments on, and proceeds with respect to, such Subsequent Mortgage
Loans received on and after the Subsequent Cut-off Date except such payments and
proceeds as the Servicer is entitled to retain pursuant to the express
provisions of the Pooling and Servicing Agreement;
(ii) all right, title and interest of such Seller in the
Mortgages on the properties securing the Subsequent Mortgage Loans, including
any related Mortgaged Property acquired by or on behalf of the Trust by
foreclosure or deed in lieu of foreclosure or otherwise;
(iii) all right, title and interest of such Seller in and to any
rights in or proceeds from any insurance policies (including title insurance
policies) covering the Subsequent Mortgage Loans, the related Mortgaged
Properties or Mortgagors and any amounts recovered from third parties in respect
of any Subsequent Mortgage Loans that became Liquidated Mortgage Loans; and
(iv) the proceeds of all of the foregoing.
(b) With respect to each Subsequent Mortgage Loan, the Seller,
contemporaneously with the delivery of this Agreement, has delivered or caused
to be delivered to the Trustee, each item set forth in Section 2.01 of the
Pooling and Servicing Agreement. The transfer to the Trustee by the Seller of
the Subsequent Mortgage Loans identified on the Schedule A hereto shall be
absolute and is intended by the Seller, the Servicer, the Trustee and the
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<PAGE> 157
Certificateholders to constitute and to be treated as a sale by the Seller.
(c) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Agreement and the Pooling and Servicing Agreement shall be
borne by the Seller.
(d) Additional terms of the sale, including the purchase price, are set
forth on Attachments A and B hereto separated by Mortgage Loan Group.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties set
forth in Section 2.05 of the Pooling and Servicing Agreement that relate to the
Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms that
each of the conditions set forth in Section 2.02 of the Pooling and Servicing
Agreement (except such conditions that are required to be satisfied as of the
end of the Funding Period) are satisfied as of the date hereof.
(b) All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified and confirmed; provided however, that in the event of any
conflict the provisions of this Agreement shall control over the conflicting
provisions of the Pooling and Servicing Agreement.
Section 3. Recordation of Agreement.
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the Mortgaged Properties are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer and at its expense in the event such recordation
materially and beneficially affects the interests of 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 4. Governing Law.
This Agreement shall be construed in accordance with the laws of the
State of California (without regard to conflict of laws principles and the
application of the laws of any other jurisdiction), and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 5. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Seller and the Purchaser and their respective successors and assigns.
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<PAGE> 158
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
AAMES CAPITAL CORPORATION,
as Seller
By: ___________________________
Name:
Title:
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., as Trustee
for Aames Mortgage Trust 1997-D
By: ____________________________
Name:
Title:
I-3
<PAGE> 159
EXHIBIT J
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
I-4
<PAGE> 160
EXHIBIT K
FORM OF NOTICE OF CLAIM AND CERTIFICATE
I-5
<PAGE> 161
EXHIBIT L
FORM OF INSURANCE AND INDEMNITY AGREEMENT
I-6
<PAGE> 162
SCHEDULE A
SUBSEQUENT MORTGAGE LOAN SCHEDULE
I-7
<PAGE> 1
Exhibit 4.2
FINANCIAL GUARANTY
INSURANCE POLICY
Trust: As described in Endorsement No. 1 hereto Policy No.: 50650-N
Certificates: $380,000,000 Aames Mortgage Trust 1997-D, Date of Issuance:
Mortgage Pass-Through Certificates, Series 1997-D, 12/19/97
Class A-1A and Class A-2A
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be made
following receipt by Financial Security of notice as described in Endorsement
No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ BRUCE STERN
-------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE> 2
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement dated
as of December 1, 1997 between Aames Capital Corporation, as
Seller and Servicer, and Bankers Trust Company of California,
N.A., as Trustee
POLICY NO.: 50650-N
SECURITIES: $380,000,000 Aames Mortgage Trust 1997-D, Mortgage Pass-Through
Certificates, Series 1997-D, Class A-1A and Class A-2A.
DATE OF ISSUANCE: December 19, 1997
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in New York or California are
authorized or obligated by law or executive order to be closed.
"Class A-1A Insured Amount" means, as to any Distribution Date, the sum
of (i) any shortfall of Accrued Certificate Interest with respect to the Class
A-1A Certificates, (ii) the Class A-1A Coverage Deficit, if any, on such
Distribution Date, (iii) at Financial Security's sole option, the payment of any
Realized Loss with respect to a Liquidated Mortgage Loan and (iv) the Preference
Amount for the Class A-1A Certificates for such Distribution Date.
Notwithstanding the foregoing, with respect to each Distribution Date, "Class
A-1A Insured Amount" shall not include, nor shall coverage be provided under
this Policy in respect of, the Supplemental Interest Amount, the Interest
Shortfall Amount, any taxes, withholding or other charge imposed by any
governmental authority due in connection with distributions on the Class A-1A
Certificates by the Trustee to a Holder.
"Class A-2A Insured Amount" means, as to any Distribution Date, the sum
of (i) any shortfall of Accrued Certificate Interest with respect to the Class
A-2A Certificates, (ii) the Class A-2A Coverage Deficit, if any, on such
Distribution Date, (iii) Certificate Principal Balance as of the Distribution
Date in December of 2007, (iv) at Financial Security's sole option, the payment
of any Realized Loss with respect to a Liquidated Mortgage Loan and (v) the
Preference Amount for the Class A-2A Certificates for such Distribution Date.
Notwithstanding the foregoing, with respect to each Distribution Date, "Class
A-2A Insured Amount" shall not include, nor shall coverage be
<PAGE> 3
provided under this Policy in respect of, any taxes, withholding or other charge
imposed by any governmental authority due in connection with distributions on
the Class A-2A Certificates by the Trustee to a Holder.
"Guaranteed Distributions" means the Insured Amounts.
"Insured Amounts" means in the case of the Class A-1A Certificates, the
Class A-1A Insured Amount and, in the case of the Class A-2A Certificates, the
Class A-2A Insured Amount.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of December 1, 1997 between Aames Capital Corporation, as
Seller and Servicer, and Bankers Trust Company of California, N.A., as Trustee,
as amended from time to time with the consent of Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on the next succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Trustee and
the Trustee may submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all the Securities is zero, (ii) any period during which any payment
on the Securities could have been avoided in whole or in part as a preference
payment under applicable bankruptcy, insolvency, receivership or similar law has
expired, and (iii) if any proceedings requisite to avoidance as a preference
payment have been commenced prior to the occurrence of (i) and (ii), a final and
non-appealable order in resolution of each such proceeding has been entered.
"Trustee" means Bankers Trust Company of California, N.A., in its
capacity as Trustee under the Pooling and Servicing Agreement and any successor
in such capacity.
2. Notices and Conditions to Payment in Respect of Insured Amounts.
Following Receipt by Financial Security of a notice and certificate from the
Trustee in the form attached as Exhibit A to this Endorsement, Financial
Security will pay any amount payable hereunder in respect of Insured Amounts out
of the funds of Financial Security on the later to occur of (a) 12:00 noon, New
York City time, on the second Business Day following such Receipt; and (b) 12:00
noon, New York City time, on the Distribution Date to which such claim relates.
Payments due hereunder in respect of Insured Amounts will be disbursed by wire
transfer of immediately available funds to the
-2-
<PAGE> 4
Policy Payments Account established pursuant to the Trust Agreement or, if no
such Policy Payments Account has been established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Insured Amounts, whether or not any notice and certificate shall have
been Received by Financial Security as provided above. Financial Security shall
be entitled to pay hereunder any amount in respect of Guaranteed Distributions
on an accelerated basis at any time or from time to time, in whole or in part,
prior to the scheduled date of payment thereof. Financial Security's obligations
hereunder in respect of Insured Amounts shall be discharged to the extent funds
are disbursed by Financial Security as provided herein whether or not such funds
are properly applied by the Trustee.
3. Notices and Conditions to Payment in Respect of Insured Amounts
Avoided as Preference Payments. If any Insured Amount is avoided as a preference
payment under applicable bankruptcy, insolvency, receivership or similar law,
Financial Security will pay such amount out of the funds of Financial Security
on the later of (a) the date when due to be paid pursuant to the Order referred
to below or (b) the first to occur of (i) the fourth Business Day following
Receipt by Financial Security from the Trustee of (A) a certified copy of the
order of the court or other governmental body which exercised jurisdiction to
the effect that the relevant Certificateholder is required to return principal
or interest distributed with respect to the Security during the Term of this
Policy because such distributions were avoidable as preference payments under
applicable bankruptcy law (the "Order"), (B) a certificate of the relevant
Certificateholder that the Order has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the relevant
Certificateholder, in such form as is reasonably required by Financial Security
and provided to the relevant Certificateholder by Financial Security,
irrevocably assigning to Financial Security all rights and claims of the
relevant Certificateholder relating to or arising under the Security against the
debtor which made such preference payment or otherwise with respect to such
preference payment or (ii) the date of Receipt by Financial Security from the
Trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Certificateholder
directly (unless a Certificateholder has previously paid such amount to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order, in which case such payment shall be disbursed to the Trustee for
distribution to such Certificateholder upon proof of such payment reasonably
satisfactory to Financial Security). In connection with the foregoing, Financial
Security shall have the rights provided pursuant to Section 3.19(d) of the
Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee
-3-
<PAGE> 5
at the notice address specified in the Pooling and Servicing Agreement
specifying the name and notice address of the Fiscal Agent. From and after the
date of receipt of such notice by the Trustee, (i) copies of all notices and
documents required to be delivered to Financial Security pursuant to this Policy
shall be simultaneously delivered to the Fiscal Agent and to Financial Security
and shall not be deemed Received until Received by both and (ii) all payments
required to be made by Financial Security under this Policy may be made directly
by Financial Security or by the Fiscal Agent on behalf of Financial Security.
The Fiscal Agent is the agent of Financial Security only and the Fiscal Agent
shall in no event be liable to any Holder for any acts of the Fiscal Agent or
any failure of Financial Security to deposit, or cause to be deposited,
sufficient funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance Department
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
-4-
<PAGE> 6
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ BRUCE STERN
------------------------------
Authorized Officer
-5-
<PAGE> 7
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Bankers Trust Company of
California, N.A. (the "Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50650-N dated December 19, 1997, including Endorsement No.
1 thereto, (the "Policy") issued by Financial Security in respect of Aames
Mortgage Trust 1997-D, Mortgage Pass-Through Certificates, Series 1997-D, Class
A-1A and Class A-2A that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) With respect to the [Class A-1A Certificates] [Class A-2A
Certificates] for the Distribution Date in _______, the related Insured
Amount due under the Policy is
$________.
(iii) The Trustee is making a claim under the Policy for the
Insured Amount to be applied to distributions of principal or interest
or both with respect to the Securities.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Insured Amounts on the Securities
when due; (b) not apply such funds for any other purpose; (c) not
commingle such funds with other funds held by the Trustee and (d)
maintain an accurate record of such payments with respect to each
Security and the corresponding claim on the Policy and proceeds thereof
and, if the Security is required to be surrendered for such payment,
shall stamp on each such Security the legend "$[insert applicable
amount] paid by Financial Security and the balance hereof has been
cancelled and reissued" and then shall deliver such Security to
Financial Security.
(v) The Trustee, on behalf of the Certificateholders, hereby
assigns to Financial Security the rights of the Certificateholders with
respect to the Trust Fund to the extent of any payments under the
Policy, including, without limitation, any amounts due to the
Certificateholders in respect of securities law violations arising from
the offer and sale of the Trust Fund. The foregoing assignment is in
addition to, and not in limitation of, rights of
A-1
<PAGE> 8
subrogation otherwise available to Financial Security in respect of such
payments. The Trustee shall take such action and deliver such
instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the
Certificateholders, hereby appoints Financial Security as agent and
attorney-in-fact for the Trustee and each such Certificateholder in any
legal proceeding with respect to the Trust Fund. The Trustee hereby
agrees that Financial Security may at any time during the continuation
of any proceeding by or against the Seller under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding, including
without limitation, (A) all matters relating to any claim in connection
with an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment with respect to the Trust Fund (a "Preference
Claim"), (B) the direction of any appeal of any order relating to any
Preference Claim at the expense of Financial Security but subject to
reimbursement as provided in the Insurance and Indemnity Agreement,
dated as of December 1, 1997, between the Company and Financial Security
and (C) the posting of any surety, supersedeas or performance bond
pending any such appeal. In addition, the Trustee hereby agrees that
Financial Security shall be subrogated to, and the Trustee on its behalf
and on behalf of each Certificateholder, hereby delegates and assigns,
to the fullest extent permitted by law, the rights of the Trustee and
each Certificateholder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued in
connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[Policy Payments Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE> 9
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the _______ day of _____________________, _____.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:_____________________________
Title:__________________________
For Financial Security or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number ___________________________________________
A-3
<PAGE> 1
Exhibit 5.1
[Letterhead of O'Melveny & Myers LLP]
December 16, 1997
Aames Capital Corporation
Aames Capital Acceptance Corp.
350 South Grand Avenue
Los Angeles, California 90071
Re: Aames Capital Corporation
Aames Capital Acceptance Corp.
Registration Statement on Form S-3
Registration No. 333-21219
Ladies & Gentlemen:
We have acted as special counsel to Aames Capital Corporation
("ACC"), a California corporation, and Aames Capital Acceptance Corp., a
Delaware corporation ("ACAC," and together with ACC, "Transferors"), in
connection with the proposed issuance from time to time after the date hereof in
one or more series (each, a "Series") of asset-backed certificates (the
"Certificates") to be offered pursuant to a registration statement on Form S-3
(such registration statement as amended, the "Registration Statement") relating
to the Certificates. The Registration Statement has been declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), and the rules and regulations promulgated thereunder.
As set forth in the Registration Statement, each Series of Certificates will be
issued under and pursuant to the conditions of a separate Pooling and Servicing
Agreement (each, a "Pooling and Servicing Agreement") among either ACC or ACAC,
as applicable, as transferor (the "Transferor" for such Series), ACC, as
servicer (in such capacity, the "Servicer"), and a trustee to be identified in
the prospectus supplement for such Series of Certificates (the "Trustee" for
such Series).
We have examined originals or copies, certified or otherwise
identified to our satisfaction of the organizational documents of ACC and ACAC,
the form of Pooling and Servicing Agreement incorporated by reference as an
exhibit to the Registration Statement, the form of Certificates included in such
form of Pooling and Servicing Agreement, the Registration Statement, and such
other records, documents and statutes as we have deemed necessary for the
purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. When a Pooling and Servicing Agreement for a Series of
Certificates has been duly and validly authorized by all necessary action on the
part of the related Transferor and has been duly executed and delivered by the
related Transferor, the Servicer, the Trustee and any other party thereto for
such Series, such Pooling and Servicing Agreement will constitute a legally
valid and binding agreement of
<PAGE> 2
such Transferor, enforceable against such Transferor, in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally (including,
without limitation, fraudulent conveyance laws), and general principles of
equity, including without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or injunction relief, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
2. When a Series of Certificates has been duly authorized by
all necessary action on the part of the related Transferor (subject to the terms
thereof being otherwise in compliance with applicable law at such time), duly
executed and authenticated by the Trustee for such Series in accordance with the
terms of the related Pooling and Servicing Agreement, and issued and delivered
against payment therefor as contemplated in the Registration Statement, the
Certificates of such Series will be validly issued, fully paid and nonassessable
and the holders thereof will be entitled to the benefits of the related Pooling
and Servicing Agreement, enforceable against the related Transferor, in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally (including, without limitation, fraudulent conveyance laws), and
general principles of equity, including without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunction relief, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
The opinions expressed above are limited to the federal laws
of the United States of America and the laws of the States of California and
Delaware (excluding choice of law principles therein). We express no opinion
herein as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
We consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus, without admitting that we are "experts"
within the meaning of the 1933 Act or the rules or regulations of the Securities
and Exchange Commission thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
-----------------------------
<PAGE> 1
Exhibit 5.2
[Letterhead of O'Melveny & Myers LLP]
December 16, 1997
Aames Capital Corporation
Aames Capital Acceptance Corp.
350 South Grand Avenue
Los Angeles, California 90071
Re: Aames Capital Corporation
Aames Capital Acceptance Corp.
Registration Statement on Form S-3
Registration No. 333-21219
Ladies & Gentlemen:
We have acted as special counsel to Aames Capital Corporation,
a California corporation, and Aames Capital Acceptance Corp., a Delaware
corporation (the "Transferor"), in connection with the proposed issuance from
time to time after the date hereof in one or more series (each, a "Series") of
asset-backed bonds (the "Bonds") to be offered pursuant to a registration
statement on Form S-3 (such registration statement as amended, the "Registration
Statement") relating to the Bonds. The Registration Statement has been declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act"), and the rules and regulations promulgated
thereunder. As set forth in the Registration Statement, each Series of Bonds
will be issued under and pursuant to the conditions of an indenture (the
"Indenture") between the Transferor or a trust, partnership, limited liability
company or corporation formed by the Transferor solely for the purpose of
issuing the related series of Bonds (the Transferor or any such entity, as
applicable, the "Bond Issuer") and a trustee to be identified in the prospectus
supplement for such Series of Bonds (the "Trustee" for such Series).
We have examined originals or copies, certified or otherwise
identified to our satisfaction of the Transferor's organizational documents, the
form of Indenture filed as an exhibit to the Registration Statement, the form of
Bonds included in such form of Indenture, the Registration Statement and such
other records, documents and statutes as we have deemed necessary for the
purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. When an Indenture for a Series of Bonds has been duly and
validly authorized by all necessary action on the part of the related Bond
Issuer and has been duly executed and delivered by the related Bond Issuer and
the Trustee and any other party thereto for such Series, such Indenture will
constitute a legally valid and binding agreement of the related Bond Issuer,
enforceable against the related Bond Issuer, in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium
<PAGE> 2
or other similar laws relating to or affecting creditors' rights generally
(including, without limitation, fraudulent conveyance laws), and general
principles of equity, including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunction relief, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
2. When a Series of Bonds has been duly authorized by all
necessary action on the part of the related Bond Issuer (subject to the terms
thereof being otherwise in compliance with applicable law at such time), duly
executed and authenticated by the Trustee for such Series in accordance with the
terms of the related Indenture, and issued and delivered against payment
therefor as contemplated in the Registration Statement, the Bonds of such Series
will be valid and binding non-recourse obligations of the related Bond Issuer,
enforceable against the related Bond Issuer, in accordance with their terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws), and general principles of equity,
including without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
or injunction relief, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
The opinions expressed above are limited to the federal laws
of the United States of America and the laws of the States of California and
Delaware (excluding choice of law principles therein). We express no opinion
herein as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
We consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus, without admitting that we are "experts"
within the meaning of the 1933 Act or the rules or regulations of the Securities
and Exchange Commission thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
-----------------------------
<PAGE> 1
Exhibit 8.1
[Letterhead of O'Melveny & Myers LLP]
December 16, 1997
Aames Capital Corporation
Aames Capital Acceptance Corp.
350 South Grand Avenue
Los Angeles, California 90071
Re: Aames Capital Corporation
Aames Capital Acceptance Corp.
Registration Statement on Form S-3
Registration No. 333-21219
Ladies & Gentlemen:
We have acted as special tax counsel to Aames Capital
Corporation, a California corporation ("ACC"), and Aames Capital Acceptance
Corp., a Delaware corporation ("ACAC," and together with ACC, the "Transferors")
in connection with the proposed issuance from time to time after the date hereof
in one or more series (each, a "Series") of asset-backed certificates (the
"Certificates") and asset-backed bonds (the "Bonds") to be offered pursuant to a
registration statement on Form S-3 (such registration statement as amended, the
"Registration Statement") relating to the Certificates and the Bonds. The
Registration Statement has been declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "1933
Act"), and the rules and regulations promulgated thereunder. As set forth in the
Registration Statement, each Series of Certificates will be issued under and
pursuant to the conditions of a separate Pooling and Servicing Agreement (each,
a "Pooling and Servicing Agreement") among one of the Transferors, as
transferor, Aames Capital Corporation, as servicer (in such capacity, the
"Servicer") and a trustee to be identified in the prospectus supplement for such
Series of Certificates (the "Trustee" for such Series of Certificates); each
Series of Bonds will be issued under and pursuant to the conditions an indenture
(the "Indenture") between ACAC or a trust, partnership, limited liability
company or corporation formed by the Transferor solely for the purpose of
issuing the related series of Bonds (the Transferor or any such entity, as
applicable, the "Bond Issuer") and a trustee to be identified in the prospectus
supplement for such Series of Bonds (the "Trustee" for such Series of Bonds).
In connection with rendering this opinion letter, we have
examined the Registration Statement and such other documents, records and
instruments as we have deemed necessary. As to matters of fact, we have examined
and relied upon representations or certifications of officers of the Transferors
or public officials. We have assumed the authenticity of all documents submitted
to us as originals, the genuiness of all signatures, the legal capacity of
natural persons and the conformity to the originals of all documents.
<PAGE> 2
In arriving at the opinion expressed below, we have assumed
that (i) each Pooling and Servicing Agreement and each Indenture will be duly
and validly authorized by all necessary corporate action on the part of the
related Transferor, or Bond Issuer, as applicable, the related Trustee, the
Servicer, as applicable, and any other party thereto for the related Series of
Certificates or Bonds, (ii) each Pooling and Servicing Agreement and each
Indenture will be duly executed and delivered by the related Transferor or Bond
Issuer, as applicable, the related Trustee, the Servicer, as applicable, and any
other party thereto substantially in the form filed as an exhibit to the
Registration Statement, that the Certificates or the Bonds of each Series will
be duly executed and delivered substantially in the forms set forth in the form
of Pooling and Servicing Agreement incorporated by reference as an exhibit to
the Registration Statement or the form of Indenture filed as an exhibit to the
Registration Statement, and (iii) the Certificates or the Bonds will be sold in
the manner described in the Registration Statement.
In rendering this opinion letter, we express no opinion as to
the laws of any jurisdiction other than the United States Internal Revenue Code
of 1986, as amended, (the "Code") nor do we express any opinion, either
implicitly or otherwise, or any issue not expressly addressed below. In
rendering this opinion letter, we have not passed upon and do not pass upon the
application of "doing business" or the securities laws of any jurisdiction.
As special tax counsel to ACC and ACAC, we have advised ACC
and ACAC with respect to certain federal income tax aspects of the proposed
issuance of each Series of Certificate or Bonds after the date hereof as
described in the Registration Statement. Such advice has formed the basis for
the description of selected federal income tax consequences for holders of such
Certificates or Bonds that appears under the heading "Certain Federal Income Tax
Consequences" in the Prospectus. Such description does not purport to discuss
all possible federal income tax ramifications of the proposed issuance of the
Certificates or the Bonds, but with respect to those federal income tax
consequences which are discussed, in our opinion, the description is accurate.
This opinion set forth above is based on relevant provisions
of the Code, Treasury Regulations thereunder, and interpretations of the
foregoing as expressed in court decisions, administrative determinations, and
legislative history as of the date hereof. These provisions and interpretations
are subject to change, which may or may not be retroactive in effect, that might
result in modifications of our opinion.
We consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Certain Federal Income Tax Consequences" in the Prospectus, without admitting
that we are "experts" within the meaning of the 1933 Act or the rules or
regulations of the Securities and Exchange Commission thereunder, with respect
to any part of the Registration Statement, including this exhibit.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
-----------------------------
<PAGE> 1
SUBSEQUENT TRANSFER AGREEMENT
Pursuant to this Subsequent Transfer Agreement, dated as of December 19,
1997 by and between Aames Capital Corporation (the "Seller") and Bankers Trust
Company of California, N.A., in its capacity as trustee for Aames Mortgage Trust
1997-D (the "Trustee"), and pursuant to that certain Pooling and Servicing
Agreement, dated as of December 1, 1997 (the "Pooling and Servicing Agreement"),
by and between the Seller, as seller and servicer, and the Trustee, as trustee,
the Seller and the Trustee agree to the sale by the Seller and the purchase by
the Trustee of additional mortgage loans (the "Subsequent Mortgage Loans") to be
included in the Fixed Rate Group or the Adjustable Rate Group as listed on the
Mortgage Loan Schedule attached hereto as Schedule A.
Capitalized terms used and not defined herein shall have their
respective meanings as set forth in the Pooling and Servicing Agreement.
Section 1. Purchase and Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and convey
to the Trustee:
(i) all right, title and interest of such Seller in and to the
Subsequent Mortgage Loans owned by it and listed on Schedule A
hereto, including without limitation, the related Mortgages,
Mortgage Files and Mortgage Notes, and all payments on, and
proceeds with respect to, such Subsequent Mortgage Loans
received on and after the Subsequent Cut-off Date except such
payments and proceeds as the Servicer is entitled to retain
pursuant to the express provisions of the Pooling and Servicing
Agreement;
(ii) all right, title and interest of such Seller in the Mortgages on
the properties securing the Subsequent Mortgage Loans, including
any related Mortgaged Property acquired by or on behalf of the
Trust by foreclosure or deed in lieu of foreclosure or
otherwise;
(iii) all right, title and interest of such Seller in and to any
rights in or proceeds from any insurance policies (including
title insurance policies) covering the Subsequent Mortgage
Loans, the related Mortgaged Properties or Mortgagors and any
amounts recovered from third parties in respect of any
Subsequent Mortgage Loans that became Liquidated Mortgage Loans;
and
(iv) the proceeds of all of the foregoing.
(b) With respect to each Subsequent Mortgage Loan, the Seller,
contemporaneously with the delivery of this Agreement, has delivered or caused
to be
<PAGE> 2
delivered to the Trustee, each item set forth in Section 2.01 of the Pooling and
Servicing Agreement. The transfer to the Trustee by the Seller of the Subsequent
Mortgage Loans identified on Schedule A hereto shall be absolute and is intended
by the Seller, the Servicer, the Trustee and the Certificateholders to
constitute and to be treated as a sale by the Seller.
(c) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Agreement and the Pooling and Servicing Agreement shall be
borne by the Seller.
(d) Additional terms of the sale, including the purchase price, are set
forth on Attachments A and B hereto separated by Mortgage Loan Group.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties set
forth in Section 2.05 of the Pooling and Servicing Agreement that relate to the
Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms that
each of the conditions set forth in Section 2.02 of the Pooling and Servicing
Agreement (except such conditions that are required to be satisfied as of the
end of the Commitment Period) are satisfied as of the date hereof.
(b) All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified and confirmed; provided however, that in the event of any
conflict the provisions of this Agreement shall control over the conflicting
provisions of the Pooling and Servicing Agreement.
Section 3. Recordation of Agreement.
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the Mortgaged Properties are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer and at its expense in the event such recordation
materially and beneficially affects the interests of 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 4. Governing Law.
This Agreement shall be construed in accordance with the laws of the
State of California (without regard to conflict of laws principles and the
application of the laws of
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<PAGE> 3
any other jurisdiction), and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 5. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Seller and the Purchaser and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
AAMES CAPITAL CORPORATION,
as Seller
By: /s/ Mark E. Elbaum
----------------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President - Finance
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., as Trustee
for Aames Mortgage Trust 1997-D
By: /s/ Whitney Iger
----------------------------------------
Name: Whitney Iger
Title: Assistant Vice President
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<PAGE> 4
State of California )
) ss.:
County of Los Angeles )
On the 19th day of December, 1997, before me, a notary public in and for
of the State of California, personally appeared Mark E. Elbaum, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in the capacity or capacities indicated in the within
instrument, and that by his signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Michelle L. Adams
-------------------------------
Notary Public
[Notary Seal]
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<PAGE> 5
State of California )
) ss.:
County of Los Angeles )
On the 19th day of December, 1997, before me, a notary public in and for
of the State of California, personally appeared Whitney Iger, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
she executed the same in the capacity or capacities indicated in the within
instrument, and that by her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Catherine Emmett
-------------------------------
Notary Public
[Notary Seal]
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<PAGE> 6
SCHEDULE A
SUBSEQUENT MORTGAGE LOAN SCHEDULE
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<PAGE> 7
ATTACHMENT A
Subsequent Transfer Date: December 19, 1997
Subsequent Cut-off Date: December 19, 1997
Aggregate of the Principal Balances of $6,381,680.00
the Fixed Rate Group Subsequent Mortgage Loans:
Aggregate of the Purchase Prices of the Fixed Rate Group $6,062,596.00
Subsequent Mortgage Loans:
Number of Subsequent Mortgage Loans 111
in the Fixed Rate Group:
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<PAGE> 8
ATTACHMENT B
Subsequent Transfer Date: December 19, 1997
Subsequent Cut-off Date: December 19, 1997
Aggregate of the Principal Balances of $33,628,972.92
The Adjustable Rate Group Subsequent Mortgage Loans:
Aggregate of the Purchase Prices of the Adjustable Rate Group $31,947,524.27
Subsequent Mortgage Loans:
Number of Subsequent Mortgage Loans 365
in the Adjustable Rate Group:
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